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EXHIBIT 2.2
TAX DISAFFILIATION AGREEMENT dated as of November 5, 1999, by
and between XXXXXX CORPORATION, a Delaware corporation ("Xxxxxx"), and XXXXXX
WORLDWIDE, INC., a Delaware corporation ("Xxxxxx").
RECITALS
X. Xxxxxx is a first tier subsidiary of Xxxxxx.
X. Xxxxxx is the common parent of an affiliated group of
corporations within the meaning of Section 1504(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), which currently files consolidated Federal
income Tax Returns.
C. Pursuant to the Agreement and Plan of Distribution dated
October 22, 1999 by and between Xxxxxx and Xxxxxx (the "Distribution
Agreement"), Xxxxxx will distribute to the holders of its Common Stock
approximately 90% of the outstanding shares of the Common Stock of Xxxxxx (the
"Distribution").
X. Xxxxxx and Xxxxxx intend that the Distribution will
qualify as a distribution described in Section 355 of the Code and will not
result in the recognition of any taxable gain or income to Xxxxxx, Xxxxxx or
any shareholder of Xxxxxx or Xxxxxx (except to the extent of cash received for
any fractional share interest in Xxxxxx stock and any deferred intercompany
gain).
E. From and after Date of the Distribution, Xxxxxx will cease
to be a member of the Xxxxxx affiliated group for Federal income tax purposes.
X. Xxxxxx and Xxxxxx desire on behalf of themselves, their
subsidiaries and their successors to set forth their rights and obligations
with respect to taxes due for periods before and after the Distribution.
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NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Article I
Definitions
For the purposes of this Agreement:
1.01 "Affiliate" shall mean any Person that directly or
indirectly through one or more intermediaries, Controls, is Controlled by, or
is under common Control with a specified Person.
1.02 "Agreement" shall mean this Tax Disaffiliation Agreement
dated November 5, 1999 between Xxxxxx and Xxxxxx as the same may be amended
from time to time.
1.03 "Applicable Federal Rate" shall have the meaning set
forth in Section 1274(d) of the Code, compounded quarterly.
1.04 "Claim" shall have the meaning set forth in Section
5.03(a).
1.05 "Code" shall have the meaning set forth in paragraph B
of the recitals.
1.06 "Control" or "Controlled" shall mean, with respect to
any Person, the presence of one of the following: (i) the legal, beneficial or
equitable ownership, directly or indirectly, of more than 50% (by vote or
value) of the capital or voting stock (or other ownership or voting interest,
if not a corporation) of such Person or (ii) the ability, directly or
indirectly, to direct the voting of a majority of the directors of such
Person's board of directors or, if the Person does not have a board of
directors, a majority of the positions on any similar body, whether through
appointment, voting agreement or otherwise.
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1.07 "Controlling Party" shall have the meaning set forth in
Section 5.01.
1.08 "Corporate Restructuring Transactions" shall have the
meaning set forth in the Distribution Agreement.
1.09 "Date of Distribution" shall mean the Distribution Date
specified in the Distribution Agreement.
1.10 "Distribution" shall have the meaning set forth in
paragraph C of the recitals.
1.11 "Distribution Agreement" shall have the meaning set
forth in paragraph C of the recitals.
1.12 "Final Determination" shall mean with respect to any
issue (a) a decision, judgment, decree or other order by any court of competent
jurisdiction, which decision, judgment, decree or other order has become final
and not subject to further appeal, (b) a closing agreement whether or not
entered into under Section 7121 of the Code or any other binding settlement
agreement (whether or not with the Internal Revenue Service) entered into in
connection with or in contemplation of an administrative or judicial
proceeding, or (c) the completion of the highest level of administrative
proceedings if a judicial contest is not or is no longer available.
1.13 "Fiscal Year 1999" shall mean the period beginning July
4, 1998 and ending July 2, 1999.
1.14 "Fiscal Year 2000" shall mean the period beginning July
3, 1999 and ending July 1, 2000.
1.15 "Fiscal Year 2000 Stub Period" shall mean the period
beginning July 3, 1999 and ending on or after the Date of Distribution.
1.16 "Form 10" shall mean the registration statement
(including the related information statement) relating to the spinoff of Xxxxxx
Worldwide, Inc. from
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Xxxxxx Corporation on Form 10, as made effective by the Securities and Exchange
Commission.
1.17 "Xxxxxx" shall have the meaning set forth in the
preamble to this Agreement.
1.18 "Xxxxxx Group" shall mean, for any period, Xxxxxx and
its then Subsidiaries other than members of the Xxxxxx Group as hereinafter
defined, and shall also mean the historical activities of Xxxxxx previously
carried on by other Xxxxxx Subsidiaries.
1.19 "Xxxxxx Tainting Act" shall mean (a) any breach of any
written representation or covenant relating to the qualification of the
Distribution as a distribution described in Section 355 of the Code which is
given by Xxxxxx in connection with the tax opinion of Xxxxxxxx & Xxxxxxxx
described beginning on Page 17 of Form 10, or (b) any action or actions of or
involving any Person (other than Xxxxxx or any Person that is an Affiliate of
Xxxxxx immediately before or immediately after such action or actions), or any
omission or omissions of any Person (other than Xxxxxx or any Person that is an
Affiliate of Xxxxxx immediately before or immediately after such omission or
omissions), of an action or actions available to it, after the Date of the
Distribution, if such breach, action or omission described in (a) or (b)
contributes to a Final Determination that the Distribution results in the
recognition of gain to Xxxxxx by virtue of (i) the Distribution failing to
qualify as a distribution described in Section 355 of the Code, (ii) any stock
or securities of Xxxxxx failing to qualify as "qualified property" within the
meaning of Section 355(c)(2) of the Code, or (iii) the application of Section
355(e) of the Code to the Distribution.
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1.20 "Indemnitor" shall have the meaning set forth in Section
5.02.
1.21 "IRS" shall have the meaning set forth in Section
5.03(a).
1.22 "Xxxxxx" shall have the meaning set forth in the
preamble to this Agreement.
1.23 "Xxxxxx Group" shall mean, for any period, Xxxxxx and
its then Subsidiaries (if any), and shall also mean the historical activities
of Xxxxxx previously carried on by other Xxxxxx Subsidiaries.
1.24 "Xxxxxx Tainting Act" means (a) any breach of any
written representation or covenant relating to the qualification of the
Distribution as a distribution described in Section 355 of the Code which is
given by Xxxxxx in connection with the tax opinion of Xxxxxxxx & Xxxxxxxx
described beginning on page 17 of Form 10, or (b) any action or actions of or
involving any Person (other than Xxxxxx or any Person that is an Affiliate of
Xxxxxx immediately before or immediately after such action or actions), or any
omission or omissions of any Person (other than Xxxxxx or any Person that is an
Affiliate of Xxxxxx immediately before or immediately after such omission or
omissions), of an action or actions available to it, after the Date of
Distribution, if such breach, action or omission described in (a) or (b)
contributes to a Final Determination that the Distribution results in the
recognition of gain to Xxxxxx by virtue of (i) the Distribution failing to
qualify as a distribution described in Section 355 of the Code, (ii) any stock
or securities of Xxxxxx failing to qualify as "qualified property" within the
meaning of Section 355(c)(2) of the Code, or (iii) the application of Section
355(e) of the Code to the Distribution.
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1.25 "Period After Distribution" shall mean any taxable year
or other taxable period beginning on or after the Date of Distribution and, in
the case of any taxable year or other taxable period that begins before and
ends after the Date of Distribution, that part of the taxable year or other
taxable period that begins after the close of the Date of Distribution.
1.26 "Period Before Distribution" shall mean any taxable year
or other taxable period that ends on or before the Date of Distribution and, in
the case of any taxable year or other taxable period that begins before and
ends after the Date of Distribution, that part of the taxable year or other
taxable period through the close of the Date of Distribution.
1.27 "Person" shall mean any individual, partnership, joint
venture, corporation, limited liability company, trust, unincorporated
organization, government or department or agency of a government.
1.28 "Restructuring Taxes" means any taxes resulting from the
Corporate Restructuring Transactions, including, but not limited to, any taxes
imposed pursuant to or as a result of Section 311 of the Code or Section
1.1502-13 of the Treasury Regulations (and any applicable similar federal,
state, local or foreign taxes, together with related interest, penalties and
additions to tax), but excluding any taxes imposed as a result of a Final
Determination that the Distribution failed to meet the requirements of Section
355 of the Code for nonrecognition of gain by Xxxxxx.
1.29 "Subsidiary" shall mean a corporation, limited liability
company, partnership, joint venture or other business entity if 50% or more of
the outstanding equity or voting power of such entity is owned directly or
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indirectly by the corporation with respect to which such term is used. In
determining whether a Subsidiary is a Subsidiary of Xxxxxx or Xxxxxx for any
period, Lanier shall not be a Subsidiary of Xxxxxx and any Subsidiary of Xxxxxx
and any Subsidiary of Xxxxxx which is engaged in a Xxxxxx business shall be a
Subsidiary of Xxxxxx, not Xxxxxx, for such period.
1.30 "tax" or "taxes" whether used in the form of a noun or
adjective, shall mean all forms of taxation, whenever created or imposed,
including, but not limited to, taxes on or measured by income, franchise, gross
receipts, sales, use, excise, payroll, personal property (tangible or
intangible), real property, ad-valorem, value-added, leasing, leasing use or
other taxes, levies, imposts, duties, charges or withholdings of any nature
whether imposed by a nation, locality, municipality, government, state,
federation, or other governmental body (a "Taxing Authority"). Whenever the
term "tax" or "taxes" is used (including, without limitation, in the context of
any duty to reimburse another party or indemnify for taxes or refunds or
credits of taxes) it shall include penalties, fines, additions to tax and
interest thereon.
1.31 "Taxing Authority" shall have the meaning set forth in
Section 1.30.
1.32 "Tax Returns" shall mean all reports, returns,
information statements, questionnaires or other documents required to be filed
or that may be filed for any period with any Taxing Authority (whether domestic
or foreign) in connection with any tax or taxes (whether domestic or foreign).
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Article II
Tax Returns, Tax Payments and Tax Sharing Obligations
2.01 Obligations to File Tax Returns. Xxxxxx shall timely
file or cause to be filed all Tax Returns with respect to the Xxxxxx Group that
(a) are required to be filed and are due before the Date of Distribution or (b)
are for either Fiscal Year 1999 or the Fiscal Year 2000 Stub Period, and are
filed on a consolidated, combined or unitary basis and include Xxxxxx or any of
its Subsidiaries with Xxxxxx or any of its Subsidiaries. Xxxxxx shall timely
file or cause to be timely filed any other Tax Return with respect to the
Xxxxxx Group.
2.02 Obligation to Remit Taxes. Xxxxxx and Xxxxxx shall each
remit or cause to be remitted any taxes due in respect of any tax for which it
is required to file a Tax Return and shall be entitled to reimbursement for
such payments only to the extent provided in Section 2.03.
2.03 Tax Sharing Obligations and Prior Agreements. (a) Other
than liabilities dealt with elsewhere in this Agreement, Xxxxxx shall be liable
for and shall indemnify and hold the Xxxxxx Group harmless against (i) any tax
liability of the Xxxxxx Group for any Period After Distribution, (ii) any tax
liability of the Xxxxxx Group for both Fiscal Year 1999 and the taxable year or
period that begins before and ends on or after the Date of Distribution in
respect of the Period Before Distribution, both determined in accordance with
the Xxxxxx Group's intergroup method of federal income tax allocation
determined under sections 1.1502-33(d) and 1.1552-1 of the income tax
regulations in a manner consistent with past practice, or any other allocation
methodology for taxes other than Federal income tax in a manner consistent with
past practice, (iii) any tax liability resulting from a Final
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Determination with respect to an adjustment attributable to any member of the
Xxxxxx Group for any Period Before Distribution, and (iv) any amount determined
to be Xxxxxx'x liability under Section 2.04. Xxxxxx shall be entitled to any
refund of or credit for taxes of the Xxxxxx Group or amounts owed by Xxxxxx or
for which Xxxxxx is responsible under this Section 2.03(a). Any liability for
taxes under this Section 2.03(a) shall be measured by the Xxxxxx Group's actual
liability for taxes after applying tax benefits otherwise available to the
Xxxxxx Group other than tax benefits that the Xxxxxx Group in good faith
determines would actually offset tax liabilities of the Xxxxxx Group in other
taxable years or periods. Any right to refund under this Section 2.03(a) shall
be measured by the actual refund or credit of the Xxxxxx Group attributable to
the adjustment without regard to offsetting tax attributes or liabilities of
the Xxxxxx Group.
(b) Other than liabilities dealt with elsewhere in this
Agreement, Xxxxxx shall be liable for and shall hold the Xxxxxx Group harmless
against (i) any liability attributable to any member of the Xxxxxx Group for
taxes regardless of whether attributable to a Period Before Distribution or a
Period After Distribution, including any liability asserted against any member
of the Xxxxxx Group under the provisions of Treas. Regs. s. 1.1502-6(a) that
impose several liability on members of an affiliated group of corporations that
files consolidated returns, or similar provisions of any foreign, state or
local law, in respect of taxes of any member of the Xxxxxx Group, and (ii) any
amount determined to be Xxxxxx' liability under Section 2.04. Xxxxxx shall be
entitled to any refund of or credit for taxes for any periods that are
attributable to the Xxxxxx
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Group or amounts owed by Xxxxxx or for which Xxxxxx is responsible under this
Section 2.03(b).
(c) Except as set forth in this Section 2.03 and in
consideration of the mutual indemnities and other obligations of this
Agreement, any and all prior tax sharing agreements or practices between any
member of the Xxxxxx Group and any member of the Xxxxxx Group shall be
terminated with respect to the Xxxxxx Group as of the Date of Distribution.
2.04 Restructuring Taxes; Other Taxes Relating to the
Distribution. (a) Generally. Notwithstanding any other provision of this
Agreement to the contrary, Xxxxxx shall pay, and shall indemnify and hold
harmless Xxxxxx and any member of the Xxxxxx Group from and against any and all
Restructuring Taxes and any reasonable expenses (including, but not limited to,
attorney's fees) incurred in defending any audit or examination with respect to
Restructuring Taxes. In the event of a Final Determination that the
Distribution failed to meet the requirements of Section 355 of the Code for
nonrecognition of gain by Xxxxxx (other than a Final Determination that the
Distribution failed to qualify for nonrecognition which determination would not
have been made but for a Xxxxxx Tainting Act or a Xxxxxx Tainting Act), the
liability of Xxxxxx and Xxxxxx for any Taxes arising from such Final
Determination and any liability to shareholders arising from such Final
Determination (together with any reasonable expense (including, but not limited
to, attorney's fees) incurred in defending against any liability) shall be
borne 50 percent by Xxxxxx and 50 percent by Lanier. If a Xxxxxx Tainting Act
and a Xxxxxx Tainting Act both contribute to such a Final Determination, any
such taxes or liability (together with any reasonable expense (including, but
not limited to,
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attorney's fees) incurred in defending against any liability) shall be borne 50
percent by Xxxxxx and 50 percent by Lanier.
(b) Indemnification for Xxxxxx Tainting Acts. Xxxxxx
covenants that neither Lanier nor any member of the Xxxxxx Group shall commit
or be party to or the subject of any Xxxxxx Tainting Act which would result in
any tax or liability described in the following sentence and payable by Xxxxxx.
To the extent that Xxxxxx would not have been liable for the following amounts
but for a Xxxxxx Tainting Act, Xxxxxx shall pay, and shall indemnify and hold
harmless Xxxxxx from and against, (i) any liability of Xxxxxx to any Taxing
Authority, Xxxxxx shareholders or Lanier shareholders (together with any
reasonable expenses (including, but not limited to, attorney's fees) incurred
in defending against any such liability) resulting from a Final Determination
that the Distribution failed to meet the requirements of Section 355 of the
Code for nonrecognition of gain by Xxxxxx, including, without limitation, by
reason of (x) any stock or securities of Xxxxxx failing to qualify as
"qualified property" within the meaning of Section 355(c)(2) of the Code or (y)
the application of Section 355(e) of the Code to the Distribution, and (ii) any
taxes and related expenses payable by Xxxxxx by reason of the receipt of such
payment.
(c) Indemnification for Xxxxxx Tainting Acts. Xxxxxx
covenants that neither Xxxxxx nor any member of the Xxxxxx Group shall commit
or be party to or the subject of any Xxxxxx Tainting Act which would result in
any tax or liability described in the following sentence and payable by Xxxxxx.
To the extent that Xxxxxx would not have been liable for the following amounts
but for a Xxxxxx Tainting Act, Xxxxxx shall pay, and shall indemnify and hold
harmless
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Xxxxxx from and against, (i) any liability of Xxxxxx to any Taxing Authority,
Xxxxxx shareholders or Lanier shareholders (together with any reasonable
expenses (including, but not limited to, attorney's fees) incurred in defending
against any such liability) resulting from a Final Determination that the
Distribution failed to meet the requirements of Section 355 of the Code for
nonrecognition of gain by Xxxxxx, including, without limitation, by reason of
(x) any stock or securities of Xxxxxx failing to qualify as "qualified
property" within the meaning of Section 355(c)(2) of the Code or (y) the
application of Section 355(e) of the Code to the Distribution, and (ii) any
taxes and related expenses payable by Xxxxxx by reason of the receipt of such
payment.
2.05 Period that Includes the Date of Distribution. (a) To
the extent permitted by law or administrative practice, the taxable year of the
Xxxxxx Group shall be treated as closing at the close of the Date of
Distribution.
(b) If it is necessary for purposes of this Agreement to
determine the income tax liability of any member of the Xxxxxx Group for a
taxable year that begins on or before and ends after the Date of the
Distribution and is not treated under Section 2.05(a) as closing at the close
of the Date of Distribution, the determination shall be made by assuming that
such member of the Xxxxxx Group had a taxable year that ended at the close of
the Date of Distribution, except that exemptions, allowances or deductions that
are calculated on an annual basis shall be apportioned on a time basis.
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Article III
Carrybacks, Distributions and Elections
3.01 Carrybacks. Any member of the Xxxxxx Group shall be
entitled to carry back any net operating loss or other item from a Period After
Distribution to a Period Before Distribution, except to the extent that Xxxxxx
determines in good faith that such action will cause an actual increase in the
taxes for which the Xxxxxx Group is responsible or will cause an actual
reduction in the amount of any refund of taxes payable to the Xxxxxx Group. Any
refund of taxes resulting from any such carryback by a member of the Xxxxxx
Group shall be payable to Xxxxxx as provided in Section 2.03(a).
3.02 Distributions and Elections. (a) No member of the Xxxxxx
Group shall make any tax election, pay or cause to be paid any distribution
from an Affiliate or take any other action that shall cause an actual increase
in the taxes for which the Xxxxxx Group is responsible or will cause an actual
reduction in the amount of any refund of taxes payable to the Xxxxxx Group.
(b) No member of the Xxxxxx Group shall make any tax
election, pay or cause to be paid any distribution from an Affiliate or take
any other action that shall cause an actual increase in the taxes for which the
Xxxxxx Group is responsible or will cause an actual reduction in the amount of
any refund of taxes payable to the Xxxxxx Group.
Article IV
Payments
4.01 Fiscal Year 2000 Stub Period and Fiscal Year 1999. (a)
Xxxxxx shall determine and Xxxxxx shall pay the final amount owed, if any,
under clause (ii) of Section 2.03(a) for the Fiscal Year 2000 Stub Period as
follows:
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(i) within sixty (60) days from the Date of Distribution, Xxxxxx shall provide
Xxxxxx with a Federal and State tax package (except that standard items such as
Internal Revenue Service Form 5471's, boycott information, FTC receipts and
Section 861 information may be provided within one hundred twenty (120) days
from the Date of Distribution) in the normal Xxxxxx format of its Fiscal Year
2000 Stub Period operating and nonoperating tax and financial results in
sufficient detail to enable Xxxxxx to compute Xxxxxx'x Fiscal Year 2000 Stub
Period tax liability; (ii) Xxxxxx will calculate in accordance with the
principles established in Section 2.03 and past practice an estimate of
Xxxxxx'x Fiscal Year 2000 Stub Period tax liability, offsetting such liability
by the amount, if any, determined to be owed to Xxxxxx for Fiscal Year 1999
pursuant to Section 4.01(b), to the extent payment has not already been
received by Xxxxxx for such overpayment pursuant to Section 4.01(b), and submit
the calculation to Xxxxxx within thirty (30) days after the date on which the
Federal and State tax package described in clause (i) of this Section 4.01(a)
is provided to Xxxxxx; (iii) Xxxxxx shall have the right to object in writing
to such calculation on or before sixty (60) days after the date on which the
Federal and State tax package described in clause (i) of this Section 4.01(a)
is provided to Xxxxxx, on the grounds that there is substantial authority that
such calculation is incorrect; provided that if Xxxxxx so objects, (i) Xxxxxx
and Xxxxxx shall promptly submit the dispute to an independent accounting or
law firm acceptable to both Xxxxxx and Xxxxxx for prompt resolution, whose
decision shall be final and binding on Xxxxxx and Xxxxxx, and (ii) the party
that such accounting or law firm determines has lost the dispute shall pay all
of the fees and expenses incurred in connection with submitting such
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dispute; (iv) Xxxxxx shall pay to Xxxxxx an amount equal to 80% of the amount
determined in clause (ii) of this Section 4.01(a) by March 15, 2000; (v) a
determination of the final amount owed, if any, under clause (ii) of this
Section 4.01(a) shall be made when the Xxxxxx Group's Fiscal Year 2000 Tax
Returns are filed and shall be paid within thirty (30) days from the date
Xxxxxx notifies Xxxxxx of any additional amounts due together with interest at
a rate equal to the Applicable Federal Rate from the date on which such Tax
Return is filed. Similarly, any refund owed Xxxxxx over the amount previously
determined and paid under clause (ii) of this Section 4.01(a) shall be refunded
by Xxxxxx within the same thirty (30) day period together with interest at a
rate equal to the Applicable Federal Rate from the date on which Xxxxxx
receives such refund; and (vi) any claims resulting from carrybacks, tax audits
or Final Determination shall be handled in the same manner as provided in
Articles V, VI, VII, and VIII.
(b) Xxxxxx shall determine and Xxxxxx shall pay the final
amount owed, if any, under clause (ii) of Section 2.03(a) for Fiscal Year 1999
as follows: (i) Xxxxxx shall provide Xxxxxx with a Federal and State tax
package, together with standard items such as Internal Revenue Service Form
5471's, boycott information, FTC receipts and Section 861 information in the
normal Xxxxxx format and according to the normal Xxxxxx schedule of its Fiscal
Year 1999 operating and nonoperating tax and financial results; (ii) Xxxxxx
shall prepare and file those Tax Returns in respect of Fiscal Year 1999 that it
is obligated to file pursuant to Section 2.01; (iii) Xxxxxx shall prepare a
reconciliation of the amounts Xxxxxx has paid either directly or indirectly
through inter-company charges in respect of the Xxxxxx Fiscal Year 1999
consolidated federal
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Tax Return or any other Tax Return in respect of Fiscal Year 1999 that Xxxxxx
is required to file pursuant to Section 2.01 to the calculation of the Xxxxxx
Group's final liability for Fiscal Year 1999 to be determined from such Tax
Returns in accordance with the principles established in Section 2.03(a) and
past practice, and shall provide such reconciliation to Xxxxxx within thirty
(30) days before the due date for filing the relevant Tax Return; (iv) Xxxxxx
shall have the right to object in writing to such reconciliation in accordance
with the principles established in Section 4.01(a)(iii) within fifteen (15)
days of delivery of the reconciliation; (v) if the reconciliation described in
clause (iii) of this Section 4.01(b) indicates that Xxxxxx owes Xxxxxx money,
Xxxxxx shall pay the balance to Xxxxxx within thirty (30) days of the delivery
of such reconciliation together with interest at a rate equal to the Applicable
Federal Rate from the date on which such Tax Return was filed. If the
reconciliation shows that Xxxxxx owes Xxxxxx money and Xxxxxx'x overpayment
cannot be applied to Xxxxxx'x Fiscal Year 2000 Stub Period tax liabilities
pursuant to Section 4.01(a)(ii), Xxxxxx shall pay such balance to Xxxxxx within
five (5) days of Xxxxxx' receipt of such balance from the relevant taxing
authority to the extent that a refund is due from the relevant taxing authority
(with no interest) and concurrently with delivery of the reconciliation to the
extent that no refund is due from the relevant taxing authority (together with
interest at a rate equal to the Applicable Federal Rate from the due date of
the Tax Return); and (vi) any claims resulting from carrybacks, tax audits or
Final Determination shall be handled in the same manner as provided in Articles
V, VI, VII and VIII.
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4.02 Other Payments. Other payments due to a party under
Section 2.03 shall be due not later than twenty (20) days after the receipt or
crediting of a refund or the receipt of notice of a Final Determination that
the indemnified party is liable for an indemnified cost, together with interest
at a rate equal to the Applicable Federal Rate from the date on which the
indemnifying party receives such receipt, credit or notice.
4.03 Notice. Xxxxxx and Xxxxxx shall give each other prompt
written notice of any payment that may be due under this Agreement.
Article V
Tax Audits
5.01 General. Except as provided in Sections 5.02 and 6.02,
each of Xxxxxx and Xxxxxx shall have sole responsibility for all audits or
other proceedings with respect to Tax Returns that it is required to file under
Section 2.01 (the "Controlling Party"). Except as provided in Section 5.03, the
Controlling Party shall have the sole right to contest the audit or proceeding
and to employ advisors of its choice.
5.02 Indemnified Claims in General. Xxxxxx or Xxxxxx shall
promptly notify the other in writing prior to the issuance of an actual notice
of assessment by the relevant Taxing Authority (for example, if by the Internal
Revenue Service, prior to the issuance of a Form 5701 Notice of Proposed
Adjustment) of any proposed adjustment to a Tax Return that may result in
liability of the other party (the "Indemnitor") under this Agreement. If the
Indemnitor is not also the Controlling Party, the Controlling Party shall
provide the Indemnitor with information about the nature and amounts of the
proposed adjustments and shall permit the other party to participate in the
proceeding at its own
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expense, provided, however, that the Controlling Party shall not be required to
indemnify the Indemnitor if the Controlling Party fails to notify or provide
such information to the Indemnitor, unless the Indemnitor is materially
prejudiced thereby. The Indemnitor shall pay all reasonable expenses
(including, but not limited to, legal and accounting fees) incurred by the
Controlling Party in connection with the assessment or adjustment within seven
(7) days after a written request by the Controlling Party.
5.03 Certain Federal Income Tax Claims. (a) Any issues raised
by the Internal Revenue Service ("IRS") in any tax inquiry, audit, examination,
investigation, dispute, litigation or other proceeding which would result in
federal income tax liability to the Indemnitor which in the aggregate would
equal or exceed $1,000,000 in any taxable year are defined as a Claim (a
"Claim"). Except as provided in Section 5.03(d) and notwithstanding any other
provision of this Agreement that may be construed to the contrary, the
Controlling Party agrees to contest any Claim and not to settle any Claim
without prior written consent of the Indemnitor, provided that (i) the
Controlling Party shall provide notice to Indemnitor pursuant to Section 5.02
of any Claim, (ii) within thirty (30) days after notice by the Controlling
Party to the Indemnitor of a Claim is received by the Indemnitor, the
Indemnitor shall request in writing that such Claim be contested, (iii) within
thirty (30) days after notice by the Controlling Party to the Indemnitor of
such Claim is received by the Indemnitor, the Indemnitor shall have provided an
opinion of independent tax counsel, selected by the Indemnitor and reasonably
acceptable to the Controlling Party, to the effect that it is more likely than
not that a Final Determination will be substantially consistent with the
Indemnitor's position relating to such
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Claim, (iv) the Indemnitor agrees to pay on demand and pays all out-of-pocket
costs, losses and expenses (including, but not limited to, legal and accounting
fees) paid or incurred by the Controlling Party in connection with contesting
such Claim, except for a Claim where the expenses are shared pursuant to
Section 2.04(a), and (v) the Controlling Party, after reasonable consultation
with the Indemnitor, shall determine in its sole discretion the nature of all
actions to be taken to contest such Claim, including (1) whether any action to
contest such Claim shall initially be by way of judicial or administrative
proceeding, or both, (2) whether any such Claim shall be contested by resisting
payment thereof or by paying the same and seeking a refund thereof, and (3) the
court or other judicial body before which judicial action, if any, shall be
commenced. To the extent the Indemnitor is not participating, the Controlling
Party shall keep the Indemnitor and, upon request by the Indemnitor, its
counsel informed as to the progress of the contest.
(b) If the Indemnitor requests that the Controlling Party
accept a settlement of a Claim offered by the IRS and if such Claim may, in the
reasonable discretion of the Controlling Party, be settled without prejudicing
any claims the IRS may have with respect to matters other than the transactions
contemplated by the Distribution Agreement, the Controlling Party shall either
accept such settlement offer or agree with the Indemnitor that the Indemnitor's
liability with respect to such Claim shall be limited to the lesser of (i) an
amount calculated on the basis of such settlement offer plus interest owed to
the IRS on the date of eventual payment or (ii) the amount calculated on the
basis of a Final Determination.
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(c) If the Controlling Party shall elect to pay the tax
claimed and seek a refund, the Indemnitor shall lend sufficient funds on an
interest-free basis to the Controlling Party, and with no net after-tax cost to
the Controlling Party, to cover any applicable indemnity obligations of the
Indemnitor. To the extent such refund claim is ultimately disallowed, the loan
or portion thereof equal to the amount of the refund claim so disallowed shall
be applied against the Indemnitor's obligation to make indemnity payments
pursuant to this Agreement. To the extent such refund claim is allowed, the
Controlling Party shall pay to the Indemnitor all amounts advanced to the
Controlling Party with respect to the indemnity obligation within ten (10) days
of the receipt of such refund (or if the Controlling Party would have received
such refund but for the existence of a counterclaim or other claim not
indemnified by the Indemnitor under this Agreement, within ten (10) days of the
final resolution of the contest), plus an amount equal to any interest received
(or that would have been received) from the IRS that is properly attributable
to such amount.
(d) Except as provided below, the Controlling Party shall not
settle a Claim that Indemnitor is entitled to require the Controlling Party to
contest under Section 5.03(a) without the prior written consent of the
Indemnitor. At any time, whether before or after commencing to take any action
pursuant to this Section 5.03 with respect to any Claim, the Controlling Party
may decline to take action with respect to such Claim and may settle such Claim
without the prior written consent of the Indemnitor by notifying the Indemnitor
in writing that the Indemnitor is released from its obligations to indemnify
the Controlling Party with respect to such Claim (which notification shall
release the
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Indemnitor from such obligations except to the extent the Indemnitor has agreed
in writing that it would be willing to have its liability calculated on the
basis of a settlement offer, as provided in Section 5.03(b), at that point in
the contest) and with respect to any Claim related to such Claim or based on
the outcome of such Claim. If the Controlling Party settles any Claim or
otherwise takes or declines to take any action pursuant to this paragraph, the
Controlling Party shall pay to the Indemnitor any amounts paid or advanced by
the Indemnitor with respect to such Claim (other than amounts payable by the
Indemnitor in connection with a settlement offer pursuant to Section 5.03(b)),
plus interest attributable to such amounts.
Article VI
Cooperation
6.01 General. Xxxxxx and Xxxxxx shall cooperate with each
other in the filing of any Tax Returns and the conduct of any audit or other
proceeding and each shall execute and deliver such powers of attorney and make
available such other documents as are reasonably necessary to carry out the
intent of this Agreement. Each party agrees to notify the other party in
writing of any audit adjustments which do not result in tax liability but can
be reasonably expected to affect Tax Returns of the other party, or any of its
Subsidiaries, for a Period After Distribution. Each party agrees to treat the
Distribution for all income tax purposes as not causing the recognition of any
gain or loss.
6.02 Cooperation With Respect to Tax Return Filings,
Examinations and Tax Related Controversies.
(a) Xxxxxx' Obligations. In addition to any obligations
imposed pursuant to the Distribution Agreement,
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Xxxxxx and each other member of the Xxxxxx Group shall fully cooperate with
Xxxxxx and its representatives, in a prompt and timely manner, in connection
with (i) the preparation and filing of and (ii) any inquiry, audit,
examination, investigation, dispute, or litigation involving, any Tax Return
filed or required to be filed by or for any member of the Xxxxxx Group for any
taxable period beginning on or before the Distribution Date. Such cooperation
shall include, but not be limited to, (x) the execution and delivery to Xxxxxx
by the appropriate Xxxxxx Group member of any power of attorney required to
allow Lanier and its counsel to represent Xxxxxx or such other Xxxxxx Group
member in any controversy which Lanier shall have the right to control pursuant
to the terms of Section 5.01 of this Agreement, (y) making available to Xxxxxx,
during normal business hours, and within sixty (60) days of any written request
therefor, all books, records and information, and the assistance of all
officers and employees, necessary or useful in connection with any tax inquiry,
audit, examination, investigation, dispute, litigation or any other matter, and
(z) use of its best efforts in defending Xxxxxx'x interests in any tax inquiry,
audit, examination, investigation, dispute, litigation or any other matter for
which Xxxxxx is the Controlling Party.
(b) Xxxxxx'x Obligations. Except as otherwise provided in
this Article VI, Xxxxxx shall fully cooperate with Xxxxxx and its
representatives, in a prompt and timely manner, in connection with (i) the
preparation and filing of and (ii) any inquiry, audit, examination,
investigation, dispute, or litigation involving, any Tax Return filed or
required to be filed by or for any member of the Xxxxxx Group which includes
Xxxxxx or any other member of the Xxxxxx Group. Such cooperation shall include,
but not be
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limited to, (x) the execution and delivery to Xxxxxx by Lanier of any power of
attorney required to allow Xxxxxx and its counsel to participate on behalf of
Xxxxxx or other Xxxxxx Group members in any inquiry, audit or other
administrative proceeding and to assume the defense or prosecution, as the case
may be, of any suit, action or proceeding pursuant to the terms of and subject
to the conditions set forth in Section 5.01 of this Agreement, (y) making
available to Xxxxxx, during normal business hours, and within sixty (60) days
of any written request therefor, all books, records and information, and the
assistance of all officers and employees, necessary or useful in connection
with any tax inquiry, audit, examination, investigation, dispute, litigation or
any other matter, and (z) the use of its best efforts in defending Xxxxxx'
interests in any tax inquiry, audit, examination, investigation, dispute,
litigation or other matter for which Xxxxxx is the Controlling Party.
(c) Remedy for Failure to Comply. If Xxxxxx reasonably
determines that Xxxxxx is not for any reason fulfilling its obligations under
Section 6.02(a), or if Xxxxxx reasonably determines that Xxxxxx is not for any
reason fulfilling its obligations under Section 6.02(b), then Xxxxxx or Xxxxxx,
as the case may be, shall have the right to appoint, at the expense of the
other, an independent entity such as a nationally-recognized public accounting
or law firm to assist the other in meeting its obligations under this Section
6.02. Such entity shall have complete access, during normal business hours to
all books, records and information, and the complete cooperation of all
officers and employees, of Xxxxxx or Xxxxxx, as the case may be. The remedy
provided in this Section 6.02(c) shall not be deemed exclusive.
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Article VII
Retention of Records; Access
The Xxxxxx Group and the Xxxxxx Group shall (a) in accordance
with their then current record retention policy, retain records, documents,
accounting data and other information (including computer data) necessary for
the preparation and filing of all Tax Returns in respect of taxes of the Xxxxxx
Group or the Xxxxxx Group for any Period Before Distribution or for the audit
of such Tax Returns; and (b) give to the other reasonable access to such
records, documents, accounting data and other information (including computer
data) and to its personnel (insuring their cooperation) and premises, for the
purpose of the review or audit of such Tax Returns to the extent relevant to an
obligation or liability of a party under this Agreement. At any time after the
Date of Distribution that the Xxxxxx Group proposes to destroy such material or
information, they shall first notify the Xxxxxx Group in writing and the Xxxxxx
Group shall be entitled to receive such materials or information proposed to be
destroyed.
Article VIII
Disputes
If Xxxxxx and Xxxxxx cannot agree on any calculation of any
liabilities under this Agreement, such calculation shall be made by any
independent public accounting firm acceptable to both Xxxxxx and Xxxxxx. The
decision of such firm shall be final and binding. The fees and expenses
incurred in connection with such calculation shall be borne by the party that
such independent public accounting firm determines has lost the dispute.
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Article IX
Termination of Liabilities
Notwithstanding any other provision in this Agreement, any
liabilities determined under this Agreement shall not terminate any earlier
than the expiration of the applicable statute of limitation for such liability.
All other covenants under this Agreement shall survive indefinitely.
Article X
Miscellaneous Provisions
Sections 7.3, 7.4, 7.6, 7.7, 7.8, 7.9, 7.10, 7.14, 7.16, 7.17
and 7.18 of the Distribution Agreement shall apply in relevant part to this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the day and year first above written.
XXXXXX CORPORATION
By /s/ Xxxxx X. Xxxxxxxxx
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President -
Treasurer
Witness: /s/ Xxxxx X. Xxxxxx
Name:Xxxxx X. Xxxxxx
XXXXXX WORLDWIDE, INC.
By /s/ Xxxxx X. XxxXxxxxx
Name: Xxxxx X. XxxXxxxxx
Title: Executive Vice
President and Chief
Financial Officer
Witness: /s/ J. Xxxxxxx Xxxxx
Name:J. Xxxxxxx Xxxxx
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