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EXHIBIT 10.09
SUPPLEMENTAL TAX SHARING AGREEMENT
This SUPPLEMENTAL TAX SHARING AGREEMENT (this "Agreement"), dated as
of September 13, 1996, is made and entered into by and between LOCKHEED XXXXXX
CORPORATION, a Maryland corporation ("Lockheed Xxxxxx"), and XXXXXX XXXXXXXX
MATERIALS, INC., a North Carolina corporation ("Materials").
RECITALS
1. Materials is a New York Stock Exchange listed corporation.
Lockheed Xxxxxx owns, directly or indirectly through its wholly owned
subsidiary, Xxxxxx Xxxxxxxx Investments, Inc., 37,350,000 shares (approximately
81% of the outstanding shares) of Materials Common Stock (as defined in Section
1.1).
2. Lockheed Xxxxxx has determined to distribute all of the shares
it owns in Materials to Lockheed Xxxxxx stockholders by means of a transaction
(the "Transaction") intended to qualify as a Tax-Free Distribution (as defined
in Section 1.1).
3. Due to compelling strategic business considerations, Lockheed
Xxxxxx'x and Materials' Boards of Directors have determined that it is in the
best interests of the corporations and their stockholders and shareholders to
effect the Transaction.
4. The Board of Directors of Materials has determined that
Materials will realize significant independent benefits as a result of the
Transaction, which benefits will include, among other things: (a) facilitating
the future issuance by Materials of its stock to finance strategic acquisitions
in pursuit of its growth strategy; (b) permitting Materials to implement more
effective management stock incentive programs and employee stock compensation
programs; (c) permitting Materials to have direct control over its
administrative costs; and (d) allowing Materials' credit rating to be evaluated
independently of Lockheed Xxxxxx'x credit rating.
4. Lockheed Xxxxxx and Materials desire to provide for the
allocation of the tax liabilities that would result in the event of a Failure
(as defined in Section 1.1).
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, each of Lockheed
Xxxxxx and Materials, intending to be legally bound, hereby agrees as follows:
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ARTICLE I.
DEFINITIONS AND CONSTRUCTION
Section 1.1 Certain Definitions. As used in this Agreement, the
following terms shall have the meanings specified below:
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
any successor thereto, as in effect for the taxable period in question.
"Distribution Tax" shall mean any federal or state tax imposed on a
Person as a result of a Failure, together with any related interest, penalties
or additions to tax.
"Failure" shall mean the failure of the Transaction for any reason
whatsoever to constitute a Tax-Free Distribution under Section 355 of the
Code.
"Fault" shall mean, with respect to each party, and except as
otherwise provided by Section 2.3 of the Tax Assurance Agreement,
responsibility for a Failure where (a) such party engaged in the conduct
described in, or otherwise breached, any of the following sections of the Tax
Assurance Agreement: (i) in the case of Materials, Section 2.1, 2.2, 2.4 or
2.5 of the Tax Assurance Agreement or (ii) in the case of Lockheed Xxxxxx,
Section 2.5 of the Tax Assurance Agreement and (b) but for such conduct or
breach the Transaction would have been a Tax-Free Distribution; provided,
however, that any misrepresentation by either party made in connection with the
King & Spalding Opinion shall not constitute Fault. For purposes of clause (b)
of the preceding sentence, in making the determination of whether conduct that
is the subject of this Agreement is the "but for" cause of the Failure, the
only conduct or action that could constitute the "but for" cause of the Failure
is (y) if the government has determined a deficiency and issued a statutory
notice of deficiency, any conduct or action identified in either the statutory
notice of deficiency or the answer to Lockheed Xxxxxx'x Tax Court petition, or
in the answer to a suit for refund if the issue arises in that posture, as
forming the basis for the government's position that there has been a Failure
and, if a court of competent jurisdiction makes a final determination which is
not subject to appeal that there has been a Failure, any conduct or action
identified in the written decision of that court as a cause of the Failure and
(z) in all other instances, any conduct or action so identified by the
government in writing in connection with its examination of the Lockheed Xxxxxx
tax return or any resulting administrative appeal (collectively, the
"Identified Conduct"). For purposes of this Agreement, (a) no conduct or
action other than Identified Conduct may be deemed to have caused the Failure,
(b) the fact that Identified Conduct could constitute the "but for" cause of
the Failure for purposes of this Agreement is not dispositive as to whether any
particular Identified Conduct is in fact the "but for" cause of the Failure and
such determination will be resolved between the parties by agreement or through
litigation, and (c) the Transaction otherwise shall be deemed to have been a
Tax-Free Distribution.
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"King & Spalding Opinion" shall mean the opinions of King & Spalding
which will be delivered in connection with the closing of the Transaction
stating that the Transaction will qualify as a Tax-Free Distribution.
"Materials Common Stock" shall mean the shares of common stock of
Materials, par value $.01 per share.
"Opinion of Counsel" shall mean a written opinion of counsel, other
than the King & Spalding Opinion, delivered to Materials relating to the
taxability of the Transaction, which opinion is of a strength and character
appropriate to the issues at stake and which opinion and counsel are reasonably
satisfactory to Lockheed Xxxxxx. For this purpose, the parties agree that
Xxxxxxxxxx, Xxxxxx & Xxxxxxx will be deemed satisfactory counsel. Such Opinion
of Counsel shall be (a) obtained from approved counsel that (i) is engaged by
Materials for the purpose of providing such Opinion of Counsel prior to
Materials' taking substantial steps toward consummating the action that is to
be the subject of the Opinion of Counsel and (ii) is, from the time of its
engagement, actively involved by Materials in Materials' consideration, review
or evaluation of the proposed action or conduct, (b) delivered, together with
copies of supporting documentation relied upon in such Opinion of Counsel, to
Lockheed Xxxxxx in sufficient time prior to Materials' consummation of the
action that is the subject of such Opinion of Counsel to allow Lockheed Xxxxxx
a reasonable opportunity to review the Opinion of Counsel prior to Materials'
consummation of the action that is the subject of the Opinion of Counsel, and
(c) brought current, with no changes except as expressly agreed by Lockheed
Xxxxxx in writing as of the date that Materials consummates the action. In
addition, such Opinion of Counsel shall expressly provide that Lockheed Xxxxxx
is entitled to rely thereon. Such Opinion of Counsel must state that the
proposed action or conduct, or in the case of a request under Section 2.5(a) of
the Tax Assurance Agreement, the failure to satisfy such request, will neither
cause the Transaction to fail to qualify under Section 355 of the Code nor
cause the distribution to be a disqualified distribution under Section 355(d)
of the Code, without any qualification other than those in the King & Spalding
Opinion or those which are otherwise acceptable to the parties. Such Opinion
of Counsel (a) may assume the accuracy of the facts and assumptions relied upon
in the King & Spalding Opinion, but only as of the date of the King & Spalding
Opinion, (b) may rely upon written representations, appropriate to the issues
at stake, of parties to the action or conduct which representations have been
subject to due diligence by the approved counsel which due diligence shall be
described in the Opinion of Counsel in reasonable detail, and (c) may assume
that the Transaction would qualify as a Tax-Free Distribution except that such
assumption shall not extend to (i) the action or conduct which is the subject
of the Opinion of Counsel and (ii) other action or conduct of Materials that is
described in Section 2.1, 2.2, 2.4 or 2.5 of the Tax Assurance Agreement and
for which an Opinion of Counsel has not been obtained. Such Opinion of Counsel
shall be deemed satisfactory to Lockheed Xxxxxx unless written notice that it
is unsatisfactory with specifications as to the reasons is given to Materials
as soon as practicable, but no later than 30 days after delivery to Lockheed
Xxxxxx pursuant to the notice provisions of Section 3.4 of both such Opinion of
Counsel and the supporting documentation identified in such Opinion of Counsel
as being relied upon.
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"Person" shall mean an individual, a general partnership, a limited
partnership, a limited liability company, an association, a joint venture, a
corporation, a business, a trust, any entity organized under applicable law, an
unincorporated organization or any governmental authority.
"Tax Assurance Agreement" shall mean the Tax Assurance Agreement, by
and between Lockheed Xxxxxx and Materials, entered into in connection with the
Transaction.
"Tax-Free Distribution" shall mean a distribution qualifying under
Section 355 of the Code that is free from federal income taxes except for taxes
resulting from the recognition of gain or income under the consolidated return
regulations (i.e., taking into account gain from intercompany transactions or
income attributable to excess loss accounts) and gain recognized on the receipt
of cash paid in lieu of fractional shares. Thus, for example, a distribution
for which gain is recognized as the result of a disqualified distribution
within the meaning of Section 355(d) of the Code is not a Tax-Free
Distribution.
Section 1.2 Interpretation and Construction of this Agreement.
The definitions in Section 1.1 shall apply equally to both the singular and
plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine or neuter form.
The words "include," "includes" and "including" shall be deemed to be followed
by the phrase "without limitation." The headings contained in this Agreement
are inserted for convenience only and shall not constitute a part hereof. All
references herein to Articles and Sections (other than references to Sections
of the Code) shall be deemed to be references to Articles and Sections of this
Agreement unless the context shall otherwise require. Unless the context shall
otherwise require or provide, any reference to any agreement or other
instrument or statute or regulation is to such agreement, instrument, statute
or regulation as amended and supplemented from time to time (and, in the case
of a statute or regulation, to any successor provision), provided, however,
that no covenant herein shall be deemed to have been breached because of a
change in law or regulation which is enacted or issued subsequent to the
completion of the action or conduct which is the subject of the covenant. This
Agreement shall be construed in accordance with its fair meaning and shall not
be construed strictly against the drafter.
ARTICLE II.
INDEMNIFICATION
Section 2.1 Indemnification for a Failure for Any Reason Other
Than Fault. Lockheed Xxxxxx and Materials agree that any liability of Lockheed
Xxxxxx or Materials for Distribution Taxes to any Person resulting from a
Failure, other than liability arising under Section 2.2 or 2.3, shall be
allocated 81 percent to Lockheed Xxxxxx and 19 percent to Materials, provided,
however, that the aggregate liability of Materials under this Section 2.1
(including the sum of the costs, if any, incurred and borne by Materials
pursuant to Section 2.5(a) of the Tax Assurance Agreement), whether such
liability is the result of one or a number of disputes, shall in no event
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exceed $25 million. Lockheed Xxxxxx agrees to indemnify and hold harmless
Materials for any liability for Distribution Taxes resulting from a Failure,
other than liability arising under Section 2.2 or 2.3, imposed upon Materials
in excess of the liability allocated to Materials under this Section 2.1.
Section 2.2 Indemnification for a Failure Because of Fault.
Lockheed Xxxxxx and Materials each agrees to indemnify and hold harmless the
other for any liability for Distribution Taxes to any Person resulting from a
Failure as a result of the Fault of the indemnifying party.
Section 2.3 Indemnification for Liability Arising From a Hostile
Takeover. Excluding any acquisition of Materials with respect to which it
obtains an Opinion of Counsel, if either Lockheed Xxxxxx or Materials is
acquired in a manner that causes a Failure, and the Failure did not result from
the Fault of either party, the liability of Lockheed Xxxxxx and Materials for
Distribution Taxes to any Person resulting from such Failure shall be allocated
solely to the party so acquired. To the extent that this Section 2.3 is
applicable, it shall apply with respect to any liability arising from the
Failure, and Sections 2.1 and 2.2 shall not apply to such extent.
Section 2.4 Exclusive Remedy. The remedies provided in this
Article II constitute the sole and exclusive remedies for recoveries by each of
the parties against the other arising out of, based upon, or in connection with
a Failure. Neither Lockheed Xxxxxx nor Materials shall assert any right or
make any claim to recover or seek relief for a Failure on any basis other than
as provided in this Agreement, including, but not limited to, rights or claims
in contract or tort (including fraud and fraudulent misrepresentation), at law
or in equity, under common law or statute, or otherwise. Each of Lockheed
Xxxxxx and Materials waives any and all such rights or claims except for rights
or claims arising pursuant to the express terms of this Agreement and the Tax
Assurance Agreement.
Section 2.5 Notice of Investigation. If either Lockheed Xxxxxx
or Materials receives any written notice that a taxing authority is considering
treating the Transaction as not qualifying under Section 355 of the Code or as
constituting a disqualified distribution within the meaning of Section 355(d)
of the Code, the party receiving such notice shall promptly give written notice
thereof to the other party. Each party agrees that from and after such time as
it obtains knowledge that any representative of a taxing authority has formally
begun to investigate or inquire as to the tax-free status of the Transaction,
it will notify the other, consult with the other from time to time as to the
conduct of such investigation or inquiry, and provide the other with copies of
all correspondence between it or its representatives and such taxing authority
pertaining to such investigation or inquiry. Each party agrees that, from such
time as the taxing authorities have proposed an adjustment based upon the
Transaction not constituting a Tax-Free Distribution, it shall, to the extent
possible, arrange for a representative of the other to be present at all
meetings with such taxing authority or any representative thereof pertaining to
such investigation or inquiry, permit the other to consult with respect to such
disputes, and, if the other party may be liable under Section 2.2 or 2.3,
permit the other to participate in the resolution of any such disputes.
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Section 2.6 Tax Benefit. In determining any liability for
indemnification under this Article II, the parties shall take into account the
extent of any tax benefit realized by the indemnitee with respect to the
obligation for which there is an indemnification obligation under this
Agreement.
ARTICLE III.
PROCEDURAL AND OTHER MATTERS
Section 3.1 Forms 1099. Lockheed Xxxxxx shall file on behalf of
and at the expense of Materials all Forms 1099 due with respect to the receipt
by Materials' shareholders of any cash paid in lieu of fractional shares in the
Transaction.
Section 3.2 Form of Payment. Whenever payment is required under
this Agreement, payment shall be made in cash by wire transfer of immediately
available funds.
Section 3.3 Character of Payments; Gross-Up. All payments made
by any party pursuant to this Agreement or Section 2.5(a) of the Tax Assurance
Agreement shall be treated as the discharge of liabilities incurred by such
party in connection with the Transaction. If, notwithstanding such treatment
by the parties, payment by any party is finally determined to be taxable to the
other party by any taxing authority, there shall be a gross-up with respect to
such payment to such other party to the extent necessary to fully indemnify the
indemnitee on an after-tax basis. The amount of such gross-up shall be
determined consistent with all of the principles contained in this Agreement
and the Tax Assurance Agreement. Thus, for example, the gross-up payment, as
well as the amount of the indemnified liability, shall take into account the
extent of the tax benefits, if any, realized by the indemnitee with respect to
the obligation for which there is an indemnification obligation under this
Agreement or the Tax Assurance Agreement, and if the indemnification arises
under Section 2.1 of this Agreement (or Section 2.5(a) of the Tax Assurance
Agreement), all costs and the amount of the gross-up shall be apportioned 81%
to Lockheed Xxxxxx and 19% to Materials, subject to any applicable limitations
on the aggregate liability of Materials. Any such gross-up with respect to the
liabilities that may arise under Section 2.1 or the Tax Assurance Agreement
shall be treated as a liability of Materials for the purpose of determining its
aggregate liability under Section 2.1 such that, notwithstanding such gross-up,
Materials' aggregate liability shall be limited to $25 million.
Section 3.4 Notices. Any notice, demand, claim or other
communication under this Agreement shall be in writing and shall be deemed to
have been given on the earliest of the following:
(a) upon the delivery thereof if delivered personally;
(b) on the date on which delivery thereof is guaranteed
by the carrier if delivered by a national courier
guaranteeing delivery within a fixed number of days
of sending; or
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(c) on the date on which facsimile transmission thereof is
confirmed "OK" by the receiving machine if transmitted by
facsimile machine and confirmed by delivery by one of the
prior methods;
but, in each case, only if addressed to the parties in the following manner at
the following addresses or facsimile numbers ("Fax") (or at such other address
or other facsimile number as a party may specify by written notice to the
other):
Lockheed Xxxxxx: Lockheed Xxxxxx Corporation
0000 Xxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Senior Vice President and General Counsel
URGENT: NOTICE UNDER LOCKHEED
XXXXXX/MATERIALS TAX
AGREEMENT
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to: Lockheed Xxxxxx Corporation
0000 Xxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Vice President and General Tax Counsel
URGENT: NOTICE UNDER LOCKHEED
XXXXXX/MATERIALS TAX
AGREEMENT
Tel: (000) 000-0000
Fax: (000) 000-0000
Materials: Xxxxxx Xxxxxxxx Materials, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Vice President and Chief Financial Officer
URGENT: NOTICE UNDER LOCKHEED
XXXXXX/MATERIALS TAX
AGREEMENT
Tel: (000) 000-0000
Fax: (000) 000-0000
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With a copy to: Xxxxxx Xxxxxxxx Materials, Inc.
0000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Vice President and General Counsel
URGENT: NOTICE UNDER LOCKHEED
XXXXXX/MATERIALS TAX
AGREEMENT
Tel: (000) 000-0000
Fax: (000) 000-0000
ARTICLE IV.
MISCELLANEOUS PROVISIONS
Section 4.1 Tax Sharing Agreement. The Tax Sharing Agreement,
dated as of February 18, 1994, by and between Xxxxxx Xxxxxxxx Corporation, a
Maryland corporation and a predecessor-in-interest to Lockheed Xxxxxx, and
Materials (the "Tax Sharing Agreement"), shall remain in full force and effect
in accordance with its terms and is not amended or otherwise modified by this
Agreement.
Section 4.2 Entire Agreement. This Agreement, together with the
Tax Sharing Agreement and the Tax Assurance Agreement, embodies the entire
agreement and understanding of the parties in respect of the subject matter
contained herein and in those documents. This provision shall not abrogate any
other agreement or understanding between the parties dealing with a different
subject matter that was executed contemporaneously with this Agreement. Except
with respect to any subsequent written modifications of this Agreement, this
Agreement, the Tax Sharing Agreement and the Tax Assurance Agreement supersede
any prior agreements or understandings and abrogate any inconsistent provisions
of any contemporaneous agreements or understandings between the parties with
respect to the subject matter contained in this Agreement, the Tax Sharing
Agreement and the Tax Assurance Agreement.
Section 4.3 Waiver, Amendment, etc. This Agreement may not be
amended or supplemented, and no waivers of or consents to departures from the
provisions hereof shall be effective, unless set forth in a writing signed by,
and delivered to, each party. No failure or delay of any party in exercising
any power or right under this Agreement will operate as a waiver thereof, nor
will any single or partial exercise of any right or power, or any abandonment
or discontinuance of steps to enforce such right or power, preclude any other
or further exercise thereof or the exercise of any other right or power.
Section 4.4 Survival. The covenants and agreements contained
herein shall survive until 30 days after the expiration of all applicable
statutes of limitations under the Code with respect to the Transaction, except
as otherwise provided herein. No investigation or other
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examination by Lockheed Xxxxxx or Materials, or their respective
representatives, shall affect the term of survival of the covenants and
agreements set forth in this Agreement.
Section 4.5 Governing Law. THIS AGREEMENT SHALL BE INTERPRETED,
AND THE RIGHTS, OBLIGATIONS AND LIABILITIES OF THE PARTIES HERETO DETERMINED,
IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW
PROVISIONS) OF THE STATE OF MARYLAND.
Section 4.6. Consent to Jurisdiction. LOCKHEED XXXXXX AGREES THAT
IT WILL BRING ANY ACTION OR PROCEEDING FOR THE ENFORCEMENT OF ANY RIGHT,
REMEDY, OBLIGATION OR LIABILITY ARISING UNDER OR IN CONNECTION WITH THIS
AGREEMENT SOLELY IN THE STATE OR FEDERAL COURTS LOCATED IN NORTH CAROLINA.
MATERIALS AGREES THAT IT WILL BRING ANY ACTION OR PROCEEDING FOR THE
ENFORCEMENT OF ANY RIGHT, REMEDY, OBLIGATION OR LIABILITY ARISING UNDER OR IN
CONNECTION WITH THIS AGREEMENT SOLELY IN THE STATE OR FEDERAL COURTS LOCATED IN
MARYLAND. EACH PARTY HEREBY IRREVOCABLY WAIVES ITS RIGHT TO BRING ANY ACTION
OR PROCEEDING AGAINST THE OTHER EXCEPT IN ACCORDANCE WITH THE PRECEDING
SENTENCES. EACH PARTY CONSENTS THAT ALL SERVICE OF PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL DIRECTED TO THE PARTY AT THE ADDRESS STATED IN
SECTION 3.4.
Section 4.7 Severability. The invalidity or unenforceability of
any provision hereof in any jurisdiction will not affect the validity or
enforceability of the remainder hereof in that jurisdiction or the validity or
enforceability of this Agreement, including that provision, in any other
jurisdiction. To the extent permitted by applicable law, each party waives any
provision of applicable law that renders any provision hereof prohibited or
unenforceable in any respect. If any provision of this Agreement is held to be
unenforceable for any reason, it shall be adjusted rather than voided, if
possible, in order to achieve the intent of the parties to the extent possible.
Section 4.8 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
Section 4.9 Binding Agreement. This Agreement shall be binding
upon and shall inure only to the benefit of the parties hereto and their
respective successors and assigns (by merger, acquisition of assets, or
otherwise) to the same extent as if the successor or assign had been an
original party to this Agreement.
Section 4.10 No Third Party Beneficiaries. This Agreement is not
intended to benefit any person other than the parties hereto and their
respective successors and assigns, and no such person (including stockholders
of Lockheed Xxxxxx or shareholders of Materials) shall be a third party
beneficiary hereof.
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Section 4.11 Assignment. Neither Lockheed Xxxxxx nor Materials
shall assign this Agreement or any rights, interests or obligations thereunder,
or delegate any of its obligations hereunder, without the prior written consent
of the other.
Section 4.12 Termination. The rights and obligations of the
parties to this Agreement shall terminate, and neither party shall have any
liability under this Agreement, if the Transaction is not consummated.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their authorized representatives.
[signatures follow on separate pages]
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LOCKHEED XXXXXX CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Executive Vice President
and Chief Financial Officer
THIS IS A SIGNATURE PAGE TO
THE SUPPLEMENTAL TAX SHARING AGREEMENT
AND IS EXECUTED BY THE PARTY NAMED ABOVE.
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XXXXXX XXXXXXXX MATERIALS, INC.
By: /s/ Xxxxxxx X. Xxxxxx, Xx.
--------------------------------------------
Name: Xxxxxxx X. Xxxxxx, Xx.
Title: President and Chief Executive Officer
THIS IS A SIGNATURE PAGE TO
THE SUPPLEMENTAL TAX SHARING AGREEMENT
AND IS EXECUTED BY THE PARTY NAMED ABOVE.
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