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EXHIBIT 10.3
FORM OF TAX INDEMNITY AGREEMENT
This TAX INDEMNITY AGREEMENT (the "Agreement"), dated as of this ___
day of May, 1999, by and between XXXXXX CORPORATION ("Xxxxxx"), a Delaware
corporation, and XXX.XXX CORPORATION ("XXX.XXX"), a Nevada corporation.
R E C I T A L S:
X. Xxxxxx, a public company, whose common shares are traded on the New
York Stock Exchange, owns [36,388,000] shares of XXX.XXX's common stock, par
value $.01 per share, constituting all of the issued and outstanding common
stock of XXX.XXX.
B. Simultaneously with the execution hereof, Xxxxxx will contribute
$8,000,000 to XXX.XXX in exchange for 10,000 shares of Series A preferred stock
and transferable rights (the "Rights") to purchase at $8.00 per share (the
"Rights Offering") an aggregate of up to 13,602,000 shares of XXX.XXX common
stock. Holders of the Series A preferred stock and the XXX.XXX common stock will
vote on all matters presented to the stockholders as one class, with each holder
of the Series A preferred stock entitled to 50,000 votes for each share held and
each holder of common stock entitled to one vote for each share held.
X. Xxxxxx'x Board of Directors (the "Xxxxxx Board") has determined,
subject to its further consideration and the satisfaction of certain conditions,
to authorize Xxxxxx to distribute the Rights to eligible Xxxxxx stockholders as
of a record date to be determined by the Xxxxxx Board.
D. The Rights Offering, as more fully described in the registration
statement on Form S-1 (Registration No. ______) (the "Registration Statement"),
filed by XXX.XXX with the Securities and Exchange Commission, provides that
Xxxxxx stockholders may exercise their Right to purchase one share of XXX.XXX
Common Stock at $8.00 per share.
E. The Rights are set to expire on _______, 1999 unless extended up to
ten (10) days by XXX.XXX. All shares that remain unpurchased as of the
expiration of the Rights shall be issued to the Company.
F. If the shares to be issued pursuant to exercised Rights are
insufficient for XXX.XXX's common stock to be eligible for listing on the Nasdaq
National Market or the Pacific Stock Exchange either because there will be to
few record holders or beneficial owners of XXX.XXX common stock or because there
will be to few shares held by unaffiliated stockholders, then Xxxxxx will
distribute between a minimum of 150,000 shares of XXX.XXX common stock and a
maximum of 1,000,000 shares of common stock to its stockholders as of the record
date.
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G. As a results of these transactions following the consummation of the
Rights Offering and the Stock Distribution, Xxxxxx will own all of XXX.XXX's
Series A preferred stock and between 74% and 99% of its outstanding common
stock.
H. In connection with the Rights Offering, Xxxxxx and XXX.XXX have
entered into a Distribution Agreement on even date herewith (the "Distribution
Agreement") which requires, among other things, Xxxxxx and XXX.XXX to enter into
this Agreement to address certain tax issues involving Xxxxxx and XXX.XXX that
will arise after the Rights Offering after Xxxxxx'x ownership of XXX.XXX is less
than 80% of XXX.XXX's issued and outstanding shares as a result of which neither
XXX.XXX nor any XXX.XXX Post-Closing Affiliates (hereinafter defined) will file
Tax Returns (hereinafter defined) as a member of the Xxxxxx Group (hereinafter
defined); and
NOW, THEREFORE, in consideration of their mutual promises, Xxxxxx and
XXX.XXX agree as follows:
ARTICLE 1
DEFINITIONS
1.1 As used in this Agreement, the following terms shall have the
following meanings:
"Code" means the Internal Revenue Code of 1986, as amended, or
any successor thereto, as in effect for the taxable period in question.
"Consolidated Group" means the group of corporations that
immediately prior to the Effective Date are members of the affiliated group of
corporations (within the meaning of Section 1504 of the Code) of which Xxxxxx is
the common parent.
"Effective Date" means the date upon which Xxxxxx ceases to
own eighty percent (80%) of the issued and outstanding shares of XXX.XXX.
"Final Determination" shall mean the final resolution of
liability for any Tax for a taxable period, including any related interest or
penalties, (a) by Internal Revenue Service Form 870 or 870-AD (or any successor
forms thereto), on the date of acceptance by or on behalf of the Internal
Revenue Service ("IRS"), 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; (b) by a decision,
judgment, decree, or other order by a court of competent jurisdiction, which has
become final and unappealable; (c) by a closing agreement or accepted offer in
compromise under Section 7121 or 7122 of the Code, or comparable agreements
under the laws of other jurisdictions; (d) by any allowance of a refund or
credit in respect of an overpayment of Tax, but only after the
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expiration of all periods during which such refund may be recovered (including
by way of offset) by the Tax imposing jurisdiction; or (e) by any other final
disposition, including by reason of the expiration of the applicable statute of
limitations.
"Representative" means with respect to any person or entity,
any of such person's or entity's directors, officers, employees, agents,
consultants, advisors, accountants, attorneys, and representatives.
"Tax" or "Taxes" means (a) all forms of taxation, whenever
created or imposed, and whenever imposed by a national, municipal, governmental,
state, federal or other body, whether domestic or foreign (a "Taxing
Authority"), and without limiting the generality of the foregoing, shall include
net income, alternative or add-on minimum tax, gross income, sales, use, ad
valorem, gross receipts, value added, franchise, profits, license, transfer,
recording, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall profit, custom duty, or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any related interest, penalties, or other additions to tax, or
additional amounts imposed by any such Taxing Authority, (b) liability for the
payment of any amounts of the type described in (a) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any period,
including any liability arising pursuant to Treas. Reg. Section 1.1502-6, or as
a result of being a party to any agreement or arrangement whereby liability for
payment of such amounts was determined or taken into account with reference to
the liability of another party and (c) liability for the payment of any amounts
of the type described in (a) as a result of any express or implied obligation to
indemnify any other person.
"Taxing Authority" is defined under the term "Taxes."
"Taxable Period" or "Taxable Periods" means the tax year for
the "Consolidated Group" as defined in this Article 1.
"Tax Return" means any return, filing, questionnaire or other
document required to be filed, including requests for extensions of time,
filings made with estimated Tax payments, claims for refund and amended returns
that may be filed, for any taxable period with any Taxing Authority in
connection with any Tax (whether or not a payment is required to be made with
respect to such filing).
"XXX.XXX Businesses" means the present and future
subsidiaries, divisions and business of XXX.XXX and any member of the XXX.XXX
Post-Closing Affiliates.
"XXX.XXX Post-Closing Affiliate" means any corporation,
partnership or other entity directly or indirectly controlled by XXX.XXX after
the Effective Date.
"XXX.XXX Pre-Closing Affiliate" means any corporation,
partnership or other entity directly or indirectly controlled by XXX.XXX on or
before the Effective Date.
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"Xxxxxx Affiliate" means any corporation, partnership or other
entity directly or indirectly controlled by Xxxxxx, other than XXX.XXX or any
XXX.XXX Affiliate.
"Xxxxxx Businesses" means the present and future subsidiaries,
divisions and business of any member of the Xxxxxx Group, other than the present
and future subsidiaries, divisions and business of XXX.XXX or any XXX.XXX
Post-Closing Affiliates.
"Xxxxxx Group" means the group of corporations that
immediately after the Effective Date are members of the affiliated group of
corporations of which Xxxxxx is the common parent (within the meaning of section
1504 of the Code).
ARTICLE 2
PREPARATION AND FILING OF TAX RETURNS
2.1 INCOME INCLUDED. All Tax Returns required to be filed by the
Consolidated Group relating to Taxable Periods ending before or including the
Effective Date and filed after the date of this Agreement shall include the
income of XXX.XXX and XXX.XXX Pre-Closing Affiliates (as determined in this
Section 2.1) attributable to such Taxable Periods (including, for Federal income
Tax purposes, any deferred income triggered into income by Treas. Reg. Section
1.1502-13 and Treas. Reg. Section 1.1502-14 and any excess loss accounts taken
into income under Treas. Reg. Section 1.1502-19) required to be reported in the
Consolidated Group's consolidated Federal income Tax Returns (or under any
similar rules applicable to any state, local or other Tax Returns filed on a
consolidated basis). The income of XXX.XXX and XXX.XXX Pre-Closing Affiliates
will be apportioned for the period October 1, 1998 up to and including the
Effective date and the period after the Effective Date by closing the books of
XXX.XXX and such XXX.XXX Pre-Closing Affiliates as of the end of the Effective
Date. The income of XXX.XXX and any XXX.XXX Pre-Closing Affiliate shall not
include any deferred income triggered into income by Treas. Reg. Section
1.1502-13 and Treas. Reg. 1.1502-14 and any excess loss accounts taken into
income under Treas. Reg. Section 1.1502-19, attributable to any other member of
the Consolidated Group.
2.2 TAX RETURNS FOR TAXABLE PERIODS ENDING BEFORE OR INCLUDING THE
EFFECTIVE DATE. Except as otherwise provided in Section 2.4, Xxxxxx shall timely
prepare and file, or cause to be timely prepared and filed, all Tax Returns
required to be filed by or on behalf of any member of the Consolidated Group
relating to Taxable Periods ending before or including the Effective Date.
XXX.XXX shall provide Xxxxxx any Tax-related information reasonably requested by
Xxxxxx relating to any Taxable Periods ending on or before the Effective Date.
2.3 TAX RETURNS FOR TAXABLE PERIODS BEGINNING AFTER THE EFFECTIVE DATE.
XXX.XXX shall prepare and file, or cause to be prepared and filed, all Tax
Returns for XXX.XXX and any XXX.XXX Post-Closing Affiliate for taxable periods
of XXX.XXX and any XXX.XXX Post-Closing Affiliate beginning after the Effective
Date. Xxxxxx shall
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prepare and file, or cause to be prepared and filed, all Tax Returns for the
Xxxxxx Group for Taxable Periods beginning after the Effective Date.
2.4 CARRY-OVER PERIOD RETURNS.
(a) XXX.XXX shall prepare and file on a timely basis any Tax
Returns (but not including any Federal income Tax Return or Tax Returns under
any similar rules applicable to any state or local, and filed on a consolidated
basis) of XXX.XXX and any XXX.XXX Pre-Closing Affiliate for any Taxable Period
beginning before and ending after the Effective Date (a "Carry-Over Period").
(b) All other Tax Returns for a Carry-Over Period required to
be filed by any member of the Consolidated Group other than XXX.XXX or any
XXX.XXX Pre-Closing Affiliate shall be prepared and filed by Xxxxxx.
ARTICLE 3
PAYMENT OF TAXES
3.1 LIABILITY FOR TAXES WITH RESPECT TO TAXABLE PERIODS ENDING BEFORE
OR INCLUDING THE EFFECTIVE DATE. Except as otherwise provided in this Agreement,
Xxxxxx shall be responsible for paying and shall pay all Taxes relating to any
Tax Return filed by the Consolidated Group or any member thereof with respect to
any Taxable Period ending before and including the Effective Date, including
without limitation, any additional Taxes as a result of any audit, amendment or
other change in a Tax Return as filed by the Consolidated Group or any member
thereof.
3.2 PREPARATION OF XXX.XXX'S FINAL RETURNS; PAYMENT OF TAXES. On or
before _____________, 1999, Xxxxxx shall cause to be prepared (in a manner
consistent with practices followed in prior years) and delivered to XXX.XXX a
separate United States Federal Income Tax Return for XXX.XXX and each XXX.XXX
Pre-Closing Affiliate for the period beginning October 1, 1998 and ending on the
Effective Date (the "XXX.XXX Final Returns"). The XXX.XXX Final Returns shall
include all items of income, gain, loss, deductions and credit of XXX.XXX and
the XXX.XXX Pre-Closing Affiliates realized during such period and determined
and apportioned in accordance with Section 2.1. Xxxxxx shall include in its
consolidated federal income tax for its first taxable year ending after the
Effective Date the items of income, gain, loss, deductions and credit shown on
the XXX.XXX Final Returns and shall pay all Taxes due with respect thereto as
provided in this Section 3.2 and Section 3.1.
3.3 SEPARATION PAYMENT WITH RESPECT TO FEDERAL INCOME TAXES. Xxxxxx
shall give XXX.XXX notice of the filing of Xxxxxx'x consolidated federal income
tax returns for its first taxable year ending after the Effective Date ("Final
Return Notice"). If the XXX.XXX Final Returns show a tax liability, XXX.XXX
shall pay to Xxxxxx the amount thereof within thirty (30) days after receipt by
XXX.XXX of the Final Return Notice. Xxxxxx shall not withdraw any earnings or
assets of XXX.XXX or any XXX.XXX Pre-
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Closing Affiliates prior to the Effective Date. If the XXX.XXX Final Returns
show a net operating loss or other tax benefit that is utilized by Xxxxxx or any
member of the Xxxxxx Group and, therefore, is not allocated to the entity
incurring such tax benefit pursuant to Treas. Reg. Section 1.1502-79, Xxxxxx
shall pay to XXX.XXX (or the appropriate entity) the amount of any tax savings
to be realized thereby within thirty (30) days after receipt by XXX.XXX of the
XXX.XXX Final Returns.
3.4 ALLOCATION OF EARNINGS AND PROFITS FOR TAXABLE PERIODS ENDING
BEFORE OR INCLUDING THE EFFECTIVE DATE. All earnings and profits of the
Consolidated Group for all Taxable Periods ending before or including the
Effective Date shall be allocated pursuant to Section 1552 of the Code among the
members of the Consolidated Group in accordance with the ratio which that
portion of the consolidated taxable income attributable to each member of the
Consolidated Group having taxable income bears to the consolidated taxable
income of the Consolidated Group in accordance with Section 1552(a)(1) of the
Code and the Regulations thereunder.
3.5 UNUSED CARRY-FORWARD ATTRIBUTES. Xxxxxx and XXX.XXX agree that, for
purposes of all required returns and reports with respect to Taxes, the amount
of unused tax credits under the Code attributable to XXX.XXX and each of the
XXX.XXX Pre-Closing Affiliates that may be carried forward to Taxable Periods
ending after the Effective Date shall, unless otherwise required by law or
regulations, be determined in accordance with the principles of Treas. Reg.
Section 1.1502-79(c). Any other carry-forward attributes shall similarly be
determined in accordance with applicable regulations.
3.6 LIABILITY FOR TAXES WITH RESPECT TO POST-EFFECTIVE DATE TAXABLE
PERIODS. The Xxxxxx Group shall pay all Taxes of the Xxxxxx Group and shall be
entitled to receive and retain all refunds of Taxes of the Xxxxxx Group with
respect to Taxable Periods beginning after the Effective Date which are
attributable to the Xxxxxx Businesses. XXX.XXX shall pay all Taxes of XXX.XXX
and any XXX.XXX Post-Closing Affiliate and shall be entitled to receive and
retain all refunds of Taxes of XXX.XXX and any XXX.XXX Post-Closing Affiliate
for all periods beginning after the Effective Date which are attributable to the
XXX.XXX Businesses.
3.7 CARRY-OVER PERIOD PAYMENTS. Xxxxxx shall be responsible for (and
shall pay) any Taxes shown to be due on a Tax Return for a Carry-Over Period
filed pursuant to Section 2.4(b) hereof by any member of the Consolidated Group
other than XXX.XXX or a XXX.XXX Pre-Closing Affiliate. XXX.XXX shall be
responsible for (and shall pay) any Taxes shown to be due on a Tax Return for a
Carry-Over Period filed by XXX.XXX and any XXX.XXX Pre-Closing Affiliate
pursuant to Section 2.4(a) hereof.
3.8 CARRY-BACKS. XXX.XXX shall be entitled to any refund of any Tax
obtained by the Consolidated Group (or any member of the Consolidated Group),
including any refund obtained as a result of the carry-back of losses or credits
of XXX.XXX or any XXX.XXX Post-Closing Affiliate from any taxable period
beginning after the Effective Date to any Taxable Period ending before or
including the Effective Date. The application of
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any such carry-backs by XXX.XXX and/or any other current or former member of the
Consolidated Group shall be in accordance with the Code and the Treasury
Regulations promulgated thereunder. Notwithstanding this Section 3.9, XXX.XXX
and any XXX.XXX Post-Closing Affiliate shall have the right, in its sole
discretion, to make any election, including the election under Section 172(b)(3)
of the Code, which would eliminate or limit the carry-back of any loss or credit
to any Taxable Period ending before or including the Effective Date.
3.9 POST-CLOSING ELECTIONS. At Xxxxxx'x request, XXX.XXX and the
XXX.XXX Pre-Closing Affiliates shall make and/or join with Xxxxxx in making any
Tax elections reasonably requested by Xxxxxx after the Effective Date, if the
making of such election does not have a material adverse impact on XXX.XXX or
any XXX.XXX Pre-Closing Affiliate for any post-Effective Date Tax period.
3.10 REFUNDS. XXX.XXX and any XXX.XXX Pre-Closing Affiliate shall be
entitled to any refund of any Tax obtained by the Consolidated Group (or any
member of the Consolidated Group) as a result of any audit, amendment or other
change in the Tax Return as filed by the Consolidated Group or any member
thereof to the extent the refund is attributable to XXX.XXX and any XXX.XXX
Pre-Closing Affiliate for any Taxable Period of the Consolidated Group ending
before or including the Effective Date. Xxxxxx will cooperate with XXX.XXX and
any XXX.XXX Pre-Closing Affiliate in obtaining such refunds, including, but not
limited to, the filing of amended Tax Returns or refund claims. Xxxxxx will
immediately pay to XXX.XXX and any XXX.XXX Pre-Closing Affiliate any Tax refund
described in this Section 3.10 when such refund is received by the Xxxxxx Group.
With the exception of Section 3.8, all other refunds arising from Tax Returns
filed for the Consolidated Group will belong to Xxxxxx.
ARTICLE 4
COOPERATION AND EXCHANGE OF INFORMATION
4.1 COOPERATION. XXX.XXX shall cooperate (and shall cause any XXX.XXX
Post-Closing Affiliate to cooperate) fully at such time and to the extent
reasonably requested by Xxxxxx in connection with the preparation and filing of
any Tax Return or the conduct of any audit, dispute, proceeding, suit or action
concerning any issues or any other matter contemplated hereunder relating to any
Taxable Period ending before or including the Effective Date. Such cooperation
shall include, without limitation, (a) the retention and provision on demand of
copies of books, records, documentation or other information relating to any
such Tax Return until the later of (i) the expiration of the applicable statute
of limitation (giving effect to any extension, waiver, or mitigation thereof)
and (ii) in the event any claim has been made under this Agreement for which
such information is relevant, until a Final Determination with respect to such
claim; (b) the execution of any document that may be necessary or reasonably
helpful in connection with the filing of any such Tax Return, or in connection
with any audit, proceeding, suit or action addressed in the preceding sentence;
and (c) the use of the parties' reasonable best efforts to obtain any
documentation from a governmental authority or a third party that may be
necessary or
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helpful in connection with the foregoing. Each party shall make its employees
and facilities available on a mutually convenient basis to facilitate such
cooperation.
4.2 TAX RETURNS FOR TAXABLE PERIODS INCLUDING THE EFFECTIVE DATE.
Xxxxxx will provide XXX.XXX with the opportunity to review and comment upon any
Tax Returns to be filed after the date of this Agreement (including any amended
returns), and will provide XXX.XXX, promptly upon its request, with copies of
such Tax Returns (including any amended returns).
4.3 AUDITS. Xxxxxx will allow XXX.XXX and any XXX.XXX Pre-Closing
Affiliate and its counsel to participate (at the expense of XXX.XXX or its
XXX.XXX Pre-Closing Affiliate) in any audits of Xxxxxx'x Consolidated Federal
Income Tax Returns to the extent that such returns relate to XXX.XXX and any
XXX.XXX Pre-Closing Affiliate. Xxxxxx will not settle any such audit in a manner
which would adversely affect XXX.XXX and any XXX.XXX Pre-Closing Affiliate
without the prior written consent of XXX.XXX, which consent shall not be
unreasonably withheld.
4.4 CARRY-BACKS. Xxxxxx will immediately pay to XXX.XXX and any XXX.XXX
Pre-Closing Affiliate any Tax refund (or reduction in Tax liability) resulting
from a carry-back of a post-acquisition tax attribute of XXX.XXX and any XXX.XXX
Pre-Closing Affiliates into the Xxxxxx Consolidated Group Tax Return, when such
refund or reduction is realized by the Xxxxxx Group. Xxxxxx will cooperate with
XXX.XXX and any XXX.XXX Pre-Closing Affiliate in obtaining such refunds (or
reduction in Tax liability), including, but not limited to, the filing of
amended Tax Returns or refund claims.
4.5 CONTEST PROVISIONS. Xxxxxx shall have full responsibility and
discretion in the handling of any Tax controversy, including, without
limitation, an audit, a protest to the Appeals Division of the IRS, and
litigation in Tax Court or any other court of competent jurisdiction involving a
Tax Return of the Consolidated Group or the Xxxxxx Group.
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ARTICLE 5
MISCELLANEOUS
5.1 TAX INDEMNIFICATION.
(a) Xxxxxx shall defend, indemnify and hold harmless XXX.XXX
and each XXX.XXX Pre-Closing Affiliate from and against any liability, cost or
expense, including, without limitation, any fine, penalty, interest, charge or
reasonable accountant's fee, for any Tax required under this Agreement to be
paid by Xxxxxx or any member of the Consolidated Group other than XXX.XXX or a
XXX.XXX Pre-Closing Affiliate.
(b) XXX.XXX shall indemnify and hold harmless Xxxxxx and each
member of the Xxxxxx Group from and against any liability, cost or expense,
including without limitation, any fine, penalty, interest, charge or reasonable
accountant's fee, for any Tax required under this Agreement to be paid by
XXX.XXX or any XXX.XXX Post-Closing Affiliate.
(c) The amount of any payment made with respect to this
Section 5.1 shall include any additional amount necessary to indemnify the
recipient of the payment against any Taxes imposed or incurred (including any
increase in liability or taxes resulting from a reduction in the amount of the
loss), and any reasonable professional fees or other litigation costs incurred,
in connection with such payment, and (ii) be reduced by the amount of any tax
benefit realized or to be realized by the recipient as a result of its payment
of the Taxes being indemnified hereunder.
5.2 BREACH. Xxxxxx shall defend, indemnify and hold harmless XXX.XXX
and each XXX.XXX Pre-Closing Affiliate and XXX.XXX shall indemnify and hold
harmless each member of the Xxxxxx Group from and against any payment required
to be made under this Agreement as a result of the breach by a member of the
Xxxxxx Group or by XXX.XXX or a XXX.XXX Pre-Closing Affiliate, as the case may
be, of any obligation under this Agreement.
5.3 RESOLUTION OF CERTAIN DISPUTES.
(a) Arbitration. Disagreements between Xxxxxx and XXX.XXX with
respect to amounts that either claims is owed by the other (or by an Affiliate
of the other) under this Agreement, or other matters under this Agreement that
are not resolved by mutual agreement, shall be resolved by arbitration pursuant
to this Section 5.3.
(b) Selection of the Arbitrator. Any arbitrator selected
pursuant to this Section 5.3(b) shall have at least ten (10) years of experience
in the field of corporate taxation, shall be an attorney licensed to practice
law in any state of the United States or a certified public accountant licensed
to practice in any state of the United States and shall not be or have been
employed by or affiliated with either party. The parties shall first attempt to
agree on a mutually satisfactory arbitrator. If the parties are unable to agree
on a
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mutually satisfactory arbitrator within thirty (30) days after either party
notifies the other in writing of a disagreement requiring arbitration pursuant
to this Section 5.3 (15 days in the case of a disagreement with respect to
Section 4.1 through Section 4.5), each party shall select an arbitrator. The two
arbitrators thus selected shall agree on and select a third arbitrator. If the
two arbitrators cannot agree on such third arbitrator within thirty (30) days
(fifteen (15) days in the case of a disagreement with respect to Section 4.1
through Section 4.5), the parties shall each select a different arbitrator and
renew the foregoing procedure. If the position of an arbitrator is vacated, the
person or persons who originally selected the arbitrator to fill such position
shall select a new arbitrator to fill the position, unless the parties agree to
continue the arbitration with the remaining arbitrators. When used hereinafter,
the term "arbitrator" shall refer to the three arbitrators so selected when
appropriate and a decision of a majority of such arbitrators shall constitute a
decision by the arbitrator in the appropriate context.
(c) Arbitration Procedures.
(i) The arbitration shall be conducted under the
auspices of the American Arbitration Association.
(ii) Each party within thirty (30) days after
engagement of the arbitrator (fifteen (15) days in the case of a disagreement
with respect to Section 4.1 through Section 4.5) shall submit to the arbitrator
a written statement of the party's position (including where relevant the total
net amount it asserts is owed by it or is due to it) regarding the total amount
in dispute.
(iii) The arbitrator shall base his decision on the
following standards. In the case of a factual dispute between the parties, the
arbitrator shall make a determination of the correct facts. In the case of a
dispute regarding a legal issue, including the proper application of the Tax
laws or the proper interpretation of this Agreement, the arbitrator shall make a
determination in accordance with his best legal judgment. Upon making
determinations with respect to all factual and legal issues in dispute, the
arbitrator shall determine the amount due by one party to the other or such
other matter with respect to the matter subject to the arbitration. Where
relevant, as to each matter in dispute, the arbitrator shall find in favor of
the party whose statement submitted pursuant to paragraph (ii) above proposed
the amount closest to the amount so determined.
(iv) The arbitrator shall render a written decision
stating only the result of such decision as soon as practicable. The arbitrator
shall also orally explain the bases of such decision to both parties as soon as
practicable. If and only if both parties request, the arbitrator shall state the
bases of such decision in writing. Where relevant, as to each matter in dispute,
the arbitrator's decision shall be in an amount equal to one of the total
amounts asserted by one of the parties in the written statements submitted
pursuant to paragraph (ii) above. The arbitrator shall not, and is not
authorized to, render a decision in any other amount.
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(v) The arbitrator's decision shall be final and
binding on the parties. No appeal to any court is contemplated by this Agreement
and each party, to the maximum extent permissible by law, waives and
relinquishes all rights and entitlements to appeal such decision.
(vi) The arbitrator shall determine a fair allocation
of the costs of the arbitration proceeding (including each party's legal fees)
as between the parties.
5.4 NOTICES. Any notice, demand, claim or other communication under
this Agreement shall be in writing and shall be deemed given upon delivery if
delivered personally, upon mailing if sent by certified mail, return receipt
requested, postage prepaid, or upon completion of transmission if sent by
telecopy or facsimile, to the parties at the following address:
If to Xxxxxx:
Xxxxxx Corporation
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxx, Chief Executive Officer
If to XXX.XXX:
XXX.XXX Corporation
000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxxx XxXxxxx, Vice President - Finance
5.5 ENTIRE AGREEMENT. This Agreement and the applicable provisions of
the Distribution Agreement constitute the entire agreement of the parties
concerning the subject matter hereof, and supersedes all other agreements,
whether or not written, in respect of any Tax between or among any member or
members of the Xxxxxx Group, on the one hand, and XXX.XXX and any XXX.XXX
Pre-Closing Affiliate, on the other hand. This Agreement may not be amended
except by an agreement in writing, signed by the parties hereto. In the event
and to the extent that there shall be a conflict between the provisions of this
Agreement and the Distribution Agreement, the provisions of this Agreement shall
control.
5.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with, the laws of the State of New York.
5.7 SUCCESSORS AND ASSIGNS. A party's rights and obligations under this
Agreement may not be assigned without the prior written consent of the other
party. All of the provisions of this Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and permitted
assigns.
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5.8 NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties to this Agreement and their respective subsidiaries 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.
5.9 LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of the prohibition or unenforceability without
invalidating the remaining provisions. Any prohibition or unenforceability of
any provision of this Agreement in any jurisdiction shall not invalidate or
render unenforceable the provision in any other jurisdiction.
5.10 EXPENSES. Unless otherwise expressly provided in this Agreement or
in the Distribution Agreement, each party shall bear any and all expenses that
arise from their respective obligations under this Agreement. In the event
either party to this Agreement brings an action or proceeding for the breach or
enforcement of this Agreement, the prevailing party in such action or
proceeding, whether or not such action or proceeding proceeds to final judgment,
shall be entitled to recover as an element of its costs, and not as damages,
such reasonable attorneys' fees as may be awarded in the action or proceeding in
addition to whatever other relief to which the prevailing party may be entitled.
5.11 CONFIDENTIALITY. Each party shall hold and cause its
Representatives to hold in strict confidence, unless compelled to disclose by
judicial or administrative process or, in the opinion of its counsel, by other
requirements of law, all information (other than any such information relating
solely to the business or affairs of such party) concerning the other parties
hereto furnished it by such other party or its Representatives pursuant to this
Agreement (except to the extent that such information can be shown to have been
(a) previously known by the party to which it was furnished, (b) in the public
domain through no fault of such party, or (c) later lawfully acquired from other
sources by the party to which it was furnished), and each party shall not
release or disclose such information to any other person, except its auditors,
attorneys, financial advisors, bankers and other consultants and advisors who
shall be advised of the provisions of this Section. Each party shall be deemed
to have satisfied its obligation to hold confidential information concerning or
supplied by the other party if it exercises the same care as it takes to
preserve confidentiality for its own similar information.
5.12 COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signature thereto and hereto were upon the same instrument.
5.13 HEADINGS. Introductory headings used in this Agreement are solely
for the convenience of the parties and shall not be deemed to be limitations
upon or descriptive of the contents of the Section or sub-sections concerned.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
XXX.XXX CORPORATION
By:
Name: Xxxxxxx XxXxxxx
Title: Vice President - Finance
XXXXXX CORPORATION
By:
Name: Xxxxx Xxxxxx
Title President and Chief Executive
Officer
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