EXHIBIT 10.9
FORM OF
DISTRIBUTION AGREEMENT
TAX SHARING AGREEMENT
AMONG
GENERAL SEMICONDUCTOR, INC.
COMMSCOPE, INC.
AND
NEXTLEVEL SYSTEMS, INC.
TABLE OF CONTENTS
PAGE
SECTION 1. Definition of Terms 2
SECTION 2. Allocation of Tax Liabilities 7
SECTION 3. Proration of Taxes for Straddle Periods 11
SECTION 4. Preparation and Filing of Tax Returns 12
SECTION 5. Tax Payments and Intercompany Xxxxxxxx 17
SECTION 6. Tax Benefits 21
SECTION 7. Assistance and Cooperation 22
SECTION 8. Tax Records 23
SECTION 9. Tax Contests 24
SECTION 10. Effective Date; Termination of Prior Intercompany Tax
Allocation Agreements 25
SECTION 11. No Inconsistent Actions 25
SECTION 12. Survival of Obligations 27
SECTION 13. Employee Matters 27
SECTION 14. Treatment of Payments; Tax Gross Up 27
SECTION 15. Disagreements 29
SECTION 16. Late Payments 29
SECTION 17. Expenses 29
SECTION 18. General Provisions 30
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FORM OF
TAX SHARING AGREEMENT
This Agreement is entered into as of __________, 1997 by and among General
Semiconductor, Inc., a Delaware corporation ("GS"), CommScope, Inc., a Delaware
corporation ("CommScope"), and NextLevel Systems, Inc. a Delaware corporation
("Systems"). Capitalized terms used in this Agreement are defined in Section 1
below. Unless otherwise indicated, all "Section" references in this Agreement
are to sections of this Agreement.
RECITALS
WHEREAS, as of the date hereof, General Instrument Corporation ("GI") is
the common parent of an affiliated group of corporations, including CommScope
and Systems, which has elected to file consolidated Federal income tax returns;
and
WHEREAS, the Companies have entered into a Distribution Agreement setting
forth the corporate transactions pursuant to which GI will distribute all of the
outstanding shares of common stock of Systems to GI shareholders, and Systems
will distribute all of the outstanding shares of CommScope to Systems
shareholders, in transactions intended to qualify as tax-free distributions
under Section 355 of the Code (as defined below); and
WHEREAS, as a result of the Systems Distribution, CommScope and Systems,
and their respective subsidiaries, will cease to be members of the affiliated
group of which GI is the common parent, effective as of the Distribution Date;
and
WHEREAS, as a result of the CommScope Distribution, CommScope and its
subsidiaries will cease to be members of the affiliated group of which Systems
is the common parent, effective as of the CommScope Distribution Date; and
WHEREAS, as of the Distribution Date, GI will be renamed General
Semiconductor, Inc.; and
WHEREAS, the Companies desire to provide for and agree upon the allocation
between the parties of liabilities for Taxes arising prior to, as a result of,
and subsequent to the
transactions contemplated by the Distribution Agreement, and to provide for and
agree upon other matters relating to Taxes;
NOW THEREFORE, in consideration of the mutual agreements contained herein,
the Companies hereby agree as follows:
SECTION 1. DEFINITION OF TERMS. For purposes of this Agreement (including
the recitals hereof), the following terms have the following meanings:
"ACCOUNTING CUTOFF DATE" means, with respect to each of GS, CommScope and
Systems, any date as of the end of which there is a closing of the financial
accounting records for such entity.
"ACCOUNTING FIRM" shall have the meaning provided in Section 15.
"ADJUSTMENT REQUEST" means any formal or informal claim or request filed
with any Tax Authority, or with any administrative agency or court, for the
adjustment, refund, or credit of Taxes, including (a) any amended Tax return
claiming adjustment to the Taxes as reported on the Tax Return or, if
applicable, as previously adjusted, or (b) any claim for refund or credit of
Taxes previously paid.
"AFFILIATE" means any entity that directly or indirectly is "controlled" by
the person or entity in question. "Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a person, whether through ownership of voting securities, by
contract or otherwise. Except as otherwise provided herein, the term Affiliate
shall refer to Affiliates of a person as determined immediately after the
Distributions.
"AGREEMENT" shall mean this Tax Sharing Agreement.
"ALLOCATED FEDERAL TAX LIABILITY" shall have the meaning provided in
Section 5.01(b)(i).
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"CARRYBACK" means any net operating loss, net capital loss, excess tax
credit, or other similar Tax item which may or must be carried from one Tax
Period to another Tax Period under the Code or other applicable Tax Law.
"CODE" means the U.S. Internal Revenue Code of 1986, as amended, or any
successor law.
"COMMSCOPE" means CommScope, Inc., a Delaware corporation, and any
successor.
"COMMSCOPE DISTRIBUTION" means the CommScope Distribution, as that term is
defined in the Distribution Agreement.
"COMMSCOPE DISTRIBUTION DATE" means the CommScope Distribution Date, as
that term is defined in the Distribution Agreement.
"COMMSCOPE GROUP" means Commscope and its Affiliates as determined
immediately after the Distributions.
"COMPANIES" means GS, CommScope, and Systems, collectively, and "COMPANY"
means any one of GS, CommScope or Systems.
"CONSOLIDATED OR COMBINED INCOME TAX" means any Income Tax computed by
reference to the assets and activities of members of more than one Group.
"CONSOLIDATED OR COMBINED STATE INCOME TAX" means any State Income Tax
computed by reference to the assets and activities of members of more than one
Group.
"CONSOLIDATED TAX LIABILITY" means, with respect to any GI Federal
Consolidated Return, the "tax liability of the group" as that term is used in
Treasury Regulation Section 1.1552-1(a)(1) (including applicable interest,
additions to the tax, additional amounts, and penalties as provided in the
Code), provided that such tax liability shall be treated as including any
alternative minimum tax liability under Code Section 55.
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"CUMULATIVE FEDERAL TAX PAYMENT" shall have the meaning provided in Section
5.01(b)(ii).
"DISTRIBUTION AGREEMENT" means the agreement, as amended from time to time,
setting forth the corporate transactions required to effect the distribution to
GI shareholders of Systems common shares, and the distribution to Systems
shareholders of CommScope common shares, and to which this Tax Sharing Agreement
is attached as an exhibit.
"DISTRIBUTION DATE" means the NextLevel Systems Distribution Date, as that
term is defined in the Distribution Agreement.
"DISTRIBUTIONS" means the NextLevel Systems Distribution and the CommScope
Distribution, as such terms are defined in the Distribution Agreement.
"FEDERAL INCOME TAX" means any Tax imposed by Subtitle A or F of the Code.
"FOREIGN INCOME TAX" means any Tax imposed by any foreign country or any
possession of the United States, or by any political subdivision of any foreign
country or United States possession, which is an income tax as defined in
Treasury Regulation Section 1.901-2.
"GI DELAWARE" means General Instrument Corporation of Delaware, a Delaware
corporation.
"GI FEDERAL CONSOLIDATED RETURN" means any United States federal Tax Return
for the affiliated group (as that term is defined in Code Section 1504) that
includes GI or GS as the common parent and includes any member of the CommScope
Group or the Systems Group.
"GS" means General Semiconductor, Inc., a Delaware corporation, and any
successor.
"GS GROUP" means GS and its Affiliates, excluding any entity that is a
member of the Systems Group or the CommScope Group.
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"GROUP" means the GS Group, the CommScope Group, and the Systems Group, as
the context requires.
"INCOME TAX" means any Federal Income Tax, State Income Tax, or Foreign
Income Tax.
"PAYMENT DATE" means (i) with respect to any GI Federal Consolidated
Return, the due date for any required installment of estimated taxes determined
under Code Section 6655, the due date (determined without regard to extensions)
for filing the return determined under Code Section 6072, and the date the
return is filed, and (ii) with respect to any Tax Return for any Consolidated or
Combined State Income Tax, the corresponding dates determined under the
applicable Tax Law.
"POST-DISTRIBUTION PERIOD" means any Tax Period beginning after the
Distribution Date, and, in the case of any Straddle Period, the portion of such
Straddle Period beginning the day after the Distribution Date.
"PRE-DISTRIBUTION CONSOLIDATED TAX LIABILITY" means Consolidated Tax
Liability with respect to all Tax Periods ending on or prior to the
Distribution Date and in the case of the Tax Period which includes the
Distribution Date, the Consolidated Tax Liability computed as if the
Distribution Date were the last day of the Tax Period.
"PRE-DISTRIBUTION PERIOD" means any Tax Period ending on or before the
Distribution Date, and, in the case of any Straddle Period, the portion of such
Straddle Period ending on the Distribution Date.
"PRIME RATE" means the base rate on corporate loans charged by Citibank,
N.A., New York, New York from time to time, compounded daily on the basis of a
year of 365 or 366 (as applicable) days and actual days elapsed.
"PRIOR INTERCOMPANY TAX ALLOCATION AGREEMENTS" means any written or oral
agreement or any other arrangements relating to allocation of Taxes existing
between or among the GS Group, the CommScope Group, and the Systems Group as of
the Distribution Date (other than this Agreement and other than any such
agreement or arrangement between or among persons who are members of a single
Group).
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"RESPONSIBLE COMPANY" means, with respect to any Tax Return, the Company
having responsibility for preparing and filing such Tax Return under this
Agreement.
"RESTRUCTURING TAX" means the Taxes described in Sections 2.06(a)(ii) or
2.06(a)(iii) (relating to Tax resulting from any income or gain recognized as a
result of the Transactions).
"RULING REQUEST" means the letter filed by GI with the Internal Revenue
Service requesting a ruling from the Internal Revenue Service regarding certain
tax consequences of the Transactions (including all attachments, exhibits, and
other materials submitted with such ruling request letter) and any amendment or
supplement to such ruling request letter.
"SEPARATE COMPANY TAX" means any Tax computed by reference to the assets
and activities of a member or members of a single Group.
"STRADDLE PERIOD" means any Tax Period that begins on or before and ends
after the Distribution Date.
"STATE INCOME TAX" means any Tax imposed by any State of the United States
or by any political subdivision of any such State which is imposed on or
measured by net income, including state and local franchise or similar Taxes
measured by net income.
"SYSTEMS" means NextLevel Systems, Inc., a Delaware corporation, and any
successor.
"SYSTEMS DELAWARE" means NextLevel Systems of Delaware, Inc., a Delaware
corporation.
"SYSTEMS GROUP" means Systems and its Affiliates as determined immediately
after the Distributions.
"SYSTEMS DISTRIBUTION" means the NextLevel Systems Distribution, as that
term is defined in the Distribution Agreement.
"TAINTING ACT" shall have the meaning provided in Section 11.
"TAX" or "TAXES" means any income, gross income, gross receipts, profits,
capital stock, franchise, withholding, payroll, social security, workers
compensation, unemployment,
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disability, property, ad valorem, stamp, excise, severance, occupation, service,
sales, use, license, lease, transfer, import, export, value added, alternative
minimum, estimated or other similar tax (including any fee, assessment, or other
charge in the nature of or in lieu of any tax) imposed by any governmental
entity or political subdivision thereof, and any interest, penalties, additions
to tax, or additional amounts in respect of the foregoing.
"TAX AUTHORITY" means, with respect to any Tax, the governmental entity or
political subdivision thereof that imposes such Tax, and the agency (if any)
charged with the collection of such Tax for such entity or subdivision.
"TAX BENEFIT" means any refund, credit, or other reduction in otherwise
required Tax payments (including any reduction in estimated tax payments), net
of any associated or corresponding item of income, gain or other increase in
otherwise required Tax payments.
"TAX CONTEST" means an audit, review, examination, or any other
administrative or judicial proceeding with the purpose or effect of
redetermining Taxes of any of the Companies or their Affiliates (including any
administrative or judicial review of any claim for refund).
"TAX ITEM" means, with respect to any Income Tax, any item of income, gain,
loss, deduction, and credit.
"TAX LAW" means the law of any governmental entity or political subdivision
thereof relating to any Tax.
"TAX PERIOD" means, with respect to any Tax, the period for which the Tax
is reported as provided under the Code or other applicable Tax Law.
"TAX RECORDS" means Tax Returns, Tax Return workpapers, documentation
relating to any Tax Contests, and any other books of account or records required
to be maintained under the Code or other applicable Tax Laws or under any record
retention agreement with any Tax Authority.
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"TAX RETURN" means any report of Taxes due, any claims for refund of Taxes
paid, any information return with respect to Taxes, or any other similar report,
statement, declaration, or document required to be filed under the Code or other
Tax Law, including any attachments, exhibits, or other materials submitted with
any of the foregoing, and including any amendments or supplements to any of the
foregoing.
"TRANSACTIONS" means the transactions contemplated by the Distribution
Agreement (including the Corporate Restructuring Steps and Distributions, as
defined in such agreement).
"TRANSFERRED COMMUNICATIONS BUSINESSES" shall have the meaning provided in
Section 2.05.
"TREASURY REGULATIONS" means the regulations promulgated from time to time
under the Code as in effect for the relevant Tax Period.
SECTION 2. ALLOCATION OF TAX LIABILITIES. The provisions of this Section 2
are intended to determine each Company's liability for Taxes with respect to
Pre-Distribution Periods, Straddle Periods, and Post-Distribution Periods. Once
the liability has been determined under this Section 2, Section 5 determines the
time when payment of the liability is to be made, and whether the payment is to
be made to the Tax Authority directly or to another Company.
2.01 GENERAL RULE
(a) SYSTEMS LIABILITY. Systems shall indemnify and hold harmless the
GS Group and the CommScope Group from and against any liability for Taxes
which Systems is liable for under this Section 2.01(a).
(b) GS LIABILITY. GS shall be liable for, and shall indemnify and hold
harmless the Systems Group and the CommScope Group from and against any
liability for Taxes which are allocated to GS under this Section 2.
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(c) COMMSCOPE LIABILITY. CommScope shall be liable for, and shall indemnify
and hold harmless the Systems Group and the GS Group from and against any
liability for, Taxes which are allocated to CommScope under this Section 2.
2.02 ALLOCATION OF UNITED STATES FEDERAL INCOME TAX. Except as otherwise
provided in this Agreement:
(a) ALLOCATION OF TAX RELATING TO GI FEDERAL CONSOLIDATED RETURNS. With
respect to any GI Federal Consolidated Return: (i) Systems shall be liable
for all Pre-Distribution Consolidated Tax Liability and (ii) GS shall be
liable for any Consolidated Tax Liability for the Tax Period which includes
the Distribution Date in excess of Systems' liability under clause (i).
(b) ALLOCATION OF GI FEDERAL CONSOLIDATED RETURN TAX ADJUSTMENTS. With
respect to any GI Federal Consolidated Return: (i) Systems shall
be liable for any adjustment to the reported Pre-Distribution
Consolidated Tax Liability and (ii) GS shall be liable for any adjustments
to the Consolidated Tax Liability for the Tax Period which includes the
Distribution Date in excess of Systems' liability under clause (i).
2.03 ALLOCATION OF STATE INCOME TAXES. Except as otherwise provided in this
Agreement, State Income Taxes shall be allocated as follows:
(a) SEPARATE COMPANY TAXES. In the case of any State Income Tax which is a
Separate Company Tax that is apportioned under this Agreement to a
Pre-Distribution Period, Systems shall be liable (i) to GS for such Tax
imposed on any members of the GS Group, and (ii) to CommScope for such Tax
imposed on any members of the CommScope Group.
(b) CONSOLIDATED OR COMBINED STATE INCOME TAXES.
(i) ALLOCATION OF TAX REPORTED ON TAX RETURNS FILED AFTER THE
DISTRIBUTION DATE. Systems shall be liable for any Consolidated or Combined
State Income Tax that is apportioned under this Agreement to a
Pre-Distribution Period.
(ii) ALLOCATION OF COMBINED OR CONSOLIDATED STATE INCOME TAX ADJUSTMENTS.
Systems shall be liable for any adjustment to the amount of Consolidated or
Combined State Income Tax reported on any Tax Return (or as previously
adjusted) that is apportioned under this Agreement to a Pre-Distribution
Period.
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2.04 ALLOCATION OF STATE INCOME TAX EFFECTS OF FEDERAL AUDIT ADJUSTMENTS.
Systems shall be liable for any State Income Taxes resulting from the
adjustments to GI Federal Consolidated Returns, to the extent that such State
Income Taxes are apportioned to a Pre-Distribution Period. In accordance with
Section 6, any Tax Benefit realized by the CommScope Group or by the GS Group as
a result of Systems' payment of such State Income Taxes shall be for the account
of Systems and shall be paid to Systems under Section 6. For example, if Systems
pays a State Income Tax liability of $100x related to adjustments to the Tax
Return of a member of the CommScope Group, and if such payment is available as a
deduction on the CommScope Group's Tax Return for Federal Income Tax, CommScope
shall pay to Systems the Federal Income Tax benefit attributable to the
deduction (i.e., $35x assuming a 35% maximum marginal tax rate under Code
Section 11, and assuming the payment is treated as a nondeductible dividend,
capital contribution, or combination thereof under the Code in accordance with
Section 14 of this Agreement).
2.05 ALLOCATION OF FOREIGN INCOME TAXES AND OTHER TAXES. Except as provided
in Section 2.06, all Taxes (including without limitation any Foreign Income
Taxes) other than those specifically allocated pursuant to Sections 2.02 through
2.04 shall be allocated based on the legal entity on which the legal incidence
of the Tax is imposed; provided, however, any such Taxes specifically related to
the businesses transferred by GI Delaware to Systems in the Transactions (the
"Transferred Communications Businesses") shall be allocated to Systems. Subject
to the proviso in the preceding sentence, as between the parties to this
Agreement, GS shall be liable for all Taxes imposed on any member of the GS
Group, Systems shall be liable for all Taxes imposed on any member of the
Systems Group and CommScope shall be liable for all Taxes imposed on any member
of the CommScope Group. The Companies believe that there is no Tax not
specifically allocated pursuant to Sections 2.02 through 2.04 relating to
Pre-Distribution Periods which is legally imposed on more than one legal entity
or is not solely allocable to the
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Transferred Communications Businesses (e.g., joint and several liability);
however, if there is any such Tax, it shall be allocated in accordance with past
practices as reasonably determined by the affected Companies, or in the absence
of such practices, in accordance with any allocation method agreed upon by the
affected Companies.
2.06 TRANSACTION AND OTHER TAXES
(a) SYSTEMS LIABILITY. Except as otherwise provided in this Section 2.06,
Systems shall be liable for, and shall indemnify and hold harmless GS Group
and the CommScope Group from and against any liability for, all Taxes
resulting from the Transactions, including:
(i) Any sales and use, gross receipts, or other transfer Taxes imposed on
the transfers occurring pursuant to the Transactions;
(ii) any Tax resulting from any income or gain recognized under Treasury
Regulation Sections 1.1502-13 or 1.1502-19 (or any corresponding provisions
of other applicable Tax Laws) as a result of the Transactions; and
(iii) any Tax resulting from any income or gain recognized as a result of
any of the transactions contemplated by the Distribution Agreement failing
to qualify for tax-free treatment under Code Sections 332, 351, 355, 361,
or other provisions of the Code (as contemplated in the Ruling Request) or
other applicable Tax Laws.
(b) INDEMNITY FOR INCONSISTENT ACTS. GS shall be liable for, and shall
indemnify and hold harmless the Systems Group and the CommScope Group from
and against any liability for, any Restructuring Tax (described in
subparagraphs (ii) and (iii) above) to the extent arising from any breach of
GS's representations or covenants under Section 11 or any Tainting Act by GS
or its Affiliates. CommScope shall be liable for, and shall indemnify and
hold harmless the Systems Group and the GS Group from and against any
liability for, any Restructuring Tax to the extent arising from any breach of
CommScope's representations or covenants under Section 11 or any Tainting Act
by CommScope or its Affiliates.
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(c) INDEMNITY FOR REPRESENTATIONS. Systems shall be liable for, and shall
indemnify and hold harmless the GS Group and the CommScope Group from and
against any liability for, any Restructuring Tax to the extent arising from
the inaccuracy of any factual statements or representations in connection
with the Ruling Request, but only to the extent such inaccuracy arises from
facts in existence prior to the Distribution Date, and excluding any
inaccuracy with respect to any statements or representations relating to
CommScope or its Affiliates or any plan or intention on the part of
CommScope, or its Affiliates as to actions to be taken at or subsequent to
the Distribution Date. CommScope shall be liable for, and shall indemnify and
hold harmless the Systems Group and the GS Group from and against any
liability for, any Restructuring Tax to the extent arising from the
inaccuracy of any factual statements or representations relating to the
CommScope or its Affiliates in connection with the Ruling Request.
2.07 APPLICATION TO INTERIM PERIOD BETWEEN DISTRIBUTIONS. The parties
intend that Systems and CommScope will file consolidated and combined Income Tax
Returns for the period beginning on the day after the Systems Distribution and
ending on the date of the CommScope Distribution. In connection with such
period, Systems and CommScope intend that the principles of this Agreement
(with Systems having the role of both Systems and GS) shall apply
thereto MUTATIS MUTANDIS, except as the parties hereto may otherwise
agree.
SECTION 3. PRORATION OF TAXES FOR STRADDLE PERIODS
3.01 GENERAL METHOD OF PRORATION. In the case of any Straddle Period, Tax
Items shall be apportioned between Pre-Distribution Periods and
Post-Distribution Periods in accordance with the principles of Treasury
Regulation Section 1.1502-76(b) as reasonably interpreted and applied by the
Companies. No election shall be made under Treasury Regulation Section
1.1502-76(b)(2)(ii) (relating to ratable allocation of a year's items). If the
Distribution Date is not an Accounting Cutoff Date, the provisions of Treasury
Regulation Section 1.1502-76(b)(2)(iii) will
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be applied to ratably allocate the items (other than extraordinary items) for
the month which includes the Distribution Date.
3.02 TRANSACTION TREATED AS EXTRAORDINARY ITEM. In determining the
apportionment of Tax Items between Pre-Distribution Periods and
Post-Distribution Periods, any Tax Items relating to the Transactions shall be
treated as an extraordinary item described in Treasury Regulation Section
1.1502-76(b)(2)(ii)(C) and shall be allocated to Pre-Distribution Periods, and
any Taxes related to such items shall be treated under Treasury Regulation
Section 1.1502-76(b)(2)(iv) as relating to such extraordinary item and shall be
allocated to Pre-Distribution Periods.
SECTION 4. PREPARATION AND FILING OF TAX RETURNS
4.01 GENERAL. Except as otherwise provided in this Section 4, Tax Returns
shall be prepared and filed when due (including extensions) by the person
obligated to file such Tax Returns under the Code or applicable Tax Law. The
Companies shall provide, and shall cause their Affiliates to provide, assistance
and cooperate with one another in accordance with Section 7 with respect to the
preparation and filing of Tax Returns, including providing information required
to be provided in Section 7.
4.02 PRE-DISTRIBUTION PERIOD AND STRADDLE PERIOD TAX RETURNS. All Tax
Returns required to be filed for Pre-Distribution Periods or Straddle Periods,
if not filed by the Distribution Date, shall be:
(1) prepared and filed by Systems, in the case of any Tax Returns relating
to a Consolidated or Combined Income Tax;(1) and
(2) prepared and filed, or caused to be prepared and filed, by the Group to
which such Tax Return relates in all other cases.
----------------------
(1) Systems may prepare these Tax Returns under the Transition Services
Agreement.
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Each of GS and CommScope shall, for each Tax Period or portion thereof for
which a member of the GS Group or the CommScope Group, respectively, is included
in a Tax Return described in clause (1) of the preceding sentence, provide
Systems with (i) a true and correct tax return for its Group together with an
accompanying computation of Tax liability of its Group, (ii) separate tax
returns for each member of its Group together with accompanying computations of
the separate tax return Tax liabilities of each member of its Group, and (iii) a
reconciliation of book income to federal taxable income for each member of its
Group. GS and CommScope each hereby agrees to use its best efforts to provide
Systems with such returns and computations no later than the first day of the
sixth month following the end of the period to which such returns and
computations relate, but in any event shall provide such returns and
computations to Systems no later than the fifteenth day of the sixth month
following the end of the period to which such returns and computations relate.
Each of GS and CommScope, in preparing the above mentioned tax returns for its
Group, shall not consider or give effect to any (i) net operating loss carryover
or carryover, (ii) capital loss carryover or carryback, (iii) excess charitable
deduction carryover, (iv) excess tax carryover or carryback, or (v) other
similar carryback or carryback item.
4.03 POST-DISTRIBUTION PERIOD TAX RETURNS. Except as otherwise provided in
Section 4.02 with respect to Straddle Period Tax Returns:
(1) All Tax Returns related to the CommScope Group for Post-Distribution
Periods shall be prepared and filed (or caused to be prepared and filed) by
CommScope,
(2) All Tax Returns related to the Systems Group for Post-Distribution
Periods shall be prepared and filed (or caused to be prepared and filed) by
Systems.
(3) All Tax Returns related to the GS Group for Post-Distribution Periods
shall be prepared and filed (or caused to be prepared and filed) by GS.
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4.04 MANNER OF FILING.
(a) All Tax Returns filed or caused to be filed by GS, CommScope or Systems
after the Distribution Date shall be prepared on a basis that is consistent
with any IRS ruling obtained by GI in connection with the restructuring of GI
contemplated by the Distribution Agreement (in the absence of a controlling
change in law or circumstances), and shall be filed on a timely basis by the
party responsible for such filing under this Agreement.
(b) All Tax Returns filed or caused to be filed by GS, or CommScope or
Systems after the Distribution Date shall be prepared (in the absence of a
controlling change in law or circumstances) consistent with past practices,
elections, accounting methods, conventions, and principles of taxation used
for the most recent taxable periods for which Tax Returns involving similar
items have been filed prior to the Distribution Date.
4.05 RIGHT TO REVIEW TAX RETURNS
(a) GENERAL. The Responsible Company with respect to any Tax Return shall
make such Tax Return and related workpapers available for review by the other
Companies, if requested, to the extent (i) such Tax Return relates to Taxes
for which the requesting party may be liable, (ii) such Tax Return relates to
Taxes for which the requesting party may be liable in whole or in part for
any additional Taxes owing as a result of adjustments to the amount of Taxes
reported on such Tax Return, (iii) such Tax Return relates to Taxes for which
the requesting party may have a claim for Tax Benefits under this Agreement,
or (iv) the requesting party reasonably determines that it must inspect such
Tax Return to confirm compliance with the terms of this Agreement. The
Responsible Company shall use its reasonable best efforts to make such Tax
Return available for review as required under this paragraph sufficiently in
advance of the due date for filing such Tax Returns to provide the requesting
party with a meaningful opportunity to analyze and comment on such Tax
Returns and have such Tax Returns modified before filing, taking into account
the person responsible for payment of the tax (if any) reported on such Tax
Return and the materiality of the amount
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of Tax liability with respect to such Tax Return. The Companies shall attempt
in good faith to resolve any issues arising out of the review of such Tax
Returns.
(b) EXECUTION OF RETURNS PREPARED BY OTHER PARTY. In the case of any Tax
Return which is required to be prepared and filed by one Company under this
Agreement and which is required by law to be signed by another Company (or by
its authorized representative), the Company which is legally required to sign
such Tax Return shall not be required to sign such Tax Return under this
Agreement if there is no reasonable basis for the tax treatment of any
material items reported on the Tax Return. Any such Tax Return shall be
supplied by the Company responsible for its preparation and filing to the
Company responsible for its signing at least five days prior to the due date
of such Tax Return (including applicable extensions) and such signing Company
shall deliver an executed copy of such Tax Return to the filing Company at
least two days prior to the due date of such Tax Return (including applicable
extensions).
4.06 CLAIMS FOR REFUND, CARRYBACKS, AND SELF-AUDIT ADJUSTMENTS ("ADJUSTMENT
REQUESTS")
(a) CONSENT REQUIRED FOR ADJUSTMENT REQUESTS RELATED TO CONSOLIDATED OR
COMBINED INCOME TAXES. Except as provided in paragraph (b) below, each of the
Companies hereby agrees that, unless each of the other Companies consents in
writing, which consent shall not be unreasonably withheld, (i) no Adjustment
Request with respect to any Consolidated or Combined Income Tax for a
Pre-Distribution Period shall be filed, and (ii) any available elections to
waive the right to claim in any Pre-Distribution Period with respect to any
Consolidated or Combined Income Tax any Carryback arising in a
Post-Distribution Period shall be made, and no affirmative election shall be
made to claim any such Carryback. Any Adjustment Request which the Companies
consent to make under this Section 4.06 shall be prepared and filed by the
Responsible Company under Sections 4.02 and 4.03 for the Tax Return to be
adjusted. The Company requesting the Adjustment Request shall provide to the
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Responsible Company all information required for the preparation and filing
of such Adjustment Request in such form and detail as reasonably requested by
the Responsible Company.
(b) EXCEPTION FOR ADJUSTMENT REQUESTS RELATED TO AUDIT ADJUSTMENTS. Each of
the Companies shall be entitled, without the consent of any other Company, to
require GS to file an Adjustment Request to take into account any net
operating loss, net capital loss, deduction, credit, or other adjustment
attributable to such Company or any member of its Group corresponding to any
adjustment resulting from any audit by the Internal Revenue Service or other
Tax Authority with respect to Consolidated or Combined Income Taxes for any
Pre-Distribution Period. For example, if the Internal Revenue Service
requires a Company to capitalize an item deducted for the taxable year 1993,
such Company shall be entitled, without the consent of any other Company, to
require GS to file an Adjustment Request for the taxable year 1994 (and later
years) to take into account any depreciation or amortization deductions in
such years directly related to the item capitalized in 1993. In addition,
Systems shall be entitled to require GS or CommScope, as appropriate, to file
an Adjustment Request of the same sort with respect to Separate Company Taxes
for any Pre-Distribution Periods.
(c) OTHER ADJUSTMENT REQUESTS PERMITTED. Nothing in this Section 4.06 shall
prevent any Company or its Affiliates from filing any Adjustment Request with
respect to Income Taxes which are not Consolidated or Combined Income Taxes
or with respect to any Taxes other than Income Taxes; provided, however, that
without the written consent of Systems (which consent shall not be
unreasonably withheld) neither GS nor CommScope shall file an amended Tax
Return with respect to Taxes for which Systems is liable under this
Agreement. Any refund or credit obtained as a result of any such Adjustment
Request (or otherwise) shall be for the account of the person liable for the
Tax under this Agreement.
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(d) PAYMENT OF REFUNDS. Any refunds or other Tax Benefits received by any
Company (or any of its Affiliates) as a result of any Adjustment Request
which are for the account of another Company (or member of such other
Company's Group) shall be paid by the Company receiving (or whose Affiliate
received) such refund or Tax Benefit to such other Company in accordance with
Section 6.
SECTION 5. TAX PAYMENTS AND INTERCOMPANY XXXXXXXX
5.01 PAYMENT OF TAXES WITH RESPECT TO GI FEDERAL CONSOLIDATED RETURNS FILED
AFTER THE DISTRIBUTION DATE. In the case of any GI Federal Consolidated Return
the due date for which (including extensions) is after the Distribution Date,
(a) COMPUTATION AND PAYMENT OF TAX DUE. At least ten business days prior to
any Payment Date, GS shall compute the amount of Tax required to be paid to
the Internal Revenue Service (taking into account the requirements of Section
4.04 relating to consistent accounting practices) with respect to such Tax
Return on such Payment Date and shall notify Systems in writing of the amount
of Tax required to be paid on such Payment Date. GS will pay such amount to
the Internal Revenue Service on or before such Payment Date.
(b) COMPUTATION AND PAYMENT OF SYSTEMS LIABILITY WITH RESPECT TO TAX DUE.
Within 30 days following any Payment Date, Systems will pay to GS the excess
(if any) of
(i) the Pre-Distribution Consolidated Tax Liability determined as of such
Payment Date with respect to the applicable Tax Period allocable to Systems
in a manner consistent with the provisions of Section 2.02(a) (the
"Allocated Federal Tax Liability"), over
(ii) the cumulative net payments with respect to such Tax Return prior to
such Payment Date made before the Distribution Date, plus all such payments
by the members of the Systems Group made from the Distribution Date to the
Payment Date (the "Cumulative Federal Tax Payment").
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If the Systems Cumulative Federal Tax Payment is greater than the Systems
Allocated Federal Tax Liability as of any Payment Date, then GS shall pay
such excess to Systems within 30 days of GS's receipt of the corresponding
Tax Benefit (i.e., through either a reduction in GS's otherwise required Tax
payment, or a refund of prior Tax payments).
(c) INTEREST ON INTERGROUP TAX ALLOCATION PAYMENTS. In the case of any
payments to GS required under paragraph (b) of this subsection 5.01, Systems
shall also pay to GS an amount of interest computed at the Prime Rate on the
amount of the payment required based on the number of days from the
applicable Payment Date to the date of payment. In the case of any payments
by GS required under paragraph (b) of this subsection 5.01, GS shall also pay
to the payee an amount of interest computed at the Prime Rate on the amount
of the payment required based on the number of days from the date of receipt
of the Tax Benefit to the date of payment of such amount to the payee.
(d) REPRESENTATION REGARDING CUMULATIVE 1997 FEDERAL INCOME TAX PAYMENTS.
Systems represents and warrants to GS that, as of the the date hereof,
$__________ of cumulative net payments have been made by GI, and credited by
the Internal Revenue Service, with respect to the 1997 GI Federal
Consolidated Return.
5.02 PAYMENT OF FEDERAL INCOME TAX RELATED TO ADJUSTMENTS
(a) ADJUSTMENTS RESULTING IN UNDERPAYMENTS. GS shall pay to the Internal
Revenue Service when due any additional Federal Income Tax required to be
paid as a result of any adjustment to the Pre-Distribution Consolidated Tax
Liability with respect to any GI Federal Consolidated Return. Systems
shall pay to GS such amount within 30 days from the later of (i) the date
the additional Tax was paid by GS or (ii) the date of receipt by Systems
of a written notice and demand from GS for payment of the amount due,
accompanied by evidence of payment and a statement detailing the Taxes
paid and describing in reasonable detail the particulars relating thereto.
Any payments required under this Section 5.02(a) shall include interest
computed at
- 19 -
the Prime Rate based on the number of days from the date the additional Tax
was paid by GS to the date of the payment under this Section 5.02(a).
(b) ADJUSTMENTS RESULTING IN OVERPAYMENTS. Within 30 days of receipt by GS
of any Tax Benefit resulting from any adjustment to the Pre-Distribution
Consolidated Tax Liability with respect to any GI Federal Consolidated
Return, GS shall pay to Systems its share of any such Tax Benefit, as
determined by Systems. Any payments required under this Section 5.02(b)
shall include interest computed at the Prime Rate based on the number of
days from the date the Tax Benefit was received by GS to the date of
payment to Systems Company under this Section 5.02(b).
5.03 PAYMENT OF STATE INCOME TAX RELATING TO PRE-DISTRIBUTION PERIODS WITH
RESPECT TO RETURNS FILED AFTER THE DISTRIBUTION DATE
(a) COMPUTATION AND PAYMENT OF TAX DUE. At least three business days prior
to any Payment Date for any Tax Return with respect to any State Income Tax
relating to a Pre-Distribution Period, the Responsible Company shall compute
the amount of Tax required to be paid to the applicable Tax Authority (taking
into account the requirements of Section 4.04 relating to consistent
accounting practices) with respect to such Tax Return on such Payment Date
and--
(i) If such Tax Return is with respect to a Consolidated or Combined
State Income Tax, GS shall notify Systems in writing of the amount of Tax
required to be paid on such Payment Date. GS will pay such amount to such
Tax Authority on or before such Payment Date.
(ii) If such Tax Return is with respect to a Separate Company Tax, the
Responsible Company shall, if it is not the Company liable for the Tax
reported on such Tax Return, notify the Company liable for such Tax in
writing of the amount of Tax required to be
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paid on such Payment Date. The Company liable for such Tax will pay such
amount to such Tax Authority on or before such Payment Date.
(b) COMPUTATION AND PAYMENT OF SYSTEMS LIABILITY WITH RESPECT TO TAX DUE.
Within 120 days following the due date (including extensions) for filing any
Tax Return for any Consolidated or Combined State Income Tax (excluding any
Tax Return with respect to payment of estimated Taxes or Taxes due with a
request for extension of time to file) relating to a Pre-Distribution Period,
Systems shall pay to GS the tax liability allocable to Systems as determined
by Systems under the provisions of Section 2.03(b)(i), plus interest computed
at the Prime Rate on the amount of the payment based on the number of days
from the due date (including extensions) to the date of payment by Systems to
GS
5.04 PAYMENT OF STATE INCOME TAXES RELATED TO ADJUSTMENTS
(a) ADJUSTMENTS RESULTING IN UNDERPAYMENTS. GS shall pay to the applicable
Tax Authority when due any additional State Income Tax required to be paid as
a result of any adjustment to the Tax liability with respect to any Tax
Return for any Consolidated or Combined State Income Tax for any
Pre-Distribution Period. Systems shall pay to GS its respective share of any
such additional Tax payment determined by Systems in accordance with Section
2.03(b)(ii) within 120 days from the later of (i) the date the additional Tax
was paid by GS or (ii) the date of receipt by Systems of a written notice and
demand from GS for payment of the amount due, accompanied by evidence of
payment and a statement detailing the Taxes paid and describing in reasonable
detail the particulars relating thereto. Systems shall also pay to GS
interest on its respective share of such Tax computed at the Prime Rate based
on the number of days from the date the additional Tax was paid by GS to the
date of its payment to GS under this Section 5.04(a).
(b) ADJUSTMENTS RESULTING IN OVERPAYMENTS. Within 120 days of receipt by GS
of any Tax Benefit resulting from any adjustment to the Tax liability with
respect to any Tax Return for
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any Consolidated or Combined State Income Tax for any Pre-Distribution
Period, GS shall pay to Systems its share of any such Tax Benefit determined
by Systems. Any payments required under this Section 5.04(b) computed at the
Prime Rate based on the number of days from the date the Tax Benefit was
received by GS to the date of payment to Systems under this Section 5.04(b).
5.05 PAYMENT OF SEPARATE COMPANY TAXES. Each Company shall pay, or shall
cause to be paid, to the applicable Tax Authority when due all Separate Company
Taxes owed by such Company or a member of such Company's Group.
5.06 INDEMNIFICATION PAYMENTS. If any Company (the "payor") is required to
pay to a Tax Authority a Tax that another Company (the "responsible party") is
required to pay to such Taxing Authority under this Agreement, the responsible
party shall reimburse the payor within 30 days of delivery by the payor to the
responsible party of an invoice for the amount due, accompanied by evidence of
payment and a statement detailing the Taxes paid and describing in reasonable
detail the particulars relating thereto. The reimbursement shall include
interest on the Tax payment computed at the Prime Rate based on the number of
days from the date of the payment to the Tax Authority to the date of
reimbursement under this Section 5.06.
SECTION 6. TAX BENEFITS
If a Tax Benefit accrues to a member of one Group as the result of an
adjustment to any Tax Return with respect to any Taxes for which a member of
another Group is liable hereunder, the Company to which such Tax Benefit accrues
shall make a payment to the Company that is liable for such Taxes hereunder
within 30 days following accrual of the Tax Benefit. Such payment shall be in
an amount equal to the present value of such Tax Benefit (including any Tax
Benefit realized as a result of the payment), plus interest on such amount
computed at the Prime Rate based on the number of days from the date of accrual
of the Tax Benefit to the date of payment of such amount under this Section;
provided, however, that no payment under this
- 22 -
Section 6 by the Company to which such Tax Benefit accrues shall exceed the
present value of the detriment to the Company liable for such Taxes, which
deteriment results from the adjustment giving rise to such Tax Benefit.
SECTION 7. ASSISTANCE AND COOPERATION
7.01 GENERAL. After the Distribution Date, each of the Companies shall
cooperate (and cause their respective Affiliates to cooperate) with each other
and with each other's agents, including accounting firms and legal counsel, in
connection with Tax matters relating to the Companies and their Affiliates
including (i) preparation and filing of Tax Returns, (ii) determining the
liability for and amount of any Taxes due (including estimated Taxes) or the
right to and amount of any refund of Taxes, (iii) examinations of Tax Returns,
and (iv) any administrative or judicial proceeding in respect of Taxes assessed
or proposed to be assessed. Such cooperation shall include making all
information and documents in their possession relating to the other Companies
and their Affiliates available to such other Companies as provided in Section 8.
Each of the Companies shall also make available to each other, as reasonably
requested and available, personnel (including officers, directors, employees and
agents of the Companies or their respective Affiliates) responsible for
preparing, maintaining, and interpreting information and documents relevant to
Taxes, and personnel reasonably required as witnesses or for purposes of
providing information or documents in connection with any administrative or
judicial proceedings relating to Taxes. Any information or documents provided
under this Section 7 shall be kept confidential by the Company receiving the
information or documents, except as may otherwise be necessary in connection
with the filing of Tax Returns or in connection with any administrative or
judicial proceedings relating to Taxes.
7.02 INCOME TAX RETURN INFORMATION. Each Company will provide to each other
Company information and documents relating to their respective Groups required
by the other Companies to prepare Tax Returns. The Responsible Company shall
determine a reasonable compliance
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schedule for such purpose in accordance with GI's past practices. Any additional
information or documents the Responsible Company requires to prepare such Tax
Returns will be provided in accordance with past practices, if any, or as the
Responsible Company reasonably requests and in sufficient time for the
Responsible Company to file such Tax Returns timely.
SECTION 8. TAX RECORDS
8.01 RETENTION OF TAX RECORDS. Except as provided in Section 8.02, each
Company shall preserve and keep all Tax Records exclusively relating to the
assets and activities of their respective Groups for Pre-Distribution Tax
Periods, and Systems shall preserve and keep all other Tax Records relating to
Taxes of the Groups for Pre-Distribution Tax Periods, for so long as the
contents thereof may become material in the administration of any matter under
the Code or other applicable Tax Law, but in any event until the later of (i)
the expiration of any applicable statutes of limitation, and (ii) seven years
after the Distribution Date. If, prior to the expiration of the applicable
statute of limitation and such seven-year period, a Company reasonably
determines that any Tax Records which it is required to preserve and keep under
this Section 8 are no longer material in the administration of any matter under
the Code or other applicable Tax Law, such Company may dispose of such records
upon 90 days prior notice to the other Companies. Such notice shall include a
list of the records to be disposed of describing in reasonable detail each file,
book, or other record accumulation being disposed. The notified Companies shall
have the opportunity, at their cost and expense, to copy or remove, within such
90-day period, all or any part of such Tax Records.
8.02 STATE INCOME TAX RETURNS. Tax Returns with respect to State Income
Taxes and workpapers prepared in connection with preparing such Tax Returns
shall be preserved and kept, in accordance with the guidelines of Section 8.01,
by the Company responsible for preparing and filing the applicable Tax Return.
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8.03 ACCESS TO TAX RECORDS. The Companies and their respective Affiliates
shall make available to each other for inspection and copying during normal
business hours upon reasonable notice all Tax Records in their possession to the
extent reasonably required by the other Company in connection with the
preparation of Tax Returns, audits, litigation, or the resolution of items under
this Agreement.
SECTION 9. TAX CONTESTS
9.01 NOTICE. Each of the parties shall provide prompt notice to the other
parties of any pending or threatened Tax audit, assessment or proceeding or
other Tax Contest of which it becomes aware related to Taxes for Tax Periods for
which it is indemnified by one or more other parties hereunder. Such notice
shall contain factual information (to the extent known) describing any asserted
Tax liability in reasonable detail and shall be accompanied by copies of any
notice and other documents received from any Tax Authority in respect of any
such matters. If an indemnified party has knowledge of an asserted Tax liability
with respect to a matter for which it is to be indemnified hereunder and such
party fails to give the indemnifying party prompt notice of such asserted Tax
liability, then (i) if the indemnifying party is precluded from contesting the
asserted Tax liability in any forum as a result of the failure to give prompt
notice, the indemnifying party shall have no obligation to indemnify the
indemnified party for any Taxes arising out of such asserted Tax liability, and
(ii) if the indemnifying party is not precluded from contesting the asserted Tax
liability in any forum, but such failure to give prompt notice results in a
monetary detriment to the indemnifying party, then any amount which the
indemnifying party is otherwise required to pay the indemnified party pursuant
to this Agreement shall be reduced by the amount of such detriment.
9.02 CONTROL OF TAX CONTESTS. Each Company shall have full
responsibility and discretion in handling, settling or contesting any Tax
Contest involving a Tax for which it is liable pursuant to Section 2 of this
Agreement; provided, however, Systems may participate in any Tax Contest
- 25 -
with respect to Restructuring Taxes regardless of whether it has liability or
indemnification obligations with respect to such Taxes under this Agreement.
SECTION 10. EFFECTIVE DATE; TERMINATION OF PRIOR INTERCOMPANY TAX
ALLOCATION AGREEMENTS. This Agreement shall be effective on the Distribution
Date. Immediately prior to the close of business on the Distribution Date (i)
all Prior Intercompany Tax Allocation Agreements (the "Prior Agreements") shall
be terminated, and (ii) amounts due under such Prior Agreements as of the
Distribution Date shall be settled as of the Distribution Date (including
capitalization or distribution of amounts due or receivable under such
agreements). Upon such termination and settlement, no further payments by or to
the GS Group, by or to the CommScope Group, or by or to the Systems Group, with
respect to such Prior Agreements shall be made, and all other rights and
obligations resulting from such Prior Agreements between the Companies and their
Affiliates shall cease at such time. Any payments pursuant to such Prior
Agreements shall be ignored for purposes of computing amounts due under this
Agreement.
SECTION 11. NO INCONSISTENT ACTIONS.
(a) Each of the Companies covenants and agrees that it will not take any
action, and it will cause its Affiliates to refrain from taking any action,
which may be inconsistent with the Tax treatment of the Transactions as
contemplated in the Ruling Request (any such action is referred to in this
Section 11 as a "Tainting Act"), unless (i) the Company or Affiliate thereof
proposing such Tainting Act (the "Requesting Party") either (A) obtains a
ruling with respect to the Tainting Act from the Internal Revenue Service or
other applicable Tax Authority that is reasonably satisfactory to each other
Company (the "Requested Parties") (except that the Requesting Party shall not
submit any such ruling request if a Requested Party determines in good faith
that filing such request might have a materially adverse effect upon such
Requested Party), or (B) obtains an unqualified opinion of independent
nationally recognized tax counsel acceptable to each Requested Party, on a
basis of assumed facts and
- 26 -
representations consistent with the facts at the time of such action, that
such Tainting Act will not affect the Tax treatment of the Transactions as
contemplated in the Ruling Request, or (ii) each Requested Party consents in
writing to such Tainting Act, which consent shall be granted or withheld in
the sole and absolute discretion of each such Requested Party. Without
limiting the foregoing:
(i) SPECIFIED ACTIONS. During the two year period following the
Distribution Date, unless clause (i) or (ii) of the preceding paragraph is
satisfied with respect to the applicable action, no Company or its
Affiliate will (A) liquidate or merge with or into any other corporation
(other than a merger which results in the outstanding stock of such Company
or its Affiliates immediately before the merger continuing to represent at
least eighty (80) percent of the outstanding voting stock and non-voting
stock of the merged corporations after the transaction); (B) issue more
than 20%, by vote or value, of its capital stock in one or more
transactions; (C) redeem, purchase or otherwise reacquire more than five
(5) percent, by vote or value, of its capital stock in one or more
transactions (other than in connection with future employee benefit plans
or pursuant to a future market purchase program involving five (5) percent
or less of its publicly traded stock); (D) sell, exchange, distribute or
otherwise dispose of, other than in the ordinary course of business, more
than 25% of the assets constituting the trades or businesses relied upon in
the Ruling Request to sastisfy Section 355(b) of the Code; or (E)
discontinue or cause to be discontinued the active conduct of the trades or
businesses relied upon in the Ruling Request to satisfy Section 355(b) of
the Code.
(ii) NO INCONSISTENT PLAN OR INTENT. Each of the Companies represents
and warrants that neither it nor any of its Affiliates has any plan or
intent to take any action which is inconsistent with any factual statements
or representations in the Ruling Request. Regardless of any change in
circumstances, each of the Companies covenants and agrees
- 27 -
that it will not take, and it will cause its Affiliates to refrain from
taking, any such inconsistent action on or before the last day of the
calendar year ending after the second anniversary of the Distribution Date
other than as permitted in this Section 11.
(iii) AMENDED OR SUPPLEMENTAL RULINGS. Each of the Companies covenants
and agrees that it will not file, and it will cause its Affiliates to
refrain from filing, any amendment or supplement to the Ruling Request
subsequent to the Distribution Date without the consent of the other
Companies, which consent shall not be unreasonably withheld.
(b) Notwithstanding anything to the contrary in this Agreement, each
Company shall be solely liable for, and shall indemnify and hold harmless
each other Company from any Restructuring Tax resulting from a Tainting Act
by such first Company or its Affiliates, regardless of whether clause (i) or
(ii) of Section 11(a) was satisfied with respect to such Tainting Act.
SECTION 12. SURVIVAL OF OBLIGATIONS. The representations, warranties,
covenants and agreements set forth in this Agreement shall be unconditional and
absolute and shall remain in effect without limitation as to time.
SECTION 13. EMPLOYEE MATTERS. Each of the Companies agrees to utilize, or
cause its Affiliates to utilize, the alternative procedure set forth in Revenue
Procedure 84-77, 1984-2 C.B. 753, with respect to wage reporting.
SECTION 14. TREATMENT OF PAYMENTS; TAX GROSS UP
14.01 TREATMENT OF TAX INDEMNITY AND TAX BENEFIT PAYMENTS. In the absence
of any change in tax treatment under the Code or other applicable Tax Law,
(a) any Tax indemnity payments made by a Company under Section 5 shall be
reported for Tax purposes by the payor and the recipient as distributions or
capital contributions, as appropriate, occurring immediately before the
distribution of the Systems Common Shares and the CommScope Common Shares to
GI shareholders on the Distribution Date, but only
- 28 -
to the extent the payment does not relate to a Tax allocated to the payor in
accordance with Treasury Regulation Section 1.1502-33(d) (or under
corresponding principles of other applicable Tax Laws), and
(b) any Tax Benefit payments made by a Company under Section 6, shall be
reported for Tax purposes by the payor and the recipient as distributions or
capital contributions, as appropriate, occurring immediately before the
distribution of Systems Common Shares and CommScope Common Shares to GI
shareholders on the Distribution Date, but only to the extent the payment
does not relate to a Tax allocated to the payor in accordance with Treasury
Regulation Section 1.1502-33(d) (or under corresponding principles of other
applicable Tax Laws).
14.02 TAX GROSS UP. If notwithstanding the manner in which Tax indemnity
payments and Tax Benefit payments were reported, there is an adjustment to the
Tax liability of a Company as a result of its receipt of a payment pursuant to
this Agreement, such payment shall be appropriately adjusted so that the amount
of such payment, reduced by the amount of all Income Taxes payable with respect
to the receipt thereof (but taking into account all correlative Tax Benefits
resulting from the payment of such Income Taxes), shall equal the amount of the
payment which the Company receiving such payment would otherwise be entitled to
receive pursuant to this Agreement.
14.03 INTEREST UNDER THIS AGREEMENT. Anything herein to the contrary
notwithstanding, to the extent one Company ("indemnitor") makes a payment of
interest to another Company ("indemnitee") under this Agreement with respect to
the period from the date that the indemnitee made a payment of Tax to a Tax
Authority to the date that the indemnitor reimbursed the indemnitee for such Tax
payment, or with respect to the period from the date that the indemnitor
received a Tax Benefit to the date indemnitor paid the Tax Benefit to the
indemnitee, the interest payment shall be treated as interest expense to the
indemnitor (deductible to the extent provided
- 29 -
by law) and as interest income by the indemnitee (includible in income to the
extent provided by law). The amount of the payment shall not be adjusted under
Section 14.02 to take into account any associated Tax Benefit to the indemnitor
or increase in Tax to the indemnitee.
SECTION 15. DISAGREEMENTS. If after good faith negotiations the parties
cannot agree on the application of this Agreement to any matter, then the matter
will be referred to a nationally recognized accounting firm acceptable to each
of the parties (the "Accounting Firm"). The Accounting Firm shall furnish
written notice to the parties of its resolution of any such disagreement as soon
as practical, but in any event no later than 45 days after its acceptance of the
matter for resolution. Any such resolution by the Accounting Firm will be
conclusive and binding on all parties to this Agreement. In accordance with
Section 17, each party shall pay its own fees and expenses (including the fees
and expenses of its representatives) incurred in connection with the referral of
the matter to the Accounting Firm. All fees and expenses of the Accounting Firm
in connection with such referral shall be shared equally by the parties affected
by the matter.
SECTION 16. LATE PAYMENTS. Any amount owed by one party to another party
under this Agreement which is not paid when due shall bear interest at the Prime
Rate plus two percent, compounded semiannually, from the due date of the payment
to the date paid. To the extent interest required to be paid under this Section
16 duplicates interest required to be paid under any other provision of this
Agreement, interest shall be computed at the higher of the interest rate
provided under this Section 16 or the interest rate provided under such other
provision.
SECTION 17. EXPENSES. Except as provided in Section 15, each party and its
Affiliates shall bear their own expenses incurred in connection with preparation
of Tax Returns, Tax Contests, and other matters related to Taxes under the
provisions of this Agreement.
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SECTION 18. GENERAL PROVISIONS
18.01 ADDRESSES AND NOTICES. Any notice, demand, request or report required
or permitted to be given or made to any party under this Agreement shall be in
writing and shall be deemed given or made when delivered in party or when sent
by first class mail or by other commercially reasonable means of written
communication (including delivery by an internationally recognized courier
service or by facsimile transmission) to the party at the party's address as
follows:
If to GS, at: PRIOR TO THE DISTRIBUTION DATE:
General Instrument Corporation
0000 Xxxx Xxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: General Counsel
AFTER THE DISTRIBUTION DATE:
General Semiconductor, Inc.
00 Xxxxxxxx Xxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000-0000
Attn: General Counsel
If to Systems, at: NextLevel Systems, Inc.
0000 Xxxx Xxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: General Counsel
If to CommScope, at: CommScope, Inc.
0000 Xxxxxx-Xxxxx Xxxxxxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: General Counsel
A party may change the address for receiving notices under this Agreement by
providing written notice of the change of address to the other parties.
18.02 BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and assigns.
18.03 WAIVER. No failure by any party to insist upon the strict performance
of any obligation under this Agreement or to exercise any right or remedy under
this Agreement shall
- 31 -
constitute waiver of any such obligation, right, or remedy or any other
obligation, rights, or remedies under this Agreement.
18.04 INVALIDITY OF PROVISIONS. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity,
legality, and enforceability of the remaining provisions contained herein shall
not be affected thereby.
18.05 FURTHER ACTION. The parties shall execute and deliver all documents,
provide all information, and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement, including
the execution and delivery to the other parties and their Affiliates and
representatives of such powers of attorney or other authorizing documentation as
is reasonably necessary or appropriate in connection with Tax Contests (or
portions thereof) under the control of such other parties in accordance with
Section 9.
18.06 INTEGRATION. This Agreement constitutes the entire agreement among
the parties pertaining to the subject matter of this Agreement and supersedes
all prior agreements and understandings pertaining thereto. In the event of any
inconsistency between this Agreement and the Distribution Agreement or any other
agreements relating to the transactions contemplated by the Distribution
Agreement, the provisions of this Agreement shall control.
18.07 CONSTRUCTION. The language in all parts of this Agreement shall in
all cases be construed according to its fair meaning and shall not be strictly
construed for or against any party.
18.08 NO DOUBLE RECOVERY; SUBROGATION. No provision of this Agreement shall
be construed to provide an indemnity or other recovery for any costs, damages,
or other amounts for which the damaged party has been fully compensated under
any other provision of this Agreement or under any other agreement or action at
law or equity. Unless expressly required in this Agreement, a party shall not be
required to exhaust all remedies available under other agreements or at law or
equity before recovering under the remedies provided in this Agreement.
- 32 -
Subject to any limitations provided in this Agreement (for example, the
limitation on filing claims for refund in Section 4.06), the indemnifying party
shall be subrogated to all rights of the indemnified party for recovery from any
third party.
18.09 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.
18.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts
executed in and to be performed in that State.
- 33 -
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by the respective officers as of the date set forth above.
GENERAL SEMICONDUCTOR, INC.
By:
Its:
COMMSCOPE, INC.
By:
Its:
NEXTLEVEL SYSTEMS, INC.
By:
Its:
- 34 -
