TAX DISAFFILIATION AGREEMENT
THIS TAX DISAFFILIATION AGREEMENT, dated as of June 3, 1997, is made
and entered into by and between COMSAT Corporation, a District of Columbia
corporation ("COMSAT"), and Ascent Entertainment Group, Inc., a Delaware
corporation ("Ascent"), and supersedes the Tax Sharing Agreement dated as
of December 18, 1995 by and between COMSAT and Ascent (the "Tax Sharing
Agreement"), as of the date specified in and subject to the conditions of
Article XII hereof.
RECITALS
WHEREAS, COMSAT is the common parent corporation of an affiliated
group of corporations within the meaning of Section 1504(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and Ascent is a member of
such affiliated group; and
WHEREAS, the affiliated group of which COMSAT is the common parent and
Ascent is a member files a consolidated Federal income tax return pursuant
to Code Section 1501; and
WHEREAS, the parties hereto contemplate that COMSAT will make a
distribution (the "Distribution") with respect to its common stock of all
of the common stock of Ascent held by COMSAT pursuant to the Distribution
Agreement, dated as of the date hereof, by and between COMSAT and Ascent
(the "Distribution Agreement"); and
WHEREAS, COMSAT and Ascent desire to provide for the allocation of
liabilities, procedures to be followed, and other matters with respect to
certain taxes in the event the Distribution takes place.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
1. "Adjustment" shall mean the deemed increase or decrease in a Tax,
determined on an issue-by-issue or transaction-by-transaction basis, as
appropriate, and using the assumptions set forth in the next sentence,
resulting from an adjustment made or proposed by a Taxing Authority with
respect to any amount reflected or required to be reflected on any Return
relating to such Tax. For purpose of determining such deemed increase or
decrease in a Tax, the following assumptions will be used: (a) in the case
of any Income Tax, the highest marginal Tax rate or, in the case of any
other Tax, the highest applicable Tax rate, in each case in effect with
respect to that Tax for the Taxable period or any portion of the Taxable
period to which the adjustment relates; and (b) such determination shall be
made without regard to whether any actual increase or decrease in such Tax
will in fact be realized with respect to the Return to which such
adjustment relates.
2. "Affiliate" shall mean, with respect to any Person, any
partnership, joint venture, corporation, limited liability company, trust,
unincorporated association, or other entity directly or indirectly
controlling or controlled by, or under direct or indirect common control
with, such Person.
3. "After-Tax Basis" in reference to an Article VI Indemnity Payment
shall mean an amount that, after (i) subtraction of the aggregate
additional Taxes incurred or to be incurred by the party receiving the
Article VI Indemnity Payment as a result of the receipt of such payment and
(ii) addition of the tax benefit to the party receiving the Article VI
Indemnity Payment on account of the Adjustment to which such Article VI
Indemnity Payment relates, is equal to the amount of the correlative
Adjustment. "After-Tax Basis" in reference to an Article VI Benefit Payment
shall mean an amount that, after (i) addition of the aggregate additional
Taxes incurred or to be incurred by the party making the Article VI Benefit
Payment on account of the Ascent Tax Benefit or the COMSAT Tax Benefit to
which such Article VI Benefit Payment relates and (ii) subtraction of the
tax benefit to the party making the Article VI Benefit Payment as a result
of the making of such payment, is equal to the amount of the correlative
Ascent Tax Benefit or COMSAT Tax Benefit. For purpose of determining such
additional taxes incurred or to be incurred and such tax benefit, the
following assumptions will be used: (a) in the case of any Income Tax, the
highest marginal Tax rate or, in the case of any other Tax, the highest
applicable Tax rate, in each case in effect with respect to that Tax for
the Taxable period or any portion of the Taxable period to which the
Article VI Indemnity Payment or Article VI Benefit Payment relates; and (b)
such determination shall be made without regard to whether any actual
additional taxes or tax benefit will in fact be realized with respect to
the Return to which such payment relates.
4. "Agreement" shall mean this Tax Disaffiliation Agreement,
including any schedules, exhibits and appendices attached hereto.
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5. "Article VI Benefit Payment" shall mean a payment made under
section 2 of Article VI hereof that is a payment with respect to an Ascent
Tax Benefit or a COMSAT Tax Benefit.
6. "Article VI Indemnity Payment" shall mean a payment made under
section 2 of Article VI hereof that is an indemnity payment with respect to
an Ascent Tax Adjustment or a COMSAT Tax Adjustment.
7. "Ascent Consolidated Group" shall mean, for any taxable year prior
to the Distribution, the affiliated group of corporations of which Ascent
would be the common parent for consolidated Federal income tax return
filing purposes if it were not a subsidiary of COMSAT, and, as of the
Distribution Date and thereafter, the affiliated group of corporations of
which Ascent will be the common parent for consolidated Federal income tax
return filing purposes, and any other corporations that are or become
members of such affiliated group. If, subsequent to the Distribution,
Ascent ceases to be the common parent of an affiliated group, "Ascent
Consolidated Group" shall refer to the affiliated group of which Ascent or
a successor is a member or, in the event that Ascent ceases to be either
the common parent or a member of any affiliated group, to Ascent or a
successor. To the extent required to carry out the intent of any provision
of this Agreement, "Ascent Consolidated Group" shall also refer to any
corporation that, subsequent to the Distribution, leaves the affiliated
group of which Ascent is the common parent or otherwise a member.
8. "Ascent Tax Adjustment" shall mean, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with
respect to each Tax, the net increase in each such Tax equal to the sum of
all Adjustments made pursuant to a Final Determination with respect to each
such Tax for each such Taxable period or portion of a Taxable period that
are attributable to the Ascent Consolidated Group; provided, however, that
any Adjustment comprising a Restructuring Adjustment shall not be
considered in determining the amount of any Ascent Tax Adjustment.
9. "Ascent Tax Benefit" shall mean, with respect to any Taxable period
or portion of a Taxable period, and as computed separately with respect to
each Tax, the net decrease in each such Tax equal to the sum of all
Adjustments made pursuant to a Final Determination with respect to each
such Tax for each such Taxable period or portion of a Taxable period that
are attributable to the Ascent Consolidated Group; provided, however, that
any Adjustment comprising a Restructuring Adjustment shall not be
considered in determining the amount of any Ascent Tax Benefit.
10. "Base Rate," with respect to any Person, shall mean the highest
marginal interest rate paid by that Person on such Person's outstanding
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indebtedness for borrowed money in effect from time to time, or, if the
Person does not have indebtedness for borrowed money, ten percent per
annum.
11. "Code" shall have the meaning set forth in the Recitals to this
Agreement.
12. "Combined Consolidated Group" shall mean for any taxable year the
affiliated group of corporations comprised of the COMSAT Consolidated Group
and the Ascent Consolidated Group.
13. "Combined Consolidated Return" shall mean a consolidated Federal
income tax return filed for the Combined Consolidated Group.
14. "COMSAT Consolidated Group" shall mean for any taxable year the
affiliated group of corporations of which COMSAT is the common parent, and
any other corporations which become members of the affiliated group, but
excluding members of the Ascent Consolidated Group. If, subsequent to the
Distribution, COMSAT ceases to be the common parent of an affiliated group,
"COMSAT Consolidated Group" shall refer to the affiliated group of which
COMSAT or a successor is a member or, in the event that COMSAT ceases to be
either the common parent or a member of any consolidated group, to COMSAT
or a successor.
15. "COMSAT Tax Adjustment" shall mean, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with
respect to each Tax, the net increase in each such Tax equal to the sum of
all Adjustments made pursuant to a Final Determination with respect to each
such Tax for each such Taxable period or portion of a Taxable period that
are attributable to the COMSAT Consolidated Group; provided, however, that
any Adjustment comprising a Restructuring Adjustment shall not be
considered in determining the amount of any COMSAT Tax Adjustment.
16. "COMSAT Tax Benefit" shall mean, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with
respect to each Tax, the net decrease in each such Tax equal to the sum of
all Adjustments made pursuant to a Final Determination with respect to each
such Tax for each such Taxable period or portion of a Taxable period that
are attributable to the COMSAT Consolidated Group; provided, however, that
any Adjustment comprising a Restructuring Adjustment shall not be
considered in determining the amount of any COMSAT Tax Benefit.
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17. "Controlling Party" shall mean the member of the Combined
Consolidated Group, that filed, or, if a Return was not filed, was required
pursuant to this Agreement to file a Return that is the subject of any Tax
Contest, or any successor and/or assign of any of the foregoing.
18. "Distribution" shall have the meaning set forth in the Recitals to
this Agreement.
19. "Distribution Agreement" shall have the meaning set forth in the
Recitals to this Agreement.
20. "Distribution Date" shall mean the date the Distribution becomes
effective pursuant to the Distribution Agreement.
21. "Federal Income Taxes" and "Federal Income Tax Liability" shall
mean the taxes imposed by sections 11, 55, 59A, and 1201(a) of the Code, or
any successor provisions to such sections and any other income-based U.S.
Federal taxes which are hereinafter imposed upon corporations.
22. "Final Determination" shall mean the final resolution of liability
for any Tax for a Taxable period, (i) by IRS Form 870 or 870-AD (or any
successor forms thereto), on the date of acceptance by or on behalf of the
Taxing Authority, or by a comparable form under the laws of other
jurisdictions; except that a Form 870 or 870-AD or comparable form that
reserves (whether by its terms or by operation of law) the right of the
taxpayer to file a claim for refund and/or the right of the Taxing
Authority to assert a further deficiency shall not constitute a Final
Determination: (ii) by a decision, judgment, decree, or other order by a
court of competent jurisdiction, which has become final and unappealable;
(iii) by a closing agreement or accepted offer in compromise under Section
7121 or 7122 of the Code (or any successor provisions thereto), or
comparable agreements under the laws of other jurisdictions; (iv) by any
allowance of a refund or credit in respect of an overpayment of tax, but
only after the expiration of all periods during which such refund may be
recovered (including by way of offset) by the Taxing Authority; or (v) by
any other final disposition, including by reason of the expiration of the
applicable statute of limitations or by mutual agreement of the parties.
23. "Group" shall mean the COMSAT Consolidated Group or the Ascent
Consolidated Group.
24. "Income Taxes" shall mean Federal Income Taxes and other Taxes
that are imposed on or measured by net income and not gross receipts or
sales.
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25. "Indemnified Party" shall have the meaning set forth Article VIII,
section 1 of this Agreement.
26. "Indemnifying Party" shall have the meaning set forth in Article
VIII, section 1 of this Agreement.
27. "Interested Party" shall mean COMSAT or any other member of the
COMSAT Consolidated Group, or Ascent or any other member of the Ascent
Consolidated Group (including any successor and/or assign of any of each of
the foregoing), as the case may be, to the extent (a) such Person is not
the Controlling Party with respect to a Tax Contest; and (b) such Person
(i) may be liable for, or required to make, any indemnity payment,
reimbursement or other payment pursuant to the provisions of this Agreement
with respect to such Tax Contest; or (ii) may be entitled to receive any
indemnity payment, reimbursement or other payment pursuant to the
provisions of this Agreement with respect to such Tax Contest; provided,
however, that in no event shall a member of either the COMSAT Consolidated
Group or the Ascent Consolidated Group, as the case may be, be an
Interested Party in a Tax Contest in which another member of its Group is
the Controlling Party with respect to the Tax Contest.
28. "IRS" shall mean the Internal Revenue Service.
29. "Person" shall mean an individual, partnership, joint venture,
corporation, limited liability company, trust, unincorporated association,
any other entity, or a government or any department or agency or other unit
thereof.
30. "Post-Affiliation Year" shall have the meaning set forth in
Article III, section 3.
31. "Regulations" or "Treas. Reg." shall mean the final or temporary
U.S. Treasury regulations in effect from time to time.
32. "Restructuring Adjustment" shall mean, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with
respect to each Tax, the net increase or decrease in each such Tax, as the
case may be, equal to the sum of all Adjustments made pursuant to a Final
Determination with respect to each such Tax for each Taxable period or
portion of a Taxable period that are attributable to, or as a result of,
the Distribution.
33. "Return" shall mean any return, report, form or similar statement
or document (including, without limitation, any related or supporting
information or schedule attached thereto and any information return, claim
for refund, amended return and declaration of estimated tax) that has been
or is required to be filed with any Taxing Authority or that has been or is
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required to be furnished to any Taxing Authority in connection with the
determination, assessment or collection of any Taxes or the administration
of any laws, regulations or administrative requirements relating to any
Taxes.
34. "Straddle Period" shall mean any Taxable period of the Combined
Consolidated Group (or any member thereof) that includes but does not end
on the Distribution Date, other than a Taxable Period that begins on the
Distribution Date.
35. "Tax" (and, with correlative meanings, "Taxes" and "Taxable")
shall mean, without limitation, and as determined on a
jurisdiction-by-jurisdiction basis, each foreign or U.S. federal, state,
local or municipal income, alternative or add-on minimum, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium,
property or any other tax, custom, tariff, impost, levy, duty, government
fee or other like assessment or charge of any kind whatsoever, together
with any interest or penalty, addition to tax or additional amount related
thereto, imposed by any Taxing Authority.
36. "Taxing Authority" shall mean any government or any subdivision,
agency, commission or authority thereof, or any quasi-governmental or
private body having jurisdiction over the assessment, determination,
collection or other imposition of Taxes.
37. "Tax Contest" shall mean, without limitation, any audit,
examination, claim, suit, action or other proceeding relating to Taxes in
which an Adjustment to Taxes may be proposed, collected or assessed and in
respect of which an indemnity payment, reimbursement, other payment, or
entitlement to receive or retain tax benefits may be sought under or arises
pursuant to this Agreement.
38. "Tax Sharing Agreement" shall have the meaning set forth in the
Recitals to this Agreement.
ARTICLE II
RETURNS
1. COMSAT shall have the sole and exclusive responsibility for the
preparation and filing of the consolidated U.S. Federal income tax return
of the Combined Consolidated Group, including any amended returns and any
other returns, documents, or statements required to be filed with the IRS
with respect to the determination of the Federal Income Tax Liability of
the Combined Consolidated Group. All returns shall be filed by COMSAT on a
timely basis, taking into account extensions of the due date for the filing
of such returns.
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2. The Ascent Consolidated Group shall continue to join in filing a
consolidated Federal income tax return with the COMSAT Consolidated Group
for all such taxable years for which the Ascent Consolidated Group is
eligible to do so under the Code and the Regulations, unless COMSAT shall
request and be granted permission to discontinue filing on a consolidated
basis or shall otherwise properly elect not to file on a consolidated basis
in any particular case.
3. COMSAT shall make all Federal income tax payments, including
estimated payments, with respect to consolidated tax returns of the
Combined Consolidated Group, and COMSAT shall have the right to exercise
all powers of a common parent with respect to filing the consolidated
Federal income tax returns as are conferred on it by the Regulations.
4. COMSAT shall be the sole and exclusive agent of the Ascent
Consolidated Group and any member of such group in any and all matters
relating to the U.S. Federal Income Tax Liability of the Combined
Consolidated Group for all consolidated return years. After consultation
with Ascent with respect to all Returns in which Ascent joins, COMSAT
shall, inter alia, have the right with respect to any Federal consolidated
returns which it files (a) to determine (i) the manner in which such
returns shall be prepared and filed, including, without limitation, the
manner in which any item of income, gain, loss, deduction or credit shall
be reported, (ii) whether any extensions of the due dates for filing of
such returns or of the applicable statutes of limitations may be requested
and (iii) the elections that will be made by any member of the Combined
Consolidated Group, (b) to file and prosecute any claim for refund and (c)
to determine whether any refunds, to which the Combined Consolidated Group
may be entitled, shall be paid by way of refund or credited against the tax
liability of the Combined Consolidated Group. Ascent hereby irrevocably
appoints COMSAT as its agent and attorney-in-fact to take such action
(including the execution of documents) as COMSAT may deem appropriate to
effect the foregoing.
5. COMSAT shall, in its sole discretion, determine whether it is
appropriate to make any elections pursuant to Treas. Reg. Sections
1.1502-76(b)(2)(ii) or (iii). Ascent and each member of the Ascent
Consolidated Group shall file with their Returns all statements required to
effectuate any such election.
6. (a) Subject to section 4 of this Article II, COMSAT shall, on
behalf of the Combined Consolidated Group (or any member thereof), prepare
and file or cause to be prepared and filed all Returns of the Combined
Consolidated Group (or any member thereof) (i) with respect to any Taxable
period ending prior to January 1, 1997, and (ii) with respect to Income
Taxes for (x) any Taxable period beginning after December 31, 1996, and
ending on or before the Distribution Date and (y) any Straddle Period.
Subject to Article III, Article V, and Article VI hereof, COMSAT shall pay
or cause to be paid all Taxes shown to be due and payable on such Returns.
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(b) COMSAT shall prepare and file or cause to be prepared and
filed all Returns of the COMSAT Consolidated Group (or any member thereof)
for any Taxable period beginning on or after the Distribution Date and
shall pay or cause to be paid all Taxes shown to be due and payable by the
COMSAT Consolidated Group (or any member thereof) on such Returns. Ascent
shall prepare and file or cause to be prepared and filed all Returns of the
Ascent Consolidated Group (or any member thereof) (i) with respect to any
Taxable period beginning after December 31, 1996, other than Returns with
respect to Income Taxes for (x) any Taxable period beginning after December
31, 1996, and ending on or before the Distribution Date and (y) any
Straddle Period, and (ii) for any Taxable period beginning on or after the
Distribution Date, and shall pay or cause to be paid all Taxes shown to be
due and payable by the Ascent Consolidated Group (or any member thereof) on
such Returns.
(c) All Taxes other than the Taxes discussed in Article III and
Article V hereof shall be paid by the entity that incurs such Taxes. In the
event COMSAT has paid any such Taxes as agent for a member of the Ascent
Consolidated Group, such member shall reimburse COMSAT therefor.
ARTICLE III
CALCULATION AND PAYMENT OF TAX SHARING PAYMENTS
1. For each taxable year for which COMSAT files a Combined
Consolidated Return, Federal Income Tax Liability shall be allocated among
the members of the Combined Consolidated Group in the same manner as the
applicable methods in effect under Treas. Reg. Section 1.1552-1 for such
year, provided that the Combined Consolidated Group shall in any event be
treated as having elected the percentage method under Treas. Reg. Section
1.1502-33(d)(3), utilizing a fixed percentage of 100 percent.
2. a. Prior to March 15 following each taxable year for which a
Combined Consolidated Return is filed, COMSAT may prepare a preliminary tax
calculation ("Preliminary Tax Calculation") for such taxable year. Ascent
shall pay to COMSAT by such March 15 the amount, if any, of the Federal
Income Tax Liability (allocated as provided in Section 1 of this Article
III) of the Ascent Consolidated Group determined pursuant to the
Preliminary Tax Calculation.
b. Within 10 days after the date on which a Combined Consolidated
Return for the taxable year is filed, Ascent shall make a payment to COMSAT
in an amount equal to the amount, if any, by which the Federal Income Taxes
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actually paid by COMSAT with respect to such taxable year (which may be
zero), but not including any amount received by COMSAT from Ascent pursuant
to paragraph (a) of this Section 2, exceed the Federal Income Tax Liability
allocated to members of the COMSAT Consolidated Group under Section 1 of
this Article (which may be a negative amount). No interest shall be payable
in respect of any amount payable to COMSAT pursuant to the preceding
sentence.
c. Within 10 days after the date on which a Combined Consolidated
Return for the taxable year is filed, COMSAT shall make a payment to Ascent
in an amount equal to the amount, if any, by which the amounts (which may
be zero) actually paid by Ascent to COMSAT pursuant to paragraph (a) of
this Section 2 exceed the Federal Income Tax Liability allocated to members
of the Ascent Consolidated Group under Section 1 of this Article (which may
be a negative amount). No interest shall be payable in respect of any
amount payable to Ascent pursuant to the preceding sentence.
d. It is the intention of the parties hereto that the
interpretation of paragraphs (b) and (c) of this section 2 of Article III
be consistent with the results reflected in their previous computations
made and course of dealing under paragraphs (b) and (c) of section 2 of
Article III of the Tax Sharing Agreement as heretofore in effect.
e. COMSAT shall furnish to Ascent the Preliminary Tax Calculation
(if any) no later than 10 days prior to March 15 of the year following the
taxable year, and shall furnish to Ascent the allocation of tax liability
under Section 1 of this Article no later than 10 days before the Combined
Consolidated Return for the taxable year is filed.
f. The provisions of this section 2 shall not apply to Returns
governed by section 6(b) of Article II hereof.
3. If, for any taxable year beginning on or after the Distribution
Date ("Post-Affiliation Year"), a member of the Ascent Consolidated Group
(or a successor to such member) incurs net operating losses that could be
carried back to a Combined Consolidated Return, the common parent of the
affiliated group of which such member of the Ascent Consolidated Group (or
a successor to such member) is a member for such Post-Affiliation Year
shall timely make an irrevocable election pursuant to Treas. Reg. Section
1.1502-21T(b)(3)(i) (or successor regulation) to relinquish the entire
carryback period with respect to such net operating losses. Regardless of
whether the common parent of the affiliated group of which such member (or
its successor) is a member for such Post-Affiliation Year timely makes such
irrevocable election, COMSAT shall have no payment obligation in respect of
any such net operating losses incurred by such member of the Ascent
Consolidated Group in any Post-Affiliation Year.
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4. If, in any Post-Affiliation Year, a net capital loss, excess tax
credit or any other tax attribute of a member of the Ascent Consolidated
Group is carried back and actually utilized in a Combined Consolidated
Return, COMSAT shall pay such member an amount equal to the actual
reduction in tax resulting from the utilization of such tax attribute;
provided however, that if such utilization is subsequently displaced by
other tax attributes, a recomputation shall be made and such member shall
repay to COMSAT any amount necessary to reflect the actual utilization of
such tax attribute following such displacement. Any payments made under
this Section 4 shall reflect interest under Article IV to the extent that
interest is actually paid to or received from the Internal Revenue Service
with respect to the utilization of such attribute.
5. Subsequent to the Distribution, a payment shall be made between
COMSAT and Ascent to reflect the difference, if any, between the amount of
alternative minimum tax credit allocated to any member of the Ascent
Consolidated Group under Prop. Treas. Reg. Section 1.1502-55(h)(6) or
successor provisions and the allocable amount of alternative minimum tax
paid by such member (and not subsequently credited against regular tax) as
reflected in the prior sections of this Article III. Such payment shall be
made no later than 10 days after the filing of the Combined Consolidated
Return for the taxable year that includes the Distribution Date.
ARTICLE IV
INTEREST
1. Interest required to be paid by or to Ascent pursuant to this
Agreement shall, unless otherwise specified, be computed at the rate and in
the manner provided in the Code for interest on underpayments (including
large corporate underpayments, if applicable) and overpayments,
respectively, of Federal income tax for the relevant period.
2. Any interest charge required to be paid by or to Ascent pursuant to
this Agreement with respect to any state or local income tax or franchise
tax return shall be computed at the rate and in the manner as provided
under the applicable state or local statute for interest on underpayments
and overpayments of such tax for the relevant period.
ARTICLE V
STATE & LOCAL TAXES
The principles expressed with respect to the Combined Consolidated
Group Federal income tax matters throughout this Agreement (including
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Article II, Article VI, and Article X) shall apply with equal force and
effect to state and local income and franchise Tax matters to the extent
such Taxes are determined on a combined or consolidated basis, including
the preparation and filing of state and local income tax and franchise tax
Returns required to be filed by the Combined Consolidated Group.
ARTICLE VI
INDEMNIFICATION
1. (a) COMSAT hereby agrees to indemnify and hold each member of the
Ascent Consolidated Group harmless with respect to any Federal Income Tax
Liability of the Combined Consolidated Group where such liability arises
solely by reason of the member being severally liable for any taxes of the
COMSAT Consolidated Group pursuant to Treas. Reg. Section 1.1502-6.
(b) Ascent hereby agrees to indemnify and hold each member of the
COMSAT Consolidated Group harmless with respect to any Federal Income Tax
Liability of the Combined Consolidated Group where such liability arises
solely by reason of the member being severally liable for any taxes of the
Ascent Consolidated Group pursuant to Treas. Reg. Section 1.1502-6.
(c) Ascent hereby agrees to indemnify and hold each member of the
COMSAT Consolidated Group harmless from and against any and all
liabilities, claims and expenses resulting from any action or failure to
act on the part of Ascent or any member of the Ascent Consolidated Group
that is in contravention of the provisions of this Agreement.
(d) COMSAT hereby agrees to indemnify and hold each member of the
Ascent Consolidated Group harmless from and against any and all
liabilities, claims and expenses resulting from any action or failure to
act on the part of COMSAT or any member of the COMSAT Consolidated Group
that is in contravention of the provisions of this Agreement.
2. (a) (i) Except as provided in paragraph (ii) of this section 2(a)
of Article VI, Ascent shall be liable for, and shall indemnify and hold
harmless, as appropriate, any member of the COMSAT Consolidated Group on an
After-Tax Basis against any and all Ascent Tax Adjustments for any Taxable
period or portion of a Taxable period ending or deemed to end on or before
the Distribution Date, in each case with respect to any Return of the
Ascent Consolidated Group (or any member thereof), the COMSAT Consolidated
Group (or any member thereof) or the Combined Consolidated Group (or any
member thereof). Except as provided in section 3 of Article III, Ascent
shall be entitled to receive on an After-Tax Basis the amount of any Ascent
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Tax Benefits for any Taxable period or portion of a Taxable period ending
or deemed to end on or before the Distribution Date with respect to any
Return of the Ascent Consolidated Group (or any member thereof), the COMSAT
Consolidated Group (or any member thereof) or the Combined Consolidated
Group (or any member thereof).
(ii) Ascent shall not be required to indemnify COMSAT for
any penalty or addition to tax in the nature of a penalty (but shall
nevertheless indemnify COMSAT for tax and interest as otherwise provided
herein) imposed with respect to an item in a return that was prepared by
COMSAT, unless Ascent (x) provided COMSAT with erroneous or incomplete
information that resulted in the imposition of such penalty, or (y) was
consulted with respect to, or allowed to review prior to filing, the
treatment of such item in the return and did not expressly request COMSAT
to alter the treatment of the item giving rise to the penalty in a manner
that would have caused such penalty not to be imposed.
(b) (i) COMSAT shall be liable for, and shall indemnify and hold
harmless, as appropriate, any member of the Ascent Consolidated Group on an
After-Tax Basis against any and all COMSAT Tax Adjustments for any Taxable
period or portion of a Taxable period ending or deemed to end on or before
the Distribution Date, in each case with respect to any Return of the
Ascent Consolidated Group (or any member thereof), the COMSAT Consolidated
Group (or any member thereof) or the Combined Consolidated Group (or any
member thereof). COMSAT shall be entitled to receive on an After-Tax Basis
the amount of any COMSAT Tax Benefits for any Taxable period or portion of
a Taxable period ending or deemed to end on or before the Distribution Date
with respect to any Return of the Ascent Consolidated Group (or any member
thereof), the COMSAT Consolidated Group (or any member thereof) or the
Combined Consolidated Group (or any member thereof).
(ii) COMSAT shall be liable for, and shall indemnify and
hold harmless, as appropriate, any member of the Ascent Consolidated Group
on an After-Tax Basis against any penalty or addition to tax in the nature
of a penalty imposed with respect to an item in a return that was prepared
by COMSAT, unless Ascent (x) provided COMSAT with erroneous or incomplete
information that resulted in the imposition of such penalty, or (y) was
consulted with respect to, or allowed to review prior to filing, the
treatment of such item in the return and did not expressly request COMSAT
to alter the treatment of the item giving rise to the penalty in a manner
that would have caused such penalty not to be imposed.
3. (a) The indemnification provisions of this Agreement shall
supplement the indemnification provisions of the Distribution Agreement. In
particular, the Distribution Agreement provides for indemnification with
respect to any Restructuring Adjustment.
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(b) To the extent there is any conflict between the indemnification
provisions of this Agreement and the indemnification provisions of the
Distribution Agreement, the indemnification provisions of the Distribution
Agreement shall control.
ARTICLE VII
TAX CONTESTS
1. The Controlling Party shall promptly notify all Interested Parties
of (a) the commencement of any Tax Contest pursuant to which such
Interested Parties may be required to make or entitled to receive an
indemnity payment, reimbursement or other payment under this Agreement; and
(b) any Final Determination made with respect to any Tax Contest pursuant
to which such Interested Parties may be required to make or entitled to
receive any indemnity payment, reimbursement or other payment under this
Agreement. The failure of a Controlling Party to promptly notify any
Interested Party as specified in the preceding sentence shall not relieve
any such Interested Party of any liability and/or obligation which it may
have to the Controlling Party under this Agreement.
2. The Controlling Party shall have the right to contest, litigate,
compromise and settle any Adjustment that is made or proposed in a Tax
Contest; provided, however, that the prior written consent of each
Interested Party shall be required, which consent may not be unreasonably
withheld. The Controlling Party shall permit each Interested Party and the
counsel of its choice to participate in any such contest, litigation,
compromise or settlement of any Adjustment in a Tax Contest. All costs,
including legal and accounting expenses, of any Tax Contest are to be borne
by the party incurring such costs.
ARTICLE VIII
PROCEDURE AND PAYMENT
1. Any Person entitled to any indemnification, reimbursement or other
payment under this Agreement with respect to the amount of any Adjustment
that has become immediately due and payable (the "Indemnified Party") shall
notify in writing the Person against whom such indemnification,
reimbursement or other payment is sought (the "Indemnifying Party") of its
right to and the amount of such indemnification, reimbursement or other
payment; provided, however, that the failure to notify the Indemnifying
Party shall not relieve the Indemnifying Party from any liability and/or
obligation which it may have to an Indemnified Party on account of the
provisions contained in this Agreement, and in no event shall such failure
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relieve the Indemnifying Party from any other liability or obligation which
it may have to such Indemnified Party. Except as otherwise provided in this
Agreement, the Indemnifying Party shall make such indemnity payment,
reimbursement or other payment to the Indemnified Party within [ten] days
of the receipt of the written notice specified in the preceding sentence.
2. Any indemnity payment, reimbursement or other payment required to
be made pursuant to this Agreement by an Indemnifying Party to an
Indemnified Party shall be made by wire transfer of immediately available
funds to such bank and/or other account of the Indemnified Party as from
time to time the Indemnified Party shall have directed the Indemnifying
Party in writing, or in such other manner as the Indemnified Party may
direct in writing.
3. Any indemnity payment, reimbursement or other payment required to
be made by an Indemnifying Party pursuant to this Agreement shall bear
interest, from the date such payment is due under this Agreement until
payment in full is received by the Indemnified Party, at [a rate per annum
equal at all times to 4% per annum above the Base Rate then in effect of
the Person obligated to make such payment]. In the event that the rate
provided for in the preceding sentence exceeds the maximum rate allowed by
applicable law, the maximum legal interest rate shall apply.
ARTICLE IX
COOPERATION
1. COMSAT and Ascent shall provide each other with such assistance and
documents, without charge and in a timely fashion, as may be reasonably
requested by such person in connection with (i) the preparation of any
Return, (ii) the conduct of any Tax Contest, (iii) any matter relating to
Taxes of any shareholder of COMSAT, or (iv) any other matter that is the
subject of this Agreement. Such assistance shall include, without
limitation: (i) the prompt provision of books, records, Returns,
documentation or other information relating to any relevant Return; (ii)
the execution of any document that may be necessary or reasonably helpful
in connection with the filing of any Return, or in connection with any Tax
Contest, including, without limitation, the execution of powers of attorney
and extensions of applicable statutes of limitations; and (iii) the use of
reasonable efforts to obtain any documentation from a governmental
authority or a third party that may be necessary or reasonably helpful in
connection with the foregoing. Each party shall make its employees and
facilities available on a mutually convenient basis to facilitate such
cooperation.
2. COMSAT and each other member of the COMSAT Consolidated Group, and
Ascent and each other member of the Ascent Consolidated Group, shall retain
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or cause to be retained all Returns, schedules and workpapers, and all
material records or other documents relating thereto, until the expiration
of the statute of limitations (including any waivers or extensions thereof)
with respect to the Taxable periods to which such Returns and other
documents relate or until the expiration of any additional period that
either COMSAT or Ascent, as the case may be, may reasonably request in
writing with respect to specifically designated material records or
documents. If COMSAT or Ascent intends to destroy any material and relevant
records or documents, it shall provide the other party with advance notice
and the opportunity to copy or take possession of such records or
documents. The parties hereto will notify each other in writing of any
waivers or extensions of the applicable statute of limitations that may
affect the period for which the foregoing records or documents must be
retained.
ARTICLE X
PARTNERSHIPS, ETC.
In the case of any partnership, limited liability company, or other
Person that is not treated as a corporation under the Code and for that
reason is not a member of the COMSAT Consolidated Group or the Ascent
Consolidated Group:
1. Responsibility for filing the Returns and payment of Taxes of such
Person under Articles II, III, and V of this Agreement shall be determined
as if such Person were a corporation.
2. Such Person shall, for other purposes of this Agreement, be treated
as a member of the Combined Consolidated Group, the COMSAT Consolidated
Group, or the Ascent Consolidated Group, as appropriate, if it would be so
treated if it were a corporation.
ARTICLE XI
MISCELLANEOUS PROVISIONS
1. COMSAT and Ascent agree that any information furnished one another
pursuant to this Agreement is confidential and, except as, and to the
extent, required during the course of an audit or litigation or otherwise
required by law, shall not be disclosed to another person or entity.
2. This Agreement shall be binding upon and inure to the benefit of
any successor to any of the parties, by merger, acquisition of assets or
otherwise, to the same extent as if the successor had been an original
party to this Agreement.
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3. This Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland without giving effect to conflicts
of law principles thereof.
4. 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 Affiliate of such party; provided,
however, that for purposes of the foregoing, no Person shall be considered
an Affiliate of a party if such Person is a member of another party's
Group.
5. This Agreement may be amended from time to time by agreement in
writing executed by all the parties hereto or all of the parties then bound
thereby. This Agreement constitutes the entire agreement with respect to
the subject matter hereof and supersedes all prior written and oral
understandings with respect thereto.
6. Any notice, request or other communication required or permitted
under this Agreement shall be in writing and shall be sufficiently given if
personally delivered or if sent by facsimile or by registered or certified
mail, postage prepaid, addressed as follows:
COMSAT:
COMSAT Corporation
0000 Xxxx Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Flower
Vice President and Chief Financial Officer
Telecopy No.: (000) 000-0000
With a copy (which shall not constitute notice) to:
Xxxxxx X. Xxxxx
Vice President, General Counsel and Secretary
COMSAT Corporation
0000 Xxxx Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxx 00000
Telecopy No.: (000) 000-0000
and
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Ascent:
Ascent Entertainment Group, Inc.
One Xxxxx Center, Suite 2800
0000 00xx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx, III
Chief Operating Officer
and Executive Vice President, Finance
Telecopy No.: (000) 000-0000
With a copy (which shall not constitute notice) to:
Xxxxxx X. Xxxxx
Vice President, Business and Legal Affairs and Secretary
Ascent Entertainment Group, Inc.
One Xxxxx Center, Suite 2800
0000 00xx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Telecopy No.: (000) 000-0000
or to such other address as either party may have furnished to the other in
writing in accordance with this Section 7.
7. In case any one or more of the provisions contained in this
Agreement should be invalid, illegal or unenforceable, the enforceability
of the remaining provisions hereof shall not in any way be affected or
impaired thereby. It is hereby stipulated and declared to be the intention
of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions hereof without including any terms,
provisions, covenants and restrictions that may hereafter be declared
invalid, void or unenforceable. In the event that any such term, provision,
covenant or restriction is hereafter held to be invalid, void or
unenforceable, the parties hereto agree to use their best efforts to find
and employ an alternate means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant or
restriction.
8. Neither the failure nor any delay on the part of any party hereto
to exercise any right under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right preclude any
other or further exercise of the same or any other right, nor shall any
waiver of any right with respect to any occurrence be construed as a waiver
of such right with respect to any other occurrence.
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9. This Agreement is solely for the benefit of the parties to this
Agreement and their respective Affiliates and should not be deemed to
confer upon third parties any remedy, claim, liability, reimbursement,
claim of action or other right in excess of those existing without this
Agreement.
10. This Agreement may be executed in any number of counterparts, each
such counterpart being deemed to be an original instrument, and all of such
counterparts shall together constitute one and the same instrument. The
section numbers and captions herein are for convenience of reference only,
do not constitute part of this Agreement and shall not be deemed to limit
or otherwise affect any of the provisions hereof.
11. Nothing in this Agreement is intended to change or otherwise
affect any previous tax election made by or on behalf of the Combined
Consolidated Group (including the election with respect to the calculation
of earnings and profits under Code Section 1552 and the regulations
thereunder).
12. Subject to the provisions hereof, the parties hereto shall make,
execute, acknowledge and deliver such other instruments and documents, and
take all such other actions, as may be reasonably required in order to
effectuate the purposes of this Agreement and to consummate the
transactions contemplated hereby. Subject to the provisions hereof, each
party shall, in connection with entering into this Agreement, performing
its obligations hereunder and taking any and all actions relating hereto,
comply with all applicable laws, regulations, orders and decrees, obtain
all required consents and approvals and make all required filings with any
governmental agency, other regulatory or administrative agency, commission
or similar authority and promptly provide the other party with all such
information as it may reasonably request in order to be able to comply with
the provisions of this sentence.
13. Any ambiguities shall be resolved without regard to which party
drafted the Agreement.
ARTICLE XII
EFFECTIVE DATE
1. This Agreement shall become effective as of the Distribution Date,
and shall not become effective if the Distribution does not take place. In
the event the Distribution does not take place, the Tax Sharing Agreement
shall continue with the same force and effect it would have had if this
Agreement had not been entered into.
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2. If the Distribution takes place, this Agreement shall supersede the
Tax Sharing Agreement. This Agreement shall terminate and be of no further
force or effect only upon the expiration of all applicable statutes of
limitations relating to Taxes that are the subject of a reimbursement,
indemnification, or other payment obligation hereunder; provided, however,
that the confidentiality provisions of Article XI, section 1 shall survive
indefinitely.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their authorized representatives.
COMSAT CORPORATION
By: /s/ A. E. Flower
-------------------------
Xxxxx X. Flower
Vice President and Chief
Financial Officer
ASCENT ENTERTAINMENT GROUP, INC.
By: /s/ Xxxxx X. Xxxxxx III
-------------------------
Xxxxx X. Xxxxxx, III
Executive Vice President, Finance and
Chief Operating Officer
