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EXHIBIT 2.5
EXHIBIT F
TAX SHARING AGREEMENT
This Tax Sharing Agreement, dated __________, 2000, is by and between
Quantum Corporation ("Quantum"), a Delaware corporation, and Snap Appliances,
Inc. ("Snap"), a Delaware corporation.
RECITALS
A. Quantum acquired the stock of Snap on September 10, 1999.
B. Quantum and Snap have determined that the independent operation of
Snap would be in their mutual best interests. Consequently, the parties plan to
separate Snap's business from the rest of the Quantum group.
C. In preparation for the separation, Snap will issue up to 20 percent
of its stock to new investors in a public offering. Quantum will then distribute
to its shareholders, pro rata, the remaining stock of Snap (the "Distribution").
D. When Quantum acquired the stock of Snap, Snap became a member of the
affiliated group of corporations of which Quantum is the common parent (the
"Quantum Group"). The operations of Snap between September 11, 1999, and the
date of the Distribution (the "Distribution Date") have been or will be included
in federal and state income tax returns of the Quantum Group.
E. While the Quantum Group has not yet filed its federal income tax
return for the taxable year ended March 31, 2000, preliminary estimates of the
taxable income or loss of the members of the group show that Snap incurred a net
operating loss that was offset by taxable income of other members of the group.
In addition, a portion of the net operating losses that Snap incurred in periods
before it joined the Quantum Group can be carried forward to offset taxable
income of the other members of the group. Snap has not received compensation
from other members of the group for the expected absorption of Snap's net
operating losses.
F. Snap is also expected to incur a net operating losses through the
Distribution Date.
G. If Snap had remained an independent corporation, it would have
received no tax benefit from its net operating losses unless and until it earned
taxable income. Because the value to Snap of its net operating loss
carryforwards is speculative, the parties have agreed that Quantum will not
compensate Snap for the use of Snap's net operating losses to offset taxable
income of other members of the Quantum Group. Correspondingly, Quantum will bear
the risk of deficiencies in the tax liabilities of the Quantum Group
attributable to the operations of Snap.
H. Although the parties have agreed not to make payments to share the
tax liability of the Quantum Group for the periods that Snap is included in the
group, the parties still believe it is useful
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to provide for certain administrative matters regarding taxes, such as the
retention of and provision of access to records and the preparation of tax
returns. In addition, the parties have agreed to indemnify each other for
certain tax liabilities.
AGREEMENT
To accomplish the purposes described above, Quantum and Snap agree as
follows:
1. Retention of and Access to Records; Cooperation and Assistance.
(a) Retention of and Access to Records. Each party shall retain
all tax returns for periods beginning before the Distribution Date, together
with all related reports, work papers, schedules or other documents or computer
files, and, subject to the confidentiality provisions of Section 4, shall make
these documents or files available to the other upon request. Neither party
shall dispose of any of these documents or files without the other's permission.
(b) Cooperation and Assistance. Subject to the confidentiality
provisions of Section 4, Quantum and Snap shall provide each other with such
cooperation, assistance, and information as either of them may reasonably
request of the other with respect to the filing with any taxing authority of any
tax return, amended return, claim for refund, or other document or with respect
to the conduct of any tax contest. With respect to any tax returns of the
Quantum Group for periods beginning before the Distribution Date
("Pre-Distribution Group Returns"), such assistance shall include the submission
by Snap to Quantum, within 75 days after the close of the relevant taxable
period, of the information and supporting documentation reasonably required by
Quantum to enable it to prepare pro forma tax returns for Snap, including a pro
forma return for the tax period of Snap that will end on the Distribution Date.
With respect to the conduct of tax contests, such assistance shall include
execution of any powers of attorney or other appropriate documentation,
attendance of administrative or judicial proceedings as requested, performance
of necessary computations, and, subject to the confidentiality provisions of
Section 5, provision of access to or furnishing books, records, tax returns, and
supporting work papers.
2. Indemnification.
(a) Indemnity Obligations of Quantum. Quantum shall indemnify
Snap and hold Snap harmless from and against any amounts paid by Snap to any
taxing authority by reason of Snap's joint and several liability for taxes of
the Quantum Group.
(b) Indemnity Obligations of Snap. Snap shall indemnify Quantum
and its subsidiaries and hold them harmless from and against any liability for
any taxes, and related interest or penalties, resulting from the application to
the Distribution of section 355(e) of the Internal Revenue Code by reason of an
acquisition of Snap stock.
3. Gross-Up for Taxes on Required Payments. If the receipt or accrual of
any payment required by this Agreement is subject to any tax, the payor shall
pay an additional amount so that the
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total amount received by the payee, net of any applicable taxes, equals the
amount of the required payment.
4. Confidentiality of Documents and Information. Any documents or
information provided pursuant to this Agreement in connection with a tax contest
or filing with a tax authority shall be provided or disclosed by the recipient
only to those of its employees responsible for the tax contest or filing or to
attorneys or accountants advising the recipient on these matters. Any wider
dissemination of these documents or this information shall be allowed only if
required by law or authorized by the party providing the documents or
information.
5. Dispute Resolution.
(a) If a dispute, controversy or claim ("Dispute") arises between
the parties relating to the interpretation or performance of this Agreement, or
the grounds for the termination hereof, appropriate senior executives (e.g.
director or vice president level) of each party who shall have the authority to
resolve the matter shall meet to attempt in good faith to negotiate a resolution
of the Dispute prior to pursuing other available remedies. The initial meeting
between the appropriate senior executives shall be referred to herein as the
"Dispute Resolution Commencement Date." Discussions and correspondence relating
to trying to resolve such Dispute shall be treated as confidential information
developed for the purpose of settlement and shall be exempt from discovery or
production and shall not be admissible. If the senior executives are unable to
resolve the Dispute within thirty (30) days from the Dispute Resolution
Commencement Date, and either party wishes to pursue its rights relating to such
Dispute, then the Dispute will be mediated by a mutually acceptable mediator
appointed pursuant to the mediation rules of JAMS/Endispute within thirty (30)
days after written notice by one party to the other demanding non-binding
mediation. Neither party may unreasonably withhold consent to the selection of a
mediator or the location of the mediation. Both parties will share the costs of
the mediation equally, except that each party shall bear its own costs and
expenses, including attorney's fees, witness fees, travel expenses, and
preparation costs. The parties may also agree to replace mediation with some
other form of non-binding or binding ADR.
(b) Any Dispute which the parties cannot resolve through
mediation within ninety (90) days of the Dispute Resolution Commencement Date,
unless otherwise mutually agreed, shall be submitted to final and binding
arbitration under the then current Commercial Arbitration Rules of the American
Arbitration Association ("AAA"), by three (3) arbitrators in Santa Xxxxx County,
California. Such arbitrators shall be selected by the mutual agreement of the
parties or, failing such agreement, shall be selected according to the aforesaid
AAA rules. The arbitrators will be instructed to prepare and deliver a written,
reasoned opinion stating their decision within thirty (30) days of the
completion of the arbitration. The prevailing party in such arbitration shall be
entitled to expenses, including costs and attorneys' and other professional
fees, incurred in connection with the arbitration (but excluding any costs and
fees associated with prior negotiation or mediation). The decision of the
arbitrator shall be final and non-appealable and may be enforced in any court of
competent jurisdiction. The use of any ADR procedures will not be construed
under the doctrine of laches, waiver or estoppel to adversely affect the rights
of either party.
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(c) Any Dispute regarding the following is not required to be
negotiated, mediated or arbitrated prior to seeking relief from a court of
competent jurisdiction: breach of any obligation of confidentiality; any claim
where interim relief from the court is sought to prevent serious and irreparable
injury to one of the parties or to others. However, the parties to the Dispute
shall make a good faith effort to negotiate and mediate such Dispute, according
to the above procedures, while such court action is pending.
(d) Unless otherwise agreed in writing, the parties will continue
to honor all commitments under this Agreement during the course of dispute
resolution pursuant to the provisions of this Section 5 with respect to all
matters not subject to such dispute, controversy, or claim.
6. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and shall
supersede all prior written and oral and all contemporaneous oral agreements and
understandings with respect to the subject matter hereof.
7. Governing Law. This Agreement shall be construed in accordance with
and all Disputes hereunder shall be governed by the laws of the State of
California, excluding its conflict of law rules and the United Nations
Convention on Contracts for the International Sales of Goods. The Superior Court
of Santa Xxxxx County and/or the United States District Court for the Northern
District of California shall have jurisdiction and venue over all Disputes
between the parties that are permitted to be brought in a court of law pursuant
to Section 5.
8. Notices. Notices, Demands, offers, requests or other communications
required or permitted to be given by either party pursuant to the terms of this
Agreement shall be given in writing to the respective parties to the following
addresses:
if to Quantum: Quantum Corporation
000 XxXxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx
President
if to Snap: Snap Appliances, Inc.
0000 Xxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxx
Chief Financial Officer
Or to such other address as the party to whom notice is given may have
previously furnished to the other in writing as provided herein. Any notice
involving non-performance, termination, or renewal shall be sent by hand
delivery, recognized overnight courier or, within the United States, may also be
sent via certified mail, return receipt requested. All other notices may also be
sent by fax, confirmed
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by first class mail. All notices shall be deemed to have been given and received
on the earlier of actual delivery or three (3) days from the date of postmark.
9. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original but all of which shall constitute one
and the same agreement.
10. Binding Effect; Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective legal
representatives and successors, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. This Agreement may
be enforced separately by each member of the Quantum Group. Neither party may
assign this Agreement or any rights or obligations hereunder, without the prior
written consent of the other party, and any such assignment shall be void;
provided, however, either party may assign this Agreement to a successor entity
in conjunction with such party's reincorporation.
11. Severability. If any term or any other provision of this Agreement
is determined by a court, administrative agency or arbitrator to be invalid,
illegal or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the fullest
extent possible.
12. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any agreement herein, nor shall any single or partial exercise of
any such right preclude other or further exercise thereof or of any other right.
All rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
13. Amendment. No change or amendment will be made to this Agreement
except by an instrument in writing signed on behalf of each of the parties to
such agreement.
14. Authority. Each of the parties hereto represents to the other that
(a) it has the corporate or other requisite power and authority to execute,
deliver, and perform this Agreement, (b) the execution, delivery and performance
of this Agreement by it have been duly authorized by all necessary corporate or
other actions, (c) it has duly and validly executed and delivered this
Agreement, and (d) this Agreement is a legal, valid and binding obligation,
enforceable against it in accordance with its terms subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equity principles.
15. Interpretation. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When a
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reference is made in this Agreement to a Section, such reference shall be to a
Section of this Agreement unless otherwise indicated.
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IN WITNESS WHEREOF, the parties have caused this Tax Sharing Agreement
to be duly executed as of the date first set forth above.
QUANTUM CORPORATION SNAP APPLIANCES, INC.
By: By:
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Name: Name:
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Title: Title:
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