Exhibit 10.2
TAX INDEMNIFICATION AGREEMENT
between
Tyco International Ltd.
and
TyCom Ltd.
TAX INDEMNIFICATION AGREEMENT
This Agreement is entered into as of the [ ]th day of [ ] between Tyco
International Ltd. ("Tyco"), a Bermuda corporation, and TyCom Ltd. ("TyCom"), a
Bermuda corporation.
R E C I T A L S:
WHEREAS, Tyco intends to cause TyCom to make a public offering of its
common shares (the "Public Offering"), with Tyco owning greater than 90% of
TyCom's common shares immediately after the offering;
WHEREAS, prior to and in connection with the Public Offering, Tyco Group
will transfer to TyCom Group all of the common stock of certain of Tyco's
subsidiaries (the "Reorganization"), which subsidiaries will become wholly-owned
subsidiaries of TyCom; and
WHEREAS, Tyco has agreed to indemnify TyCom for all income taxes of the
TyCom Group (as defined below) for tax periods (or portions thereof) ending on
or prior to the Offering Date (below);
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the parties agree as follows:
1. Definitions
(a) As used in this Agreement:
"Final Determination" shall mean (i) with respect to U.S. federal
income taxes, a "determination" as defined in Section 1313 (a) of the Code
or execution of an Internal Revenue Service Form 870AD and, with respect to
Income Taxes other than U.S. federal income taxes, any final determination
of liability in respect of a tax that, under applicable law, is not subject
to further appeal, review or modification through proceedings or otherwise,
(ii) any final disposition of a tax issue by reason of the expiration of a
statute of limitations or (iii) the payment of tax by Tyco Group with
respect to any item disallowed or adjusted by any taxing authority where
Tyco Group determines in good faith that no action should be taken to
recoup such payment.
"Income Tax" shall mean any income, franchise or similar tax imposed
by any U.S., non-U.S., state or local taxing jurisdiction, together with
all penalties, fines, additions to tax and interest imposed with respect
thereto.
"Offering Date" shall mean the date on which the Public Offering
closes.
"Post-Offering Tax Period" means (i) any tax period beginning and
ending after the Offering Date and (ii) with respect to a tax period that
begins before and
ends after the Offering Date, such portion of the tax period that
commences on the day immediately after the Offering Date.
"Pre-Offering Tax Period" means (i) any tax period beginning and
ending before or on the Offering Date and (ii) with respect to a period
that begins before and ends after the Offering Date, such portion of the
tax period ending on and including the Offering Date.
"Public Offering" shall have the meaning set forth in the recitals
hereto.
"Reorganization" shall have the meaning set forth in the recitals
hereto.
"Return" shall mean any tax return, statement, report or form
(including estimated tax returns and reports, extension requests and forms,
and information returns and reports) required to be filed with any taxing
authority.
"Tax Asset" shall mean any net operating loss, net capital loss,
investment tax credit, foreign tax credit, charitable deduction or any
other credit or tax attribute that could be carried forward or back to
reduce taxes (including without limitation deductions and credits related
to alternative minimum taxes).
"Tax Proceeding" shall mean any tax audit, dispute or proceeding
(whether administrative or judicial).
"Tyco Group" shall mean, at any time, Tyco and each of its direct and
indirect corporate subsidiaries other than those subsidiaries that are
members of the TyCom Group.
"TyCom Group" shall mean TyCom and each of its direct and indirect
corporate subsidiaries acquired from Tyco Group in the Reorganization.
(b) Any term used in this Agreement which is not defined in this
Agreement shall, to the extent the context requires, have the meaning
assigned to it in the Code or the applicable Treasury regulations
thereunder or in comparable provisions of applicable law.
2. Indemnity.
(a) Tyco Indemnity. Tyco hereby indemnifies TyCom and the members of
the TyCom Group against and hold them harmless from:
(i) all liability for Income Taxes of any member of the TyCom
Group attributable to any Pre-Offering Tax Period to the extent in
excess of Income Taxes previously paid or accrued as an expense with
respect to such Pre-Offering Tax Period; and
(ii) all liabilities, costs, expenses (including, without
limitation, reasonable expenses of investigation and attorneys' fees
and expenses),
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losses, damages, assessments, settlements or judgments arising out of
or incident to the imposition, assessment or assertion of any
liability or damage described in (i) including those incurred in the
contest in good faith in appropriate proceedings relating to the
imposition, assessment or assertion of any such tax, liability or
damage.
(b) Tax Benefits. If an indemnification obligation of Tyco under this
Section 2 arises in respect of an adjustment that makes allowable to a
member of the TyCom Group any deduction, amortization, exclusion from
income or other allowance (a "Tax Benefit") which would not, but for such
adjustment, be allowable, then any payment by Tyco pursuant to this Section
2 shall be an amount equal to (X) the amount otherwise due but for this
subsection (b), minus (Y) the present value (determined using an
appropriate discount rate determined by Tyco) of the product of the Tax
Benefit multiplied (i) by the maximum federal, foreign or state, as the
case may be, corporate tax rate in effect at the time such Tax Benefit
becomes allowable to a member of the TyCom Group or (ii) in the case of a
credit, by 100 percent.
3. Straddle Periods
In the case of any tax period of a member of the TyCom Group that
begins before and ends after the Offering Date (a "Straddle Period"),
Income Taxes for the Pre-Offering Tax Period with respect to such tax
period shall be computed as if such tax period ended as of the close of
business on the Offering Date.
4. Sole Agreement.
Any and all existing tax sharing or indemnity agreements or
arrangements, written or unwritten, between any member of Tyco Group and
any member of the TyCom Group shall be terminated as of the effective date
of this Agreement to the extent that such agreement or arrangement relates
to Income Taxes. As of the date of this Agreement, neither the members of
the TyCom Group nor the members of Tyco Group shall have any further rights
or liabilities with respect to Income Taxes thereunder, and this Agreement
shall be the sole agreement between the members.
5. Communication and Cooperation.
TyCom shall consult and cooperate (and shall cause each member of the
TyCom Group to cooperate) with Tyco fully at such time and to the extent
reasonably requested by Tyco in connection with all matters subject to this
Agreement.
6. Audits and Contest.
(a) Notwithstanding anything in this Agreement to the contrary, Tyco
shall have full control over all matters relating to any Income Tax return
or any Income Tax Proceeding relating to (i) any Income Tax matters of the
Tyco Group,
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and (ii) any Income Tax matters of the TyCom Group relating to a
Pre-Offering Tax Period. Tyco shall have absolute discretion with respect
to any decisions to be made, or the nature of any action to be taken, with
respect to any matter described in the preceding sentence.
(b) No settlement of any Income Tax Proceeding relating to any matter
that would cause a payment obligation under Section 2(a) shall be accepted
or entered into by or on behalf of TyCom or any member of the TyCom Group
unless Tyco consents thereto in writing (which consent shall not be
unreasonably withheld).
(c) TyCom agrees to give prompt notice to Tyco of the assertion of any
claim, or the commencement of any suit, action or proceeding in respect of
which indemnity may be sought hereunder.
7. Notices.
Any notice, demand, claim, or other communication under this Agreement
shall be in writing and shall be deemed to have been given upon the
delivery or mailing thereof, as the case may be, if delivered personally or
sent by certified mail, return receipt requested, postage prepaid, to the
parties at the following addresses (or at such other address as a party may
specify by notice to the other):
If to Tyco, to:
The Zurich Centre, Second Floor,
90 Xxxxx Bay Road
Pembroke HM 08, Bermuda
Attn: Secretary
If to TyCom, to:
The Zurich Centre, Second Floor,
Suite 201
90 Xxxxx Bay Road
Pembroke HM 08, Bermuda
Attn: Secretary
8. Effectiveness; Termination and Survival.
This Agreement shall become effective upon the consummation of the
Offering. All rights and obligations arising hereunder with respect to a
Pre-Offering Tax Period shall survive until they are fully effectuated or
performed and, provided, further, that notwithstanding anything in this
Agreement to the contrary, this Agreement shall remain in effect and its
provisions shall survive for
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the full period of all applicable statutes of limitation (giving effect to
any extension, waiver or mitigation thereof).
9. Amendments and Waivers.
No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver hereof nor shall any single
or partial exercise thereof preclude any other or further exercise thereof
or the exercise of any right, power or privilege. This Agreement shall not
be waived, amended or otherwise modified except by an instrument signed by
an authorized officer of each of Tyco and TyCom, or in the case of a
waiver, by the party against whom the waiver is to be effective.
10. Governing Law and Interpretation.
This Agreement has been made in and shall be construed and enforced in
accordance with the laws of the state of New York without giving effect to
laws and principles relating to conflicts of law.
11. Dispute Resolution.
If the parties hereto are unable to resolve any disagreement or
dispute relating to this Agreement within 20 days, such disagreement or
dispute shall be resolved by a recognized law firm or accounting firm
expert in tax matters in the relevant jurisdiction or that is mutually
acceptable to the parties hereto (a "Referee"). A Referee so chosen shall
resolve any such disagreement pursuant to such procedures as it may deem
advisable. Any such resolution shall be binding on the parties hereto
without further recourse. Except as otherwise provided herein, the costs of
any Referee shall be apportioned between Tyco and TyCom as determined by
such Referee in such manner as the Referee deems reasonable, taking into
account the circumstances of the dispute, the conduct of the parties and
the result of the dispute.
12. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall
constitute one and the same Agreement.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the day and year first written above.
TYCO INTERNATIONAL LTD.
By: ______________________
Title: ___________________
TYCOM LTD.
By: ______________________
Title: ___________________
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