AGREEMENT
This agreement is entered into this first day of January, 1991 by and
between Lane Industries, Inc., a Delaware corporation (hereinafter referred to
as "Lane"), and General Binding corporation, a Delaware corporation (hereinafter
referred to as "GBC").
WHEREAS, GBC became affiliated with Lane pursuant to a recapitalization
plan and upon the effective date of such plan the members of the GBC Group were
included with the Lane Group in filing consolidated U.S. federal income tax
returns; and
WHEREAS, in order to allocate the consolidated federal Tax Liability
and consolidated Tax Savings of the Combined Group among the members of each of
the GBC Group and Lane Group, a tax allocation agreement ("the Agreement") was
executed by GBC and Lane on June 1, 1978; and
WHEREAS, the portion of the consolidated Tax Savings allocated under
the Agreement to the GBC Group from June 1, 1978 to present exceeds $4,000,000;
and
WHEREAS, because of changes in the federal tax law subsequent to
execution of the Agreement and not anticipated by either party at the time the
Agreement was executed, the Agreement has further caused Lane and other members
of the Lane Group to exchange their net operating losses for the GBC Group's
foreign tax credits, which foreign tax credits were used on a separate company
basis by the GBC Group but which cannot be used on a separate company basis by
Lane or any other members of the Lane Group, and which may not ever be used on a
consolidated basis, all to the detriment of Lane and GBC; and
WHEREAS, the result of the above is that the Lane Group has been unable
to realize a substantial portion of the tax benefits relating to its net
operating losses, which tax benefits Lane bargained for in the Agreement, while
the GBC Group has been able to fully realize the tax benefits relating to its
allocated portion of the consolidated Tax Savings, which tax benefits GBC
bargained for in the Agreement; and
WHEREAS, both Lane and GBC acknowledge that such a result was not
intended nor is such a result equitable between the parties; and
WHEREAS, the parties desire to amend the Agreement dated June 1, 1978
to correct the current situation and to create benefits and detriments to the
GBC Group depending upon whether the consolidated foreign tax credits are used
or not used, respectively, which amendment will reflect the intent of the
parties as to how foreign tax credits are to be allocated between the Lane Group
and GBC Group;
NOW, THEREFORE, in consideration of the promises and the mutual
undertakings and covenants herein contained, the parties hereto hereby agree as
follows:
Paragraph 1.1 of the Agreement shall be amended to read as follows:
Additional Liability means, with respect to any Subgroup for any
taxable year, an amount equal to:
(a) 80% of any Tax Savings realized by that Subgroup for such
year, plus
(b) the lesser of:
(i) the sum of:
(A) 80% of the excess (if any) of the foreign
tax credit used in determining that
Subgroup's Hypothetical Tax Liability for
such year over the foreign tax credit used
by the Combined Group in determining the
consolidated Tax Liability for such year and
(B) the excess, if any, of the amount described
in this subparagraph (b) (i) for the
immediately preceding taxable year over the
amount described in subparagraph (b) (ii)
for the immediately preceding taxable year
or (ii) 20% of any Tax Savings realized by
that Subgroup for such year, minus
(c) the lesser of:
(i) the sum of:
(A) 80% of the excess (if any) of the foreign
tax credit used by the Combined Group in
determining the consolidated Tax Liability
for such year over the foreign tax credit
used in determining that Subgroup's
Hypothetical Tax Liability for such year and
(B) the excess, if any, of the amount described
in subparagraph (c)(i) for the immediately
preceding taxable year over the amount
described in subparagraph (c)(ii) for the
immediately preceding taxable year
(ii) the amount described in subparagraph (a) above for
such year or
(iii) the excess (if any) of amounts described in
subparagraph (b) above for all prior taxable years
beginning after December 31, 1990 over the amounts
described in this subparagraph (c) for all such prior
taxable years.
Subparagraph (d) of paragraph 2.1 of the Agreement shall be amended to
read as follows:
If the Tax Liability of the Combined Group as reflected on its
consolidated return is less than the sum of the Hypothetical Tax Liabilities of
the Subgroups for such year, the difference shall be considered the Tax Savings
for such year, and an amount equal to 80% of such Tax Savings (adjusted for
foreign tax credits pursuant to subparagraphs (b) and (c) of paragraph 1.1 of
this Agreement) shall be considered an Additional Liability of the Subgroup
which realizes
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the benefit of such Tax Savings. Such Additional Liability shall be payable to
the Subgroup generating the items of loss, deduction or credit which produced
such Tax Savings.
The above Amendment shall be effective for the taxable year beginning
January 1, 1991 and subsequent taxable years.
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IN WITNESS WHEREOF THIS AGREEMENT is executed as of the date first
above written.
General Binding Corporation
By:_____________________________________
President
Lane Industries, Inc.
By:_____________________________________
Senior Vice President and
Chief Financial Officer
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