DRAFT of November 15, 1996
TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT (this "Agreement") is dated as of [ ], 1996,
by and among CORNING INCORPORATED, a New York corporation ("Corning"), CORNING
CLINICAL LABORATORIES INC., a Delaware corporation ("CCL"), and CORNING
PHARMACEUTICAL SERVICES INC., a Delaware corporation ("CPS").
W I T N E S S E T H
WHEREAS, Corning is the common parent of an affiliated group
of corporations which includes CCL and CPS and which group and the members
thereof file consolidated federal income tax returns as well as certain
consolidated, combined or unitary state tax returns;
WHEREAS, the Board of Directors of Corning has determined that
it is appropriate and desirable to effect the Distributions as defined in and
pursuant to a Transaction Agreement dated as of even date herewith between
Corning, Corning Life Sciences Inc., a Delaware corporation ("CLSI"), CCL, and
CPS (the "Transaction Agreement"), subject to the satisfaction or waiver of the
conditions set forth in the Transaction Agreement; and
WHEREAS, the parties hereto desire to set forth their
agreements with regard to their respective liabilities for federal, state, local
and foreign taxes for periods before and after the Distributions and to provide
for certain other tax matters.
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the parties hereby agree
as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. General. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Affiliate" shall mean, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
will control, or will be controlled by or will be under common control with the
person specified immediately following the Distribution Date.
"Agreement" shall have the meaning described in the above preamble.
"Carryback Item" shall have the meaning as described in Section
5.01(b) below.
"CCL" shall have the meaning as described in the preamble to this
Agreement.
"CCL Companies" shall mean, collectively, CCL and each Subsidiary of
CCL, other than CPS and any Subsidiary of CPS.
"CCL Distribution" shall mean the distribution by Corning to the
Corning shareholders of the stock of CCL as more particularly described in the
Transaction Agreement.
"CCL Domestic Companies" shall mean, collectively, each CCL Company
incorporated or organized under the laws of one of the respective States of the
United States.
"CCL Group" shall mean the affiliated group of corporations as defined
in Section 1504(a) of the Code of which CCL is the common parent, not including
CPS or any member of the CPS Group and determined as if the capital stock of CCL
is widely held.
"CCL Returns" shall have the meaning as described in Section 2.03
below.
"CCL Return Period" shall mean a taxable period to which this Agreement
applies and for which a CCL Return is filed.
"CCL Separate Liability" shall have the meaning as described in
Section 4.01.
"CI Consolidated Return" shall mean any consolidated federal income tax
return or amendment thereof of the CI Group which includes one or more of the
CCL Domestic Companies or the CPS Domestic Companies.
"CI Consolidated Return Period" shall mean a taxable period to which
this Agreement applies and for which a CI Consolidated Return is filed.
"CI Group" shall mean the affiliated group of corporations as defined
in Section 1504(a) of the Code of which Corning is the common parent.
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"CI Group Benefit Amount" shall have the meaning as described in
Section 4.04(b) hereof.
"CI State, Local and Foreign Returns" shall have the meaning as
described in Section 2.02 below.
"CI State, Local and Foreign Return Period" shall mean a taxable period
to which this Agreement applies and for which a CI State, Local and Foreign
Return is filed.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Corning" shall have the meaning as described in the preamble to this
Agreement.
"Corning Subsidiary" shall mean any subsidiary of Corning other than
any of the CPS Companies and the CCL Companies.
"CPS" shall have the meaning as described in the preamble to this
Agreement.
"CPS Companies" shall mean, collectively, CPS and each Subsidiary of
CPS.
"CPS Distribution" shall mean the distribution by CCL to the CCL
shareholders of the stock of CPS as more particularly described in the
Transaction Agreement.
"CPS Domestic Companies" shall mean, collectively, each CPS Company
incorporated or organized under the laws of one of the respective States of the
United States. "CPS Group" shall mean the affiliated group of corporations as
defined in Section 1504(a) of the Code of which CPS is the common parent and
determined as if the capital stock of CPS is widely held.
"CPS Returns" shall have the meaning as described in Section 2.04
below.
"CPS Return Period" shall mean a taxable period to which this Agreement
applies and for which a CPS Return is filed.
"CPS Separate Liability" shall have the meaning as described in Section
4.01 below.
"Distributions" shall mean the CCL Distribution, the CPS Distribution
and any transfers relating to the CCL Distribution or the CPS Distribution.
"Distribution Date" shall have the meaning as described in the
Transaction Agreement.
"IRS" shall mean the Internal Revenue Service.
"IRS Penalty Rate" small mean the rate of interest imposed from time to
time on underpayments of income tax pursuant to Code section 6621.
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"IRS Ruling" shall mean the ruling issued by the IRS which states the
tax treatment of the Distributions and related transactions.
"person" shall mean any natural person, corporation, business trust,
joint venture, association, company, partnership or government, or any agency or
political subdivision thereof.
"Separate CPS/CCL Liability" shall have the meaning as described in
Section 4.02 below.
"Separate Returns" shall have the meaning as described in Section 2.04
below.
"Spin-Off Tax Indemnification Agreements" shall mean the Spin-Off Tax
Indemnification Agreements dated of even date herewith between or among two or
more of Corning, CCL and CPS.
"Subsidiary" shall have the meaning as described in the Transaction
Agreement.
"Tax" or "Taxes" shall mean all federal, state, local and foreign gross
or net income, gross receipts, withholding, franchise, transfer, estimated or
other tax or similar charges and assessments, including all interest, penalties
and additions imposed with respect to such amounts.
"Temporary Differences" attributable to any entity shall mean (a) any
single item of income or deduction in a CI Consolidated Return in respect of any
tax period that should reverse in one or more subsequent tax periods assuming
proper tax treatment and no change in law or in the tax accounting policies of
such entity (each an "Originating Temporary Difference") or (b) the partial or
complete reversal of an Originating Temporary Difference.
"Transaction Agreement" shall have the meaning as described on page 1
of this Agreement.
SECTION 1.02. CLSI. For all tax periods ending before or on the
Distribution Date, references herein to CCL shall include CLSI, which will be
merged into CCL prior to the Distribution Date pursuant to the Transaction
Agreement.
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ARTICLE 2
TAX RETURN FILING
SECTION 2.01. CI Consolidated Returns. Corning shall prepare and file
with the IRS all CI Consolidated Returns and amendments thereto required to be
filed by the CI Group for all tax periods beginning before or on the
Distribution Date. Such returns shall include all income, gains, losses,
deductions and credits of the CCL Domestic Companies and the CPS Domestic
Companies. Corning shall make all decisions relating to the preparation and
filing of such returns, subject to the approval of CCL and CPS, which approval
shall not be withheld unless no reasonable basis exists for the decisions made
by Corning in respect of such return. CCL and CPS further agree to, and
respectively agree to compel the CCL Domestic Companies and the CPS Domestic
Companies to, file or join in the filing of such authorizations, elections,
consents and other documents, and take such other actions as may be necessary or
appropriate, in the opinion of Corning, to carry out the purposes and intent of
this Section 2.01, provided that such actions are not inconsistent with this
Agreement or the Spin-Off Tax Indemnification Agreements. CCL and CPS each shall
furnish Corning at least sixty (60) days before the due date (including
extensions) of any such CI Consolidated Return with its completed section of
such CI Consolidated Return, prepared in accordance with this Agreement, in
accordance with instructions from Corning and in a manner consistent with prior
returns, except to the extent otherwise required by the Spin-Off Tax
Indemnification Agreements. CCL and CPS each shall also furnish Corning work
papers and other such information and documentation as is reasonably requested
by Corning with respect to the CCL Companies and the CPS Companies. At Corning's
request, major items of income, deduction, gain and loss selected by Corning for
inclusion in the CI Consolidated Returns and relating to CCL Domestic Companies
and CPS Domestic Companies shall have been reviewed and approved prior to
submission to Corning by a nationally recognized accounting firm or law firm
with expertise sufficient to address the issues presented mutually acceptable to
Corning and the party or parties submitting such information. Corning and the
other party or parties submitting such information shall each pay an equal share
of the cost of such review.
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SECTION 2.02. CI State, Local and Foreign Returns. For any taxable
period beginning before or on the Distribution Date, Corning will prepare and
file all combined, consolidated or unitary state, local or foreign income or
franchise tax returns which are required to be filed by Corning or a Corning
Subsidiary and which include the operations conducted before or as of the
Distribution Date by (i) any of the CCL Companies or the CPS Companies, and (ii)
Corning or any Corning Subsidiary (herein, together with such returns filed for
previous periods, "CI State, Local and Foreign Returns"). Corning will timely
advise CCL and CPS of the inclusion of any of the CCL Companies and the CPS
Companies in any CI State, Local and Foreign Returns and the jurisdictions in
which such returns will be filed, which inclusion will not be inconsistent with
prior CI State, Local and Foreign Returns unless required by applicable law. CCL
and CPS will, and respectively will compel each of the CCL Companies and CPS
Companies whose tax information is included in any CI State, Local and Foreign
Return to, evidence its agreement to be included in such return on the
appropriate form and take such other action as may be appropriate, in the
opinion of Corning, to carry out the purposes and intent of this Section 2.02,
provided that such actions are not inconsistent with this Agreement or the
Spin-Off Tax Indemnification Agreements. CCL and CPS each shall furnish Corning
at least sixty (60) days before the due date (including extensions) of any such
CI State, Local and Foreign Return with a final copy of the information
necessary for Corning to complete such CI State, Local and Foreign Return,
prepared in accordance with instructions from Corning and in a manner consistent
with prior returns, except to the extent otherwise required by the Spin-Off Tax
Indemnification Agreements. CCL and CPS each shall also furnish Corning work
papers and other such information and documentation as is reasonably requested
by Corning.
2.03 CCL Returns. For any taxable period beginning before or on the
Distribution Date, CCL will prepare and file all combined, consolidated or
unitary state, local or foreign income or franchise tax returns which are
required to be filed separately by CCL or any Subsidiary of CCL, and which
include the operations conducted before or as of the
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Distribution Date by any of the CCL Companies and any of the CPS Companies
(herein, together with such returns filed for previous periods, "CCL Returns").
CCL will timely advise CPS of the inclusion of any of the CPS Companies in any
CCL Returns and the jurisdictions in which such returns will be filed, which
inclusion will not be inconsistent with prior CCL Returns unless required by
applicable law. CPS will, and will compel each of the CPS Companies whose tax
information is included in any CCL Return to, evidence its agreement to be
included in such return on the appropriate form and take such other action as
may be appropriate, in the opinion of CCL, to carry out the purposes and intent
of this Section 2.03, provided that such actions are not inconsistent with this
Agreement or the Spin-Off Tax Indemnification Agreements. CPS shall furnish CCL
at least sixty (60) days before any CCL Return is due (with extensions) with a
final copy of the information necessary for CCL to complete such CCL Return,
prepared in accordance with instructions from CCL and in a manner consistent
with prior returns, except to the extent otherwise required by the Spin-Off Tax
Indemnification Agreements. CPS shall also furnish CCL work papers and other
such information and documentation as is requested by CCL.
2.04 Separate Returns. For any taxable period ending before, on or
after the Distribution Date, each of Corning, CCL and CPS will prepare and file
all respective separate combined, consolidated or unitary state, local or
foreign income or franchise tax returns which are required to be filed
separately by such party and not otherwise described in Section 2.01, 2.02 or
2.03 above (herein, together with such returns filed for previous periods,
"Separate Returns").
ARTICLE 3
TAX LIABILITY
SECTION 3.01. Corning Liability. Except to the extent otherwise
provided herein and in the Spin-Off Tax Indemnification Agreements, for each CI
Consolidated Return Period and each CI State, Local and Foreign Return Period,
Corning shall be liable for and indemnify
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CCL and CPS against all taxes due in respect of all CI Consolidated Returns and
all CI State, Local and Foreign Returns, subject to reimbursement from CCL and
CPS respectively as contemplated by Article 4.
SECTION 3.02. State, local and foreign and separate return liability.
Except to the extent otherwise provided herein and in the Spin-Off Tax
Indemnification Agreements, (a) Corning will pay all taxes due on CI State,
Local and Foreign Returns, subject to appropriate reimbursement by CCL and CPS
respectively for liabilities for state, local and foreign returns as
contemplated by Article 4; (b) CCL will pay all taxes due on returns required to
be filed by CCL by Sections 2.03 and 2.04 hereof, subject to appropriate
reimbursement by CPS as contemplated by Article 4; and (c) CPS will pay all
taxes due on returns required to be filed by CPS by Section 2.04 hereof.
SECTION 3.03. Taxes resulting from the failure of either Distribution.
In the event that either the CCL Distribution or the CPS Distribution shall fail
to qualify for the tax treatment stated in the IRS Ruling, for reasons other
than those indemnified against in the Spin-Off Tax Indemnification Agreements,
any and all Taxes imposed upon or incurred by Corning, CCL or CPS as a result of
such failure (including any liability of Corning, CCL or CPS arising from Taxes
imposed on shareholders of Corning, CCL or CPS to the extent any such
shareholders successfully seek recourse against Corning, CCL or CPS on account
of such failure, or any liability for such Taxes which Corning, CCL or CPS may
assume or otherwise provide for) shall be allocated among Corning, CCL and CPS
in such a manner as will take into account the extent to which the actions or
inactions before, on or after the Distribution Date of each of Corning, CCL, CPS
and their respective Affiliates may have contributed to such failure, and
Corning, CCL and CPS each shall indemnify and hold harmless the other from and
against the Taxes so allocated to Corning, CCL and CPS, respectively. In
determining the extent to which Corning, CCL and CPS may have contributed to
such failure, all facts and circumstances shall be taken into account. If it is
determined that none of Corning, CCL or CPS contributed to the failure of such
Distribution to qualify for the tax
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treatment stated in the IRS Ruling, the liability of Corning, CCL and CPS under
this Section 3.03 shall be borne by each corporation in proportion to their
relative average market capitalization as determined by the average closing
price for each of Corning, CCL and CPS common stock during the 20 trading-day
period immediately following the Distribution Date. Any payments to be made by
any of Corning, CCL or CPS to another pursuant to this Section 3.03 shall be
made in immediately available funds within ten (10) days of the receipt of
notice that a payment requiring indemnification under this Section 3.03 has been
made (or is required to be made), or if there is disagreement among the parties
as to the amount or existence of liability under this Section 3.03, within ten
(10) days of the resolution of such disagreement.
ARTICLE 4
SEPARATE LIABILITY
SECTION 4.01. Separate Federal Liability Computation. For all tax
periods beginning after December 31, 1995, for which CI Consolidated Returns
have not been filed by Corning as of the Distribution Date and in respect of
which Corning is required to file a CI Consolidated Return, CCL and CPS
respectively shall compute the CCL Separate Liability and the CPS Separate
Liability for the portion of such periods in which the CCL Domestic Companies
and the CPS Domestic Companies respectively are members of the CI Group. "CCL
Separate Liability" in respect of any CI Consolidated Return Period means the
federal income tax liability (including CCL's share of Corning's alternative
minimum tax if Corning is subject to alternative minimum tax for such CI
Consolidated Return Period, not to exceed Corning's consolidated alternative
minimum tax for such period) computed as of December 31, 1996, as if CCL had
filed a consolidated federal income tax return for the CCL Group in respect of
such CI Consolidated Return Period. "CPS Separate Liability" in respect of any
CI Consolidated Return Period means the federal income tax liability (including
CPS's share of Corning's alternative minimum tax if Corning is subject to
alternative minimum tax for such CI Consolidated Return Period, not to exceed
Corning's consolidated alternative minimum tax for such period) computed as of
December 31, 1996, as if CPS had filed a consolidated federal
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income tax return for the CPS Group in respect of such CI Consolidated Return
Period. If, in computing the CCL Separate Liability or the CPS Separate
Liability, CCL or CPS calculates that the CCL Group or the CPS Group,
respectively, would experience a net operating loss resulting in no federal
income tax liability as of December 31, 1996, the CCL Separate Liability or the
CPS Separate Liability, as the case may be, shall be equal to a credit amount
calculated by Corning and equal to the reduction in the Federal income tax
liability of the CI Group by reason of the use of such net operating loss of the
CCL Group or the CPS Group, as the case may be, in the CI Consolidated Return
that Corning projects to be filed in respect of such period. Except as may
otherwise be required by the Spin-Off Tax Indemnification Agreements,
computations in respect of the CCL Separate Liability and the CPS Separate
Liability shall be consistent with prior CI Group returns, shall follow the tax
elections and other tax positions adopted or prescribed by Corning and shall
take into account the adjustments and modifications set forth in Section 4.03;
provided, however, that the Tax Director and/or General Counsel of each of
Corning and CCL or CPS, as the case may be, shall negotiate reasonable
modifications or alternatives to such requirements in the event that either CCL
or CPS, as the case may be, reasonably determines that such elections,
positions, adjustments or modifications would have a materially detrimental
effect on the tax obligations of CCL or CPS, as the case may be, in respect of
the current or any subsequent tax period.
SECTION 4.02. Separate CPS/CCL Liability Computation. For all tax
periods beginning after December 31, 1995, for which CCL Returns have not been
filed by CCL as of the Distribution Date and in respect of which CCL is required
to prepare and file a CCL Return, CPS shall compute the Separate CPS/CCL
Liability for the portion of such periods in which the CPS Companies
respectively are subsidiaries of CCL. "Separate CPS/CCL Liability" in respect of
any tax period means the state, local and foreign tax liability computed as of
December 31, 1996, as if CPS had filed consolidated combined or unitary state,
local and foreign tax returns with the CPS Companies in respect of such tax
period. Except as may otherwise be required by the Spin-Off Tax Indemnification
Agreements, computations in respect of the Separate CPS/CCL Liability shall be
consistent with any prior CCL Returns,
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shall follow the tax elections, positions, adjustments and modifications adopted
or prescribed by CCL and take into account adjustments and modifications similar
to those set forth in Section 4.03; provided, however, that the Tax Director
and/or General Counsel of each of CCL and CPS shall negotiate reasonable
modifications or alternatives to such requirements in the event that CPS
reasonably determines that such elections, positions, adjustments or
modifications would have a materially detrimental effect on the tax obligations
of CPS in respect of the current or any subsequent tax period.
SECTION 4.03. Adjustments. In computing the liabilities under
Sections 4.01 and 4.02, CCL and CPS respectively shall take into account the
following adjustments and modifications:
(i) Dividends from any member of the CI Group shall be
eliminated;
(ii) Gains or losses on intercompany transactions and
intercompany distributions between any members of the CI Group shall be
deferred and recognized pursuant to Treas. Reg. ss. 1.1502-13 and
1.1502-14 and Code Section 267 and the regulations thereunder;
(iii) All carryforwards of tax credits (except the minimum tax
credit), net operating losses, capital losses, charitable contributions
and other similar items shall be determined consistent with prior CI
Consolidated Returns;
(iv) All ordinary income shall be subject to tax at the
highest tax rate applicable to taxable ordinary income of corporations;
(v) Any exemption or similar item that must be prorated or
apportioned among the component members of a controlled group of
corporations shall not be taken into account; and
(vi) Other adjustments specified by Corning shall be made.
SECTION 4.04. Payments. In respect of each period for which liabilities
are required to be calculated pursuant to Section 4.01, CCL and Corning shall
provide for payments in respect of the CCL Separate Liability and CPS and
Corning shall provide for payments in
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respect of the CPS Separate Liability, in each case effective as of December 31,
1996. In respect of each period for which liabilities are required to be
calculated pursuant to Section 4.02, CPS and CCL shall provide for payments in
respect of the Separate CPS/CCL Liability, effective as of December 31, 1996.
SECTION 4.05. Discrepancies. (a) To the extent that the liabilities
calculated pursuant to Section 4.01 are not equal to the liabilities reported on
the actual tax returns filed in respect of the periods contemplated therein: (i)
Corning shall be liable for and shall indemnify and hold harmless the other
parties hereto against all liabilities and claims and shall receive all benefits
and refunds arising in respect of such differences that do not relate to
Temporary Differences attributable to CCL or CPS and (ii) CCL or CPS, as the
case may be, shall be liable for, make payment to Corning in respect of, and
indemnify and hold harmless the other parties hereto against all liabilities and
claims and shall receive all benefits and refunds arising in respect of such
differences that relate to Temporary Differences attributable to CCL or CPS,
respectively, in accordance with Section 7.01(b).
(b) To the extent that the liabilities calculated pursuant to Section
4.02 are not equal to the liabilities reported on the actual tax returns filed
in respect of the periods contemplated therein, CPS shall be liable for, make
payment to CCL in respect of, and indemnify and hold harmless the other parties
hereto against all liabilities and claims where such actual liabilities are
greater than the liabilities calculated under Section 4.02 and shall receive all
benefits and refunds arising in respect of such differences attributable to CPS
where such actual liabilities are less than the liabilities calculated under
Section 4.02.
(c) Payments to be made to Corning ,CCL or CPS in respect of
obligations arising under this Section 4.04 shall be made no later than five
days before the due date (without extensions) of the actual return to be filed.
SECTION 4.06. State and local returns. The liabilities of CCL and the
CCL Companies and CPS and the CPS Companies with respect to CI State, Local and
Foreign Returns in respect of tax periods beginning before or on the
Distribution Date shall be computed as of December 31, 1996, under the
principles set forth in Section 4.01 and
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compensation in respect to such liabilites shall be provided to Corning in
accordance with the principles of Sections 4.04 and 4.05.
ARTICLE 5
POST-DISTRIBUTION CARRYBACKS OF TAX BENEFITS
SECTION 5.01(a). CI Consolidated Returns; Net Operating Losses. If for
any taxable period beginning on or after the Distribution Date, a CCL Company or
a CPS Company incurs a net operating loss that may be carried back to a CI
Consolidated Return Period, the CCL Company or the CPS Company shall make an
election to relinquish the entire carryback period with respect to any such net
operating loss. If for any taxable period beginning on or after the Distribution
Date, a CCL Company or a CPS Company is entitled to a foreign tax credit or a
deduction in respect of such foreign taxes, such CCL Company or CPS Company must
take the deduction in lieu of the foreign tax credit, unless the foreign tax
credit can be fully utilized on a return other than a CI Consolidated Return.
(b) Other Tax Benefits. If for any taxable period beginning on
or after the date of the CCL Distribution, a CCL Company or a CPS Company incurs
a net capital loss, business credit or other Tax attribute that must be carried
back to a CI Consolidated Return (each a "Carryback Item"), such CCL Company or
CPS Company may file a refund claim reflecting such Carryback Item only after
having obtained a written consent from Corning. In the event that such CCL
Company or CPS Company does not obtain such written consent or shall not be
eligible to file such claim under applicable law, Corning may, at the written
request and expense of such CCL Company or CPS Company, file amended returns or
refund claims reflecting such Carryback Item. Such CCL Company or CPS Company
shall be compensated for the use of such Carryback Item as follows:
(i) Corning shall, within thirty (30) days after
receipt thereof, pay to such CCL Company or CPS Company respectively any refunds
actually received by Corning resulting from the filing of an amended return or
refund claim with respect to such Carryback Item attributable to such company,
whether such amended return or refund claim was filed by
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Corning or the CCL Company or the CPS Company, together with interest received
net of taxes with respect thereto. With respect to CCL, in the event that
Corning would have received a refund (including interest) with respect to such
claim had such refund not been offset against deficiencies, interest, or
penalties assessed against the CI Group or any member thereof (other than
deficiencies, interest or penalties (A) attributable to the operations of such
CCL Company and with respect to which such entity would otherwise be responsible
under the terms of this Agreement, (B) attributable to a taxable period of the
CI Group for which the statute of limitations has expired, (C) against which CCL
is obligated to indemnify Corning pursuant to the Spin-Off Tax Indemnity
Agreements or (D) in respect of which CCL is obligated to share payment pursuant
to Section 3.03 hereof), Corning shall pay to such CCL Company, within thirty
(30) days after receipt of notice of such offset, an amount equal to the amount
of such offset, together with interest that would have been paid to Corning if
such refund had not been offset. With respect to CPS, in the event that Corning
would have received a refund (including interest) with respect to such claim had
such refund not been offset against deficiencies, interest, or penalties
assessed against the CI Group or any member thereof (other than deficiencies,
interest or penalties (A) attributable to the operations of such CPS Company and
with respect to which such entity would otherwise be responsible under the terms
of this Agreement, (B) attributable to a taxable period of the CI Group for
which the statute of limitations has expired, (C) against which CPS is obligated
to indemnify Corning pursuant to the Spin-Off Tax Indemnity Agreements or (D) in
respect of which CPS is obligated to share payment pursuant to Section 3.03
hereof), Corning shall pay to such CPS Company, within thirty (30) days after
receipt of notice of such offset, an amount equal to the amount of such offset,
together with interest that would have been paid to Corning if such refund had
not been offset.
(ii) If, for any taxable period, Corning is required
to and does make a repayment to the IRS of any portion of a refund described in
this Article 5 attributable to the denial of the CCL Company or CPS Company
Carryback Item, then such CCL Company or CPS Company shall pay to Corning in
immediately available funds within ten (10) days
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following the date Corning notifies such CCL Company or CPS Company of such
repayment, the amount of such repayment including interest thereon.
(iii) If Corning elects not to file amended returns
or refund claims reflecting a Carryback Item as to which CCL or CPS might
receive a tax benefit, Corning shall notify such CCL Company or CPS Company of
its decision and state the amount including interest which it has determined to
be the appropriate compensation for its claim, and Corning shall pay such CCL
Company or CPS Company within ten (10) days of the receipt by Corning of written
notification that the CCL Company or the CPS Company agrees with its
determination, or upon irreconcilable disagreement between such parties, upon
receipt by Corning of a written determination of a nationally recognized
accounting firm or law firm with expertise sufficient to address the issues
presented and mutually agreeable to such parties.
(iv) Notwithstanding anything to the contrary in this Article,
before Corning files a claim for refund or a CCL Company or a CPS Company is
permitted to file a claim for refund which reflects a Carryback Item and which
would affect a CI Consolidated Return, the validity and amount of any such
Carryback Item shall be reviewed and approved by Corning and such CCL Company or
CPS Company, as applicable, and, upon irreconcilable disagreement between such
parties, by a nationally recognized accounting firm or law firm with expertise
sufficient to address the issues presented and mutually agreeable to such
parties. Each CCL Company and each CPS Company, as applicable, agrees to
reimburse Corning for its reasonable expenses incurred in reviewing, filing and
securing any refund claim made at the request of such CCL Company or CPS
Company.
ARTICLE 6
POST-DISTRIBUTION CARRYOVERS OF TAX BENEFITS
SECTION 6.01. CI Group items. Corning shall notify CCL and CPS as soon
as practicable after the Distribution Date of any consolidated carryover item
which may be partially or totally attributed to and carried over by a CCL
Company or a CPS Company and will notify CCL and CPS of subsequent adjustments
which may affect such carryover item.
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SECTION 6.02. CCL Group Items. CCL shall notify Corning and CPS as soon
as practicable after the Distribution Date of any consolidated carryover item
which may be partially or totally attributed to and carried over by a CPS
Company and will notify Corning and CPS of subsequent adjustments which may
affect such carryover item.
ARTICLE 7
AUDIT ADJUSTMENTS
SECTION 7.01. CI Consolidated, State, Local and Foreign Returns. Except
as provided in the Spin-Off Tax Indemnification Agreements and in Section 3.03
hereof, if any tax liability or refund in respect of the CI Group arises as a
result of an audit by the IRS or other taxing authority and such tax liability
or refund relates to a CI Consolidated Return or a CI State, Local and Foreign
Return filed in respect of any period commencing before or on the Distribution
Date and such liability:
(a) does not relate to Temporary Differences attributable to CCL or
CPS, Corning shall be liable for and shall pay any tax liabilities and
any interest and underpayment penalties associated therewith and
Corning shall receive any such tax refunds and any interest associated
therewith. Any penalties or additions to tax associated with tax
liabilities that are not underpayment penalties shall be allocated
among Corning, CCL and CPS in the proportion to which such penalties
are assessed to Corning, CCL and CPS, respectively, or in the event
such penalties are not clearly assessed to any individual party or
parties, in such a manner as will take into account the extent to which
each may have contributed to such penalties. Corning, CCL and CPS each
shall indemnify and hold harmless the other from and against the
penalties so allocated to Corning, CCL and CPS, respectively; or
(b) does relate to Temporary Differences attributable to CCL or CPS,
and such taxing authority:
(i) acknowledges directly or indirectly to Corning's sole
satisfaction that Corning may utilize such Temporary
Differences in computing tax liability,
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benefit or refunds in respect of post-Distribution Date tax
periods, Corning shall be liable for and shall pay any such
tax liability and any interest and underpayment penalties
associated with such tax liability and shall receive any such
benefit or refunds and any interest associated therewith; or
(ii) does not acknowledge directly or indirectly to Corning's
sole satisfaction that Corning may utilize such Temporary
Differences in computing tax liability, benefit or refunds in
respect of post-Distribution Date tax periods, the party
hereto against which the issue giving rise to such tax
liability is directed shall be liable for and shall pay any
such tax liability and any interest and underpayment penalties
associated with such tax liability and shall receive any such
benefit or refunds and any interest associated therewith; and
any liability and any penalties or additions to tax associated with
such tax liability that are not underpayment penalties shall be
allocated among Corning, CCL and CPS in the proportion to which such
penalties have been assessed by such taxing authority to Corning, CCL
and CPS, respectively, or in the event such penalties have not been
clearly assessed to any individual party or parties, in such a manner
as will take into account the extent to which each may have contributed
to such penalties, and Corning, CCL and CPS each shall indemnify and
hold harmless the other from and against the penalties so allocated to
Corning, CCL and CPS, respectively.
SECTION 7.02. Non-CI Consolidated, State, Local and Foreign Returns. If
any tax liability or refunds arise in respect of any member of the CI Group
(determined before giving effect to the Distributions) as a result of an audit
by the IRS or other taxing authority and such tax liability or refund does not
relate to a CI Consolidated Return or a CI State, Local and Foreign Return, the
party hereto against which the issue giving rise to such tax liability is
directed or in favor of which such return is applicable shall be liable for and
shall pay any such tax liability and any interest and penalties associated
therewith and shall receive any such refund and any interest associated
therewith, and shall indemnify and hold harmless the other parties hereto from
and against all such liabilities and any interest and penalties related thereto.
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SECTION 7.03. Other Audit Liabilities and Refunds. Except as otherwise
provided in this Article 7 or Articles 3 or 4 hereof or in the Spin-Off Tax
Indemnification Agreements, (a) CCL or CPS, as the case may be, shall be liable
for and shall pay all tax liabilities and any interest and penalties associated
therewith, and shall receive any tax refunds and any interest associated
therewith, that arise as a result of an audit by the IRS or other taxing
authority and that relate to the business or operations of CCL or Subsidiaries
of CCL and CPS or Subsidiaries of CPS, respectively, and CCL and CPS each shall
indemnify and hold harmless Corning and each other from and against the
penalties so allocated to CCL and CPS, respectively; and (b) Corning shall be
liable for and shall pay all tax liabilities and any interest and penalties
associated therewith, and shall receive any tax refunds and any interest
associated therewith, that arise as a result of an audit by the IRS or other
taxing authority and that relate to the business or operations of Corning or
Corning Subsidiaries.
SECTION 7.04. Expenses. Any out-of-pocket expenses (e.g., travel
expenses, accountants' fees, attorneys' fees, experts' fees, etc.) incurred by
the CI Group in connection with proposed or actual liabilities or refunds of the
type contemplated in this Article 7 shall be paid by the entities to which such
liabilities or refunds are allocated hereunder. In cases where such expenses
relate to more than one member of the CI Group or more than one party hereto,
the parties affected shall determine how such expenses shall be allocated.
ARTICLE 8
CONTESTS
SECTION 8.01. CI Group Contests; Notification and communication. If a
notice of audit is given, an audit is begun, an audit adjustment is (or has
been) proposed, or any other claim is (or has been) made by any taxing authority
with respect to a tax liability that, pursuant to the terms hereof, may be
attributable to a CCL Company or a CPS Company with regard to a CI Consolidated
Return or a CI State, Local and Foreign Return, Corning shall promptly
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notify CCL and CPS of such event (unless a CCL Company and a CPS Company
previously was notified directly by the relevant tax authority). Thereafter,
Corning or CCL or CPS, as the case may be, shall keep the others, on a timely
basis, informed of all material developments in connection with audits,
administrative proceedings, litigation and other similar matters that may affect
their respective tax liabilities. Failure or delay in providing notification
hereunder shall not relieve any party hereto of any obligation hereunder in
respect of any particular tax liability, except to the extent that such failure
or delay restricts the ability of such party to contest such liability
administratively or in the courts and otherwise materially and adversely
prejudices such party.
SECTION 8.02. Group Contests; Control and Management of Claims. (a) As
among the parties hereto, Corning shall control the prosecution of any audits
and any contests in respect of any claim made by a taxing authority on audit or
in a related administrative or judicial proceeding or in respect of any refund
or credit of taxes, and shall make and prosecute other claims for refunds with
respect to any tax liability, that relates to a CI Consolidated Return Period or
a CI State, Local and Foreign Return Period. CCL or CPS, as the case may be, may
participate in such audits or contests to the extent that Corning in its sole
discretion shall deem appropriate, provided, however, that Corning shall have
the sole right to control, at Corning's expense, the prosecution of any audit,
refund claim or related administrative or judicial proceeding with respect to
those matters which could affect the CI Group's tax liability.
(b) With respect to a tax liability or refund that, pursuant to the
provisions hereof, may be attributable to a CCL Company or a CPS Company
relating to a CI Consolidated Return Period or a CI State, Local and Foreign
Return Period, if Corning elects not to exercise its rights of control under
subsection (a) hereof, and if CCL or CPS so requests, Corning shall contest,
control and allow CCL or CPS, as the case may be, to participate to the extent
that Corning in its sole discretion shall deem appropriate, all at CCL's or
CPS's respective expense, or in the alternative shall permit CCL or CPS at its
own expense to contest and control a claim made by a taxing authority on audit
or in a related administrative or judicial
19
proceeding or by appropriate claim for refund or credit of taxes (or to make and
prosecute other claims for refund. CCL or CPS, as the case may be, shall pay all
out-of-pocket and other costs relating to such contests, including but not
limited to fees for attorneys, accountants, expert witnesses or other
consultants.
(c) If asserted liabilities unrelated to the matters contemplated
herein become grouped with contests arising hereunder, the parties shall use
their respective best efforts to cause the contest arising hereunder to be the
subject of a separate proceeding.
(d) With respect to matters arising hereunder controlled by Corning,
and where deemed necessary by Corning, CCL and CPS respectively shall compel the
relevant CCL Company or CPS Company to authorize by appropriate powers of
attorney such persons as Corning shall designate to represent such CCL Company
or CPS Company with respect to such matters. The parties hereto shall reasonably
cooperate with one another in a timely manner with respect to any matter arising
hereunder.
(e) With respect to a particular adjustment or claim made with respect
to a CCL Company or a CPS Company that, pursuant to the provisions hereof, may
be attributable to a CCL Company or a CPS Company, to the extent, and for so
long as, Corning, in the exercise of its reasonable judgment, is satisfied that
CCL and the CCL Companies or CPS and the CPS Companies can and will meet all
their obligations under this Agreement, Corning shall not settle, compromise, or
concede such adjustment or claim without the written consent of CCL or CPS, as
the case may be, which consent shall not be unreasonably withheld.
(f) Group contests and the control and management of matters hereunder
relating solely to CCL Returns shall be subject to the provisions of this
Section 8.02, applied as if CCL was Corning and CPS was CCL for purposes
thereof.
ARTICLE 9
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INFORMATION AND COOPERATION; BOOKS AND RECORDS
SECTION 9.01(a). Each of CCL and CPS shall deliver to Corning, as soon
as practicable after Corning's request, and CPS shall deliver to CCL, as soon as
practicable after CCL's request, such information and data concerning the
operations conducted before or as of the Distribution Date by the CCL Companies
and the CPS Companies respectively and make available such knowledgeable
employees of the CCL Companies and CPS Companies respectively as Corning or CCL,
as the case may be, may reasonably request, including providing the information
and data required by Corning's, CCL's or CPS's customary internal tax and
accounting procedures, in order to enable each of Corning or CCL, as the case
may be, to complete and file all tax forms or reports that it may be required to
file with respect to the activities of the CCL Companies and the CPS Companies
for taxable periods ending on, prior to or including the Distribution Date, to
respond to audits by any taxing authorities with respect to such activities, to
prosecute or defend any administrative or judicial proceeding and to otherwise
enable Corning or CCL, as the case may be, to satisfy its accounting and tax
requirements. CCL and CPS shall provide office space to IRS and other tax
auditors when they are conducting on-site audits, and to employees and
representatives of Corning or CCL, as the case may be, as long as a CI
Consolidated Return Period or a CI State, Local and Foreign Return Period or a
CCL Return Period, as the case may be, is open to assessment of additional taxes
or an assessment with respect to such period is being contested. Corning shall
deliver to CCL or CPS as soon as practical after CCL's or CPS's request, and CCL
shall deliver to CPS as soon as practical after CPS's request, such information
and data concerning any tax attributes which were allocated to a CCL Company or
a CPS Company that is reasonably necessary in order to enable CCL or CPS to
complete and file all tax forms or reports that it may be required to file with
respect to such activities of the CCL Companies or the CPS Companies from and
after the Distribution Date, to respond to audits by any tax authorities with
respect to such activities, to prosecute or defend claims for taxes in any
administrative or judicial proceeding, and to otherwise enable CCL or CPS to
satisfy its
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accounting and tax requirements. In addition, Corning shall make available to
CCL and CPS, and CCL shall make available to CPS, its knowledgeable employees
for such purpose.
(b). Each CCL Company and each CPS Company shall retain all books,
records, documentation or other information relating to any CI Consolidated
Return or CI State, Local and Foreign Return, and each CPS Company shall retain
all books, records, documentation or other information relating to any CCL
Return Period, until the expiration of the applicable statute of limitations
(including any extension or waiver thereof). Upon the expiration of any statute
of limitations, the foregoing information may be destroyed or disposed of
provided that (i) the CCL Company or the CPS Company provides sixty (60) days
prior written notice to Corning or CCL, as the case may be, describing in
reasonable detail the documentation to be destroyed or disposed of and (ii)
Corning or CCL, as the case may be, agrees in writing to such destruction or
disposal. If Corning or CCL, as the case may be, objects to the proposed
destruction or disposal, then the CCL Company or the CPS Company shall promptly
deliver such materials to Corning or CCL, as the case may be, or continue to
retain such materials.
ARTICLE 10
GENERAL PROVISIONS
SECTION 10.01. Effectiveness. The effectiveness of this Agreement and
the obligations and rights created hereunder are subject and conditioned upon
the completion of the Distributions pursuant to the terms of the Transaction
Agreement.
SECTION 10.02. Notices. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be
given or made (and shall be deemed to have been duly given or made upon
receipt) by delivery in person, by courier service (including overnight
delivery), by cable, by telecopy confirmed by
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return telecopy, by telegram, by telex or by registered or certified
mail (postage prepaid, return receipt requested) to the respective
parties at the addresses (or at such other address for a party as shall
be specified in a notice given in accordance with this Section 10.01)
listed below:
(a) To Corning Incorporated:
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attn: each of the General Counsel and Tax Director
(b) To CCL:
Xxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Telecopy: (000) 000-0000
Attn: each of the General Counsel and Tax Director
(c) To CPS:
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxx Xxxxxx 00000-0000
Telecopy:(000) 000-0000
Attn: each of the General Counsel and Tax Director
SECTION 10.03. Complete Agreement; Construction. This Agreement is
intended to provide rights, obligations and covenants in respect of Taxes and,
together with the Spin-Off Tax Indemnification Agreements, shall supersede all
prior agreements and undertakings, both written and oral, between the parties
with respect to the subject matter hereof and thereof. In the event provisions
of this Agreement are inconsistent with provisions in a Spin-Off Tax
Indemnification Agreement, the provisions in the Spin-Off Tax Indemnification
Agreement shall control, except in cases where this construction would provide a
duplicate benefit.
SECTION 10.04. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when
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executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION 10.05. Waiver. The parties to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
party or parties, (b) waive any inaccuracies in the representations and
warranties of the other party or parties contained herein or in any document
delivered by the other party or parties pursuant hereto or (c) waive compliance
with any of the agreements or conditions of the other party or parties contained
herein. Any such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the party to be bound thereby. Any waiver of any
term or condition shall not be construed as a waiver of any subsequent breach or
a subsequent waiver of the same term or condition, or a waiver of any other term
or condition, of this Agreement. The failure of any party to assert any of its
rights hereunder shall not constitute a waiver of any such rights.
SECTION 10.06. Amendments. This Agreement may not be amended or
modified except (a) by an instrument in writing signed by, or on behalf of, the
parties or (b) by a waiver in accordance with Section 10.05.
SECTION 10.07. Successors and Assigns. The provisions of this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and permitted assigns. This Agreement cannot be
assigned by Corning, CCL or CPS, in each case without the consent of the other
two parties hereto.
SECTION 10.08. Subsidiaries. Each of the parties hereto shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by any subsidiary of such party
or by any entity that is contemplated to be a subsidiary of such party on and
after the Distribution Date.
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SECTION 10.09. Third Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the parties hereto and their
respective subsidiaries, and nothing herein, express or implied, is intended to
or shall confer upon any third parties any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 10.10. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 10.11. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 10.12. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, applicable to
contracts executed in and to be performed entirely within that state.
SECTION 10.13. Arbitration. Any conflict or disagreement arising out of
the interpretation, implementation, or compliance with the provisions of this
Agreement shall be finally settled pursuant to the provisions of Article V
(Dispute Resolution) of the Transaction Agreement, which provisions are
incorporated herein by reference.
SECTION 10.14. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms 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 any party. Upon such determination that any term or other
25
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 in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
CORNING INCORPORATED,
by ____________________________________
Name:
Title:
CORNING CLINICAL LABORATORIES INC.,
by ____________________________________
Name:
Title:
CORNING PHARMACEUTICAL SERVICES INC.,
by ____________________________________
Name:
Title:
MPE
taxshar.009
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