TAX INDEMNIFICATION AGREEMENT
This Tax Indemnification Agreement ("Agreement") is made as of December 21,
1998, between Golden Northwest Aluminum, Inc. ("GNA"), Northwest Aluminum
Company ("Northwest"), Northwest Aluminum Specialties, Inc. ("Specialties") and
Brett E. Wilcox ("Shareholder").
WHEREAS, Northwest and Shareholder believe that Northwest has been an "S
corporation" (within the meaning of Section 1361 of the Internal Revenue Code of
1986, as amended ("IRC")) for federal and Oregon income tax purposes since
September 1987;
WHEREAS, Specialties and Shareholder believe that Specialties has been an
"S corporation" (within the meaning of Section 1361 of the Internal Revenue Code
of 1986, as amended ("IRC")) for federal and Oregon income tax purposes since
1991;
WHEREAS, GNA has elected to be an "S corporation" (within the meaning of
Section 1361 of the Internal Revenue Code of 1986, as amended ("IRC")) effective
on the date of its organization June 26, 1998;
WHEREAS, Shareholder is the sole shareholder of Northwest and Specialties;
WHEREAS, Northwest and Specialties have taken certain positions on income
tax information returns for prior years with which auditors for the Internal
Revenue Service have disagreed, and Northwest and Specialties are contesting the
proposed adjustments;
WHEREAS, Shareholder intends to contribute all the stock of Northwest and
Specialties to GNA as an equity contribution to GNA;
WHEREAS, GNA intends to elect for Northwest and Specialties to be qualified
subchapter S subsidiaries under Section 1361(b)(3) of the Internal Revenue Code,
effective on the date of the contribution of their stock to GNA;
NOW, THEREFORE, the parties agree as follows:
A. Consistent Reporting by Northwest and Specialties. GNA shall not, on
behalf of Northwest or Specialties, without the consent of
Shareholder, file any amended income tax return or change any election
or accounting method if such filing or change would increase any
federal, state, local (including but not limited to city or county) or
foreign income tax liability (including interest and penalties, if
any) (collectively, "Tax Liability") of Shareholder.
B. Indemnification for Tax Liability.
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1. Indemnification for Tax Liability. GNA, Northwest and Specialties
jointly and severally agree to indemnify and hold Shareholder
harmless from, against and in respect of any Tax Liability
incurred by Shareholder resulting from a final judicial or
administrative adjustment (by reason of an amended return, claim
for refund, audit or otherwise) to Northwest or Specialties'
taxable income which is the result of an increase or change in
character of the income of Northwest or Specialties during the
period it was treated as an S corporation before the contribution
of its stock to GNA.
2. Fees and Costs. GNA, Northwest and Specialties hereby agree to
pay or reimburse the Shareholder for such professional fees or
other costs as are reasonably necessary to properly defend the
Shareholder in the event of an audit or review of Shareholder's
federal or state income tax return during any year in which the
Shareholder was required to report pass-through tax items from
Northwest or Specialties before the contribution of their stock
to GNA.
3. Indemnification for Additional Tax. In all events, and to the
extent not otherwise reimbursed, GNA, Northwest and Specialties
hereby agree that if any payment pursuant to this Section B is
deemed to be taxable income to a Shareholder, the amount of such
payment to the Shareholder shall be increased by an amount
necessary to equal the Shareholder's additional Tax Liability
related to such amount (including, without limitation any taxes
on such additional amounts) so that the net amount received and
retained by the Shareholder after payment by the Shareholder of
all taxes associated with the payment is equal to the payment
otherwise required to be made.
C. Payment. Any payment required to be made pursuant to this Agreement
shall be paid within seven days after receipt of written notice from
the Shareholder that a payment is due hereunder.
D. Miscellaneous. This Agreement shall be governed by Oregon law, without
regard to choice of law rules applied by Oregon courts. This Agreement
shall be binding on and shall inure to the benefit of successors and
assigns of the parties. Section headings shall not affect the
interpretation of this
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Agreement. This Agreement embodies the entire agreement of the parties
with respect to the subject matter contained herein. The parties
hereto agree to take all further actions necessary to effect the
agreements contained herein.
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GOLDEN NORTHWEST ALUMINUM, INC.
By GERALD F. MILLER
---------------------------------
Gerald F. Miller
Vice President and General Counsel
NORTHWEST ALUMINUM COMPANY
By GERALD F. MILLER
---------------------------------
Gerald F. Miller
Vice President and General Counsel
NORTHWEST ALUMINUM SPECIALTIES, INC.
By GERALD F. MILLER
---------------------------------
Gerald F. Miller
Vice President and General Counsel
BRETT E. WILCOX
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Brett E. Wilcox
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