EXECUTION COPY
TAX COOPERATION AGREEMENT
Agreement (the "Agreement") by and between The Xxxxxxxx Companies,
Inc., a Delaware corporation ("Xxxxxxxx"), and Xxxxxxxx Communications Group,
Inc. a Delaware corporation ("Communications") entered into as of the 30th day
of September, 1999, amended and restated as of the 23rd day of April 2001, and
as entered into on the 26th day of July, 2002, to be effective and amended,
restated and renamed as of the date on which the first amended Joint Chapter 11
Plan of Reorganization with respect to Communications and CG Austria, Inc., a
Delaware corporation, dated as of the 26th day of July, 2002, is consummated and
becomes effective and binding in all material respects (the "Effective Date").
RECITALS
Xxxxxxxx and Communications entered into a tax sharing agreement dated
September 30, 1999 (the "Tax Sharing Agreement") to allocate and settle among
themselves the consolidated Federal income tax liabilities of the TWC Group (as
hereinafter defined), the unitary, combined, consolidated or similar state
income tax liabilities of the parties and, if and as determined by Xxxxxxxx,
certain other tax liabilities.
On April 23, 2001, Xxxxxxxx distributed most of the stock of
Communications owned by Xxxxxxxx to Xxxxxxxx' public shareholders (the
"Spin-off"). Also on April 23, 2001, Xxxxxxxx and Communications amended and
restated the Tax Sharing Agreement.
Xxxxxxxx and Communications wish to amend, restate and rename the Tax
Sharing Agreement and execute this Agreement which will, as of the Effective
Date, supersede the Tax Sharing Agreement and be the sole governing agreement
between Xxxxxxxx and Communications to allocate and settle among themselves the
consolidated Federal income tax liabilities of the TWC Group, the unitary,
combined, consolidated or similar state income tax liabilities of the parties
and certain other tax liabilities arising prior to or after the Spin-off and to
provide procedures with respect to such tax matters.
AGREEMENTS
Accordingly, the parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
The defined terms used in this Agreement shall, except as otherwise
expressly provided or unless the context otherwise requires, have the meanings
specified in this Article I. The singular shall include the plural and masculine
gender shall include the feminine, the neuter and vice versa, as the context
requires.
"Code" means the Internal Revenue Code of 1986, as amended.
"Final Determination" means an IRS Form 870 or 870AD that reflects an
adjustment to any item (or a component of an item) shown on a Tax return
(whether or not such adjustment results in a deficiency in Taxes) and any
similar state, local or foreign form, a closing agreement or an accepted offer
in compromise with the IRS (or appropriate state, local or foreign taxing
authority) or any other adjustment to any item to which the taxpayer concedes
(including, but not limited to, the filing of an amended return upon which the
taxpayer adjusts an item in the favor of the IRS (or the appropriate state,
local or foreign taxing authority)) or as to which the period of limitations has
expired (whether or not such adjustment results in a deficiency in Taxes), a
claim for refund that has been allowed, a deficiency notice with respect to
which the period for filing a petition with the Tax Court has expired, or a
decision of any court of competent jurisdiction that is not subject to appeal or
the time for appeal of which has expired.
"IPO Date" means October 1, 1999 (the date of the initial public
offering of stock of Communications).
"IRS" means the Internal Revenue Service.
"Post-IPO Date / Pre-Spin-off WCG Attribute" means any operating loss
or loss or credit carryover or similar attribute of WCG attributable to dates
beginning on the IPO Date and ending on the Spin-off Date (including the portion
of the taxable year beginning on January 1, 2001 and ending on the Spin-off
Date). If an amended return is filed or there is any change by Final
Determination to an operating loss or loss or credit carryover or similar
attribute of WCG (or items giving rise to such operating loss or loss or credit
carryover or similar attribute of WCG), Xxxxxxxx shall allocate such changes in
the operating loss or loss or credit carryover or similar attribute of WCG
(and/or reallocate any previously allocated operating loss or loss or credit
carryover or similar attribute of WCG that is affected by a change in items
giving rise to such operating loss or loss or credit carryover or similar
attribute of WCG) between Xxxxxxxx and WCG pursuant to the following method: (i)
if the item (that caused the adjustment) has been previously allocated between
Xxxxxxxx and WCG on a Federal income tax return or on Exhibit A, the change to
such item shall be allocated in the same manner such item was allocated on the
most recently filed Federal income tax return, or if such item has not been
allocated on such return, in the same manner such item was allocated on Exhibit
A; (ii) if (i) does not apply, to the extent that such item clearly relates to
the income, assets or operations of Xxxxxxxx (or non-WCG members of the TWC
Group), the change to such item shall be allocated to Xxxxxxxx and to the extent
that the item clearly relates to the income, assets or operations of WCG, the
change to such item shall be allocated to WCG; (iii) if neither (i) nor (ii)
apply, then the change to such item shall be allocated pro-rata according to the
most relevant measure for such item, unless Xxxxxxxx and WCG otherwise agree
that another allocation method would be more equitable. If such item is an
adjustment with respect to the 1999 taxable year, such item shall first be
allocated to periods before and after the IPO Date as provided below in the
definition of Pre-IPO Date WCG Attribute.
"Pre-IPO Date WCG Attribute" means any operating loss or loss or credit
carryover or similar attribute of WCG attributable to dates preceding the IPO
Date (including the portion of the 1999 taxable year beginning on January 1,
1999 and ending on the day preceding the IPO Date). Any operating loss or loss
or credit carryover or similar attribute of WCG attributable to a taxable year
ending in or before 1998 shall be a Pre-IPO Date WCG Attribute notwithstanding
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any changes to such items resulting from an amended return or a Final
Determination. The Pre-IPO Date WCG Attributes (and items giving rise to such
attributes) attributable to the taxable year 1999 initially shall be based on
the total amount of operating loss or loss or credit carryovers or similar
attribute of WCG set forth in the latest (regular or amended) TWC Group
consolidated 1999 Federal income tax return that is filed prior to the Spin-off
Date or, if not so set forth, then as set forth on Exhibit B. If an amended
return is filed or there is any change by Final Determination to an operating
loss or loss or credit carryover or similar attribute of WCG (or items giving
rise to such operating loss or loss or credit carryover or similar attribute of
WCG) for the taxable year 1999, Xxxxxxxx shall first allocate such changes in
the operating loss or loss or credit carryover or similar attribute of WCG
(and/or reallocate any previously allocated operating loss or loss or credit
carryover or similar attribute of WCG that is affected by a change in items
giving rise to such operating loss or loss or credit carryover or similar
attribute of WCG) to periods before and after the IPO Date, and (if such
attribute is allocated to a date after the IPO Date) between Xxxxxxxx and WCG
pursuant to the following method: (i) if the item (that caused the adjustment)
has been previously allocated between Xxxxxxxx and WCG on the TWC Group
consolidated 1999 Federal income tax return or on Exhibit B, the change to such
item shall be allocated in the same manner such item was allocated on the latest
(regular or amended) TWC Group consolidated 1999 Federal income tax return, or
if such item has not been allocated on such return, in the same manner such item
was allocated on Exhibit B; (ii) if (i) does not apply, (a) for allocations of
items to periods before and after the IPO Date, to the extent that such item
clearly relates to periods prior to the IPO Date, the change to such item shall
be allocated to the period prior to the IPO Date, and to the extent that such
item clearly relates to periods after the IPO Date, the change to such item
shall be allocated to the period after the IPO Date and (b) for allocations of
items between Xxxxxxxx and WCG, to the extent that the item clearly relates the
income, assets or operations of Xxxxxxxx, the change to such item shall be
allocated to Xxxxxxxx, and to the extent that the item clearly relates the
income, assets or operations of WCG, the change to such item shall be allocated
to WCG; (iii) if neither (i) nor (ii) apply, then such item shall be allocated
pro-rata according to the most relevant measure for such item, unless Xxxxxxxx
and WCG otherwise agree that another allocation method would be more equitable.
"Spin-off Date" means April 23, 2001.
"Taxes" means all taxes, assessments, charges, duties, fees, levies or
other governmental charges, including, without limitation, all Federal, state,
local, foreign and other income, franchise, profits, capital gains, capital
stock, transfer, sales, use, occupation, property, excise, severance, windfall
profits, stamp, license, payroll, withholding and other taxes, assessments,
charges, duties, fees, levies or other governmental charges of any kind
whatsoever (whether payable directly or by withholding and whether or not
requiring the filing of a return), all estimated taxes, deficiency assessments,
additions to tax, penalties and interest and shall include any liability for
such amounts as a result either of being a member of a combined, consolidated,
unitary or affiliated group or of a contractual obligation to indemnify any
person or other entity.
"TWC Group" means Xxxxxxxx and other corporations (whether existing or
hereafter formed or acquired) that at the time would be entitled or required to
join with Xxxxxxxx in filing a consolidated Federal income tax return.
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"WCG" means the group of corporations consisting of Communications and
all members of the TWC Group owned, directly or indirectly and in whole or in
part, by Communications (but shall not include Xxxxxxxx or any other corporation
in the TWC Group in which a member of the WCG does not directly own a 5%
interest).
"WCG Loss Carryover" means any TWC Group consolidated loss (or other
similar attribute) attributable to Communications or such other member of WCG,
if any (as determined by Xxxxxxxx and Communications in accordance with any
permitted method under the consolidated return provisions of the Code and
Treasury Regulations thereunder) that became an attribute of Communications or
such other member of WCG after the Spin-off.
"WCG Credit Carryover" means any TWC Group consolidated credit
carryover (or other similar attribute) attributable to Communications or such
other member of WCG, if any (as determined by Xxxxxxxx and Communications in
accordance with any permitted method under the consolidated return provisions of
the Code and Treasury Regulations thereunder) that became an attribute of
Communications or such other member of WCG after the Spin-off.
ARTICLE II
PAYMENTS
Section 2.01 Tax Liability.
Xxxxxxxx and Communications have settled all payments with respect to
Taxes for all periods and no payments shall be required to be made by Xxxxxxxx
to Communications or by Communications to Xxxxxxxx with respect to Taxes for any
period; provided, however, that Xxxxxxxx hereby indemnifies Communications and
each corporation that is a member of WCG from and against any Taxes for which
Communications or any such WCG member has liability under Treasury Regulation
Section 1.1502-6 or any analogous provision of state, local or foreign law
relating to the membership of Communications or any such WCG member in the TWC
Group.
ARTICLE III
TAX MATTERS; COOPERATION
Section 3.01 Xxxxxxxx as Agent.
(a) General rule. Communications hereby irrevocably appoints Xxxxxxxx
as its agent, and Communications hereby agrees that Xxxxxxxx shall have sole and
absolute authority, for the purposes of preparing and filing consolidated
Federal income tax returns for the TWC Group (including, without limitation,
preparing and filing estimated tax returns, amended tax returns and claims for
refund, determining tax return positions, selecting methods of accounting and
making elections). Communications agrees that Xxxxxxxx (acting reasonably and
with an obligation to consider suggestions by Communications) shall: (i) (A)
represent any member of WCG that is a member of the TWC Group with respect to
any consolidated Federal income tax audit or consolidated Federal income tax
controversy (including, without limitation, any proceeding with the IRS and any
judicial proceedings, whether any such proceedings relate to a
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claim for additional taxes or a claim for refund of taxes), (B) settle or
compromise any claim for additional, or any claim for refund of, Federal income
taxes of any member of WCG that is a member of the TWC Group, and (C) direct all
communications between the IRS and any employee of a member of WCG that is a
member of the TWC Group with respect to any issue that could affect an item
reflected on the consolidated Federal income tax return of the TWC Group; (ii)
engage outside counsel, accountants and other experts with respect to Federal
income tax matters relating to any member of WCG that is a member of the TWC
Group; and (iii) take any other action in connection with Federal income tax
matters relating to any member of WCG that is a member of the TWC Group (or
relating to any other member of the TWC Group) as Xxxxxxxx determines to be
necessary or appropriate. Communications agrees that no employee of WCG or any
of its member companies will provide any information (whether written or oral)
to the IRS that could affect an item reflected on the consolidated Federal
income tax return of the TWC Group, except at the direction of Xxxxxxxx.
(b) Exceptions for certain matters affecting Communications.
Notwithstanding (a), the following exceptions shall apply to the general rule
set forth in (a) if there is an audit or any proposed adjustment that could
reduce either: (i) a WCG Loss Carryover or (ii) a WCG Credit Carryover (a
"Communications Tax Matter"):
(i) Xxxxxxxx shall promptly give Communications notice of the
commencement of a Communications Tax Matter, and Xxxxxxxx shall inform
Communications of the status of, and any material discussion or provision of
material information by Xxxxxxxx with respect to, a Communications Tax Matter.
In addition, Communications shall have the right to provide documentation to an
IRS agent and present an argument to an IRS agent supporting a position that is
consistent with the positions taken by Xxxxxxxx with respect to such audit;
provided, however, that Xxxxxxxx shall have full rights to control the audit and
all presentations to an IRS agent and to be present during any presentation by
Communications to the IRS.
(ii) Xxxxxxxx shall inform Communications of any formal conference with
Appeals regarding a Communications Tax Matter. To the extent feasible, Xxxxxxxx
shall provide copies to Communications of any written submissions to Appeals
that contain discussions of a Communications Tax Matter a reasonable period
prior to the submission of such written materials, and, to the extent feasible,
Xxxxxxxx agrees to consult with Communications in good faith regarding the legal
arguments raised in such submissions. Communications does not have the right to
be present or represented at appeals conferences, but Xxxxxxxx, at
Communications' request, will discuss with Communications what transpired at an
appeals conference regarding a Communications Tax Matter.
(iii) Xxxxxxxx shall not enter into a settlement regarding a
Communications Tax Matter without the consent of Communications, such consent
not to be unreasonably withheld or delayed.
(iv) If (a) Communications furnishes to Xxxxxxxx an opinion of
nationally recognized tax counsel that it is more likely than not that the IRS's
position regarding a Communications Tax Matter will not be sustained by a court,
and (b) Communications shall have acknowledged in writing its obligation to
indemnify Xxxxxxxx in the event the litigation is unsuccessful, Communications
can compel Xxxxxxxx to litigate a position, using counsel acceptable to both
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Communications and Xxxxxxxx, at Communications' expense. With respect to any
Communications Tax Matter that cannot be litigated or separated from any other
matter, Xxxxxxxx shall have the right to use its own counsel and such counsel
shall control the litigation (including making legal and strategic decisions and
making arguments in court), but Xxxxxxxx shall consider in good faith
suggestions and concerns raised by Communications' counsel regarding the
Communications Tax Matter, and, if reasonably feasible, Xxxxxxxx shall permit
Communications' counsel to control the legal arguments with respect to the
Communications Tax Matter.
Section 3.02 Cooperation. Communications shall cooperate with Xxxxxxxx,
and Xxxxxxxx shall cooperate with Communications, regarding the application of
all aspects of this Agreement (including, without limitation, the proper and
timely preparation and filing of any tax return to which this Agreement applies,
the calculation of basis and the conduct of any tax audit or tax controversy to
which this Agreement applies) (i) by maintaining such books, records, accounting
data and other information in its possession necessary for the preparation and
filing of all consolidated Federal income tax returns of the TWC Group for 10
years and by not disposing of any such books, records, accounting data and other
information after such 10-year period without first providing Xxxxxxxx or
Communications, as the case may be, with a 90-day opportunity to obtain such
books, records, accounting data and other information; (ii) by providing such
other information as requested by Xxxxxxxx or Communications, as the case may
be, (iii) by executing such documents and (iv) by taking any such other action
(including, without limitation, making any officers, directors, employees and
agents available to Xxxxxxxx or Communications, as the case may be), in each
such case as Xxxxxxxx or Communications, as the case may be, may request from
time to time. Communications or Xxxxxxxx, as the case may be, shall secure the
covenant of any acquirer of any member of WCG or Xxxxxxxx, as the case may be,
to comply with this Section 3.02 for the benefit of Xxxxxxxx and Xxxxxxxx'x
successors and assigns or for the benefit of Communications or Communications's
successor and assigns, as the case may be. For purposes of this section 3.02, in
addition to Communications's obligations pursuant to this section,
Communications shall cause WCG to comply with each obligation pursuant to this
section, and in addition to Xxxxxxxx'x obligations pursuant to this section,
Xxxxxxxx shall cause all non-WCG members of the TWC Group to comply with each
obligation pursuant to this section.
ARTICLE IV
STATE, LOCAL, FOREIGN AND OTHER FEDERAL TAXES
4.01 Xxxxxxxx and Communications have settled all payments with respect
to state, local, foreign and other federal Taxes for all periods and no payments
shall be required to be made by Xxxxxxxx to Communications or by Communications
to Xxxxxxxx with respect to such Taxes for any period.
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ARTICLE V
MISCELLANEOUS
Section 5.01 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either party
without the prior written consent of the other party, such consent not to be
unreasonably withheld or delayed.
Section 5.02 Expenses. Each party hereto will bear their own legal,
accounting and other expenses incurred by such party in connection with the
negotiation, preparation and execution of this Agreement and any other agreement
prepared in connection with the Spin-off and with respect to actions taken
pursuant to the operation of this Agreement and any other agreement executed in
connection with the Spin-off (unless otherwise provided in such other
agreement).
Section 5.03 Effect of Agreement. This Agreement shall determine the
rights and liabilities of the parties as to the matters provided for in this
Agreement, whether or not such determination is effective for financial
reporting or other purposes.
Section 5.04 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties in respect of the subject matter
contained in this Agreement and supersedes all prior or contemporaneous
agreements, promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any party or by any officer, employee
or representative of any party.
Section 5.05 Amendments and Waivers. This Agreement shall not be
modified, supplemented or terminated except by a writing duly signed by each of
the parties hereto, and no waiver of any provision of this Agreement shall be
effective unless in a writing duly signed by the party sought to be bound.
Section 5.06 Code References. Any references to Sections of the Code
shall be deemed to refer to any corresponding provisions of succeeding law as in
effect from time to time.
Section 5.07 Notices. Any notice, communication or approval required or
permitted to be given under this Agreement shall be deemed to have been duly
given if delivered by hand or deposited in the United States mail, postage
prepaid and sent by certified or registered mail, if addressed to Xxxxxxxx, at:
THE XXXXXXXX COMPANIES, INC.
XXX XXXXXXXX XXXXXX
XXXXX, XXXXXXXX 00000
ATTENTION: XXXX XXXXXXXX
if addressed to Communications, at:
XXXXXXXX COMMUNICATIONS GROUP, INC.
XXX XXXXXXXX XXXXXX
XXXXX, XXXXXXXX 00000
ATTENTION: XXXXX XXXXXXXX
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Section 5.08 Third Parties. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give to any person
other than the parties hereto any rights or remedies under or by reason of this
Agreement.
Section 5.09 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
principles of conflicts of law.
Section 5.10 Severability. If any provision of this Agreement or the
application of this Agreement in any circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of this
Agreement in any other circumstance shall not be affected thereby, the
provisions of this Agreement being severable in any such instance.
Section 5.11 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 5.12 Dispute Resolution. The parties agree that any dispute
arising under this Agreement shall be resolved in accordance with the Dispute
Resolution procedures set forth in the Amended and Restated Separation Agreement
made by and between Xxxxxxxx and Communications dated April 23, 2001.
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The parties hereto have caused this Agreement to be duly executed as of
the date first written above.
THE XXXXXXXX COMPANIES, INC.
BY: /s/ Xxxx X. XxXxxxxx
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ITS: Senior Vice President-Finance, Chief Financial
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Officer
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XXXXXXXX COMMUNICATIONS GROUP, INC.
BY: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------------
ITS: President & CEO
-------------------------------------------------
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Exhibit A
Allocation of Post-IPO Date / Pre-Spin-off WCG Attributes between
Xxxxxxxx and Communications
To the extent the preparation of such Exhibit A is necessary to provide
information in addition to the calendar year 1999 information reflected on
Exhibit B, Exhibit A is to be completed by Xxxxxxxx and Communications as soon
as practical following the filing of the Xxxxxxxx consolidated federal income
tax return for the calendar year 2001. Exhibit A will be prepared using methods
of accounting previously adopted by Xxxxxxxx and Communications and, as
necessary, the methodology utilized by Xxxxxxxx and Communications in the
completion of Exhibit B.
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