EXHIBIT 10.2
TAX DISAFFILIATION AGREEMENT
TAX DISAFFILIATION AGREEMENT dated as of ____________, 2003, by and
between F.N.B. CORPORATION ("Parent"), a Florida corporation, and FIRST
NATIONAL BANKSHARES OF FLORIDA, INC. ("SpinCo"), a Florida corporation.
RECITALS
WHEREAS, Parent 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"), and currently files consolidated federal
income tax returns;
WHEREAS, as reflected in the Agreement and Plan of Distribution (the
"Distribution Agreement") dated __________, 2003 by and between Parent and
SpinCo, Parent has formed SpinCo as a direct subsidiary;
WHEREAS, Parent will contribute to SpinCo certain assets held by
Parent and SpinCo will assume certain liabilities of Parent;
WHEREAS, following such contributions and assumptions and pursuant to
the Distribution Agreement, Parent shall distribute to its shareholders all of
the outstanding shares of stock of SpinCo on a pro rata basis (the
"Distribution");
WHEREAS, Parent and SpinCo intend that the Distribution will qualify
as a reorganization described in Sections 355 and 368 of the Code and will not
result in the recognition of any taxable gain or income to Parent, SpinCo or
any of their respective shareholders;
WHEREAS, from the day after the date of the Distribution forward,
SpinCo and its subsidiaries shall cease to be members of the Parent affiliated
group for all applicable tax purposes; and
WHEREAS, following the Distribution, the affiliated group of which
SpinCo is the common parent will file consolidated Tax Returns;
WHEREAS Parent and SpinCo desire on behalf of themselves, their
affiliates and their successors to set forth their rights and obligations with
respect to taxes due for periods before and after the Distribution.
NOW, THEREFORE, in consideration of the transactions recited above and
for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
For the purposes of this Agreement:
1.01 "45 Percent Interest" shall have the meaning ascribed to the
term "50-percent or greater interest" in Section 355(d)(4) of the Code,
substituting therein "45" each place "50" appears.
1.02 "45 Percent Threshold" shall have the meaning set forth in
Section 2.04(e)(iv).
1.03 "Affiliate" shall mean, when used with respect to any
specified Person, a Person that directly or indirectly controls, is controlled
by, or is under common control with such specified Person; provided, however,
that for purposes of this Agreement, a Person shall be deemed to be an
Affiliate only of the Group of which such Person is a member following the
Distribution. As used herein, "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities or
other interests, by contract or otherwise. Each of the Affiliates listed on
Exhibit A, attached hereto, shall be considered an Affiliate of Parent. Each of
the Affiliates listed on Exhibit B, attached hereto, shall be considered an
Affiliate of SpinCo. Any contrary provision of this Agreement notwithstanding,
neither Parent nor any Parent Affiliate shall be deemed to be an Affiliate of
SpinCo, and neither SpinCo nor any SpinCo Affiliate shall be deemed to be an
Affiliate of Parent.
1.04 "After Tax Basis" shall mean, with respect to any payment to
be received, that the amount of such payment is increased to the extent
necessary so that, after deduction of all taxes (assuming for this purpose that
the recipient of such payment is subject to taxation at the highest federal and
applicable state and local marginal rates applicable to widely held
corporations for the year in which such income is taxable) required to be paid
by the recipient (less any tax savings to be realized, utilizing the same tax
rate assumptions as set forth in the immediately preceding parenthetical
phrase, by the recipient as a result of the payment of such amounts) with
respect to the receipt of such amounts, such increased payment (as so reduced)
is equal to the payment otherwise required to be made.
1.05 "Agreement" shall mean this Tax Disaffiliation Agreement, as
the same may be amended from time to time.
1.06 "Applicable Federal Rate" shall have the meaning set forth in
Section 1274(d) of the Code for a short term rate, compounded quarterly.
1.07 "Assets" shall mean the assets of Parent, SpinCo, their
respective Affiliates, or a "predecessor or successor" (within the meaning
Section 355(e)(4)(D) of the Code) of such corporations or their Affiliates; it
being understood that any transfer, sale or assignment of the assets of Parent,
SpinCo, their Affiliates, or a predecessor or a successor in the ordinary
course of business shall not be taken into account for purposes of Section
2.04(e) of this Agreement.
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1.08 "Book Value" shall mean, with respect to Parent or SpinCo,
the shareholders' equity of such party, determined in accordance with generally
acceptable accounting principles in the United States, as of the close of
business on the Distribution Date.
1.09 "Claim" shall have the meaning set forth in Section 5.03(a)
of this Agreement.
1.10 "Code" shall have the meaning set forth in the recitals.
1.11 "Common Consolidated Tax Return" shall mean any consolidated,
combined or unitary Tax Return that includes at least one member of the Parent
Group and at least one member of the SpinCo Group.
1.12 "Controlling Party" shall have the meaning set forth in
Section 5.01 of this Agreement.
1.13 "Corporate Transactions" shall have the meaning set forth in
the Distribution Agreement.
1.14 "Distribution" shall have the meaning set forth in the
recitals.
1.15 "Distribution Agreement" shall have the meaning set forth in
the recitals.
1.16 "Distribution Date" shall mean the Distribution Date
specified in the Distribution Agreement.
1.17 "Distribution Related Gain" shall mean any gain recognized by
Parent, or Parent's or SpinCo's shareholders, by virtue of (i) either the
Distribution or the Internal Distribution failing to qualify as a distribution
described in Section 355(a)(1) of the Code, (ii) any stock or securities of
SpinCo failing to qualify as "qualified property" within the meaning of Section
355(c)(2)(B) and 361(c)(2)(B) of the Code, or (iii) the application of Section
355(d), (e) or (f) of the Code to the Distribution or the Internal
Distribution.
1.18 "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 binding 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), or (c) the
completion of the highest level of administrative proceedings if a judicial
contest is not or is no longer available.
1.19 "First SpinCo Notification Letter" shall have the meaning set
forth in Section 2.03(c)(ii) of this Agreement.
1.20 "Indemnitor" shall have the meaning set forth in Section 5.02
of this Agreement.
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1.21 "Internal Distribution" shall mean the Corporate Transaction
consisting of the distribution by First National Bank of Pennsylvania
("FNB-PA") to Parent of all of the capital stock of the national banking
association to be formed by FNB-PA for the purpose of transferring to such
association all of the Florida operations of the businesses presently conducted
by First National Trust Company and its Affiliates.
1.22 "IRS" shall have the meaning set forth in Section 2.04(d)(v)
of this Agreement.
1.23 "Parent" shall have the meaning set forth in the preamble to
this Agreement.
1.24 "Parent Affiliate" or "Affiliate of Parent" shall include all
of the Affiliates listed on Exhibit A attached hereto. Neither SpinCo nor any
SpinCo Affiliate shall be considered an Affiliate of Parent.
1.25 "Parent Group" shall mean, for any period, Parent and its
then Affiliates. Under no circumstances shall the Parent Group include any
member of the SpinCo Group.
1.26 "Parent Notification Letter" shall have the meaning set forth
in Section 2.03(c)(ii) of this Agreement.
1.27 "Parent Tainting Act" means any act or acts first occurring
after the Distribution Date of or involving any Person (other than SpinCo or
any Person that is an Affiliate of SpinCo immediately before or immediately
after such act or acts), or any omission or omissions of any Person (other than
SpinCo or any Person that is an Affiliate of SpinCo immediately before or
immediately after such omission or omissions), of a commercially reasonable act
or acts first available to it after the Distribution Date, if such act or
omission contributes to a Final Determination that the Distribution or the
Internal Distribution results in any Distribution Related Gain.
1.28 "Period After Distribution" shall mean (i) any taxable year
or other taxable period beginning after the Distribution Date and, (ii) that
part of the taxable year or other taxable period that includes the Distribution
Date that begins on the day immediately after the Distribution Date.
1.29 "Period Before Distribution" shall mean (i) any taxable year
or other taxable period that ends on, at the close of, or before the
Distribution Date and, (ii) that part of the taxable year or other taxable
period that includes the Distribution Date that ends on and includes the
Distribution Date.
1.30 "Person" shall mean any individual, partnership, joint
venture, corporation, limited liability company, trust, unincorporated
organization, government or department or agency of a government.
1.31 "Restructuring Taxes" means any taxes resulting from the
Corporate Transactions, the Internal Distribution or the Distribution,
including, but not limited to, any taxes imposed pursuant to or as a result of
Sections 311 or 1001 of the Code or the Treasury Regulations under Section 1502
of the Code (and any applicable similar federal, state, local or
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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 or the Internal Distribution results in any Distribution Related
Gain.
1.32 "SpinCo" shall have the meaning set forth in the preamble to
this Agreement.
1.33 "SpinCo Affiliate" or "Affiliate of SpinCo" shall include all
of the Affiliates listed on Exhibit B attached hereto. Neither Parent nor any
Parent Affiliate shall be considered an Affiliate of SpinCo.
1.34 "SpinCo Group" shall mean, for any period, SpinCo and its
then Affiliates. Under no circumstances shall the SpinCo Group include any
member of the Parent Group.
1.35 "SpinCo Tainting Act" means any act or acts first occurring
after the Distribution Date of or involving any Person (other than Parent or
any Person that is an Affiliate of Parent immediately before or immediately
after such act or acts), or any omission or omissions of any Person (other than
Parent or any Person that is an Affiliate of Parent immediately before or
immediately after such omission or omissions) of a commercially reasonable act
or acts first available to it after the Distribution Date, if such act or
omission contributes to a Final Determination that the Distribution or the
Internal Distribution results in any Distribution Related Gain.
1.36 "SpinCo Tax Adjustment Amount" shall have the meaning set
forth in Section 2.03(c)(ii) of this Agreement.
1.37 "Stock" shall mean common or preferred stock or any
instrument that might reasonably be treated as common or preferred stock for
federal income tax purposes. However, for purposes of Section 2.04(d) only, the
term Stock shall not include stock acquired by a person in connection with such
person's performance of services as an employee, director, or independent
contractor for Parent or SpinCo, or a Person related to such corporation under
Section 355(d)(7)(A) of the Code (and that is not excessive by reference to the
services performed) in a transaction in which Section 83 or Section 421(a) of
the Code applies. The preceding sentence shall not apply if the acquiring
person or a coordinated group (within the meaning of Treas. Xxx.xx.
1.355-7T(h)(4)) of which such person is a member is a controlling shareholder
(within the meaning of Treas. Xxx.xx. 1.355-7T(h)(3)) or a 10-percent
shareholder (within the meaning of Treas. Xxx.xx. 1.355-7T(h)(9)) of the
acquired company (i.e., Parent or SpinCo) immediately after the acquisition.
1.38 "Stock Options" shall mean call options, warrants,
convertible obligations, the conversion feature of convertible stock, put
options, redemption agreements (including rights to cause the redemption of
stock), any other instruments that provide for the right or possibility to
issue, redeem, or transfer stock (including an option on an option), or any
other similar interest treated as an option; provided, however, for purposes of
Section 2.04(d)(i) only, the term "Stock Options" only includes instruments
that provide for the right or possibility to issue, redeem or transfer stock
(including an option on an option), or any similar interest and does not
include: (i) an option that is part of a security arrangement in a typical
lending transaction (including a purchase money loan), if the arrangement is
subject to customary commercial conditions; (ii) an
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option to acquire stock in Parent or SpinCo with customary terms and conditions
provided to a person in connection with such person's performance of services
as an employee, director, or independent contractor for Parent or SpinCo or a
person related to it under Section 355(d)(7)(A) of the Code (and is not
excessive by reference to the services performed), provided that (a) the
transfer of stock pursuant to such option is described in Section 421(a) of the
Code or (b) the option is nontransferable within the meaning of Treas. Reg. ss.
1.83-3(d) and does not have a readily ascertainable fair market value as
defined in Treas. Reg. ss. 1.83-7(b); (iii) an option entered into between
shareholders of a corporation (or a shareholder and the corporation) that is
exercisable only upon death, disability or mental incompetency of the
shareholder, or, in the case of stock acquired in connection with the
performance of services for a corporation, or a person related to the
corporation under Section 355(d)(7)(A) (and that is not excessive by reference
to the services performed), the shareholder's separation from service; and (iv)
a bona fide right of first refusal regarding the corporation's stock with
customary terms, entered into between shareholders of a corporation (or between
the corporation and a shareholder).
1.39 "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 pay, or 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. The term "tax" or "taxes" does not include any
unclaimed or abandoned property remitted or required to be remitted to any
Taxing Authority under applicable law.
1.40 "Tax Attribute" shall mean any net operating loss, capital
loss, credit or other tax attribute (other than the basis of property) relevant
to the calculation of a tax liability.
1.41 "Taxing Authority" shall have the meaning set forth in
Section 1.39 of this Agreement.
1.42 "Tax Item" shall mean any item of income, capital gain, net
operating loss, capital loss, deduction, credit or other tax attribute relevant
to the calculation of a tax liability.
1.43 "Tax Return" shall mean any report, return, information
statement, questionnaire, evidence of tax payments, invoice or other document
received from, or 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).
All capitalized terms used but not defined herein shall have the
meaning given to such terms in the Distribution Agreement.
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ARTICLE II
TAX RETURNS, TAX PAYMENTS AND TAX SHARING OBLIGATIONS
2.01 Obligations to File Tax Returns.
(a) Parent shall prepare and shall timely file or cause to be
filed (i) all Tax Returns filed on a separate company basis for any member of
the Parent Group, (ii) all Tax Returns filed on a consolidated, combined or
unitary basis that include members of the Parent Group other than any Common
Consolidated Tax Return, and (ii) all Common Consolidated Tax Returns. SpinCo
shall reimburse Parent for SpinCo's proportionate share of the expenses
incurred by Parent in the preparation and filing of a Common Consolidated Tax
Return. For purposes of this Section 2.01(a), SpinCo's proportionate share of
the expenses with respect to a Common Consolidated Tax Return shall be
determined by multiplying the total expenses by a fraction, the numerator of
which equals the number of SpinCo Affiliates included in the return and the
denominator of which equals the total number of SpinCo Affiliates and Parent
Affiliates included in the return. Subject to Section 2.03(c) hereof, Parent
shall make full and timely payment of all taxes shown due on all Tax Returns
described in this Section 2.01(a).
(b) SpinCo shall prepare, at its own expense, and shall timely
file or cause to be filed (i) all Tax Returns with respect to the SpinCo Group
for any taxable year or other taxable period beginning after the Distribution
Date, (ii) all Tax Returns filed on a separate company basis, for any member of
the SpinCo Group, and (iii) all Tax Returns filed on a consolidated, combined
or unitary basis that include members of the SpinCo Group other than any Common
Consolidated Tax Return. SpinCo shall make full and timely payment of all taxes
shown due on all Tax Returns described in this Section 2.01(b).
(c) To the extent required or permitted by law or administrative
practice, in the case of any Common Consolidated Tax Return that includes the
Distribution Date, the taxable year of the SpinCo Group member shall be treated
as closing at the close of the Distribution Date.
2.02 Obligation to Remit Taxes. SpinCo and Parent shall each timely
remit or cause to be remitted any taxes due in respect of any tax for which it
is required to file a Tax Return hereunder 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) SpinCo's Obligations. Other than liabilities dealt with
elsewhere in this Agreement, SpinCo shall be liable for and shall indemnify and
hold Parent and its Affiliates harmless on an After Tax Basis against any tax
liability for any member of the SpinCo Group, including the portion of any tax
liability resulting from the inclusion of any member of the SpinCo Group in a
Common Consolidated Tax Return as determined under Section 2.03(c). Except as
provided in Section 3.01 for refunds attributable to carrybacks, SpinCo shall
be entitled to any refund of or credit for taxes for which SpinCo
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is responsible under this Section 2.03(a) or with respect to which SpinCo is
required to file a Tax Return under Section 2.01 hereof.
(b) Parent's Obligations. Other than liabilities dealt with
elsewhere in this Agreement, Parent shall be liable for, and shall hold SpinCo
and its Affiliates harmless on an After Tax Basis against any tax liability of
any member of the Parent Group. Except as provided in Section 3.01 for refunds
attributable to carrybacks, Parent shall be entitled to any refund of or credit
for taxes for any periods for which Parent is responsible under this Section
2.03(b) or with respect to which Parent is required to file a Tax Return under
Section 2.01 hereof.
(c) SpinCo's Share of the Common Consolidated Tax Return
Liability. SpinCo's proportionate share of the tax liability with respect to a
Common Consolidated Tax Return, or with respect to any estimated tax payment
relating to any such Tax Return, shall be determined by multiplying the Common
Consolidated Tax Return tax liability by a fraction, the numerator of which
equals the separate return tax liability of the SpinCo Group and the
denominator of which equals the sum of the separate return tax liabilities of
the Parent Group and the SpinCo Group. For purposes of this determination, the
separate return tax liabilities of the Parent Group and the SpinCo Group are,
in each case, determined as if the Common Consolidated Tax Return included only
the Tax Items of the respective group, applying the principles of Section
1552(a)(2) of the Code and Treas. Xxx.xx. 1.1552-1(a)(2). For purposes of this
Section 2.03(c) and Section 2.03(d), the tax liability of the Common
Consolidated Tax Return and the separate return tax liability of the SpinCo
Group and the Parent Group shall not include Restructuring Taxes or any tax
liability resulting from Distribution Related Gain.
(d) Payment for use of Tax Attributes. With respect to any Common
Consolidated Tax Return, (i) SpinCo shall reimburse Parent on an After Tax
Basis for the tax benefit attributable to the use of Tax Attributes of the
Parent Group to reduce SpinCo's proportionate share of the Common Consolidated
Tax Return tax liability to an amount that is less than the separate return tax
liability of the SpinCo Group, and (ii) Parent shall reimburse SpinCo on an
After Tax Basis for the tax benefit attributable to the use of Tax Attributes
of the SpinCo Group to reduce Parent's proportionate share of the Common
Consolidated Tax Return tax liability to an amount that is less than the
separate return tax liability of the Parent Group. For purposes of this Section
2.03(d), (i) the separate return tax liabilities of the Parent Group and the
SpinCo Group are, in each case, determined as if the Common Consolidated Tax
Return included only the Tax Items of the respective group, applying the
principles of Section 1552(a)(2) of the Code and Treas. Xxx.xx. 1.1552-1(a)(2),
and (ii) Parent's proportionate share of the tax liability with respect to a
Common Consolidated Tax Return shall be determined by multiplying the Common
Consolidated Tax Return tax liability by a fraction, the numerator of which
equals the separate return tax liability of the Parent Group and the
denominator of which equals the sum of the separate return tax liabilities of
the Parent Group and the SpinCo Group.
(e) Notification and contest procedures. (i) Parent shall, in
good faith, calculate SpinCo's tax liability, if any, under Section 2.03(c),
and the amount of any
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payment obligation of Parent or SpinCo under Section 2.03(d), and notify SpinCo
of the amount of its liability, if any, under Section 2.03(a) and the amount of
any Parent or SpinCo payment obligation under Section 2.03(d) (the "Parent
Notification Letter"). Notification of a SpinCo tax liability and payment
obligation under this clause (i) of this Section 2.03(e) shall constitute a
request for payment, and, subject to clause (ii) of this Section 2.03(e),
SpinCo shall pay such amount, in immediately available funds, to Parent within
five days after receipt of such notice from Parent, provided that SpinCo shall
not be obligated to make such payment to Parent earlier than ten days prior to
the due date for the filing or making of the relevant Tax Return or estimated
tax payment. Subject to clause (ii) of this Section 2.03(e), Parent shall pay
the amount of its obligation under Section 2.03(d), in immediately available
funds, to SpinCo within ten days of the date of mailing (or other type of
delivery) by Parent of the Parent Notification Letter, provided that Parent
shall not be obligated to make such payment to SpinCo earlier than the due date
for the filing or making of the relevant Tax Return or estimated tax payment.
(ii) If SpinCo determines in good faith that the amount
of its tax liability under Section 2.03(a) or the amount of any
payment obligation under section 2.03(d) differs from the
corresponding amount in the Parent Notification Letter, SpinCo shall
notify Parent of such difference (the "SpinCo Tax Adjustment Amount")
(such determination, with calculations in reasonable detail, being
referred to as the "First SpinCo Notification Letter," which SpinCo
shall deliver to Parent no later than 30 days after the date of
receipt of the Parent Notification Letter). If Parent determines in
good faith that SpinCo's determination of the SpinCo Tax Adjustment
Amount is incorrect, Parent shall notify SpinCo of such determination
(the "Second Parent Notification Letter") within thirty days of
receipt of the First SpinCo Notification Letter. If the dispute is not
resolved by mutual accord within thirty days of SpinCo's receipt of
the Second Parent Notification Letter, the dispute shall be resolved
under the provisions of Article VIII. Until Parent and SpinCo reach
agreement, or any dispute between them is resolved pursuant to Article
VIII, as to the SpinCo Tax Adjustment Amount, the provisions of this
Section 2.03(a) and 2.03(d) shall continue to apply and payments shall
be made by the parties in the amounts set forth in the Parent
Notification Letter in accordance with clause (i) of this Section
2.03(e). Within ten days of reaching an agreement or resolution,
Parent shall pay to SpinCo the agreed amount after taking into account
any payments made under clause (i) of this Section 2.03(e), together
with interest at a rate equal to the Applicable Federal Rate from the
date of SpinCo's payment pursuant to this Section 2.03(e).
(f) Prior Agreements. Except as set forth in this Agreement 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 Parent Group and any member of the SpinCo Group shall be
terminated as of the beginning of the day after the Distribution Date.
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2.04 Restructuring Taxes and Expenses; Other Taxes Relating to the
Distribution.
(a) Restructuring Taxes and Expenses. Notwithstanding any other
provision of this Agreement to the contrary, Taxes and expenses attributable to
the transactions set forth in Exhibit C shall be borne in the manner set forth
in such Exhibit. Any remaining Restructuring Taxes (together with any
reasonable expenses, including, but not limited to, attorney's fees, incurred
in defending any audit or examination with respect to Restructuring Taxes) and
expenses incurred to effect the Distribution and the Internal Distribution
shall be borne by Parent and SpinCo pro rata based on their relative Book
Value.
(b) Distribution Related Gain. (i) In the event of a Final
Determination that the Distribution or the Internal Distribution results in any
Distribution Related Gain (other than a Final Determination that the
Distribution or the Internal Distribution results in any Distribution Related
Gain which determination would not have been made but for a Parent Tainting Act
or a SpinCo Tainting Act), the liability of Parent and SpinCo for any taxes or
liability arising from such Final Determination, including any liability to
shareholders arising from such Final Determination (together with any
reasonable expenses, including, but not limited to, attorney's fees incurred in
defending against any liability) shall be borne by Parent and SpinCo pro rata
based on their relative Book Value.
(ii) In the event of a Final Determination that the
Distribution or the Internal Distribution results in any Distribution
Related Gain which determination would not have been made but for the
occurrence of both a Parent Tainting Act and a SpinCo Tainting Act,
any taxes or liability resulting from such Final Determination
(together with any reasonable expenses, including, but not limited to,
attorney's fees incurred in defending against any liability) shall be
borne by Parent and SpinCo pro rata based on their relative Book
Value.
(iii) In the event of a Final Determination that the
Distribution or the Internal Distribution results in any Distribution
Related Gain which determination would not have been made but for the
occurrence of either a Parent Tainting Act and a SpinCo Tainting Act,
and both such Acts occurred, any taxes or liability resulting from
such Final Determination (together with any reasonable expenses,
including, but not limited to, attorney's fees incurred in defending
against any liability) shall be borne by the party whose Act occurred
first.
(c) Covenant and Indemnification for SpinCo Tainting Acts. SpinCo
covenants that neither SpinCo nor any member of the SpinCo Group shall commit
or be party to or the subject of any SpinCo Tainting Act. In the event of a
Final Determination that the Distribution or the Internal Distribution results
in any Distribution Related Gain which Final Determination would not have been
made but for a SpinCo Tainting Act, SpinCo shall pay, and shall indemnify and
hold harmless Parent and its Affiliates on an After Tax Basis, from and
against, any liability of Parent or its Affiliates, or of SpinCo or its
Affiliates, to any Taxing Authority, Parent shareholders or SpinCo shareholders
(together with any reasonable expenses, including, but not limited to,
attorney's fees
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incurred in defending against any such liability) resulting from a Final
Determination that the Distribution or the Internal Distribution results in any
Distribution Related Gain.
(d) Covenant and Indemnification for Parent Tainting Acts. Parent
covenants that neither Parent nor any member of the Parent Group shall commit
or be party to or the subject of any Parent Tainting Act. In the event of a
Final Determination that the Distribution or the Internal Distribution results
in any Distribution Related Gain which Final Determination would not have been
made but for a Parent Tainting Act, Parent shall pay, and shall indemnify and
hold harmless SpinCo and its Affiliates on an After Tax Basis, from and
against, any liability of SpinCo or its Affiliates, or of Parent or its
Affiliates, to any Taxing Authority, Parent shareholders or SpinCo 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 or the Internal Distribution
results in any Distribution Related Gain.
(e) Reporting and Restrictions. (i) During the two-year period
commencing immediately after the Distribution Date, at quarterly intervals and
at any other time reasonably requested by the party to receive such report,
Parent will provide to SpinCo and SpinCo will provide to Parent a report
("Report") listing for the period commencing immediately after the Distribution
Date and ending on the date of the Report any issuance, sale, transfer,
assignment or redemption (or any agreement concerning the issuance, sale,
transfer, assignment or redemption) of the reporting corporation's or any of
its Affiliates': (x) Stock (excluding any sale, transfer, or assignment of Stock
that meets the requirements of the safe harbor in Treas. Xxx.xx.
1.355-7T(d)(5)); (y) Stock Options; or (z) Assets (excluding: (A) any sale,
transfer, or assignment of Assets that is fully taxable to the selling,
transferring, or assigning corporation; and (B) any other sale, transfer, or
assignment of Assets that in the aggregate does not exceed 5 percent of the
gross assets of the selling, transferring, or assigning corporation as
reflected on such corporation's balance sheet during any 90 day period).
(ii) At any time during the two-year period commencing
immediately after the Distribution Date that the issuance, sale,
transfer, assignment or redemption (or any agreement concerning the
issuance, sale, arrangement, assignment or redemption) of the
reporting corporation's (or its Affiliates) Stock or Stock Options
would exceed 10 percent by vote or value of the reporting
corporation's (or its Affiliates) outstanding Stock (treating Stock
Options as exercised) when aggregated with all prior such issuances,
sales, transfer, assignments or redemptions occurring after the
Distribution Date, or the issuance, sale, transfer, or assignment (or
any agreement concerning the issuance, sale, transfer, or assignment)
of the reporting corporation's (or its Affiliates) Assets, when
aggregated with all prior such issuances, sales, transfers of
assignments occurring after the Distribution Date, exceeds 10 percent
of the gross assets of the selling, transferring, or assigning
corporation as reflected on such corporation's balance sheet, a notice
("Notice") of such transaction must be given to the other party within
10 days of entering into any agreement concerning the issuance, sale,
arrangement, assignment or redemption of the reporting corporation's
(or its Affiliate's) stock (but in no event less than 30 days prior to
11
such issuance, transfer, assignment or redemption). For purposes of
this clause (ii) of Section 2.04(e), the exclusions from Parent's and
SpinCo's Asset reporting obligations contained in clause (i) of
Section 2.04(e) shall not apply, but the exclusions to Parent's and
SpinCo's Stock reporting obligations contained in clause (i) of
Section 2.04(e) shall apply.
(iii) Parent's and SpinCo's obligations to issue Reports
and Notices will be extended beyond the two-year reporting period (not
to exceed five years after the Distribution Date) until the
consummation of any agreement resulting in the issuance, sale,
transfer or assignment of the reporting corporation's Stock, Stock
Options or Assets that is reported or required to be reported during
the two-year period after the Distribution Date.
(iv) If, before the two-year anniversary of the
Distribution, the issuances, sales, transfers, assignments, or
redemptions (or agreements concerning the issuance, sale, transfer,
assignment or redemption) of the reporting corporation's Stock, Stock
Options or Assets that are required to be reported pursuant to clause
(ii) of this Section 2.04(e), in the aggregate, would equal or exceed
(as calculated using a method provided by a nationally recognized tax
advisor acceptable to both Parent and SpinCo) a 45 Percent Interest in
such reporting company (the "45 Percent Threshold"), such company (or
companies, if both have reached the 45 Percent Threshold) shall not
act or fail to take any commercially reasonable act that would cause
the 45 Percent Threshold to be exceeded without obtaining an opinion
from a nationally recognized tax advisor (acceptable to both Parent
and SpinCo) that such issuance, sale, transfer, assignment, or
redemption (or agreement concerning the issuance, sale, transfer,
assignment or redemption) will not cause Section 355(e) or (f) of the
Code to apply to the Distribution or the Internal Distribution. The
expense of obtaining any opinion under this clause (iv) of Section
2.04(e) will be borne by the party whose issuance, sale, transfer,
assignment or redemption is the subject of such opinion. The party
that receives such ruling or opinion shall forward a copy of such
ruling or opinion to the other party at least thirty days prior to the
consummation of the transaction contemplated to occur and with respect
to which the ruling or opinion relates.
(v) For purposes of this Section 2.04(e), Parent and
SpinCo will not be required to report any issuance, sale, transfer,
assignment, or redemption of Stock, Stock Options or Assets with
respect to which (y) the Internal Revenue Service ("IRS") has issued a
private letter ruling to Parent or SpinCo, or (z) a nationally
recognized tax advisor acceptable to both Parent and SpinCo has issued
an opinion that such issuance, sale, transfer, assignment, or
redemption should not be required to be taken into account in applying
Sections 355(e) or 355(f) of the Code by reason of any authority upon
which taxpayers are authorized to rely. The expense of obtaining any
opinion under this clause (v) of Section 2.04(e) from a nationally
recognized tax advisor or an IRS private letter ruling will be borne
by the party whose issuance, sale, transfer, assignment or redemption
is the subject of such opinion or private letter ruling. The party
that
12
receives such ruling or opinion shall forward a copy of such ruling or
opinion to the other party at least thirty days prior to the
consummation of the transaction contemplated to occur and with respect
to which the ruling or opinion relates.
ARTICLE III
CARRYBACKS, DISTRIBUTIONS AND ELECTIONS
3.01 Carrybacks.
(a) To the extent permitted by law, any member of the SpinCo
Group shall be entitled, but not required, to carry back any Tax Attribute from
a taxable period ending after the Distribution Date to a taxable period ending
before or including the Distribution Date. At the direction of SpinCo, Parent
shall file (or cause to be filed) any claim for refund relating to such
carryback. Any refund of taxes resulting from any such carryback by a member of
the SpinCo Group shall be payable to SpinCo as provided in Section 4.01. In
addition, if the SpinCo Tax Attribute is carried to a Common Consolidated Tax
Return and reduces the separate return tax liability of the SpinCo Group
(within the meaning of Section 2.03(c)), SpinCo's share of the Common
Consolidated Tax Return liability for the carryback year shall be recomputed
("SpinCo's Recomputed Share"), and Parent shall pay to SpinCo an amount equal
to the sum of (i) the excess of SpinCo's share of the Common Consolidated Tax
Return liability as originally computed (but not in excess of SpinCo's payment
of such liability) over SpinCo's Recomputed Share, and (ii) the payments made
by SpinCo for the use of a Tax Attribute of the Parent Group to the extent the
Tax Attribute of the Parent Group is replaced by the Tax Attribute of the
SpinCo Group as a result of the carryback. SpinCo shall indemnify and hold the
Parent Group harmless on an After Tax Basis for any tax liability that results
from any refund claim relating to a carryback under this Section 3.01(a).
Notwithstanding any other provision of this Agreement to the contrary, Parent
shall be considered the Controlling Party for purposes of Article V for any tax
audit or proceeding involving a Common Consolidated Tax Return for any period
ending before or including the Distribution Date to which the net operating
loss or other item is carried and Parent shall have sole right to contest such
audit or proceeding and to employ advisors of its choice under Section 5.01
provided, however, that Parent shall (i) permit SpinCo to participate at its
own expense in any proceedings relating to any claim for refund pursuant to
this Section 3.01(a); (ii) at SpinCo's request, contest any denial (in whole or
in part) of any such claim for refund, provided that SpinCo shall agree to pay
to Parent on demand all out-of-pocket costs, losses and expenses (including,
but not limited to, legal and accounting fees) paid or incurred by Parent in
connection with contesting such claim; (iii) not settle any such claim for
refund without SpinCo's consent (which consent shall not be unreasonably
delayed or withheld); provided that if Parent wishes to settle such claim and
SpinCo does not consent, SpinCo will pay to Parent on demand all out-of-pocket
costs, losses and expenses (including, but not limited to, legal and accounting
fees) paid or incurred by Parent in connection with contesting such claim,
regardless of whether SpinCo requested such claim to be contested; and (iv) to
the extent SpinCo is not participating, shall keep SpinCo informed as to all
significant developments relating to any such claim for refund or the contest
of any denial thereof.
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(b) To the extent permitted by law, any member of the Parent
Group shall be entitled, but not required, to carry back any net operating loss
or other item from a taxable period ending after the Distribution Date to a
taxable period ending before or including the Distribution Date. Any refund of
taxes resulting from any such carryback by a member of the Parent Group shall
be payable to Parent as provided in Section 4.01. Parent shall indemnify and
hold the SpinCo Group harmless for any tax liability that results from any
refund claim relating to a carryback under this Section 3.01(b).
Notwithstanding any other provision of this Agreement to the contrary, Parent
shall be considered the Controlling Party for purposes of Article V for any tax
audit or proceeding involving any period ending before or including the
Distribution Date to which the net operating loss or other item is carried back
and Parent shall have sole right to contest such audit or proceeding and to
employ advisors of its choice under Section 5.01.
3.02 Distributions and Elections.
(a) Except as contemplated by the Corporate Transactions, no
member of the SpinCo Group shall make any tax election, pay or cause to be paid
any distribution from an Affiliate or take any other action that would cause an
actual increase in the taxes for which the Parent Group is responsible or would
cause an actual reduction in the amount of any refund of taxes payable to the
Parent Group unless Parent and its Affiliates are indemnified and held
harmless, on an After Tax Basis, for the detriment resulting from such act.
(b) Except as contemplated by the Corporate Transactions, no
member of the Parent Group shall make any tax election, pay or cause to be paid
any distribution from an Affiliate or take any other action that would cause an
actual increase in the taxes for which the SpinCo Group is responsible or would
cause an actual reduction in the amount of any refund of taxes payable to the
SpinCo Group unless SpinCo and its Affiliates are indemnified and held
harmless, on an After Tax Basis, for the detriment resulting from such act.
(c) Neither SpinCo nor Parent shall be liable to the other under
Section 3.02(a) or Section 3.02(b) for any tax position on a Tax Return that
independent tax counsel selected by SpinCo (in the case of a Tax Return
position desired to be taken by any member of the SpinCo Group) or Parent (in
the case of a Tax Return position desired to be taken by any member of the
Parent Group), the identity of which is reasonably acceptable to the other
party, opines is necessary and required to comply with the Code, the
regulations or other applicable law.
(d) In the absence of a controlling change in law or
circumstances, and unless deviation from past practice would have no adverse
effect on any of the parties, to the extent permitted by law, SpinCo and Parent
will file any Tax Return which such party is responsible to file for any Period
Before Distribution or for the period that includes the Distribution Date
consistent with the tax principles and methods reflected in the most recent Tax
Returns involving similar Tax Items filed prior to the Distribution Date.
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ARTICLE IV
PAYMENTS
4.01 Payments. Subject to the provisions of Section 2.03 and
Section 5.03, and except as otherwise explicitly provided herein, all payments
due hereunder to a party shall be paid not later than twenty days after the
receipt or crediting of a refund or the receipt of notice of a Final
Determination by reason of which a party is liable for an indemnified cost
pursuant to this Agreement. In the event that such payment is not made within
ten days after such receipt, credit or notice, interest shall be charged to the
indemnifying party at a rate equal to the Applicable Federal Rate from the date
on which the indemnifying party receives such receipt, credit or notice to the
date the payment is made.
4.02 Notice. SpinCo and Parent shall give each other prompt written
notice of any payment that may be due under this Agreement.
4.03 Reimbursement. Any party hereto that is entitled to
indemnification, payment or reimbursement pursuant to the terms of this
Agreement shall be reimbursed on an After Tax Basis for all reasonable expenses
(including, but not limited to, attorney's fees) incurred in connection with the
enforcement of its rights hereunder. The preceding sentence shall not be
construed to limit a party's entitlement to reimbursements or payments to which
it otherwise is entitled pursuant to the terms of this Agreement.
ARTICLE V
TAX AUDITS
5.01 General. Except as provided in Sections 3.01, 5.02 and 6.02
hereof, each of SpinCo and Parent 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
hereof, 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. SpinCo and Parent 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 IRS,
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 there is no Indemnitor other
than the Controlling Party, Sections 5.02 and 5.03 are inapplicable and Section
5.01 shall govern the rights of the parties with respect to the audit or
proceeding. 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 expense, provided, however, that the failure of the
Controlling Party to notify or provide such information to the Indemnitor shall
not affect the Indemnitor's indemnity obligations hereunder unless and to the
extent the Indemnitor is materially prejudiced thereby. Upon a Final
Determination of the assessment or proposed adjustment, the Indemnitor shall pay
its pro rata share (based on its share of liability resulting from the Final
Determination) of all reasonable expenses (including, but not limited to, legal
and accounting fees) incurred by the
15
Controlling Party in connection with the assessment or proposed adjustment
within seven days after a written request by the Controlling Party.
5.03 Certain Tax Claims.
(a) Any issue raised by any Taxing Authority in any tax
inquiry, audit, examination, investigation, dispute, litigation or other
proceeding relating to a Common Consolidated Tax Return that would result in tax
liability to the Indemnitor is defined as a "Claim." Except as provided in
Sections 3.01(b), 5.03(d) and the second sentence of Section 5.02 hereof, 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 the prior written consent of the Indemnitor, provided
that (i) the Controlling Party shall provide notice to Indemnitor pursuant to
Section 5.02 hereof of any Claim, (ii) within thirty days after notice by the
Controlling Party to the Indemnitor of a Claim is received by the Indemnitor,
the Indemnitor shall (1) request in writing that such Claim be contested, and
(2) provide 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 shall be substantially
consistent with the Indemnitor's position relating to such Claim, (iii) the
Indemnitor agrees to pay on demand 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) hereof, and (iv)
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 any Taxing Authority and if such Claim
may, in the reasonable discretion of the Controlling Party, be settled without
prejudicing any claims such Taxing Authority 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 or (ii) the amount calculated on the basis of a Final
Determination. After a settlement or a Final Determination, the Controlling
Party shall reimburse the Indemnitor in an amount equal to the excess, if any,
of the amount of expenses paid by the Indemnitor pursuant to clause (iv) of
Section 5.03(a) over the Indemnitor's pro rata portion of such expenses based on
the Indemnitor's share of the liability with respect to such Claim as determined
under the first sentence of this Section 5.03(b).
16
(c) If the Controlling Party shall elect to pay the Claim
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. In addition, if the refund is ultimately disallowed,
the Controlling Party shall reimburse the Indemnitor for the Controlling Party's
pro rata portion of the expenses paid by the Indemnitor under clause (iv) of
Section 5.03(a) based on the Controlling Party's share of the tax previously
paid. To the extent such refund claim is allowed, the Controlling Party shall
pay to the Indemnitor (i) the amounts loaned or advanced to the Controlling
Party with respect to the indemnity obligation (not to exceed the Indemnitor's
share of any refund), and (ii) the Controlling Party's pro rata portion of the
expenses paid by the Indemnitor under clause (iv) of Section 5.03(a) based on
the Controlling Party's share of any refund, within ten 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 days of the final resolution of the contest),
plus an amount equal to any interest received (or that would have been received)
from the Taxing Authority 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 (which consent shall not be unreasonably withheld). 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 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 the resolution of which is based on the outcome of
such Claim. If the Controlling Party settles any Claim without the consent of
the Indemnitor or otherwise takes or declines to take any action pursuant to
this paragraph, the Controlling Party shall (i) reimburse the Indemnitor for all
the expenses paid by the Indemnitor pursuant to clause (iv) of Section 5.03(a),
and (ii) pay to the Indemnitor any other 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 at a rate equal to the Applicable Federal Rate from the date on
which the amounts were advanced.
17
ARTICLE VI
COOPERATION
6.01 General. Parent and SpinCo shall cooperate with each other in
the filing of any Tax Return 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 that do not result in tax liability but can be reasonably expected
to affect Tax Returns of the other party, or any of its Affiliates, for any
period that includes or is subsequent to the Distribution Date. Each party
agrees to treat the Distribution and the Internal 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) SpinCo's Obligations. In addition to any obligations
imposed pursuant to the Distribution Agreement, SpinCo and each other member of
the SpinCo Group shall fully cooperate with Parent 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 Parent Group for any taxable period ending before or including the
Distribution Date. Such cooperation shall include, but not be limited to, (x)
the execution and delivery to Parent by the appropriate SpinCo Group member of
any power of attorney required to allow Parent and its counsel to participate on
behalf of SpinCo or such other SpinCo Group member 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 for which Parent is the
Controlling Party, (y) making available to Parent, during normal business hours,
and within thirty days of any written request therefor, all books, records and
information, and the assistance of all appropriate officers and employees,
reasonably necessary or useful in connection with any tax inquiry, audit,
examination, investigation, dispute, litigation or any other matter, and (z) use
of its commercially reasonable best efforts in defending Parent's interests in
any tax inquiry, audit, examination, investigation, dispute, litigation or any
other matter for which SpinCo is the Controlling Party.
(b) Parent's Obligations. In addition to any obligations
imposed pursuant to the Distribution Agreement, Parent shall fully cooperate
with SpinCo 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 SpinCo Group which
includes Parent or any other member of the Parent Group. Such cooperation shall
include, but not be limited to, (x) the execution and delivery to SpinCo by the
appropriate Parent Group member of any power of attorney required to allow
SpinCo and its counsel to participate on behalf of Parent or such other Parent
Group member 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 for which SpinCo is the Controlling Party, (y) making available to
SpinCo, during normal business
18
hours, and within thirty days of any written request therefor, all books,
records and information, and the assistance of all appropriate officers and
employees, reasonably necessary or useful in connection with any tax inquiry,
audit, examination, investigation, dispute, litigation or any other matter, and
(z) the use of its commercially reasonable best efforts in defending SpinCo's
interests in any tax inquiry, audit, examination, investigation, dispute,
litigation or other matter for which Parent is the Controlling Party.
(c) Remedy for Failure to Comply. If Parent reasonably
determines that SpinCo is not for any reason fulfilling its obligations under
Section 6.02(a) hereof, or if SpinCo reasonably determines that Parent is not
for any reason fulfilling its obligations under Section 6.02(b) hereof, then
Parent or SpinCo, as the case may be, shall have the right to appoint an
independent 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 reasonable cooperation of all appropriate officers and
employees, of Parent or SpinCo, as the case may be. In addition, the
non-fulfilling party shall be responsible for any additional tax liability
caused by the non-fulfillment of its obligations under Section 6.02(a) or (b).
Anything in the preceding provisions of this Section 6.02(c) to the contrary
notwithstanding, if the party alleged not to have fulfilled or be fulfilling its
obligations under Section 6.02(a) or 6.02(b), as applicable, shall maintain that
it fulfilled its obligations under Section 6.02(a) or Section 6.02(b), as
applicable, and/or that no additional liability resulted from any
non-fulfillment with respect to Section 6.02(a) or Section 6.02(b), as
applicable, such matter or matters shall be determined by independent counsel
agreed to by both the allegedly non-fulfilling party and the party alleging
non-fulfillment (which determination shall be final and binding). If such
independent counsel shall determine that the allegedly non-fulfilling party in
fact fulfilled its obligations under Section 6.02(a) or Section 6.02(b), as
applicable: (i) the fees and expenses of the accounting or law firm appointed
pursuant to the first sentence of this Section 6.02(c) as well as the fees and
expenses of the independent counsel making such determination shall be paid by
the party alleging non-fulfillment, and (ii) liability for taxes alleged to have
resulted from such non-fulfillment shall be borne by SpinCo or Parent without
regard to this Section 6.02(c). If such independent tax counsel shall determine
that the alleged non-fulfilling party did not fulfill its obligations under
Section 6.02(a) or 6.02(b), as applicable: (i) the fees and expenses referred to
in clause (i) of the preceding sentence shall be borne by the party determined
not to have fulfilled such obligations, and (ii) the additional tax liability
alleged to have been caused by such non-fulfillment shall be borne by the
non-fulfilling party, unless and to the extent that such independent counsel
determines that such taxes were not caused by such non-fulfillment, in which
case and to which extent liability for taxes alleged to have resulted from such
non-fulfillment shall be borne by SpinCo or Parent without regard to this
Section 6.02(c).
ARTICLE VII
RETENTION OF RECORDS; ACCESS
The Parent Group and the SpinCo Group shall (a) in accordance with
their then current record retention policy, retain records, documents,
accounting data and other information
19
(including computer data) necessary for the preparation and filing of all Tax
Returns in respect of taxes of the Parent Group or the SpinCo Group for any
taxable period ending before or including the Distribution Date 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 Distribution
Date that either the Parent Group or the SpinCo Group proposes to destroy such
material or information, it shall first notify the other Group in writing, and
the other Group shall be entitled to receive such materials or information
proposed to be destroyed.
ARTICLE VIII
DISPUTES
8.01 Negotiation. Subject to Section 8.05, in the event of a
controversy, dispute or claim arising out of, in connection with, or in relation
to the interpretation, performance, nonperformance, validity or breach of this
Agreement or otherwise arising out of, or in any way related to this Agreement,
including any claim based on contract, tort, statute or constitution
(collectively, "Agreement Disputes"), the management of the parties shall
negotiate in good faith for a reasonable period of time to settle such Agreement
Dispute; provided, however, such reasonable period shall not, unless otherwise
agreed by the parties in writing, exceed sixty days from the time a party has
first given written notice of such Agreement Dispute to the other party.
8.02 Mediation. If after such reasonable period of negotiation the
parties are unable to settle such Agreement Dispute (and in any event, unless
otherwise agreed in writing by the parties, after ninety days have elapsed from
the time the parties began such negotiations), such Agreement Dispute shall be
determined, at the request of any party, by mediation conducted in a location
selected by the non-requesting party and acceptable to the requesting party,
before a tax expert mutually agreeable to both parties. The mediation process
shall continue as the exclusive method of resolving the Agreement Dispute (other
than negotiation between the parties) until the earlier of the Agreement Dispute
being resolved or the mediator finding in good faith that all settlement
possibilities have been exhausted and that the matter is not resolvable through
mediation.
8.03 Continuing Performance. Unless otherwise agreed in writing,
the parties will continue to honor all other commitments under this Agreement
during the course of dispute resolution pursuant to the provisions of this
Article VIII with respect to all matters not subject to such dispute,
controversy or claim.
8.04 Other Remedies. Nothing in this Article VIII shall limit the
right that any party may otherwise have to seek to obtain from any court of
competent jurisdiction (i) preliminary injunctive relief in order to preserve
the status quo pending the resolution of the a dispute or (ii) temporary or
permanent injunctive relief from any breach of any provisions of this Agreement.
By seeking such relief, a party in no way waives its arbitration rights under
this Agreement.
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8.05 Tolling. The parties acknowledge and agree that any statute of
limitations or any other defense that could be raised by a party based on the
passage or expiration of time with respect to any Agreement Dispute shall be
suspended and tolled during the period in which the parties are negotiating in
good faith pursuant to Section 8.01 hereof and during the period in which any
mediation is pending or conducted pursuant to Section 8.02 hereof.
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
10.01 Complete Agreement; Construction. This Agreement shall
constitute the entire agreement between the parties with respect to the subject
matter hereof and shall supersede all previous negotiations, commitments and
writings with respect to such subject matter.
10.02 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other parties.
10.03 Survival of Agreements. Except as otherwise contemplated by
this Agreement, all covenants and agreements of the parties contained in this
Agreement shall survive the Distribution Date.
10.04 Notices. All notices and other communications hereunder shall
be in writing, shall reference this Agreement and shall be hand delivered or
mailed by registered or certified mail (return receipt requested) or sent by any
means of electronic message transmission with delivery confirmed (by voice or
otherwise) to the parties at the following addresses (or at such other addresses
for a party as shall be specified by like notice) and will be deemed given on
the date on which such notice is received:
To Parent:
F.N.B. Corporation
Xxx X.X.X. Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: _______________________
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To SpinCo:
First National Bankshares of Florida, Inc.
0000 Xxxxxxxxx Xxxx Xxxxx
Xxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxx
Telephone: (000) 000-0000
Facsimile: _______________________________
10.05 Waivers. The failure of any party to require strict'
performance by any other party of any provision in this Agreement shall not
waive or diminish that party's right to demand strict performance thereafter of
that or any other provision hereof.
10.06 Amendments. This Agreement may not be modified or amended
except by an agreement in writing signed by each of the parties hereto.
10.07 Successors and Assigns. The provisions to this Agreement shall
be binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
10.08 Affiliates. Each of the parties hereto shall cause to be
performed, and hereby guarantees the performance of, all actions, agreements and
obligations set forth herein to be performed by any Affiliate of such party or
by any entity that is contemplated to be an Affiliate of such party on and after
the Distribution Date.
10.09 Third-Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and their respective Affiliates and should not be
deemed to confer upon third parties any remedy, claim, liability, reimbursement,
claim of action or other right in excess of those existing without reference to
this Agreement.
10.10 Title and Headings. Titles and headings to Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
10.11 Governing Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Florida, without regard to
conflicts of Laws principles.
10.12 Dispute Resolution. Any dispute arising out of or relating to
the performance, breach or interpretation of this Agreement shall be handled in
accordance with Article VIII of this Agreement (solely with respect to matters
of computation) and Article V of the Distribution Agreement.
10.13 Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic or
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operational effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
F.N.B. CORPORATION
By:
-------------------------------------
Xxxxxxx X. Xxxxxxxxx, Vice Chairman
FIRST NATIONAL BANKSHARES OF
FLORIDA, INC.
By:
-------------------------------------
Xxxx X. Xxxx, Chairman and Chief
Executive Officer
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EXHIBIT A
Affiliates of F.N.B. CORPORATION
First National Corporation
Firs National community Development Corporation
First National Bank of Pennsylvania
F.N.B. PA Investments Corporation
Infitech, Inc.
First National Building Corporation
First National Corporation, Hermitage, PA
First National Financial Management Corporation
Metropolitan National Realty Holdings, Inc.
Pennsylvania First National Trust
F.N.B. Advisors, Inc.
F.N.B. Building Corporation
Penn-Ohio Life Insurance Company
Regency Finance Company
Regency Investment Company, Inc.
Citizens Financial Services, Inc.
Xxxxxx, Xxxxxxx & Xxxxx, Inc.
EXHIBIT B
Affiliates of FIRST NATIONAL BANKSHARES OF FLORIDA, INC.
Florida First National Trust
First National Bank of Florida
First National Realty Services Co.
FNB Corporation Florida Holdings Company
FNB Corporation Florida Real Estate Holding company
FNB Corporation Florida Real Estate Investment Trust Co.
West Coast Guaranty Title Insurance Co.
First National Corporation (formerly Citizens Financial Corporation)
Xxxxx Xxxxxxxx Insurance, Inc.
Allocation of Tax Liability and Expenses of Certain Transactions
TRANSACTION ALLOCATION OF TAX LIABILITY AND EXPENSE
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1. The February 2001 transfer of First National Bank of Florida with respect to
assets by West Coast Guarantee any gain or loss of West Coast Guarantee Bank
Bank to First National Bank resulting from the transfer that is taken into
Florida account immediately before the Distribution
pursuant to Treas. Xxx.xx. 1.1502-13(c)
2. Transactions involving the stock - Regency Finance with respect to
of Customer Service Center of expenses incurred, and any gain or
F.N.B., L.L.C. ("CSC") loss realized, in connection with
the sale of CSC stock to First
National Bank of Pennsylvania
- First National Bank of Pennsylvania
and First National Bank of Florida
shall individually bear their
respective gain or loss resulting
from the receipt of property
pursuant to liquidation of CSC
- Gain or loss realized, and expenses
incurred, by CSC in connection with
its complete liquidation (including
gain or loss realized on the
distributions of property) shall be
borne by First National Bank of
Pennsylvania and First National
Bank of Florida in proportion to
their percentage ownership of CSC
stock immediately before its
liquidation
3. Sale of Xxxxxx Xxxxxxx & Xxxxx stock by Xxxxx Xxxxxxxx Insurance, Inc. with respect to expenses
Xxxxx Xxxxxxxx Insurance, Inc. to F.N.B. incurred, and any gain or loss realized, in connection
Corporation with such sale
4. Sale of municipal bonds by First National First National Bank of Pennsylvania with respect to
Bank of Pennsylvania expenses incurred, and any gain or loss realized, in
connection with such sale
5. Division of the corporate owned life Any tax liability resulting from such division (as well
insurance as the expenses incurred to effect the division) shall
be borne by F.N.B. Corporation and First National
Bankshares of Florida, Inc. in proportion to their
percentage ownership of the insurance contracts
