Exhibit 2.02
TAX SHARING AGREEMENT
dated as of April 30, 1997
by and between
Xxxxxx International, Inc.,
an Indiana corporation
and
New Xxxxxx International, Inc.,
an Indiana corporation
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
.......................................... 2
ARTICLE II
FILING OF TAX RETURNS
Section 2.01 Manner of Filing.......................... 6
Section 2.02 Pre-Distribution Tax Returns.............. 7
Section 2.03 Post-Distribution Tax Returns............. 9
ARTICLE III
BALANCE SHEET ADJUSTMENTS AND PAYMENT OF TAXES
Section 3.01 Allocation of Tax Liabilities With Respect
to Unfiled Returns for Pre-Distribution
Periods................................. 10
(a) United States Consolidated Income
Tax for Periods Ended on the
Distribution Date.................. 10
(b) State and Local Income and Similar
Taxes for Periods Ended on or
Before the Distribution Date for
which the Company is Responsible... 13
(c) Federal, State and Local Taxes Other
Than Income Taxes for Periods that
Include the Distribution Date for
which the Company is Responsible... 16
(d) Federal, State and Local Taxes for
which New Xxxxxx is Responsible.... 18
(e) Foreign Tax Returns.................. 21
Section 3.02
(a) Change in the Company Filed Returns.. 21
(b) Changes in New Xxxxxx Group Member
Filed Returns...................... 24
(c) Manner of Payment; Miscellaneous..... 27
Section 3.03 Restructuring Taxes....................... 27
Section 3.04 Liability for Taxes with Respect to Post-
Distribution Periods.................... 28
Section 3.05
(a) Carrybacks........................... 29
(b) Payment.............................. 30
Section 3.06 Liabilities............................... 30
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Section 3.07 Payment................................... 33
Section 3.08 Breach.................................... 33
ARTICLE IV
INDEMNITY; COOPERATION AND EXCHANGE OF INFORMATION
Section 4.01 Indemnity................................. 34
Section 4.02 Tax Controversies......................... 35
Section 4.03 Cooperation and Exchange of Information... 39
ARTICLE V
MISCELLANEOUS
Section 5.01 Expenses.................................. 42
Section 5.02 Entire Agreement; Termination of Prior
Agreements.............................. 42
Section 5.03 Notices................................... 43
Section 5.04 Resolution of Disputes.................... 44
Section 5.05 Application to Present and Future
Subsidiaries............................ 44
Section 5.06 Term...................................... 45
Section 5.07 Titles and Headings....................... 45
Section 5.08 Legal Enforceability...................... 45
Section 5.09 Singular and Plural....................... 46
Section 5.10 Governing Law............................. 46
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TAX SHARING AGREEMENT
Tax Sharing Agreement (the "Agreement"), dated as of
April 30, 1997, by and between Xxxxxx International, Inc., an
Indiana corporation (the "Company"), and New Xxxxxx Interna-
tional, Inc., an Indiana corporation and a wholly owned subsid-
iary of the Company ("New Xxxxxx").
WHEREAS, the Board of Directors of the Company has
determined it is appropriate and desirable to enter into the
Distribution Agreement (the "Distribution Agreement") dated as
of April 30, 1997, by and between the Company and New Xxxxxx,
pursuant to which, among other things, the Company will dis-
tribute to holders of its common stock all the issued and out-
standing shares of common stock of New Xxxxxx (the "Distribu-
tion");
WHEREAS, the Board of Directors of the Company has
determined it is appropriate and desirable to enter into the
Combination Agreement, dated as of November 25, 1996 (the "Com-
bination Agreement"), by and among the Company, Autoliv AB, a
corporation organized under the laws of the Kingdom of Sweden
("Autoliv"), Autoliv, Inc., a Delaware corporation ("New Par-
ent"), and ASP Merger Sub Inc., a Delaware corporation and a
wholly owned subsidiary of New Parent ("Safety Sub"), pursuant
to which, among other things, Safety Sub will be merged with
and into the Company (the "Merger") and New Parent will offer
to acquire all of the outstanding capital stock of Autoliv pur-
suant to the Offer (as defined in the Combination Agreement,
and, together with the other transactions contemplated thereby,
the "Transactions");
WHEREAS, the Company, on behalf of itself and its
present and future subsidiaries other than the New Xxxxxx Group
(as hereinafter defined) (the "Company Group"), and New Xxxxxx,
on behalf of itself and its present and future subsidiaries
(the "New Xxxxxx Group"), wish to provide for the allocation
between the Company Group and the New Xxxxxx Group of all re-
sponsibilities, liabilities and benefits relating to or affect-
ing Taxes (as hereinafter defined) paid or payable by either of
them for all taxable periods, whether beginning before, on or
after the Distribution Date (as hereinafter defined) and to
provide for certain other matters.
NOW, THEREFORE, in consideration of the mutual agree-
ments, provisions and covenants contained in this Agreement,
the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Any capitalized terms used but not defined in this
Agreement shall have the meanings ascribed thereto in the Dis-
tribution Agreement. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be
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equally applicable to both the singular and the plural forms of
the terms defined):
"Code" means the Internal Revenue Code of 1986, as
amended, and shall include corresponding provisions of any sub-
sequently enacted federal tax laws.
"Distribution Date" means the date determined by the
Company's Board of Directors as of which the Distribution shall
be effected, which is presently contemplated to be the close of
business on April 30, 1997.
"due date" means, with respect to any Tax Return or
payment, the date on which such Tax Return is due to be filed
with or such payment is due to be made to the appropriate gov-
ernmental authority pursuant to applicable law, giving effect
to any applicable extensions of the time for such filing or
payment.
"Final Determination" shall mean the final resolution
of liability for any Tax for a taxable period, (i) by IRS Form
870 or 870-AD (or any successor forms thereto), on the date of
acceptance by or on behalf of the IRS, or by a comparable form
under the laws of other jurisdictions; except that a Form 870
or 870-AD or comparable form that reserves (whether by its
terms or by operation of law) the right of the taxpayer to file
a claim for refund and/or the right of the taxing authority to
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assert a further deficiency shall not constitute a Final Deter-
mination; (ii) by a decision, judgment, decree, or other order
by a court of competent jurisdiction, which has become final
and unappealable; (iii) by a closing agreement or accepted of-
fer in compromise under Section 7121 or 7122 of the Code, or
comparable agreements under the laws of other jurisdictions;
(iv) by any allowance of a refund or credit in respect of an
overpayment of Tax, but only after the expiration of all peri-
ods during which such refund may be recovered (including by way
of offset) by the Tax imposing jurisdiction; or (v) by any
other final disposition, including by reason of the expiration
of the applicable statute of limitations.
"IRS" means the Internal Revenue Service.
"Reasonable Basis" means "reasonable basis" within
the meaning of section 1.6662-7(d) of the Treasury Regulations.
"Restructuring Taxes" means any Taxes resulting from
the transfers of stock and/or assets undertaken to effect the
Distribution; including, without limitation, any Tax imposed
pursuant to or as a result of Code Section 311.
"Tax" means any of the Taxes.
"Tax Benefit" means any item of loss, deduction,
credit or any other Tax Item which decreases Taxes paid or pay-
able.
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"Tax Detriment" means any item of income, gain, re-
capture of credit or any other Tax Item which increases Taxes
paid or payable.
"Tax Item" means any item of income, gain, loss, de-
duction, credit, recapture of credit or any other item which
increases or decreases Taxes paid or payable, including an ad-
justment under Code Section 481 resulting from a change in ac-
counting method.
"Tax Return" means any return, filing, questionnaire
or other document required to be filed, including requests for
extensions of time, filings made with estimated tax payments,
claims for refund and amended returns that may be filed, for
any period with any taxing authority (whether domestic or for-
eign) in connection with any Tax or Taxes (whether or not a
payment is required to be made with respect to such filing).
"Taxes" means all forms of taxation, whenever created
or imposed, and whether of the United States or elsewhere, and
whether imposed by a local, municipal, governmental, state,
federation or other body, and without limiting the generality
of the foregoing, shall include income, sales, use, ad valorem,
gross receipts, value added, franchise, transfer, recording,
withholding, payroll, employment, excise, occupation, premium
and property taxes, together with any related interest, penal-
ties and additions to any such tax, or additional amounts im-
posed by any taxing authority (domestic or foreign) upon the
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New Xxxxxx Group, the Company Group or any of their respective
members, divisions, assets or branches.
ARTICLE II
FILING OF TAX RETURNS
Section 2.01. Manner of Filing. All Tax Returns
filed after the date hereof relating to taxable periods begin-
ning prior to the close of business on the Distribution Date
shall be prepared on a basis which is consistent with the rul-
ings obtained in connection with the Distribution (in the ab-
sence of a controlling change in law or circumstances) and oth-
erwise in accordance with past practice and shall be filed on a
timely basis (including extensions) by the party responsible
for such filing under this Agreement. To the extent that an
inconsistent position would result in a Tax Detriment to the
other party and in the absence of a controlling change in law
or circumstances, all Tax Returns filed after the date hereof
relating to taxable periods beginning prior to the Distribution
Date shall be prepared on a basis consistent with the elec-
tions, accounting methods, conventions, and principles of taxa-
tion used for the most recent taxable periods for which Tax
Returns involving similar Tax Items have been filed. Subject
to the provisions of this Agreement, all decisions relating to
the preparation of Tax Returns shall be made in the reasonable
discretion of the party responsible under this Agreement for
such preparation.
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Section 2.02. Pre-Distribution Tax Returns. All
consolidated federal income Tax Returns which include a member
of the Company Group and the New Xxxxxx Group that are required
to be filed for periods beginning before the Distribution Date
("Pre-Distribution Federal Periods") shall be prepared by New
Xxxxxx and provided to the Company at least twenty days prior
to the due date for such Tax Return. If requested to do so by
New Xxxxxx, the Company shall make consent dividend elections
or any other elections provided for under the Code and, for a
newly organized New Xxxxxx Group member, including, without
limitation, New Xxxxxx, to adopt any permissible accounting
method with respect to the Company's consolidated federal in-
come Tax Return for the Company's taxable year ending on the
Distribution Date; provided, that the Company shall not be re-
quired to make any such election if the Company determines in
good faith that such election would cause a material Tax Detri-
ment or other material adverse effect to any member of the Com-
pany Group.
All state and local income and/or franchise Tax Re-
turns or other Tax Returns for state and local Taxes measured
by income including, without limitation, the Michigan Single
Business Tax, which include a member of the Company Group
and/or the New Xxxxxx Group that may be or are required to be
filed for periods beginning before the Distribution Date shall
be prepared by New Xxxxxx and provided to the Company at least
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twenty days prior to the due date for such Tax Return. Not-
withstanding the foregoing, if the corresponding return for the
most recent period for which such a Tax Return was filed was
filed by a member of the New Xxxxxx Group, such New Xxxxxx
Group member shall file such return.
Unless otherwise agreed to by the Company and New
Xxxxxx, all foreign Tax Returns and any other Tax Returns not
described elsewhere in this Section 2.02 which include a member
of the New Xxxxxx Group that are required to be filed for peri-
ods beginning before the Distribution Date shall be prepared by
New Xxxxxx and provided to the Company at least twenty days
prior to the due date for such Tax Return. Such Tax Return
shall be filed by the member of the Company Group or the New
Xxxxxx Group, as the case may be, who filed the corresponding
Tax Return for the most recent period for which such a Tax Re-
turn has been filed, or, if no such corresponding Tax Return
has been filed, by the appropriate entity in accordance with
local law or custom.
Except as otherwise provided in this Section 2.02,
the Company shall consent to and assume responsibility for the
filing of each Tax Return described in this Section 2.02 as
prepared by New Xxxxxx, which consent shall not be withheld
unless the Company delivers written notice to New Xxxxxx that
the Company disagrees with one or more Tax Items (each, a "Dis-
puted Item") in such Tax Return at least ten days prior to the
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due date for such Tax Return. If, after receiving such notice
and prior to such due date for such Tax Return, New Xxxxxx xx-
xxxxxx to the Company an opinion of nationally recognized tax
counsel to the effect that each of the Disputed Items has a
Reasonable Basis, then the Company shall file such Tax Return
as prepared by New Xxxxxx, and an amended Tax Return shall, if
necessary, be filed to report such Disputed Item as determined
pursuant to Section 5.04 of this Agreement. Notwithstanding
the foregoing, if the Company disagrees with the treatment of
any Tax Item as reported on a Tax Return described in this Sec-
tion 2.02, and such Tax Item is a Tax Item the liability for
which is allocated to the Company pursuant to Article III
hereof (a "Safety Item"), such Safety Item shall be reported as
directed by the Company, provided that the Company shall first
provide New Xxxxxx with an opinion of counsel to the effect
that there is a Reasonable Basis for the treatment of such
Safety Item as directed by the Company. If New Xxxxxx and the
Company have not agreed to the treatment of a Safety Item as of
the due date of such Tax Return, the Tax Return shall be filed
as prepared by New Xxxxxx, and an amended Tax Return shall, if
necessary, be filed to report such Safety Item as determined
pursuant to Section 5.04 of this Agreement.
Section 2.03. Post-Distribution Tax Returns. All Tax
Returns for periods beginning after the Distribution Date shall
be the responsibility of the New Xxxxxx Group if such Tax
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Returns relate solely to New Xxxxxx Businesses, and all other
Tax Returns shall be the responsibility of the Company.
ARTICLE III
BALANCE SHEET ADJUSTMENT
AND PAYMENT OF TAXES
Section 3.01. Allocation of Tax Liabilities With
Respect to Unfiled Returns for Pre-Distribution Periods.
(a) United States Consolidated Income Tax for Peri-
ods Ended on the Distribution Date. Except as otherwise pro-
vided in this Section 3.01(a), the Company shall pay, on a
timely basis, all Taxes due with respect to the United States
consolidated income tax liability for Pre-Distribution Federal
Periods ("Pre-Distribution Consolidated Federal Tax Liabil-
ity"). New Xxxxxx hereby assumes and agrees to pay on or prior
to the due date for payment thereof its share of the Pre-
Distribution Consolidated Federal Tax Liability, which payment
may be made either directly to the IRS by New Xxxxxx (provided
that New Xxxxxx shall provide the Company with written notice
of such payment at least ten business days prior to the due
date of the corresponding Tax Return and provide proof of such
payment within five business days of making such payment) or to
the Company which shall then forward such New Xxxxxx payment to
the IRS together with its own payment, if any.
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New Xxxxxx'x share of the Pre-Distribution Xxxxxxx-
dated Federal Tax Liability for each Pre-Distribution Federal
Period shall be
(i) that portion of the total tax liability shown on
the Company's United States consolidated income tax return for
such Pre-Distribution Federal Period, as filed (each, a "Com-
pany Pre-Distribution Consolidated Federal Return"), as would
be allocated to New Xxxxxx under the Company's existing federal
income tax allocation election (it being agreed and understood
that with respect to New Xxxxxx and the New Xxxxxx Businesses
amounts will be allocated to the Pre-Distribution Federal Pe-
riod which ends on the Distribution Date and the post-
Distribution period which ends June 30, 1998 using the ratable
allocation election provided for in Treasury Regulation Section
1.1502-76) if: (p) the Company and New Xxxxxx were separately
incorporated members of the same consolidated group for such
Pre-Distribution Federal Period and all previous taxable peri-
ods; (q) the Company owned and operated the Safety Business
during such Pre-Distribution Federal Period and all previous
taxable periods; and (r) New Xxxxxx owned and operated the New
Xxxxxx Businesses during such Pre-Distribution Federal Period
and all previous taxable periods;
(ii) reduced by the sum of (x) all amounts paid by
New Xxxxxx after the Distribution Date with respect to such
Pre-Distribution Consolidated Federal Tax Liability, and (y) an
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amount equal to New Xxxxxx'x share of all estimated federal
income tax payments remitted by the Company to the IRS on or
prior to the Distribution Date with respect to such Pre-
Distribution Federal Period. New Xxxxxx'x share of all esti-
mated federal income tax payments remitted by the Company to
the IRS on or prior to the Distribution Date with respect to
such Pre-Distribution Federal Period shall with respect to any
such payment made on or after July 1, 1996, be equal to the
amount of such payments less the amounts taken into account in
determining "cash used in the Safety Business" for purposes of
Section 2.01(c) of the Distribution Agreement.
If the calculations made pursuant to paragraphs (i)
and (ii) of this Section 3.01(a) indicate that New Xxxxxx has
either overpaid or underpaid its share of any such Pre-
Distribution Consolidated Federal Tax Liability, then at the
time that the relevant Company Pre-Distribution Consolidated
Federal Return is filed, the Company shall pay New Xxxxxx the
amount of any such overpayment or New Xxxxxx shall pay the Com-
pany the amount of any such underpayment, the amount of such
overpayment or underpayment, as the case may be, to be equal to
the difference between the amounts calculated pursuant to para-
graphs (i) and (ii) of this Section 3.01(a).
All calculations and determinations required to be
made pursuant to this Section 3.01(a) shall be made in good
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faith by New Xxxxxx and shall be subject to the Company's ap-
proval, which approval shall not be withheld unless the Company
in good faith reasonably disputes any such calculation or de-
termination, in which case any payments shall nevertheless be
made in accordance with New Xxxxxx'x calculations and determi-
nations, subject to subsequent adjustment in accordance with
the provisions of Section 5.04 of this Agreement.
(b) State and Local Income and Similar Taxes for
Periods Ended on or Before the Distribution Date for which the
Company is Responsible. Except as otherwise provided in this
Section 3.01(b), the Company shall pay, on a timely basis, all
state and local income taxes, and other Taxes the calculations
of which are based upon income, including, without limitation,
the Michigan Single Business Tax, with respect to taxable peri-
ods ending on or before the Distribution Date ("Pre-
Distribution State or Local Taxable Periods") for those Tax
Returns with respect to which it has filing responsibility pur-
suant to Section 2.02 of this Agreement (each such Tax being
individually referred to as a "Pre-Distribution State or Local
Income Tax"). New Xxxxxx hereby assumes and agrees to pay on
or prior to the due date thereof its share of each Pre-
Distribution State or Local Income Tax, which payment may be
made either directly to the appropriate taxing authority by New
Xxxxxx (provided that New Xxxxxx shall provide the Company with
written notice of such payment at least ten business days prior
to the due date of the corresponding Tax Return and provide
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proof of such payment within five business days of making such
payment) or to the Company which shall then forward such New
Xxxxxx payment to the appropriate taxing authority together
with its own payment, if any. For each Pre-Distribution State
or Local Taxable Period, New Xxxxxx'x share of each Pre-
Distribution State or Local Income Tax shall be
(i) that portion of each such Tax as shown on the
applicable Tax Return, as filed, as the ratio (referred to as
the "New Xxxxxx State or Local Income Tax Ratio"), of the ag-
gregate Pre-Distribution State or Local Income Tax liability of
the New Xxxxxx Group with respect to such Pre-Distribution
State or Local Taxable Period (determined on a separate return
basis as if the corporate separation contemplated by the Dis-
tribution Agreement had been effected on the first day of each
relevant taxable period), bears to the sum of the applicable
Pre-Distribution State or Local Income Tax liability of the New
Xxxxxx Group and the Company Group (each determined on a sepa-
rate return basis as if the corporate separation contemplated
by the Distribution Agreement had been the first day of each
relevant taxable period);
(ii) reduced by the sum of (x) all amounts paid by
New Xxxxxx after the Distribution Date with respect to such
Pre-Distribution State or Local Income Tax and (y) an amount
equal to New Xxxxxx'x share of all estimated tax payments re-
mitted by the Company to the relevant taxing authority on or
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prior to the Distribution Date with respect to each such Pre-
Distribution State or Local Income Tax. New Xxxxxx'x share of
each such estimated tax payment remitted by the Company to the
relevant taxing authority on or before the Distribution Date
shall (A) with respect to any such payment made on or before
June 30, 1996, be an amount equal to the product of (r) such
payment and (s) the applicable New Xxxxxx Pre-Distribution
State or Local Income Tax Ratio and (B) with respect to any
such payment made on or after July 1, 1996, be equal to the
amount of such payments less the amounts taken into account in
determining "cash used in the Safety Business" for purposes of
Section 2.01(c) of the Distribution Agreement.
With respect to each Pre-Distribution State or Local
Income Tax, if the calculations made pursuant to paragraphs (i)
and (ii) of this Section 3.01(b) indicate that New Xxxxxx has
either overpaid or underpaid its share of such liability, then
not later than 30 days after the actual filing date, the Com-
pany shall pay New Xxxxxx the amount of any such overpayment or
New Xxxxxx shall pay the Company the amount of any such under-
payment, the amount of such overpayment or underpayment, as the
case may be, to be equal to the difference between the amounts
calculated pursuant to paragraphs (i) and (ii) of this Section
3.01(b).
All calculations and determinations required to be
made pursuant to this Section 3.01(b) shall be made in good
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faith by New Xxxxxx and shall be subject to the Company's ap-
proval, which approval shall not be withheld unless the Company
in good faith reasonably disputes any such calculation or de-
termination, in which case any payments shall nevertheless be
made in accordance with New Xxxxxx'x calculations and determi-
nations, subject to subsequent adjustment in accordance with
the provisions of Section 5.04 of this Agreement.
(c) Federal, State and Local Taxes Other Than Income
Taxes for Periods that Include the Distribution Date for which
the Company is Responsible. Except as otherwise provided in
this Section 3.01(c), the Company shall pay, on a timely basis,
all federal, state and local Taxes not dealt with in either
Section 3.01(a) or 3.01(b), with respect to all Tax Returns due
after the Distribution Date that include any period ending on
or before the Distribution Date with respect to which it has
filing responsibility pursuant to Section 2.02 of this Agree-
ment (each such Tax being individually referred to as an "1997
Other Tax"). New Xxxxxx hereby assumes and agrees to pay prior
to the due date thereof its share of each 1997 Other Tax, which
payment may be made either directly to the appropriate taxing
authority by New Xxxxxx (provided that New Xxxxxx shall provide
the Company with written notice of such payment at least ten
business days prior to the due date of the corresponding Tax
Return and provide proof of such payment within five business
days of making such payment) or to the Company which shall then
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forward such New Xxxxxx payment to the appropriate taxing au-
thority together with its own payment, if any. New Xxxxxx'x
share of each 1997 Other Tax shall be
(i) that portion of each such Tax as shown on the
applicable Tax Return, as filed, as the ratio (referred to as
the "New Xxxxxx 1997 Other Tax Ratio") of the applicable 1997
Other Tax liability of the New Xxxxxx Group (determined on a
separate return basis as if the corporate separation contem-
plated by the Distribution Agreement had been effected July 1,
1996), bears to the sum of the applicable 1997 Other Tax lia-
bility of the New Xxxxxx Group and the Company Group (each de-
termined on a separate return basis as if the corporate sepa-
ration contemplated by the Distribution Agreement had been ef-
fected July 1, 1996);
(ii) reduced by the sum of (x) all amounts paid by
New Xxxxxx after the Distribution Date with respect to such
1997 Other Tax and (y) an amount equal to New Xxxxxx'x share of
all estimated or other similar payments remitted by the Company
to the relevant taxing authority on or prior to the Distribu-
tion Date with respect to each such 1997 Other Tax. New
Xxxxxx'x share of each such estimated or other similar payment
remitted by the Company on or before the Distribution Date
shall be an amount equal to the product of (r) such payments
and (s) the applicable New Xxxxxx 1997 Other Tax Ratio.
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With respect to each 1997 Other Tax, if the calcula-
tions made pursuant to paragraphs (i) and (ii) of this Section
3.01(c) indicate that New Xxxxxx has either overpaid or under-
paid its share of such liability, then, not later than 30 days
after the actual filing date, the Company shall pay New Xxxxxx
the amount of such overpayment or New Xxxxxx shall pay the Com-
pany the amount of any such underpayment, the amount of such
overpayment or underpayment, as the case may be, to be equal to
the difference between the amounts calculated pursuant to para-
graphs (i) and (ii) of this Section 3.01(c).
All calculations and determinations required to be
made pursuant to this Section 3.01(c) shall be made in good
faith by New Xxxxxx and shall be subject to the Company's ap-
proval, which approval shall not be withheld unless the Company
in good faith reasonably disputes any such calculation or de-
termination, in which case any payments shall nevertheless be
made in accordance with New Xxxxxx'x calculations and determi-
nations, subject to subsequent adjustment in accordance with
the provisions of Section 5.04 of this Agreement.
(d) Federal, State and Local Taxes for which New
Xxxxxx is Responsible. New Xxxxxx or a member of the New Mor-
ton Group, as the case may be, shall pay, on a timely basis,
all federal, state and local Taxes with respect to all Tax Re-
turns due after the Distribution Date with respect to periods
ending on or before the Distribution Date for which New Xxxxxx
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or any member of the New Xxxxxx Group has filing responsibility
pursuant to Section 2.02 of this Agreement (each such Tax being
individually referred to as a "New Xxxxxx 2.02 Tax"). The Com-
pany hereby assumes and agrees to pay prior to the due date
thereof its share of each New Xxxxxx 2.02 Tax, which payment
may be made either directly to the appropriate taxing authority
by the Company (provided that the Company shall provide New
Xxxxxx with written notice of such payment at least ten busi-
ness days prior to the due date of the corresponding Tax Return
and provide proof of such payment within five business days of
making such payment) or to New Xxxxxx which shall then forward
such Company payment to the appropriate taxing authority to-
gether with its own payment, if any. The Company's share of
each New Xxxxxx 2.02 Tax shall be
(i) that portion of each such Tax as shown on the
applicable Tax Return (other than any amended Tax Return), as
filed, as the ratio (referred to as the "Company 2.02 Ratio")
of the applicable New Xxxxxx 2.02 Tax liability of the Company
Group (determined on a separate return basis as if the corpo-
rate separation contemplated by the Distribution Agreement had
been effected July 1, 1996), bears to the sum of the applicable
New Xxxxxx 2.02 Tax liability of the Company Group and the New
Xxxxxx Group (each determined on a separate return basis as if
the corporate separation contemplated by the Distribution
Agreement had been effected July 1, 1996);
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(ii) reduced by the sum of (x) all amounts paid by
the Company after the Distribution Date with respect to such
New Xxxxxx 2.02 Tax and (y) an amount equal to the Company's
share of all estimated or other similar payments remitted by
the Company on or prior to the Distribution Date, with respect
to each such New Xxxxxx 2.02 Tax. The Company's share of each
such estimated or other similar payment remitted by the Company
on or before the Distribution Date shall be an amount equal to
the product of (r) such payments and (s) the applicable Company
2.02 Ratio.
With respect to each New Xxxxxx 2.02 Tax, if the cal-
culations made pursuant to paragraphs (i) and (ii) of this Sec-
tion 3.01(d) indicate that the Company has either overpaid or
underpaid its share of such liability, then not later than 30
days after the actual filing date, New Xxxxxx shall pay the
Company the amount of any such overpayment or the Company shall
pay New Xxxxxx the amount of such underpayment, the amount of
such overpayment or underpayment, as the case may be, to be
equal to the difference between the amounts calculated pursuant
to paragraphs (i) and (ii) of this Section 3.01(d).
All calculations and determinations required to be
made pursuant to this Section 3.01(d) shall be made in good
faith by New Xxxxxx and shall be subject to the Company's ap-
proval, which approval shall not be withheld unless the Company
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in good faith reasonably disputes any such calculation or de-
termination, in which case any payments shall nevertheless be
made in accordance with New Xxxxxx'x calculations and determi-
nations, subject to subsequent adjustment in accordance with
the provisions of Section 5.04 of this Agreement.
(e) Foreign Tax Returns. The New Xxxxxx Group shall
be responsible for the filing of all foreign Tax Returns that
are due with respect to periods ending on or before the Distri-
bution Date and for the payment of all Taxes due or payable in
connection therewith.
Section 3.02. (a) Change in the Company Filed Re-
turns. If as a result of any audit, amendment or other change
in a Tax Return as filed by the Company or any of the Automo-
tive Safety Businesses with respect to any period ending on or
before the Distribution Date, any Tax Benefit or Tax Detriment
is changed (a "Change"), then:
(i) If in connection with any such Change, the
amount of the Tax Detriments generated by or attributable to
New Xxxxxx Businesses with respect to the taxable period to
which such return relates ("New Xxxxxx Business Tax Detri-
ments") exceeds the amount of Tax Benefits generated by or at-
tributable to New Xxxxxx Businesses with respect to such tax-
able period ("New Xxxxxx Business Tax Benefits"), New Xxxxxx
hereby assumes and agrees to pay to the appropriate taxing au-
thority (provided that New Xxxxxx shall provide the Company
-21-
with written notice of such payment at least ten business days
prior to the due date of the corresponding Tax Return and pro-
vide proof of such payment within five business days of making
such payment), or to the Company to the extent payment cannot
be made directly to such taxing authority the Company has pre-
viously made the payment to such taxing authority, or no pay-
ment is due to the taxing authority, an amount equal to the
product of (x) the amount by which New Xxxxxx Business Tax Det-
riments exceed New Xxxxxx Business Tax Benefits and (y) the
actual marginal tax rate applicable with respect to the rel-
evant Tax Return, with appropriate adjustment to account for
Tax credits generated by or attributable to New Xxxxxx Xxxx-
nesses included in such calculation and an amount equal to all
interest payable with respect thereto, which interest shall be
calculated as hereinafter set forth. New Xxxxxx shall pay in-
terest at the rate the taxing jurisdiction imposes upon tax
deficiencies (the "Deficiency Rate") for the relevant periods
with respect to that portion of such tax payment attributable
to the lesser of (a) the amount by which New Xxxxxx Business
Tax Detriments exceed New Xxxxxx Business Tax Benefits, and (b)
the amount by which New Xxxxxx Business Tax Detriments (net of
New Xxxxxx Business Tax Benefits) exceeds Automotive Safety
Business Tax Benefits net of Automotive Safety Business Tax
Detriments, each as defined below. New Xxxxxx shall pay inter-
est on the balance, if any, of such tax payment (the "Balance")
in an amount equal to one-half of the sum of (x) the interest
-22-
the taxing jurisdiction would have paid with respect to the
Balance had the Balance been a refund from the taxing jurisdic-
tion, and (y) the interest that New Xxxxxx would have paid to
the taxing authority with respect to the tax deficiency repre-
sented by the Balance, in each case, for the relevant periods
(the "Blended Rate").
(ii) If in connection with any such Change, the New
Xxxxxx Business Tax Benefits exceed the New Xxxxxx Business Tax
Detriments, the Company shall pay or cause to be paid to New
Xxxxxx the product of (x) the amount by which New Xxxxxx Xxxx-
xxxx Tax Benefits exceed New Xxxxxx Business Tax Detriments and
(y) the actual marginal Tax rate applicable with respect to the
relevant Tax Return, with appropriate adjustment to account for
Tax credits generated by or attributable to New Xxxxxx Xxxx-
nesses included in such calculation plus a payment equal to any
interest received by the Company, acting as agent for New Mor-
ton with respect to such amount. If, however, the refund of
tax, exclusive of interest, received by the Company as New
Xxxxxx'x agent is less than the amount due New Xxxxxx pursuant
to this Section 3.02(a)(ii), the Company shall also pay to New
Xxxxxx interest on the additional tax amount (the "Excess") in
an amount equal to one-half of the sum of (x) the interest the
taxing jurisdiction would have paid to the Company with respect
to the Excess had the Excess been refunded by the taxing juris-
diction, and (y) the interest the Company would have paid to
-23-
the taxing jurisdiction with respect to the Excess had the Ex-
cess been a deficiency due from the Company to such jurisdic-
tion, in each case, for the relevant periods.
(b) Changes in New Xxxxxx Group Member Filed Re-
turns. If as a result of any Change in any Tax Return as filed
by any member of the New Xxxxxx Businesses with respect to any
period ending on or before the Distribution Date, any Tax Ben-
efit or Tax Detriment is changed, then:
(i) If in connection with any such Change, the
amount of the Tax Detriments generated by or attributable to
Automotive Safety Businesses with respect to the taxable period
to which such return relates ("Automotive Safety Business Tax
Detriments") exceeds the amount of Tax Benefits generated by or
attributable to Automotive Safety Businesses with respect to
such taxable period ("Automotive Safety Business Tax Bene-
fits"), the Company shall pay to the appropriate New Xxxxxx
Business or to the appropriate taxing authority (provided that
the Company shall provide New Xxxxxx with written notice of
such payment at least ten business days prior to the due date
of the corresponding Tax Return and provide proof of such pay-
ment within five business days of making such payment) an
amount equal to the product of (x) the amount by which Automo-
tive Safety Business Tax Detriments exceed Automotive Safety
-24-
Business Tax Benefits and (y) the actual marginal Tax rate ap-
plicable with respect to the relevant Tax Return, with appro-
priate adjustment to account for Tax credits generated by or
attributable to the Safety Business included in such calcula-
tion and an amount equal to all interest payable with respect
thereto, which interest shall be calculated as hereinafter set
forth, any such payment to be reduced to the extent it would
otherwise duplicate any Tax refund received by New Xxxxxx. The
Company shall pay interest at the Deficiency Rate for the rel-
evant periods with respect to that portion of such tax payment
attributable to the lesser of (a) the amount by which the Auto-
motive Safety Business Tax Detriments exceed the Automotive
Safety Business Tax Benefits, and (b) the amount by which the
Automotive Safety Business Tax Detriments (net of the Automo-
tive Safety Business Tax Benefits) exceeds New Xxxxxx Business
Tax Benefits (net of New Xxxxxx Business Tax Detriments). The
Company shall pay interest on the balance, if any, of such tax
payment (the "Company Balance") in an amount equal to one-half
of the sum of (x) the interest the taxing jurisdiction would
have paid with respect to the Company Balance had the Company
Balance been a refund from the taxing jurisdiction, and (y) the
interest that the Company would have paid to the taxing author-
ity with respect to the tax deficiency represented by the Com-
pany Balance, in each case, for the relevant periods (the "Com-
pany Blended Rate").
-25-
(ii) If in connection with any such Change, the Auto-
motive Safety Business Tax Benefits exceed the Automotive
Safety Business Tax Detriments, the appropriate New Xxxxxx Bus-
iness shall pay to the Company the product of (x) the amount by
which Automotive Safety Business Tax Benefits exceed Automotive
Safety Business Tax Detriments and (y) the actual marginal Tax
rate applicable with respect to the relevant Tax Return, with
appropriate adjustment for Tax credits generated by or attrib-
utable to the Safety Business included in such calculation,
such payment to be reduced to the extent it would otherwise
duplicate any Tax refund received by the Company directly from
a taxing authority plus a payment equal to any interest re-
ceived by New Xxxxxx, acting as agent for the Company with re-
spect to such amount. If, however, the refund of tax, exclu-
sive of interest, received by New Xxxxxx as the Company's agent
is less than the amount due the Company pursuant to this Sec-
tion 3.02(a)(ii), New Xxxxxx shall also pay to the Company in-
terest on the additional tax amount (the "Company Excess") in
an amount equal to one-half of the sum of (x) the interest the
taxing jurisdiction would have paid New Xxxxxx with respect to
the Company Excess had the Company Excess been refunded by the
taxing jurisdiction, and (y) the interest New Xxxxxx would have
paid to the taxing jurisdiction with respect to the Company
Excess had the Company Excess been a deficiency due from New
Xxxxxx to such jurisdiction, in each case, for the relevant
periods.
-26-
(c) Manner of Payment; Miscellaneous. Any payment
required to be made pursuant to this Section 3.02 with respect
to any Tax Return shall be made by the party obligated to make
such payment at such time as such party shall reasonably deter-
mine and direct.
Section 3.03. Restructuring Taxes. (b) (i) Notwith-
standing any other provision of this Agreement to the contrary,
and except as otherwise provided in this Section 3.03(a) or in
Section 9.03 of the Distribution Agreement, New Xxxxxx shall
pay or cause to be paid, and shall fully indemnify and hold
harmless the Company from and against, all Restructuring Taxes,
including all liability, costs and expenses associated with
claims with respect to such Restructuring Taxes asserted by
third parties against any member of the Company Group. New
Xxxxxx hereby assumes and agrees to pay prior to the due date
thereof all such Restructuring Taxes, which payment may be made
either directly to the appropriate taxing authority by New Mor-
ton (provided that New Xxxxxx shall provide the Company with
written notice of such payment at least ten business days prior
to the due date of the corresponding Tax Return and provide
proof of such payment within five business days of making such
payment) or to the Company which shall then forward such New
Xxxxxx payment to the appropriate taxing authority.
(ii) Anything in this Section 3.03(a) to the con-
trary notwithstanding, Section 3.03(a) hereof shall not apply
-27-
to any Restructuring Taxes to the extent that all or any por-
tion of such Restructuring Taxes would not have resulted but
for an act or omission of the Company or any of its affiliates,
a misrepresentation on the part of the Company made in connec-
tion with the opinions of counsel described in Section 6.03 of
the Distribution Agreement, or any other post Distribution Date
transaction involving either the stock or assets of the Company
or any of its affiliates.
(b) If the Company is otherwise required to recog-
nize gain pursuant to Code Section 311 with respect to the Dis-
tribution, then, to the extent permitted by law or regulation,
the Company, if so requested by New Xxxxxx, shall elect pursu-
ant to Code Section 336(e) to treat the Distribution as a dis-
position of all the assets of New Xxxxxx; provided, that the
Company shall not be required to make any such election if the
Company determines in good faith that such election would cause
a material Tax Detriment or other material adverse effect to
any member of the Company Group.
Section 3.04. Liability for Taxes with Respect to
Post-Distribution Periods. Unless otherwise provided in this
Agreement, the Company Group shall pay all Taxes and shall be
entitled to receive and retain all refunds of Taxes with re-
spect to periods beginning after the Distribution Date which
are attributable to Automotive Safety Businesses. Unless oth-
erwise provided in this Agreement, the New Xxxxxx Group shall
-28-
pay all Taxes and shall be entitled to receive and retain all
refunds of Taxes with respect to periods beginning after the
Distribution Date which are attributable to New Xxxxxx Xxxx-
nesses.
Section 3.05. (a) Carrybacks. Except as provided in
this Section 3.05, if the consolidated federal income taxes of
the Company Group are reduced for a taxable period ending on or
before the Distribution Date (a "Company Tax Reduction"), by
reason of (i) a New Xxxxxx loss or other Tax attribute arising
on or after the Distribution Date (a "New Xxxxxx Carryback"),
and/or (ii) a Company loss or other Tax attribute arising on or
after the Distribution Date (a "Company Carryback"), then the
Company shall pay to New Xxxxxx an amount equal to the portion
of the Company Tax Reduction which is attributable to the New
Xxxxxx Carryback. If both a New Xxxxxx Carryback and a Company
Carryback exist, the rules of Treas. Reg. Section 1.1502-21T(b)
shall be applied to determine the portion of the Company Tax
Reduction attributable to the New Xxxxxx Carryback and the
Company Carryback, respectively. The preceding two sentences
shall apply, mutatis mutandis, to state and local Taxes. The
Company shall, and shall cause each member of the Company Group
to, take all steps reasonably necessary to receive a reduction
in Taxes attributable to a New Xxxxxx Carryback.
Notwithstanding anything in this Section 3.05 to the contrary,
the Company shall not be required to take any action to carry
back a New Xxxxxx Carryback if the Company determines in good
faith that
-29-
carrying back such New Xxxxxx Carryback would cause a material
Tax Detriment or other material adverse effect to any member of
the Company Group.
(b) Payment. Any payment required to be made pur-
suant to this Section 3.05 shall be made no later than 10 days
after the Company Tax Reduction is actually received, credited
or otherwise utilized by the Company. Any payment not so made
within 10 days shall thereafter bear interest at the Federal
short-term rate established pursuant to Section 6621 of the
Code.
Section 3.06. Liabilities.
(a) To the extent that Taxes imposed on a member of
the New Xxxxxx Group are reduced for a taxable period beginning
after the Distribution Date (the "Section 3.06(a) Tax Reduc-
tion") by reason of a deduction, loss or credit with respect to
an item for which a member of the Company Group bore the eco-
nomic responsibility (such as a foreign tax credit), then New
Xxxxxx shall pay to the Company an amount equal to the Section
3.06(a) Tax Reduction; provided, however, that if a New Xxxxxx
Tax Benefit, but for such deduction, loss or credit, would have
resulted in a reduction in Taxes by New Xxxxxx or any member of
the New Xxxxxx Group (the "Section 3.06(a) Hypothetical Tax
Reduction") in the same taxable period with respect to which
the Section 3.06(a) Tax Reduction occurred (assuming that such
-30-
New Xxxxxx Tax Benefit had been utilized to the extent other-
wise possible in such taxable period), New Xxxxxx shall pay to
the Company only an amount equal to the excess, if any, of the
Section 3.06(a) Tax Reduction over the Section 3.06(a) Hypo-
thetical Tax Reduction plus, for the taxable period in which
the New Xxxxxx Tax Benefit, in fact, results in a reduction of
Taxes payable by the New Xxxxxx Group an amount equal to such
reduction of Taxes (but such aggregate payments shall not ex-
ceed the amount of the Section 3.06(a) Tax Reduction). New
Xxxxxx shall, and shall cause each member of the New Xxxxxx
Group to, take all steps reasonably necessary to receive a re-
duction in Taxes attributable to such deduction, loss or
credit. Within twelve months of the end of each taxable year
New Xxxxxx shall provide the Company with an accounting setting
forth the utilization of the Section 3.06(a) Tax Reduction and
New Xxxxxx Tax Benefits.
(b) To the extent that Taxes imposed on a member of
the Company Group are reduced for a taxable period (the "Sec-
tion 3.06(b) Tax Reduction") by reason of a deduction, loss or
credit with respect to an item for which a member of the New
Xxxxxx Group bore the economic responsibility (such as a for-
eign tax credit), then the Company shall pay to New Xxxxxx an
amount equal to the Section 3.06(b) Tax Reduction; provided,
however, that if the Company Tax Benefit, but for such deduc-
tion, loss or credit, would have resulted in a reduction in
Taxes by the Company or any member of the Company Group (the
-31-
"Section 3.06(b) Hypothetical Tax Reduction") in the same tax-
able period with respect to which the Section 3.06(b) Tax Re-
duction occurred (assuming that such Company Tax Benefit had
been utilized to the extent otherwise possible in such taxable
period), the Company shall pay to New Xxxxxx only an amount
equal to such excess, if any, of the Section 3.06(b) Tax Reduc-
tion over the Section 3.06(b) Hypothetical Tax Reduction plus,
for the taxable period in which the Company Tax Benefit, in
fact, results in a reduction of Taxes payable by the Company
Group an amount equal to such reduction of Taxes (but such ag-
gregate payments shall not exceed the amount of the Section
3.06(b) Tax Reduction). The Company shall, and shall cause
each member of the Company Group to, take all steps reasonably
necessary to receive a reduction in Taxes attributable to such
deduction, loss or credit. Within twelve months of the end of
each taxable year the Company shall provide New Xxxxxx with an
accounting setting forth the utilization of the Section 3.06(b)
Tax Reduction and the Company Tax Benefits.
(c) Any payment required to be made pursuant to this
Section 3.06 shall be made no later than 10 days after the Sec-
tion 3.06(a) Tax Reduction and New Xxxxxx Tax Benefits or the
Section 3.06(b) Tax Reduction, as the case may be, is actually
received, credited or otherwise utilized, after giving effect
to the Section 3.06(a) Hypothetical Tax Reduction or the Sec-
tion 3.06(b) Hypothetical Tax Reduction and the Company Tax
Benefits, as the case may be. Any payment not so made within
-32-
10 days shall thereafter bear interest at the Federal short-
term rate established pursuant to Section 6621 of the Code.
Section 3.07. Payment. Pursuant to Article V of the
Distribution Agreement and Article III of this Agreement, a
member of the Company Group will or may assume or satisfy, or
make an indemnification payment with respect to, a liability of
a member of the New Xxxxxx Group, and vice versa. If any such
payment or portion thereof by any member of either the New Mor-
ton Group or the Company Group pursuant to Article III of this
Agreement or Article V of the Distribution Agreement is charac-
terized by any taxing authority as a Tax Detriment to a member
of the other Group, then the payor shall pay the other Group an
additional amount so the total payments made by the payor equal
the sum of (i) the portion, if any , of such payments that was
not characterized by such taxing authority as a Tax Detriment,
plus (ii) x/(l-y) where x is the amount payable under said Ar-
ticle V of the Distribution Agreement or Article III of this
Agreement, as the case may be, which was characterized by such
taxing authority as a Tax Detriment, without reference to this
Section 3.07, and y is the then highest marginal blended rate
reflecting the federal corporate income Tax and applicable
state and local corporate income Taxes.
Section 3.08. Breach. The Company shall indemnify
and hold harmless each member of the New Xxxxxx Group and New
Xxxxxx shall indemnify and hold harmless each member of the
-33-
Company Group from and against any payment required to be made
as a result of the breach by a member of the Company Group or
the New Xxxxxx Group, as the case may be, of any obligation
under this Agreement.
ARTICLE IV
INDEMNITY; COOPERATION AND EXCHANGE OF INFORMATION
Section 4.01. Indemnity. (a) Notwithstanding any-
thing to the contrary in this Agreement, the Company shall in-
demnify and hold harmless each member of the New Xxxxxx Group
for, from and against all liability for all Taxes or portion
thereof for the payment of which the Company is responsible
pursuant to Article III of this Agreement.
(b) Notwithstanding anything to the contrary in this
Agreement, New Xxxxxx shall indemnify and hold harmless each
member of the Company Group for, from and against all liability
for all Taxes or portion thereof for the payment of which New
Xxxxxx is responsible pursuant to Article III of this Agree-
ment, including, without limitation, any liability for Taxes
for which New Xxxxxx is responsible under Article III and which
is imposed upon any member of the Company Group pursuant to
Treasury Regulation Section 1.1502-6 or any similar provision
of state, local or foreign law as a result of any member of the
New Xxxxxx Group or the Company Group being a member of an af-
filiated, combined, consolidated, unitary or similar group of
corporations.
-34-
Section 4.02. Tax Controversies. (a) Whenever a
party hereto (hereinafter an "Indemnitee") is notified in writ-
ing by any taxing authority of the existence of an issue which
could increase the liability for any Tax of the other party
hereto or any member of its Group (hereinafter an "Indemnity
Issue"), the Indemnitee shall promptly give notice to such
other party (hereinafter the "Indemnitor") of such Indemnity
Issue. The Indemnitor and its representatives, at the Indemni-
tor's expense, shall be entitled to participate (i) in all con-
ferences, meetings or proceedings with any taxing authority,
the subject matter of which is or includes an Indemnity Issue
and (ii) in all appearances before any court, the subject mat-
ter of which is or includes an Indemnity Issue. The Respon-
sible Party (as defined below) for any Tax Return with respect
to which there is an increase or decrease in liability for any
Tax or with respect to which a payment is required hereunder
shall have the right to decide as between the parties hereto
how such matter is to be dealt with and finally resolved with
the appropriate taxing authority and shall control all audits
and similar proceedings. The Responsible Party agrees to coop-
erate in the settlement of any Indemnity Issue with the other
party and to take such other party's interests into account.
If the Indemnitor is not the Responsible Party, such coopera-
tion may include permitting the Indemnitor, at the Indemnitor's
sole expense, to litigate or otherwise resolve any Indemnity
Issue. Notwithstanding the foregoing, if the Responsible Party
-35-
is not the Indemnitor, the Responsible Party shall not enter
into a final settlement with the relevant taxing authority with
respect to any matter involving an Indemnity Issue without
first presenting the proposed settlement to the Indemnitor, who
shall provide the Responsible Party with written consent to
such settlement within ten days of receipt (which consent may
not unreasonably be withheld), whereupon (or if the Indemnitor
fails to respond to such settlement in writing within such ten
day period) the Responsible Party may enter into such settle-
ment with the relevant taxing authority; provided, however,
that the Indemnitor may withhold its consent to the proposed
settlement by notifying the Responsible Party in writing within
such ten day period that the Indemnitor does not consent to the
proposed settlement. If the Indemnitor provides the Respon-
sible Party with written notification withholding consent in
accordance with the immediately preceding sentence, then:
(1) The Indemnitor shall fully indemnify and hold
harmless the Responsible Party from and against any and all
liabilities for Taxes and other costs and expenses (including,
without limitation, reasonable attorneys' and accountants'
fees) over and above the payments that the Responsible Party
would have been liable for if the Responsible Party had entered
into the proposed settlement; and
(2) The Responsible Party shall, in its sole discre-
tion:
-36-
(A) enter into a closing agreement or other
final resolution with respect to such matter with the rel-
evant taxing authority with respect to all issues other
than Indemnity Issues and shall allow the Indemnitor to
continue to defend the Indemnity Issues in proceedings
with the relevant taxing authority; or
(B) settle all issues with respect to such mat-
ter with the relevant taxing authority and/or pay any ad-
ditional liability for Taxes as provided for in such
settlement, provided, that such settlement shall permit
the Indemnitor to file a claim for refund with respect to
any Indemnity Issues; or
(C) pay to the Indemnitor any additional li-
ability for Taxes as provided for in such settlement to
the extent that such liability relates to issues other
than Indemnity Issues, whereupon the Indemnitor shall as-
sume control over and responsibility for any proceeding
related to such matter and shall be fully liable for and
shall fully indemnify and hold the Responsible Party harm-
less from and against any and all liability for Taxes with
respect to such matter.
For purposes of this Agreement, "Responsible Party" shall mean
(x) with respect to a Tax Return that relates solely to the
operations of the Safety Business, the Company, and (y) with
-37-
respect to a Tax Return that relates solely to the operations
of the New Xxxxxx Business, New Xxxxxx. With respect to all
Tax Returns other than those described in clauses (x) and (y),
above, the Company and New Xxxxxx shall attempt to separate the
Indemnity Issues in controversy with respect to such Tax Return
into Indemnity Issues for which the Company shall be the Re-
sponsible Party and Indemnity Issues for which New Xxxxxx shall
be the Responsible Party. If the Company and New Xxxxxx do not
succeed in separating such Indemnity Issues, the Company and
New Xxxxxx shall jointly act as Responsible Party with respect
to such Tax Return and shall cooperate reasonably in any audit
or similar proceeding with respect to such Tax Return, pro-
vided, that New Xxxxxx shall always be the Responsible Party
with respect to Indemnity Issues relating to Restructuring
Taxes to the extent that New Xxxxxx bears indemnification re-
sponsibility with respect thereto pursuant to this Agreement.
Neither the Company nor New Xxxxxx shall take any action with
respect to such Tax Return without the other's written consent,
which consent shall not be unreasonably withheld, and the Com-
pany and New Xxxxxx shall agree as to any settlement or compro-
mise of Indemnity Issues on such Tax Return. If the Company
and New Xxxxxx cannot agree as to any action to be taken with
respect to any Indemnity Issue on such Tax Return, the parties
shall take such action as shall be determined pursuant to Sec-
tion 5.04 with respect to such Indemnity Issue.
-38-
(b) Notwithstanding the foregoing, if the settlement
of any Indemnity Issue would materially increase the other
party's liability for Taxes, the Responsible Party shall not
enter into a final settlement without the consent of the other
party, which consent shall not be unreasonably withheld.
(c) The right to participate referred to in Section
4.01(a) shall include the submission and content of documenta-
tion, protests, memoranda of fact and law and briefs, the con-
duct of oral arguments or presentations, the selection of wit-
nesses and the negotiation of stipulations of fact.
Section 4.03. Cooperation and Exchange of Informa-
tion. (a) New Xxxxxx shall prepare and submit to the Company
on a timely basis blank Tax Return workpaper packages for the
year of the Distribution. The Company shall, and shall cause
each appropriate member of the Company Group to, prepare and
submit to New Xxxxxx in accordance with the various due dates
set forth in the tax package instructions, all information as
New Xxxxxx shall reasonably request to enable New Xxxxxx to
prepare the Company Tax Returns for the taxable year ended the
Distribution Date.
(b) The Company, on behalf of itself and each member
of the Company Group, agrees to provide the New Xxxxxx Group,
and New Xxxxxx, on behalf of itself and each member of the New
Xxxxxx Group, agrees to provide the Company Group, with such
-39-
cooperation and information as the other shall reasonably re-
quest of the other in connection with the preparation or filing
of any Tax Return or claim for refund contemplated by this
Agreement or in conducting any audit or other proceeding in
respect of Taxes. The Company shall file on a timely basis all
Tax Returns prepared by New Xxxxxx for filing by the Company,
in accordance with this Agreement. Such cooperation and infor-
mation shall include without limitation promptly forwarding
copies of appropriate notices and forms or other communications
received from or sent to any taxing authority which relate to
Automotive Safety Businesses in the case of the New Xxxxxx
Group and New Xxxxxx Businesses in the case of the Company
Group, and providing copies of all relevant Tax Returns, to-
gether with accompanying schedules and related workpapers,
documents relating to rulings or other determinations by taxing
authorities, including without limitation, foreign taxing au-
thorities, and records concerning the ownership and Tax basis
of property, which either party may possess. Each party shall
make its employees and facilities available on a mutually con-
venient basis to provide explanation of any documents or infor-
mation provided hereunder.
(c) New Xxxxxx and the Company agree to retain all
Tax Returns, related schedules and workpapers, and all material
records and other documents relating thereto existing on the
date hereof or created through or with respect to periods end-
ing on or before the Distribution Date, until the expiration of
-40-
the statute of limitations (including extensions) of the tax-
able years to which such Tax Returns and other documents relate
and until the Final Determination of any payments which may be
required in respect of such years under this Agreement. The
Company and New Xxxxxx agree to advise each other promptly of
any such Final Determination. Any information obtained under
this Agreement shall be kept confidential, except as may be
otherwise necessary in connection with the filing of Tax Re-
turns or claims for refund or in conducting any audit or other
proceeding.
(d) If any member of the Company Group or the New
Xxxxxx Group, as the case may be, fails to provide any informa-
tion requested pursuant to this Section 4.02 by (i) the dates,
specified in subsection (a) hereof or, (ii) with respect to
information not requested pursuant to subsection (a) hereof,
within a reasonable period, as determined in good faith by the
party requesting information, then the requesting party shall
have the right to engage a public accountant of its choice to
gather such information. New Xxxxxx and the Company, as the
case may be, agree upon 24 hours' notice, in the case of a
failure to provide information pursuant to subsection (a) here-
of, and otherwise upon 30 days' notice after the expiration of
such reasonable period, to permit any such public accountant
full access to all appropriate records or other information in
the possession of any member of the Company Group or the New
Xxxxxx Group, as the case may be, during reasonable business
-41-
hours, and to reimburse or pay directly all costs and expenses
in connection with the engagement of such public accountant.
ARTICLE V
MISCELLANEOUS
Section 5.01. Expenses. Unless otherwise expressly
provided in this Agreement or in the Distribution Agreement,
each party shall bear any and all expenses that arise from
their respective obligations under this Agreement.
Section 5.02. Entire Agreement; Termination of
Prior Agreements. This Agreement constitutes the entire
agreement of the parties concerning the subject matter hereof
and supersedes all other agreements, whether or not written, in
respect of any Tax between or among any member or members of
the Company Group, on the one hand, and any member or members
of the New Xxxxxx Group, on the other hand. All such
agreements are hereby cancelled and any rights or obligations
existing thereunder are hereby fully and finally settled
without any payment by any party thereto. This Agreement may
not be amended except by an agreement in writing, signed by the
parties hereto. Anything in this Agreement or the Distribution
Agreement to the contrary notwithstanding, in the event and to
the extent that there shall be a conflict between the
provisions of this Agreement and the Distribution Agreement,
the provisions of this Agreement shall control.
-42-
Section 5.03. Notices. All notices and other com-
munications hereunder shall be in writing and shall be deliv-
ered by hand or mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses
(or at such other addresses for a party as shall be specified
by like notice) and shall be deemed given on the date on which
such notice is received:
To the Company or any member of the Company Group:
Autoliv ASP, Inc.
0000 Xxxxxxx Xxxx
Xxxxx, Xxxx 00000
Attention: Corporate Secretary
with a copy to:
Autoliv, Inc.
x/x Xxxxxxx XX
Xxx 00000
X-000 00 Xxxxxxxxx
Xxxxxx
Attention: Corporate Secretary
and
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxxx, Esq.
To New Xxxxxx or any member of the New Xxxxxx Group:
Xxxxxx International, Inc.
000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Corporate Secretary
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with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Section 5.04. Resolution of Disputes. Any disputes
between the parties with respect to this Agreement that cannot
be resolved by good faith effort by the parties shall be re-
solved by a "Big Six" public accounting firm or a law firm sat-
isfactory to the Company and New Xxxxxx, whose determination
shall be final and binding on all parties and whose fees and
expenses shall be shared by each of New Xxxxxx and the Company
in accordance with the final allocation of the Tax liability in
dispute.
Section 5.05. Application to Present and Future Sub-
sidiaries. This Agreement is being entered into by the Company
and New Xxxxxx on behalf of themselves and each member of the
Company Group and New Xxxxxx Group, respectively. This Agree-
ment shall constitute a direct obligation of each such member
and shall be deemed to have been readopted and affirmed on be-
half of any corporation which becomes a member of the Company
Group or New Xxxxxx Group in the future. The Company and New
Xxxxxx hereby guarantee the performance of all actions, agree-
ments and obligations provided for under this Agreement of each
member of the Company Group and the New Xxxxxx Group, respec-
tively. The Company and New Xxxxxx shall, upon the written
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request of the other, cause any of their respective group mem-
bers formally to execute this Agreement. This Agreement shall
be binding upon, and shall inure to the benefit of, the succes-
sors, assigns and persons controlling any of the corporations
bound hereby for so long as such successors, assigns or con-
trolling persons are members of the Company Group or the New
Xxxxxx Group or their successors and assigns.
Section 5.06. Term. This Agreement shall commence
on the date of execution indicated below and shall continue in
effect until otherwise mutually agreed to in writing by the
Company and New Xxxxxx, or their successors.
Section 5.07. Titles and Headings. Titles and head-
ings to sections herein are inserted for the convenience of
reference only and are not intended to be a part or to affect
the meaning or interpretation of this Agreement.
Section 5.08 . Legal Enforceability. Any provision
of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without in-
validating the remaining provisions hereof. Any such prohibi-
tion or unenforceability in any jurisdiction shall not invali-
date or render unenforceable such provision in any other juris-
diction. Without prejudice to any rights or remedies otherwise
available to any party hereto, each party hereto acknowledges
that damages would be an inadequate remedy for any breach of
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the provisions of this Agreement and agrees that the obliga-
tions of the parties hereunder shall be specifically enforce-
able.
Section 5.09. Singular and Plural. As used herein,
the singular shall include the plural and vice versa.
Section 5.10. Governing Law. This Agreement shall
be governed by the laws of the State of Delaware.
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IN WITNESS WHEREOF, the parties have executed this
agreement as of the 30th day of April, 1997.
XXXXXX INTERNATIONAL, INC. NEW XXXXXX INTERNATIONAL, INC.
By /s/ Xxxxxx X. XxXxxxxx By /s/ Xxxxxxx X. Xxxxxxxxx
Xxxxxx X. XxXxxxxx Xxxxxxx X. Xxxxxxxxx
Vice President Finance and Vice President for Legal
Chief Financial Officer Affairs and General
Counsel
