EXHIBIT 10.3

 

TAX SHARING AGREEMENT

 

DATED AS OF OCTOBER 31, 2013

 

BY AND BETWEEN

 

HARVARD BIOSCIENCE, INC.

 

AND

 

HARVARD APPARATUS REGENERATIVE TECHNOLOGY, INC.

 

(for itself and on behalf of each member of the SpinCo Group)

 

 

 

 

TABLE OF CONTENTS

 

    Page     Section 1.         Definition of Terms 1     Section 2.
        Allocation of Tax Liabilities 7       Section 2.01 Distributing
Liability 7       Section 2.02 Allocation of United States Federal Income Tax
and Federal Other Tax 7       Section 2.03 Allocation of State Income and State
Other Taxes 8       Section 2.04 Allocation of Foreign Taxes 9       Section
2.05 Certain Transaction and Other Taxes 9       Section 2.06 SpinCo Group
Attributes 9     Section 3.         Proration of Taxes 10     Section 4.
        Preparation and Filing of Tax Returns 10       Section 4.01 General 10  
    Section 4.02 Distributing’s Responsibility 10       Section 4.03 SpinCo’s
Responsibility 11       Section 4.04 Tax Accounting Practices 11       Section
4.05 Consolidated or Combined Tax Returns 11       Section 4.06 Right to Review
Tax Returns 12       Section 4.07 SpinCo Carrybacks, Carryforwards and Claims
for Refund 12       Section 4.08 Apportionment of Earnings and Profits and Tax
Attributes 12     Section 5.         Tax Payments 12       Section 5.01 Payment
of Separate Company Taxes 12       Section 5.02 Indemnification Payments 12    
  Section 6.         Tax Benefits 12       Section 6.01 Tax Benefits 12      
Section 6.02 Distributing and SpinCo Income Tax Deductions in Respect of Certain
Equity Awards and Incentive Compensation 13     Section 7.         Tax-Free
Status 14       Section 7.01 Tax Opinions/Rulings and Representation Letters 14
      Section 7.02 Restrictions on SpinCo 14       Section 7.03 Restrictions on
Distributing 16       Section 7.04 Procedures Regarding Opinions and Rulings 16
      Section 7.05 Liability for Tax-Related Losses 17     Section 8.
        Assistance and Cooperation 18       Section 8.01 Assistance and
Cooperation 18       Section 8.02 Income Tax Return Information 18

 

 

 

 

Section 9.         Tax Records 18       Section 9.01 Retention of Tax Records 18
      Section 9.02 Access to Tax Records 19     Section 10.       Tax Contests
19       Section 10.01 Notice 19       Section 10.02 Control of Tax Contests 19
    Section 11.       Effective Date; Termination of Prior Intercompany Tax
Allocation Agreements 20     Section 12.       Survival of Obligations 20    
Section 13.       Treatment of Payments; Tax Gross Up 20       Section 13.01
Treatment of Tax Indemnity and Tax Benefit Payments 20       Section 13.02 Tax
Gross Up 20       Section 13.03 Interest Under This Agreement 20     Section 14.
        Disagreements 21     Section 15.         Reserved 21     Section 16.
        Expenses 21     Section 17.         General Provisions 21       Section
17.01 Addresses and Notices 21       Section 17.02 Binding Effect 22      
Section 17.03 Waiver 22       Section 17.04 Severability 22       Section 17.05
Authority 22       Section 17.06 Further Action 22       Section 17.07
Integration 22       Section 17.08 Construction 22       Section 17.09 No Double
Recovery 22       Section 17.10 Counterparts 22       Section 17.11 Governing
Law 23       Section 17.12 Jurisdiction 23       Section 17.13 Amendment 23    
  Section 17.14 SpinCo Subsidiaries 23       Section 17.15 Successors 23      
Section 17.16 Injunctions 23

 

 

 

 

TAX SHARING AGREEMENT

 

This TAX SHARING AGREEMENT (this “Agreement”) is entered into as of October 31,
2013, by and among HARVARD BIOSCIENCE, INC., a Delaware corporation
(“Distributing”), and HARVARD APPARATUS REGENERATIVE TECHNOLOGY, INC., a
Delaware corporation and a wholly owned subsidiary of Distributing (“SpinCo”),
for itself and on behalf of each member of the SpinCo Group (as defined below).

 

RECITALS

 

WHEREAS, the Board of Directors of Distributing has determined that it would be
appropriate and desirable to completely separate the regenerative medicine
device business of Distributing from the life science tools research business of
Distributing;

 

WHEREAS, as of the date hereof, Distributing is the common parent of an
affiliated group of corporations, including SpinCo, which has elected to file
consolidated Federal income tax returns;

 

WHEREAS, pursuant to the Separation and Distribution Agreement (as defined
below), Distributing and SpinCo have agreed to separate the regenerative
medicine device business from Distributing generally by means of the
Distribution;

 

WHEREAS, prior to the Distribution, Distributing intends to cause it and its
applicable Subsidiaries to contribute the HART Assets to SpinCo and its
applicable Subsidiaries (and SpinCo and its applicable Subsidiaries will assume
the HART Liabilities), each as defined in and more fully described in the
Separation and Distribution Agreement;

 

WHEREAS, as a result of the Distribution, SpinCo and its subsidiaries will cease
to be members of the affiliated group (as that term is defined in Section 1504
of the Code) of which Distributing is the common parent (the “Deconsolidation”);
and

 

WHEREAS, the parties desire to provide for and agree upon the allocation between
the parties of Liabilities for Taxes arising prior to, as a result of, and
subsequent to the Distribution, and to provide for and agree upon other matters
relating to Taxes;

 

NOW THEREFORE, in consideration of the mutual agreements contained herein, the
parties hereby agree as follows:

 

Section 1. Definition of Terms. For purposes of this Agreement (including the
recitals hereof), the following terms have the following meanings, and
capitalized terms used but not otherwise defined herein shall have the meaning
ascribed to them in the Separation and Distribution Agreement:

 

“Accounting Cutoff Date” means, with respect to SpinCo, any date as of the end
of which there is a closing of the financial accounting records for such entity.

 

“Active Trade or Business” means the active conduct (as defined in
Section 355(b)(2) of the Code and the regulations thereunder) by SpinCo and its
“separate affiliated group” (as defined in Section 355(b)(3)(B) of the Code) of
the HART Business as conducted immediately prior to the Distribution.

 

“Adjustment Request” means any formal or informal claim or request filed with
any Tax Authority, or with any administrative agency or court, for the
adjustment, refund, or credit of Taxes, including (a) any amended Tax return
claiming adjustment to the Taxes as reported on a Tax Return or, if applicable,
as previously adjusted, (b) any claim for equitable recoupment or other offset,
and (c) any claim for refund or credit of Taxes previously paid.

 

“Affiliate” means any entity that is directly or indirectly “controlled” by
either the person in question or an Affiliate of such person. “Control” means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through ownership
of voting securities, by contract or otherwise. The term Affiliate shall refer
to Affiliates of a person as determined immediately after the Distribution.

 

“Agreement” shall have the meaning provided in the first sentence of this
Agreement.

 

1

 

 

“Board Certificate” shall have the meaning set forth in Section 7.02(e) of this
Agreement.

 

“Business Day” means a day (other than Saturday or Sunday) on which banks are
generally open in the State of New York, USA for ordinary business.

 

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

 

“Company” means Distributing or SpinCo.

 

“Company Indemnifying Party” shall have the meaning set forth in Section 5.02(b)
of this Agreement.

 

“Contribution” means the contribution of assets, by Distributing itself directly
to SpinCo itself pursuant to Section 2.1(a) of the Separation and Distribution
Agreement.

 

“Controlling Party” shall have the meaning set forth in Section 10.02(c) of this
Agreement.

 

“Deconsolidation” shall have the meaning provided in the Recitals.

 

“Deconsolidation Date” means the last date on which SpinCo qualifies as a member
of the affiliated group (as defined in Section 1504 of the Code) of which
Distributing is the common parent.

 

“DGCL” means the Delaware General Corporation Law.

 

“Distributing” shall have the meaning provided in the first sentence of this
Agreement.

 

“Distributing Affiliated Group” shall have the meaning provided in the
definition of “Distributing Federal Consolidated Income Tax Return.”

 

“Distributing Federal Consolidated Income Tax Return” means any United States
federal Income Tax Return for the affiliated group (as that term is defined in
Section 1504 of the Code and the regulations thereunder) of which Distributing
is the common parent (the “Distributing Affiliated Group”).

 

“Distributing Full Taxpayer” means the assumption that the Distributing
Affiliated Group (a) is subject to the highest marginal regular statutory income
Tax rate, (b) has sufficient taxable income to permit the realization or receipt
of the relevant Tax Benefit at the earliest possible time, and (c) is not
subject to the alternative minimum tax.

 

“Distributing Group” means Distributing and its Affiliates, excluding any entity
that is a member of the SpinCo Group.

 

“Distributing Group Transaction Returns” shall have the meaning set forth in
Section 4.04(b) of this Agreement.

 

“Distributing Separate Return” means any Separate Return of Distributing or any
member of the Distributing Group.

 

“Distributing State Combined Income Tax Return” means a consolidated, combined
or unitary State Income Tax Return that actually includes, by election or
otherwise, one or more members of the Distributing Group together with one or
more members of the SpinCo Group.

 

“Federal Income Tax” means any Tax imposed by Subtitle A of the Code, and any
interest, penalties, additions to tax, or additional amounts in respect of the
foregoing.

 

“Federal Other Tax” means any Tax imposed by the federal government of the
United States of America other than any Federal Income Taxes, and any interest,
penalties, additions to tax, or additional amounts in respect of the foregoing.

 

“Fifty-Percent or Greater Interest” shall have the meaning ascribed to such term
for purposes of Sections 355(d) and (e) of the Code.

 

“Filing Date” shall have the meaning set forth in Section 7.05(b) of this
Agreement.

 

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“Final Determination” means the final resolution of liability for Tax, which
resolution may be for a specific issue or adjustment or for a taxable period,
(a) by IRS Form 870 or 870-AD (or any successor forms thereto), on the date of
acceptance by or on behalf of the taxpayer, or by a comparable form under the
laws of a State, local, or foreign taxing jurisdiction, except that a Form 870
or 870-AD or comparable form shall not constitute a Final Determination to the
extent that it reserves (whether by its terms or by operation of law) the right
of the taxpayer to file a claim for refund or the right of the Tax Authority to
assert a further deficiency in respect of such issue or adjustment or for such
taxable period (as the case may be); (b) by any audit assessment of taxes or
other examination by any taxing authorities, proceeding or appeal of such
proceedings relating to taxes whether administrative or judicial including
proceedings related to competent authority determinations, or 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 Sections 7121 or 7122 of the Code, or a comparable agreement
under the laws of a State, local, or foreign taxing jurisdiction; (d) 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 jurisdiction imposing such Tax; (e) by a
final settlement resulting from a treaty-based competent authority
determination; or (f) by any other final disposition, including by reason of the
expiration of the applicable statute of limitations or by mutual agreement of
the parties.

 

“Foreign Income Tax” means any Tax imposed by any foreign country or any
possession of the United States, or by any political subdivision of any foreign
country or United States possession, which is an income tax as defined in
Treasury Regulation Section 1.901-2, and any interest, penalties, additions to
tax, or additional amounts in respect of the foregoing.

 

“Foreign Other Tax” means any Tax imposed by any foreign country or any
possession of the United States, or by any political subdivision of any foreign
country or United States possession, other than any Foreign Income Taxes, and
any interest, penalties, additions to tax, or additional amounts in respect of
the foregoing.

 

“Foreign Tax” means any Foreign Income Taxes or Foreign Other Taxes.

 

“Group” means the Distributing Group or the SpinCo Group, or both, as the
context requires.

 

“Income Tax” means any Federal Income Tax, State Income Tax or Foreign Income
Tax.

 

“Indemnitee” shall have the meaning set forth in Section 13.03 of this
Agreement.

 

“Indemnitor” shall have the meaning set forth in Section 13.03 of this
Agreement.

 

“Internal Restructuring” shall have the meaning set forth in Section 7.02(f) of
this Agreement.

 

“IRS” means the United States Internal Revenue Service.

 

“Joint Return” shall mean any Return of a member of the Distributing Group or
the SpinCo Group that is not a Separate Return.

 

“Non-Controlling Party” shall have the meaning set forth in Section 10.02(c) of
this Agreement.

 

“Notified Action” shall have the meaning set forth in Section 7.04(a) of this
Agreement.

 

“Other Tax” means any Federal Other Tax, State Other Tax, or Foreign Other Tax.

 

“Past Practices” shall have the meaning set forth in Section 4.04(a) of this
Agreement.

 

“Payment Date” means (i) with respect to any Distributing Federal Consolidated
Income Tax Return, the due date for any required installment of estimated taxes
determined under Section 6655 of the Code, the due date (determined without
regard to extensions) for filing the return determined under Section 6072 of the
Code, and the date the return is filed, and (ii) with respect to any other Tax
Return, the corresponding dates determined under the applicable Tax Law.

 

“Payor” shall have the meaning set forth in Section 5.02(a) of this Agreement.

 

3

 

 

“Person” means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization or a governmental entity or any department, agency
or political subdivision thereof, without regard to whether any entity is
treated as disregarded for U.S. federal income tax purposes.

 

“Post-Deconsolidation Period” means any Tax Period beginning after the
Deconsolidation Date, and, in the case of any Straddle Period, the portion of
such Straddle Period beginning the day after the Deconsolidation Date.

 

“Pre-Deconsolidation Period” means any Tax Period ending on or before the
Deconsolidation Date, and, in the case of any Straddle Period, the portion of
such Straddle Period ending on the Deconsolidation Date.

 

“Privilege” means any privilege that may be asserted under applicable law,
including, any privilege arising under or relating to the attorney-client
relationship (including the attorney-client and work product privileges), the
accountant-client privilege and any privilege relating to internal evaluation
processes.

 

“Proposed Acquisition Transaction” means a transaction or series of transactions
(or any agreement, understanding or arrangement, within the meaning of
Section 355(e) of the Code and Treasury Regulation Section 1.355-7, or any other
regulations promulgated thereunder, to enter into a transaction or series of
transactions), whether such transaction is supported by SpinCo management or
shareholders, is a hostile acquisition, or otherwise, as a result of which
SpinCo would merge or consolidate with any other Person or as a result of which
any Person or any group of related Persons would (directly or indirectly)
acquire, or have the right to acquire, from SpinCo and/or one or more holders of
outstanding shares of SpinCo Capital Stock, a number of shares of SpinCo Capital
Stock that would, when combined with any other changes in ownership of SpinCo
Capital Stock pertinent for purposes of Section 355(e) of the Code, comprise 40%
or more of (A) the value of all outstanding shares of stock of SpinCo as of the
date of such transaction, or in the case of a series of transactions, the date
of the last transaction of such series, or (B) the total combined voting power
of all outstanding shares of voting stock of SpinCo as of the date of such
transaction, or in the case of a series of transactions, the date of the last
transaction of such series. Notwithstanding the foregoing, a Proposed
Acquisition Transaction shall not include (A) the adoption by SpinCo of a
shareholder rights plan or (B) issuances by SpinCo that satisfy Safe Harbor VIII
(relating to acquisitions in connection with a person’s performance of services)
or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer)
of Treasury Regulation Section 1.355-7(d). For purposes of determining whether a
transaction constitutes an indirect acquisition, any recapitalization resulting
in a shift of voting power or any redemption of shares of stock shall be treated
as an indirect acquisition of shares of stock by the exchanging or
non-exchanging shareholders, as applicable. This definition and the application
thereof are intended to monitor compliance with Section 355(e) of the Code and
shall be interpreted accordingly. Any clarification of, or change in, the
statute or regulations promulgated under Section 355(e) of the Code shall be
incorporated in this definition and its interpretation.

 

“Representation Letters” means the representation letters and any other
materials (including, without limitation, the Ruling Request) delivered or
deliverable by Distributing and others in connection with the rendering by Tax
Advisors, and/or the issuance by the IRS, of the Tax Opinions/Rulings.

 

“Required Party” shall have the meaning set forth in Section 5.02(a) of this
Agreement.

 

“Responsible Company” means, with respect to any Tax Return, the Company having
responsibility for preparing and filing such Tax Return under this Agreement.

 

“Retention Date” shall have the meaning set forth in Section 9.01 of this
Agreement.

 

“Ruling” means any private letter ruling (and any supplemental private letter
ruling, including without limitation, any Supplemental Ruling) issued by the IRS
to Distributing in connection with the Transactions.

 

“Ruling Documents” means the Ruling and the Ruling Request.

 

“Ruling Request” means any letter filed by Distributing with the IRS requesting
a ruling regarding certain tax consequences of the Transactions (including all
attachments, exhibits, and other materials submitted with such ruling request
letter) and any amendment or supplement to such ruling request letter.

 

4

 

 

“Section 41 Credit” means any credit allowed pursuant to Section 41 of the Code,
pertaining to research for credit.

 

“Section 45K Credit” means any credit allowed pursuant to Section 45K of the
Code, including any credit allowed pursuant to Section 29 of the Code prior to
the redesignation of Section 29 as Section 45K.

 

“Section 48B Credit” means any credit allowed pursuant to Section 48B of the
Code.

 

“Section 199 Deduction” means any deduction allowed pursuant to Section 199 of
the Code.

 

“Section 7.02(e) Acquisition Transaction” means any transaction or series of
transactions that is not a Proposed Acquisition Transaction but would be a
Proposed Acquisition Transaction if the percentage reflected in the definition
of Proposed Acquisition Transaction were 25% instead of 40%.

 

“Separate Return” means (a) in the case of any Tax Return of any member of the
SpinCo Group (including any consolidated, combined or unitary return), any such
Tax Return that does not include any member of the Distributing Group and (b) in
the case of any Tax Return of any member of the Distributing Group (including
any consolidated, combined or unitary return), any such Tax Return that does not
include any member of the SpinCo Group.

 

“Separation and Distribution Agreement” means the Separation and Distribution
Agreement, as amended from time to time, by and among Distributing and SpinCo
dated as of the date hereof.

 

“Specified Election” means the election set forth in Section 4.04(c), but solely
to the extent such election is claimed as being subject to the application of
Section 168(k)(5) (or any similar provision of state income Tax law, if
applicable).

 

“Specified Excess Income Taxes” means Income Taxes resulting from a reduction in
SpinCo Federal Attributes that arose from a Specified Election in an amount
equal to the excess of (x) the amount of such SpinCo Federal Attributes claimed
as being subject to the application of Section 168(k)(5) (or any similar
provision of state income Tax law, if applicable) over (y) the amount of such
Tax Attributes not claimed as being subject to the application of
Section 168(k)(5) (or any similar provision of state income Tax law, if
applicable).

 

“Specified Excess Tax Benefit” means a Tax Benefit resulting from an adjustment
pursuant to a Final Determination to a Tax Attribute that arose from a Specified
Election in an amount equal to the excess of (x) the amount of such Tax
Attribute claimed as being subject to the application of Section 168(k)(5) (or
any similar provision of state income Tax law, if applicable) over (y) the
amount of such Tax Attribute not claimed as being subject to the application of
Section 168(k)(5) (or any similar provision of state income Tax law, if
applicable).

 

“SpinCo” shall have the meaning provided in the first sentence of this
Agreement.

 

“SpinCo Capital Stock” means all classes or series of capital stock of SpinCo,
including (i) the SpinCo Common Stock, (ii) all options, warrants and other
rights to acquire such capital stock and (iii) all instruments properly treated
as stock in SpinCo for U.S. federal income tax purposes.

 

“SpinCo Carried Item” means any net operating loss, net capital loss, excess tax
credit, or other similar Tax item of any member of the SpinCo Group which may or
must be carried from one Tax Period to another prior Tax Period, or carried from
one Tax Period to another subsequent Tax Period, under the Code or other
applicable Tax Law.

 

“SpinCo Common Stock” has the meaning given to HART Common Stock in the
Separation and Distribution Agreement.

 

“SpinCo Federal Attribute” shall have the meaning set forth in
Section 2.02(a)(ii).

 

“SpinCo Federal Consolidated Income Tax Return” shall mean any United States
federal Income Tax Return for the affiliated group (as that term is defined in
Section 1504 of the Code) of which SpinCo is the common parent.

 

5

 

 

“SpinCo Full Taxpayer” means the assumption that the SpinCo Group (a) is subject
to the highest marginal regular statutory income Tax rate that would be
applicable to SpinCo if it filed Tax Returns on a standalone basis, (b) has
sufficient taxable income to permit the realization or receipt of the relevant
Tax Benefit at the earliest possible time, and (c) is not subject to the
alternative minimum tax.

 

“SpinCo Group” means SpinCo and its Affiliates, as determined immediately after
the Distribution.

 

“SpinCo Group Attributes” shall have the meaning set forth in
Section 2.03(a)(ii).

 

“SpinCo Separate Return” means any Separate Return of SpinCo or any member of
the SpinCo Group.

 

“SpinCo State Attribute” shall have the meaning set forth in
Section 2.03(a)(ii).

 

“State Income Tax” means any Tax imposed by any State of the United States or
the District of Columbia or by any political subdivision of any such State or
the District of Columbia which is imposed on or measured by net income,
including state and local franchise or similar Taxes measured by net income, and
any interest, penalties, additions to tax, or additional amounts in respect of
the foregoing.

 

“State Other Tax” means any Tax imposed by any State of the United States or the
District of Columbia or by any political subdivision of any such State or the
District of Columbia other than any State Income Taxes, and any interest,
penalties, additions to tax, or additional amounts in respect of the foregoing.

 

“State Tax” means any State Income Taxes or State Other Taxes.

 

“Straddle Period” means any Tax Period that begins on or before and ends after
the Deconsolidation Date.

 

“Supplemental Ruling” means any ruling issued by the IRS in connection with the
spin-off other than a ruling in response to Distributing’s initial request for a
private letter ruling.

 

“Tax” or “Taxes” means any income, gross income, gross receipts, profits,
capital stock, franchise, withholding, payroll, social security, workers
compensation, unemployment, disability, property, ad valorem, stamp, excise,
severance, occupation, service, sales, use, license, lease, transfer, import,
export, value added, alternative minimum, estimated or other tax (including any
fee, assessment, or other charge in the nature of or in lieu of any tax) imposed
by any governmental entity or political subdivision thereof, and any interest,
penalties, additions to tax, or additional amounts in respect of the foregoing.

 

“Tax Attribute” shall mean a net operating loss, net capital loss, unused
investment credit, unused foreign tax credit, excess charitable contribution,
general business credit or any other Tax Item that could reduce a Tax.

 

“Tax Authority” means, with respect to any Tax, the governmental entity or
political subdivision thereof that imposes such Tax, and the agency (if any)
charged with the collection of such Tax for such entity or subdivision.

 

“Tax Benefit” means any refund, credit, or other reduction in otherwise required
Tax payments.

 

“Tax Contest” means an audit, review, examination, or any other administrative
or judicial proceeding with the purpose or effect of redetermining Taxes
(including any administrative or judicial review of any claim for refund).

 

“Tax Control” means the definition of “control” set forth in Section 368(c) of
the Code (or in any successor statute or provision), as such definition may be
amended from time to time.

 

“Tax Dispute” shall have the meaning set forth in Section 14 of this Agreement.

 

“Tax-Free Status” means the qualification of the Contribution and Distribution,
taken together, each (a) as a reorganization described in Sections 355(a) and
368(a)(1)(D) of the Code, (b) as a transaction in which the stock distributed
thereby is “qualified property” for purposes of Sections 355(d), 355(e) and
361(c) of the Code and (c) as a transaction in which Distributing, SpinCo, and
the shareholders of Distributing recognize no income or gain for U.S. federal
income tax purposes pursuant to Sections 355, 361 and 1032 of the Code, other
than, in the case of Distributing and SpinCo, intercompany items or excess loss
accounts taken into account pursuant to the Treasury Regulations promulgated
pursuant to Section 1502 of the Code.

 

6

 

 

“Tax Item” means any item of income, gain, loss, deduction, credit, recapture of
credit or any other item which increases or decreases Taxes paid or payable.

 

“Tax Law” means the law of any governmental entity or political subdivision
thereof relating to any Tax.

 

“Tax Opinions/Rulings” means the opinion or opinions of Tax Advisors deliverable
to Distributing in connection with the Contribution and the Distribution and/or
the Ruling or Rulings.

 

“Tax Period” means, with respect to any Tax, the period for which the Tax is
reported as provided under the Code or other applicable Tax Law.

 

“Tax Records” means any Tax Returns, Tax Return workpapers, documentation
relating to any Tax Contests, and any other books of account or records (whether
or not in written, electronic or other tangible or intangible forms and whether
or not stored on electronic or any other medium) required to be maintained under
the Code or other applicable Tax Laws or under any record retention agreement
with any Tax Authority.

 

“Tax-Related Losses” means (i) all federal, state and local Taxes (including
interest and penalties thereon) imposed pursuant to any settlement, Final
Determination, judgment or otherwise; (ii) all accounting, legal and other
professional fees, and court costs incurred in connection with such Taxes; and
(iii) all costs, expenses and damages associated with stockholder litigation or
controversies and any amount paid by Distributing (or any Distributing
Affiliate) or SpinCo (or any SpinCo Affiliate) in respect of the liability of
shareholders, whether paid to shareholders or to the IRS or any other Tax
Authority, in each case, resulting from the failure of the Contribution and the
Distribution, taken together, to have Tax-Free Status.

 

“Tax Return” or “Return” means any report of Taxes due, any claim for refund of
Taxes paid, any information return with respect to Taxes, or any other similar
report, statement, declaration, or document required to be filed under the Code
or other Tax Law, including any attachments, exhibits, or other materials
submitted with any of the foregoing, and including any amendments or supplements
to any of the foregoing.

 

“Third Party Indemnifying Party” shall have the meaning set forth in
Section 5.02(b) of this Agreement.

 

“Transactions” means the Contribution, the Distribution and the other
transactions contemplated by the Separation and Distribution Agreement.

 

“Transition Services Agreement” means the Transition Services Agreement, dated
as of the date hereof, by and between Distributing and SpinCo.

 

“Treasury Regulations” means the regulations promulgated from time to time under
the Code as in effect for the relevant Tax Period.

 

“Unqualified Tax Opinion” means an unqualified “will” opinion of a Tax Advisor,
which Tax Advisor is acceptable to Distributing, on which Distributing may rely
to the effect that a transaction will not affect the Tax-Free Status. Any such
opinion must assume that the Contribution and Distribution, taken together,
would have qualified for Tax-Free Status if the transaction in question did not
occur.

 

Section 2. Allocation of Tax Liabilities.

Section 2.01 Distributing Liability.

(a) Distributing shall be liable for, and shall indemnify and hold harmless the
SpinCo Group from and against any liability for, Taxes which are allocated to
Distributing under this Section 2.

 

(b) SpinCo Liability. SpinCo shall be liable for, and shall indemnify and hold
harmless the Distributing Group from and against any liability for, Taxes which
are allocated to SpinCo under this Section 2.

 

Section 2.02 Allocation of United States Federal Income Tax and Federal Other
Tax. Except as provided in Section 2.05, Federal Income Tax and Federal Other
Tax shall be allocated as follows:

 

7

 

 

(a) Allocation of Tax Relating to Distributing Federal Consolidated Income Tax
Returns. For the Tax Periods ending on or before the Deconsolidation Date,
Distributing shall be responsible for any and all Federal Income Taxes
attributable to the Tax Items of the SpinCo Group (whether as a result of a
Final Determination or otherwise) and attributable to the Tax Items of the
Distributing Group (whether as a result of a Final Determination or otherwise).

 

(b) Allocation of Tax Relating to Federal Separate Income Tax Returns. (i) For
the Tax Periods ending after the Deconsolidation Date, Distributing shall be
responsible for any and all Federal Income Taxes due with respect to or required
to be reported on any Distributing Separate Return (including any increase in
such Tax as a result of a Final Determination)(ii) For the Tax Periods ending
after the Deconsolidation Date, SpinCo shall be responsible for any and all
Federal Income Taxes due with respect to or required to be reported on any
SpinCo Separate Return (including any increase in such Tax as a result of a
Final Determination).

 

(c) Allocation of Federal Other Tax.

(i) For the Tax Periods ending after the Deconsolidation Date, SpinCo shall be
responsible for any and all Federal Other Taxes attributable to the Tax Items,
or imposed on a member of, of the SpinCo Group.

 

(ii) For the Tax Periods ending after the Deconsolidation Date Distributing
shall be responsible for any and all Federal Other Taxes attributable to the Tax
Items of the Distributing Group.

 

Section 2.03 Allocation of State Income and State Other Taxes. Except as
provided in Section 2.05, State Income Tax and State Other Tax shall be
allocated as follows:

 

(a) Allocation of Tax Relating to Distributing State Combined Income Tax
Returns.

(i) For the Tax Periods ending on or before the Deconsolidation Date,
Distributing shall be responsible for any and all State Income Taxes,
attributable to the Tax Items of the Distributing Group (whether as a result of
a Final Determination or otherwise) and for any and all State Income Taxes,
attributable to the Tax Items of the SpinCo Group (whether as a result of a
Final Determination or otherwise). For the Tax Periods ending after the
Deconsolidation Date, SpinCo shall be responsible for any and all State Income
Taxes (calculated on the basis that SpinCo is a SpinCo Full Taxpayer)
attributable to the Tax Items of the SpinCo Group (whether as a result of a
Final Determination or otherwise). For the Tax Periods ending after the
Deconsolidation Date, Distributing shall be responsible for any and all State
Income Taxes, attributable to the Tax Items of the Distributing Group (whether
as a result of a Final Determination or otherwise).

 

(ii) For the Tax Periods ending on or before the Deconsolidation Date,
Distributing shall be responsible for any and all State Income Taxes (calculated
on the basis that Distributing is a Distributing Full Taxpayer) attributable to
any Tax Items of the Distributing Group which Taxes result from a reduction in
any Tax Attributes of the SpinCo Group (any such Tax Attribute, a “SpinCo State
Attribute,” and together with any SpinCo Federal Attribute, the “SpinCo Group
Attributes”) relative to the amount of such Tax Attributes reflected on the
original Tax Return in respect of such Tax Attributes (whether such reduction
occurs as a result of a Final Determination or otherwise).

 

(b) Allocation of Tax Relating to State Separate Income Tax Returns. (i) For the
Tax Periods ending after the Deconsolidation Date, Distributing shall be
responsible for any and all State Income Taxes due with respect to or required
to be reported on any Distributing Separate Return (including any increase in
such Tax as a result of a Final Determination); (ii) For the Tax Periods ending
after the Deconsolidation Date SpinCo shall be responsible for any and all State
Income Taxes due with respect to or required to be reported on any SpinCo
Separate Return (including any increase in such Tax as a result of a Final
Determination).

 

(c) Allocation of State Other Tax.

 

(i) For the Tax Periods ending on or before the Deconsolidation Date,
Distributing shall be responsible for any and all State Other Taxes attributable
to the Tax Items of the Distributing Group and all State Other Taxes
attributable to the Tax Items of the SpinCo Group.

 

(ii) For the Tax Periods ending after the Deconsolidation Date, SpinCo shall be
responsible for any and all State Other Taxes attributable to the Tax Items of
the SpinCo Group.

 

8

 

 

(iii) For the Tax Periods ending after the Deconsolidation Date, Distributing
shall be responsible for any and all State Other Taxes attributable to the Tax
Items of the Distributing Group.

 

Section 2.04 Allocation of Foreign Taxes. Except as provided in Section 2.05,
Foreign Income Tax and Foreign Other Tax shall be allocated as follows:

 

(a) Allocation of Tax Relating to Separate Returns. (i) Distributing shall be
responsible for any and all Foreign Income Taxes due with respect to or required
to be reported on any Distributing Separate Return, including Foreign Income Tax
of Distributing or any member of the Distributing Group imposed by way of
withholding by a member of the SpinCo Group (and including any increase in such
Foreign Income Tax as a result of a Final Determination); (ii) For the Tax
Periods ending after the Deconsolidation Date, SpinCo shall be responsible for
any and all Foreign Income Taxes due with respect to or required to be reported
on any SpinCo Separate Return, including Foreign Income Tax of SpinCo or any
member of the SpinCo Group imposed by way of withholding by a member of the
Distributing Group (and including any increase in such Foreign Income Tax as a
result of a Final Determination).

 

(b) Allocation of Foreign Other Tax.

(i) For the Tax Periods ending on or before the Deconsolidation Date,
Distributing shall be responsible for any and all Foreign Other Taxes
attributable to the Tax Items of the Distributing Group and SpinCo Group.

 

(ii) For the Tax Periods ending after the Deconsolidation Date, SpinCo shall be
responsible for any and all Foreign Other Taxes attributable to the Tax Items of
the SpinCo Group.

 

(iii) For the Tax Periods ending after the Deconsolidation Date, Distributing
shall be responsible for any and all Foreign Other Taxes attributable to the Tax
Items of the Distributing Group.

 

Section 2.05 Certain Transaction and Other Taxes.

 

(a) SpinCo Liability. SpinCo shall be liable for, and shall indemnify and hold
harmless the Distributing Group from and against any liability for:

 

(i) Any stamp, sales and use, gross receipts, value-added or other transfer
Taxes imposed by any Tax Authority on any member of the SpinCo Group (if such
member is primarily liable for such Tax) on the transfers occurring pursuant to
the Transactions;

 

(ii) any Tax resulting from a breach by SpinCo of any covenant in this
Agreement, the Separation and Distribution Agreement or any Ancillary Agreement;
and

 

(iii) any Tax-Related Losses for which SpinCo is responsible pursuant to
Section 7.05 of this Agreement.

 

(b) Distributing Liability. Distributing shall be liable for, and shall
indemnify and hold harmless the SpinCo Group from and against any liability for:

 

(i) Any stamp, sales and use, gross receipts, value-added or other transfer
Taxes imposed by any Tax Authority on any member of the Distributing Group (if
such member is primarily liable for such Tax) on the transfers occurring
pursuant to the Transactions; and

 

(ii) any Tax resulting from a breach by Distributing of any covenant in this
Agreement, the Separation and Distribution Agreement or any Ancillary Agreement.

 

in the case of each of (i) and (ii), such amounts to be calculated on the basis
that SpinCo is a SpinCo Full Taxpayer.

 

(c)Additional Restrictions. SpinCo agrees not to take any action after the
Deconsolidation Date that would adversely impact the tax liability of
Distributing prior to the Deconsolidation Date. Distributing agrees not to take
any action after the Deconsolidation Date that would adversely impact the tax
liability of SpinCo prior to the Deconsolidation Date.

 

Section 2.06 SpinCo Group Attributes. For the avoidance of doubt (but without
prejudice to the provisos set forth in Sections 2.02(a)(i) and (ii)), except as
set forth in Section 6.01, SpinCo shall not be entitled to receive payment from
Distributing in respect of any SpinCo Group Attributes or for any reduction of
any Taxes (or increase in Tax Attributes) or any Tax Benefit (whether such Tax
Attributes, Tax Benefits or reduction in Taxes are reported on an original Tax
Return, arise pursuant to a Final Determination or otherwise).

 

9

 

 

Section 3. Proration of Taxes.

 

(a) General Method of Proration. Tax Items shall be apportioned between
Pre-Deconsolidation Periods and Post-Deconsolidation Periods in accordance with
the principles of Treasury Regulation Section 1.1502-76(b) as reasonably
interpreted and applied by Distributing. If the Deconsolidation Date is not an
Accounting Cutoff Date (and provided an election under Treasury Regulation
Section 1.1502-76(b)(2)(ii)(D) is not made), the provisions of Treasury
Regulation Section 1.1502-76(b)(2)(iii) will be applied to ratably allocate the
items (other than extraordinary items) for the month which includes the
Deconsolidation Date. At Distributing’s election, in its sole discretion, an
election under Treasury Regulation Section 1.1502-76(b)(2)(ii)(D) (relating to
ratable allocation of a year’s items) shall be made.

 

(b) Transaction Treated as Extraordinary Item. In determining the apportionment
of Tax Items between Pre-Deconsolidation Periods and Post-Deconsolidation
Periods, any Tax Items relating to the Transactions shall be treated as
extraordinary items described in Treasury Regulation
Section 1.1502-76(b)(2)(ii)(C) and shall (to the extent occurring on or prior to
the Deconsolidation Date) be allocated to Pre-Deconsolidation Periods, and any
Taxes related to such items shall be treated under Treasury Regulation
Section 1.1502-76(b)(2)(iv) as relating to such extraordinary item and shall (to
the extent occurring on or prior to the Deconsolidation Date) be allocated to
Pre-Deconsolidation Periods.

 

Section 4. Preparation and Filing of Tax Returns.

 

Section 4.01 General. Except as otherwise provided in this Section 4, Tax
Returns shall be prepared and filed when due (including extensions) by the
person obligated to file such Tax Returns under the Code or applicable Tax Law.
The Companies shall provide, and shall cause their Affiliates to provide,
assistance and cooperation to one another in accordance with Section 8 with
respect to the preparation and filing of Tax Returns, including providing
information required to be provided in Section 8.

 

Section 4.02 Distributing’s Responsibility. Distributing has the exclusive
obligation and right to prepare and file, or to cause to be prepared and filed:

 

(a) Distributing Federal Consolidated Income Tax Returns for any Tax Periods
ending on, before or after the Deconsolidation Date;

 

(b) Distributing State Combined Income Tax Returns and any other Joint Returns
which Distributing reasonably determines are required to be filed (or which
Distributing chooses to be filed) by the Companies or any of their Affiliates
for Tax Periods ending on, before or after the Deconsolidation Date; provided,
however, that Distributing shall use commercially reasonable efforts to provide
written notice to SpinCo of such determination to file a Distributing State
Combined Income Tax Return or other Joint Return if such a Tax Return has never
for such type of Tax in such jurisdiction been filed in a prior Tax Period; and

 

(c) SpinCo Separate Returns relating to Income Taxes and Distributing Separate
Returns which Distributing reasonably determines are required to be filed by the
Companies or any of their Affiliates (or which Distributing chooses to be filed)
for Tax Periods ending on, before or after the Deconsolidation Date (limited, in
the case of SpinCo Separate Returns relating to Income Taxes, to such Returns as
are required to be filed (or which Distributing chooses to be filed) for Tax
Periods beginning prior to the Deconsolidation Date);

 

provided, however, that to the extent any Tax Returns described in clauses (b),
(c) or (d) relate to SpinCo, the preparation and filing of such Tax Returns by
Distributing shall be treated as a Service pursuant to the Transition Services
Agreement, and SpinCo shall pay to Distributing the applicable Service Charge as
provided in the Transition Services Agreement.

 

10

 

 

Section 4.03 SpinCo’s Responsibility. SpinCo shall prepare and file, or shall
cause to be prepared and filed, all Tax Returns required to be filed by or with
respect to members of the SpinCo Group other than those Tax Returns which
Distributing is required, or chooses, to prepare and file under Section 4,
provided that SpinCo shall not file any SpinCo Separate Returns for a Tax Period
in a jurisdiction and for a type of Tax where Distributing files a Joint Return.
The Tax Returns required to be prepared and filed by SpinCo under this
Section 4.03 shall include (a) any SpinCo Federal Consolidated Income Tax Return
for Tax Periods ending after the Deconsolidation Date, (b) SpinCo Separate
Returns relating to Income Taxes required to be filed for Tax Periods beginning
on or after the Deconsolidation Date, and (c) SpinCo Separate Returns relating
to Other Taxes.

 

Section 4.04 Tax Accounting Practices.

 

(a) General Rule. With respect to any Tax Return that SpinCo has the obligation
and right to prepare and file, or cause to be prepared and filed, under
Section 4.03, for any Pre-Deconsolidation Period or any Straddle Period (or any
taxable period beginning after the Deconsolidation Date to the extent items
reported on such Tax Return might reasonably be expected to affect items
reported on any Tax Return that Distributing has the obligation or right to
prepare and file, or chooses to be prepared and filed, under Section 4.03),
except as provided in Section 4.04(b) such Tax Return shall be prepared in
accordance with past practices, accounting methods, elections or conventions
(“Past Practices”) used with respect to the Tax Returns in question (unless
there is no reasonable basis for the use of such Past Practices or unless there
is no adverse effect to Distributing), and to the extent any items are not
covered by Past Practices (or in the event that there is no reasonable basis for
the use of such Past Practices or there is no adverse effect to Distributing),
in accordance with reasonable Tax accounting practices selected by SpinCo.
Except as provided in Section 4.04(b), Distributing shall prepare any Tax Return
which it has the obligation and right to prepare and file, or cause to be
prepared and filed, under Section 4.02, in accordance with reasonable Tax
accounting practices selected by Distributing.

 

(b) Reporting of Transactions. The Tax treatment reported on any Tax Return
relating to the Transactions shall be consistent with the treatment thereof in
the Ruling Requests and the Tax Opinions/Rulings, unless there is no reasonable
basis for such Tax treatment. The Tax treatment reported on any Tax Return for
which SpinCo is the Responsible Party shall be consistent with that on any Tax
Return filed or to be filed by Distributing or any member of the Distributing
Group or caused to be filed by Distributing, in each case with respect to
periods prior to the Distribution Date or with respect to Straddle Periods
(“Distributing Group Transaction Returns”), unless there is no reasonable basis
for such Tax treatment. To the extent there is a Tax treatment relating to the
Transactions which is not covered by the Ruling Requests, the Tax
Opinions/Rulings or Distributing Group Transaction Returns, the Companies shall
agree on the Tax treatment to be reported on any Tax Return. For this purpose,
the Tax treatment shall be determined by the Responsible Company with respect to
such Tax Return and shall be agreed to by the other Company unless either
(i) there is no reasonable basis for such Tax treatment, or (ii) such Tax
treatment is inconsistent with the Tax treatment contemplated in the Ruling
Requests, the Tax Opinions/Rulings and/or the Distributing Group Transaction
Returns. Such Tax Return shall be submitted for review pursuant to
Section 4.06(a), and any dispute regarding such proper Tax treatment shall be
referred for resolution pursuant to Section 14, sufficiently in advance of the
filing date of such Tax Return (including extensions) to permit timely filing of
the Tax Return.

 

(c) Bonus Depreciation. Notwithstanding anything to the contrary herein,
Distributing shall be entitled, in its sole discretion, to elect whether SpinCo
shall take “bonus depreciation” described in Section 168(k) of the Code for any
federal income tax purposes for any tax year of SpinCo that includes the
Deconsolidation Date (or the day following the Deconsolidation Date),
irrespective of whether Distributing is responsible for filing the Tax Return to
which such election relates under this Agreement.

 

Section 4.05 Consolidated or Combined Tax Returns. At Distributing’s election,
in its sole discretion, SpinCo will elect and join, and will cause its
respective Affiliates to elect and join, in filing any Distributing State
Combined Income Tax Returns and any Joint Returns that Distributing determines
are required to be filed or that Distributing chooses to file pursuant to
Section 4.02(b). With respect to any SpinCo Separate Returns relating to any Tax
Period (or portion thereof) ending on or prior to the Deconsolidation Date,
SpinCo will elect and join, and will cause its respective Affiliates to elect
and join, in filing consolidated, unitary, combined, or other similar joint Tax
Returns, to the extent reasonably determined by Distributing.

 

11

 

 

Section 4.06 Right to Review Tax Returns. The Responsible Company with respect
to any Tax Return shall make such Tax Return and related workpapers available
for review by the other Company, if requested, to the extent (i) such Tax Return
relates to Taxes for which the requesting party would reasonably be expected to
be liable, (ii) such Tax Return relates to Taxes and the requesting party would
reasonably be expected to be liable in whole or in part for any additional Taxes
owing as a result of adjustments to the amount of such Taxes reported on such
Tax Return, (iii) such Tax Return relates to Taxes for which the requesting
party would reasonably be expected to have a claim for Tax Benefits under this
Agreement, or (iv) the requesting party reasonably determines that it must
inspect such Tax Return to confirm compliance with the terms of this Agreement.
The Responsible Company shall use its reasonable best efforts to make such Tax
Return available for review as required under this paragraph at least fifteen
(15) days prior to the due date for filing of such Tax Return to provide the
requesting party with a meaningful opportunity to analyze and comment on such
Tax Return.

 

Section 4.07 SpinCo Carrybacks, Carryforwards and Claims for Refund. SpinCo
hereby agrees that Distributing shall be entitled to determine in its sole
discretion whether (x) any Adjustment Request with respect to any Joint Return
shall be filed to claim in any Pre-Deconsolidation Period any SpinCo Carried
Item, and (y) any available elections shall be made to waive the right to claim
in any Pre-Deconsolidation Period with respect to any Joint Return any SpinCo
Carried Item, and whether any affirmative election shall be made to claim any
such SpinCo Carried Item.

 

Section 4.08 Apportionment of Earnings and Profits and Tax Attributes.
Distributing shall in good faith advise SpinCo as soon as reasonably practicable
in writing of the portion, if any, of any earnings and profits, Tax Attribute,
overall foreign loss or other consolidated, combined or unitary attribute which
Distributing determines shall be allocated or apportioned to the SpinCo Group
under applicable Tax law. SpinCo and all members of the SpinCo Group shall
prepare all Tax Returns in accordance with such written notice. In the event of
an adjustment to the earnings and profits or any Tax Attributes determined by
Distributing, Distributing shall promptly notify SpinCo in writing of such
adjustment. For the absence of doubt, Distributing shall not be liable to SpinCo
or any member of the SpinCo Group for any failure of any determination under
this Section 4.08 to be accurate under applicable law and regulations and in
good faith.

 

Section 5. Tax Payments.

 

Section 5.01 Payment of Separate Company Taxes. Each Company shall pay, or shall
cause to be paid, to the applicable Tax Authority when due all Taxes owed by
such Company or a member of such Company’s Group with respect to a Separate
Return.

 

Section 5.02 Indemnification Payments.

 

(a) If any Company (the “Payor”) is required under applicable Tax Law to pay to
a Tax Authority a Tax that another Company (the “Required Party”) is liable for
under this Agreement, the Required Party shall reimburse the Payor within eight
(8) days of delivery by the Payor to the Required Party of an invoice for the
amount due, accompanied by evidence of payment and a statement detailing the
Taxes paid and describing in reasonable detail the particulars relating thereto.

 

(b) If any Company (the “Third Party Indemnifying Party”) is required under the
terms of an agreement to which it is a party (or with respect to which it has
agreed to guarantee the obligations thereunder) to pay to a third party a Tax
that another Company (the “Company Indemnifying Party”) is liable for under this
Agreement, the Company Indemnifying Party shall reimburse the Third Party
Indemnifying Party within eight (8) days of delivery by the Third Party
Indemnifying Party to the Company Indemnifying Party of an invoice for the
amount due, accompanied by evidence of payment and a statement detailing the
Taxes paid and describing in reasonable detail the particulars relating thereto.

 

(c) All indemnification payments under this Agreement shall be made by
Distributing directly to SpinCo and by SpinCo directly to Distributing;
provided, however, that if the Companies mutually agree with respect to any such
indemnification payment, any member of the Distributing Group, on the one hand,
may make such indemnification payment to any member of the SpinCo Group, on the
other hand, and vice versa.

 

Section 6. Tax Benefits.

 

Section 6.01 Tax Benefits.

 

(a) Distributing shall be entitled to any refund (and any interest thereon
received from the applicable Tax Authority) of Taxes received by any member of
the Distributing Group or the SpinCo Group, other than any refund to which
SpinCo is entitled pursuant to Section 6.01(d). SpinCo shall not be entitled to
any refund (or any interest thereon received from the applicable Tax Authority),
except as set forth in Section 6.01(d). A Company receiving a refund to which
another Company is entitled hereunder shall pay over such refund to such other
Company within five (5) Business Days after such refund is received.

 

12

 

 

(b) If a member of the SpinCo Group would be expected to realize a Tax Benefit
as a result of an adjustment pursuant to a Final Determination to any Taxes for
which a member of the Distributing Group would otherwise be liable hereunder (or
an adjustment pursuant to a Final Determination to any Tax Attribute of a member
of the Distributing Group) and such Tax Benefit would not have arisen but for
such adjustment (determined on a “with and without” basis assuming the SpinCo
Group is a SpinCo Full Taxpayer), SpinCo shall make a payment to Distributing
within five (5) Business Days following such Final Determination, in an amount
equal to the Taxes for which the Distributing Group would otherwise be, or would
otherwise be reasonably expected to be, liable as a result of such adjustment
provided, however, that to the extent the Tax Benefit resulting from the Final
Determination would be expected to be realized in a Pre-Deconsolidation Period,
SpinCo shall instead be responsible under this Section 6.01(b) for an amount
equal to the excess of (x) the amount of Taxes for which a member of the
Distributing Group is liable as a result of the adjustment (for the avoidance of
doubt, including any interest payable in respect thereof) over (y) the amount of
such Tax Benefit (for the avoidance of doubt, including any interest owed in
respect thereof) (such amounts to be calculated on the basis that Distributing
is a Distributing Full Taxpayer), and provided, further, however, that SpinCo
shall not be required to make a payment to Distributing pursuant to this
Section 6.01(b) to the extent of any Specified Excess Tax Benefit. For purposes
of determining the amount of Taxes for which the Distributing Group is, or is
reasonably be expected to be, liable as a result of an adjustment pursuant to a
Final Determination, the Distributing Group shall be deemed (i) not to utilize
any Tax Attributes available to the Distributing Group and (ii) to be a
Distributing Full Taxpayer.

 

(c) No later than five (5) Business Days following a Final Determination
described in Section 6.01(b), Distributing shall provide SpinCo with a written
calculation of the amount payable to Distributing by SpinCo pursuant to this
Section 6. In the event that SpinCo disagrees with any such calculation
described in this Section 6.01(c), SpinCo shall so notify Distributing in
writing within thirty (30) days of receiving the written calculation set forth
above in this Section 6.01(c). Distributing and SpinCo shall endeavor in good
faith to resolve such disagreement, and, failing that, the amount payable under
Section 6.01(b) shall be determined in accordance with the disagreement
resolution provisions of Section 14 as promptly as practicable.

 

(d) Without prejudice to Section 6.01(b), SpinCo shall be entitled to any refund
(and any interest thereon received from the applicable Tax Authority) of Taxes
reported on (i) a SpinCo Separate Return for a Post-Deconsolidation Period or
(ii) a SpinCo Separate Return of Other Taxes for any Tax period that ends after
the Deconsolidation Date. For the avoidance of doubt, Distributing, and not
SpinCo, shall be entitled to any refund or Tax Benefit that results from a
SpinCo Carried Item, other than any refund to which SpinCo is entitled pursuant
to the first sentence of this Section 6.01(d).

 

Section 6.02 Distributing and SpinCo Income Tax Deductions in Respect of Certain
Equity Awards and Incentive Compensation.

 

(a)Except as provided in clauses (b)-(f) below, solely the member of the Group
by which the relevant individual is currently employed at the time of the
vesting, exercise, disqualifying disposition, payment or other relevant taxable
event, as appropriate, in respect of the equity awards and other incentive
compensation described in Article VIII of the Separation and Distribution
Agreement, or, if such individual is not currently employed at such time by a
member of the Group, the member of the Group by which the relevant individual
was most recently employed, shall be entitled to claim, in a
Post-Deconsolidation Period, any Income Tax deduction in respect of such equity
awards and other incentive compensation on its respective Tax Return associated
with such event.

 

(b) Notwithstanding clause (a) or anything to the contrary in the Separation and
Distribution Agreement, in each of the following instances, Distributing, and
not SpinCo, will be entitled to any tax deduction available in respect of such
option or award described below:

 

(i) in the event that an employee or director of SpinCo exercises the portion of
any Distributing stock option that was vested at the time of the Distribution
(or any SpinCo stock option that was issued in connection with the requisite
adjustment to such vested Distributing stock option as part of the
Distribution),

 

13

 

 

(ii) in the event that an employee or director of Distributing exercises any
Distributing stock option (whether vested or unvested at the time of
Distribution), or any SpinCo stock option that was issued in connection with the
requisite adjustment to any vested Distributing stock option as part of the
Distribution,

 

(iii) any restricted stock units issued by Distributing that were unvested at
the time of the Distribution (and any restricted stock units issued by SpinCo in
connection with the requisite adjustment to such unvested Distributing
restricted stock units as part of the Distribution), in each case that vest
while the individual is an employee or director of Distributing.

 

(c) Notwithstanding clause (a) or anything to the contrary in the Separation and
Distribution Agreement, and subject to clause (d) below, in each of the
following instances, SpinCo, and not Distributing, will be entitled to any tax
deduction available in respect of such option or award:

 

(i) in the event that an employee or director of SpinCo exercises the portion of
any Distributing stock option that was unvested at the time of the Distribution
(or any SpinCo stock option that was issued in connection with the requisite
adjustment to such unvested Distributing stock option as part of the
Distribution),

 

(ii) any restricted stock units issued by Distributing that were unvested at the
time of the Distribution (and any restricted stock units issued by SpinCo in
connection with the requisite adjustment to such unvested Distributing
restricted stock units as part of the Distribution), in each case that vest
while the individual is an employee or director of SpinCo.

 

(d)    Notwithstanding the above or anything to then contrary in the Separation
and Distribution Agreement, with respect to the allocation of the deductions as
provided above in clause (c), the portion of the available deduction shall be
split such that Distributing shall be entitled to a portion of the deduction for
the Vesting Accrual (as defined below) pertaining to such option or award
unvested at the time of Distribution (or adjustment option or award issued in
connection therewith) and SpinCo shall be entitled to the remainder of the
deduction with regard to rights that vest after the Distribution. “Vesting
Accrual” shall be determined by Distributing, in good faith and in accordance
with the Code and applicable accounting principles, and refers to the portion of
such unvested option or award attributable to the period time that had elapsed
since issuance (if the entire award was unvested) or since the last vesting was
achieved (if a portion of an award had vested) through the Distribution Date.
Subject to compliance with the Code and applicable accounting principles, it is
intended that such calculation be based on a pro rata calculation of the
requisite vesting days elapsed divided by the entire amount of the related
vesting period.

 

(e)    The provisions of (b) through (d) above shall be applicable to Incentive
Stock Options only in the event of a disqualifying disposition following the
Distribution.

 

(f)     With respect to the withholding and reporting responsibilities
pertaining to the options and restricted stock units referenced above in clauses
(b)-(e) (including withholding taxes, remitting and W-2 reporting), a party
shall promptly notify the other party of any exercises by such notifying
parties’ employees or directors that would result in a related deduction
belonging to the other party, and such party entitled to the deduction shall be
responsible for the reporting and withholding obligations pertaining to such
deduction.

 

Section 7. Tax-Free Status.

 

Section 7.01 Tax Opinions/Rulings and Representation Letters. Each of SpinCo and
Distributing hereby represents and agrees that (A) it has examined the Ruling
Documents and the Representation Letters prior to the date hereof and
(B) subject to any qualifications therein, all information contained in such
Ruling Documents or Representation Letters that concerns or relates to such
Company or any member of its Group is and, to the extent such information
relates to future events or circumstances, will be, true, correct and complete.

 

Section 7.02 Restrictions on SpinCo.

 

(a) SpinCo agrees that it will not take or fail to take, or permit any SpinCo
Affiliate to take or fail to take, any action where such action or failure to
act would be inconsistent with or cause to be untrue any material, information,
covenant or representation in any Representation Letters or Tax
Opinions/Rulings. SpinCo agrees that it will not take or fail to take, or permit
any SpinCo Affiliate to take or fail to take, any action which prevents or could
reasonably be expected to prevent (A) the Tax-Free Status, or (B) any
transaction contemplated by the Separation and Distribution Agreement which is
intended by the parties to be tax-free from so qualifying, including, in the
case of SpinCo, issuing any SpinCo Capital Stock that would prevent the
Distribution from qualifying as a tax-free distribution within the meaning of
Section 355 of the Code.

 

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(b) Pre-Distribution Period. During the period from the date hereof until the
completion of the Distribution, SpinCo shall not take any action (including the
issuance of SpinCo Capital Stock) or permit any SpinCo Affiliate directly or
indirectly controlled by SpinCo to take any action if, as a result of taking
such action, SpinCo could have a number of shares of SpinCo Capital Stock
(computed on a fully diluted basis or otherwise) issued and outstanding,
including by way of the exercise of stock options (whether or not such stock
options are currently exercisable) or the issuance of restricted stock, that
could cause Distributing to cease to have Tax Control of SpinCo.

 

(c) SpinCo agrees that, from the date hereof until the first day after the
two-year anniversary of the Distribution Date, it will (i) maintain its status
as a company engaged in the Active Trade or Business for purposes of
Section 355(b)(2) of the Code, and (ii) not engage in any transaction that would
result in it ceasing to be a company engaged in the Active Trade or Business for
purposes of Section 355(b)(2) of the Code, in each case, taking into account
Section 355(b)(3) of the Code.

 

(d) SpinCo agrees that, from the date hereof until the first day after the
two-year anniversary of the Distribution Date, it will not (i) enter into any
Proposed Acquisition Transaction or, to the extent SpinCo has the right to
prohibit any Proposed Acquisition Transaction, permit any Proposed Acquisition
Transaction to occur (whether by (a) redeeming rights under a shareholder rights
plan, (b) finding a tender offer to be a “permitted offer” under any such plan
or otherwise causing any such plan to be inapplicable or neutralized with
respect to any Proposed Acquisition Transaction, or (c) approving any Proposed
Acquisition Transaction, whether for purposes of Section 203 of the DGCL or any
similar corporate statute, any “fair price” or other provision of SpinCo’s
charter or bylaws or otherwise), (ii) merge or consolidate with any other Person
or liquidate or partially liquidate, (iii) in a single transaction or series of
transactions sell or transfer (other than sales or transfers of inventory in the
ordinary course of business) all or substantially all of the assets that were
transferred to SpinCo pursuant to the Contribution or sell or transfer 60% or
more of the gross assets of the Active Trade or Business or 60% or more of the
consolidated gross assets of SpinCo and its Affiliates (such percentages to be
measured based on fair market value as of the Distribution Date), (iv) redeem or
otherwise repurchase (directly or through a SpinCo Affiliate) any SpinCo stock,
or rights to acquire stock, except to the extent such repurchases satisfy
Section 4.05(1)(b) of Revenue Procedure 96-30 (as in effect prior to the
amendment of such Revenue Procedure by Revenue Procedure 2003-48), (v) amend its
certificate of incorporation (or other organizational documents), or take any
other action, whether through a stockholder vote or otherwise, affecting the
voting rights of SpinCo Capital Stock (including, without limitation, through
the conversion of one class of SpinCo Capital Stock into another class of SpinCo
Capital Stock) or (vi) take any other action or actions (including any action or
transaction that would be reasonably likely to be inconsistent with any
representation made in the Representation Letters or the Tax Opinions/Rulings)
which in the aggregate (and taking into account any other transactions described
in this subparagraph (d) ) would be reasonably likely to have the effect of
causing or permitting one or more persons (whether or not acting in concert) to
acquire directly or indirectly stock representing a Fifty-Percent or Greater
Interest in SpinCo or otherwise jeopardize the Tax-Free Status, unless prior to
taking any such action set forth in the foregoing clauses (i) through (vi),
(A) SpinCo shall have requested that Distributing obtain a Ruling in accordance
with Section 7.04(b) and (d) of this Agreement to the effect that such
transaction will not affect the Tax-Free Status and Distributing shall have
received such a Ruling in form and substance satisfactory to Distributing in its
sole and absolute discretion, which discretion shall be exercised in good faith
solely to preserve the Tax-Free Status (and in determining whether a Ruling is
satisfactory, Distributing may consider, among other factors, the
appropriateness of any underlying assumptions and management’s representations
made in connection with such Ruling), or (B) SpinCo shall provide Distributing
with an Unqualified Tax Opinion in form and substance satisfactory to
Distributing in its sole and absolute discretion, which discretion shall be
exercised in good faith solely to preserve the Tax-Free Status (and in
determining whether an opinion is satisfactory, Distributing may consider, among
other factors, the appropriateness of any underlying assumptions and
management’s representations if used as a basis for the opinion and Distributing
may determine that no opinion would be acceptable to Distributing) or
(C) Distributing shall have waived the requirement to obtain such Ruling or
Unqualified Tax Opinion.

 

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(e) Certain Issuances of SpinCo Capital Stock. If SpinCo proposes to enter into
any Section 7.02(e) Acquisition Transaction or, to the extent SpinCo has the
right to prohibit any Section 7.02(e) Acquisition Transaction, proposes to
permit any Section 7.02(e) Acquisition Transaction to occur, in each case,
during the period from the date hereof until the first day after the two-year
anniversary of the Distribution Date, SpinCo shall provide Distributing, no
later than ten (10) days following the signing of any written agreement with
respect to the Section 7.02(e) Acquisition Transaction, with a written
description of such transaction (including the type and amount of SpinCo Capital
Stock to be issued in such transaction) and a certificate of the Board of
Directors of SpinCo to the effect that the Section 7.02(e) Acquisition
Transaction is not a Proposed Acquisition Transaction or any other transaction
to which the requirements of Section 7.02(d) apply (a “Board Certificate”).

 

(f) SpinCo Internal Restructuring. SpinCo shall not engage in, cause or permit
any internal restructuring (including by making or revoking any election under
Treasury Regulation Section 301.7701-3) involving SpinCo and/or any of its
subsidiaries or any contribution, sale or other transfer of any of the assets
directly or indirectly contributed to SpinCo as part of the Contribution to
SpinCo or any of its subsidiaries (any such action, an “Internal Restructuring”)
during or with respect to any Tax Period (or portion thereof) ending on or prior
to the Distribution Date without obtaining the prior written consent of
Distributing (such prior written consent not to be unreasonably withheld).
SpinCo shall provide written notice to Distributing describing any Internal
Restructuring proposed to be taken during or with respect to any Tax Period (or
portion thereof) beginning after the Distribution Date and ending on or prior to
the two-year anniversary of the Distribution Date and shall consult with
Distributing regarding any such proposed actions reasonably in advance of taking
any such proposed actions and shall consider in good faith any comments from
Distributing relating thereto.

 

(g) Distributions by Foreign SpinCo Subsidiaries. Until January 1st of the
calendar year immediately following the calendar year in which the Distribution
occurs, SpinCo shall neither cause nor permit any foreign subsidiary of SpinCo
to enter into any transaction or take any action that would be considered under
the Code to constitute the declaration or payment of a dividend (including
pursuant to Section 304 of the Code) without obtaining the prior written consent
of Distributing (such prior written consent not to be unreasonably withheld).

 

Section 7.03 Restrictions on Distributing. Distributing agrees that it will not
take or fail to take, or permit any member of the Distributing Group to take or
fail to take, any action where such action or failure to act would be
inconsistent with or cause to be untrue any material, information, covenant or
representation in any Representation Letters or Tax Opinions/Rulings.
Distributing agrees that it will not take or fail to take, or permit any member
of the Distributing Group to take or fail to take, any action which prevents or
could reasonably be expected to prevent (A) the Tax-Free Status, or (B) any
other transaction contemplated by the Separation and Distribution Agreement
which is intended by the parties to be tax-free from so qualifying; provided,
however, that this Section 7.03 shall not be construed as obligating
Distributing to consummate the Distribution without the satisfaction or waiver
of all conditions set forth in Section 4.3 of the Separation and Distribution
Agreement nor shall it be construed as preventing Distributing from terminating
the Separation and Distribution Agreement pursuant to Article XI thereof.

 

Section 7.04 Procedures Regarding Opinions and Rulings.

 

(a) If SpinCo notifies Distributing that it desires to take one of the actions
described in clauses (i) through (vi) of Section 7.02(d) (a “Notified Action”),
Distributing and SpinCo shall reasonably cooperate to attempt to obtain the
Ruling or Unqualified Tax Opinion referred to in Section 7.02(d), unless
Distributing shall have waived the requirement to obtain such Ruling or
Unqualified Tax Opinion.

 

(b) Rulings or Unqualified Tax Opinions at SpinCo’s Request. Distributing agrees
that at the reasonable request of SpinCo pursuant to Section 7.02(d),
Distributing shall cooperate with SpinCo and use its reasonable best efforts to
seek to obtain, as expeditiously as possible, a Ruling from the IRS or an
Unqualified Tax Opinion for the purpose of permitting SpinCo to take the
Notified Action. Further, in no event shall Distributing be required to file any
Ruling Request under this Section 7.04(b) unless SpinCo represents that (A) it
has read the Ruling Request, and (B) all information and representations, if
any, relating to any member of the SpinCo Group, contained in the Ruling Request
documents are (subject to any qualifications therein) true, correct and
complete. SpinCo shall reimburse Distributing for all reasonable costs and
expenses incurred by the Distributing Group in obtaining a Ruling or Unqualified
Tax Opinion requested by SpinCo within ten (10) Business Days after receiving an
invoice from Distributing therefor.

 

16

 

 

(c) Rulings or Unqualified Tax Opinions at Distributing’s Request. Distributing
shall have the right to obtain a Ruling or an Unqualified Tax Opinion at any
time in its sole and absolute discretion. If Distributing determines to obtain a
Ruling or an Unqualified Tax Opinion, SpinCo shall (and shall cause each
Affiliate of SpinCo to) cooperate with Distributing and take any and all actions
reasonably requested by Distributing in connection with obtaining the Ruling or
Unqualified Tax Opinion (including, without limitation, by making any
representation or covenant or providing any materials or information requested
by the IRS or Tax Advisor; provided that SpinCo shall not be required to make
(or cause any Affiliate of SpinCo to make) any representation or covenant that
is inconsistent with historical facts or as to future matters or events over
which it has no control). Distributing and SpinCo shall each bear its own costs
and expenses in obtaining a Ruling or an Unqualified Tax Opinion requested by
Distributing.

 

(d) SpinCo hereby agrees that Distributing shall have sole and exclusive control
over the process of obtaining any Ruling, and that only Distributing shall apply
for a Ruling. In connection with obtaining a Ruling pursuant to Section 7.04(b),
(A) Distributing shall keep SpinCo informed in a timely manner of all material
actions taken or proposed to be taken by Distributing in connection therewith;
(B) Distributing shall (1) reasonably in advance of the submission of any Ruling
Request documents provide SpinCo with a draft copy thereof, (2) reasonably
consider SpinCo’s comments on such draft copy, and (3) provide SpinCo with a
final copy; and (C) Distributing shall provide SpinCo with notice reasonably in
advance of, and SpinCo shall have the right to attend, any formally scheduled
meetings with the IRS (subject to the approval of the IRS) that relate to such
Ruling. Neither SpinCo nor any SpinCo Affiliate directly or indirectly
controlled by SpinCo shall seek any guidance from the IRS or any other Tax
Authority (whether written, verbal or otherwise) at any time concerning the
Transactions (including the impact of any transaction on the Transactions) or
any transaction listed on Schedule 7.02(a).

 

Section 7.05 Liability for Tax-Related Losses.

 

(a) Notwithstanding anything in this Agreement or the Separation and
Distribution Agreement to the contrary, SpinCo shall be responsible for, and
shall indemnify and hold harmless Distributing and its Affiliates and each of
their respective officers, directors and employees from and against, one hundred
percent (100%) of any Tax-Related Losses that are attributable to or result from
any one or more of the following: (A) the direct or indirect acquisition (other
than pursuant to the Contribution, or the Distribution) of all or a portion of
SpinCo’s stock and/or its or its subsidiaries’ stock or assets by any means
whatsoever by any Person, (B) any negotiations, understandings, agreements or
arrangements by SpinCo with respect to transactions or events (including,
without limitation, stock issuances, pursuant to the exercise of stock options
or otherwise, option grants, capital contributions or acquisitions, or a series
of such transactions or events) that cause the Distribution to be treated as
part of a plan pursuant to which one or more Persons acquire directly or
indirectly stock of SpinCo representing a Fifty-Percent or Greater Interest
therein, (C) any action or failure to act by SpinCo after the Distribution
(including, without limitation, any amendment to SpinCo’s certificate of
incorporation (or other organizational documents), whether through a stockholder
vote or otherwise) affecting the voting rights of SpinCo stock (including,
without limitation, through the conversion of one class of SpinCo Capital Stock
into another class of SpinCo Capital Stock), (D) any act or failure to act by
SpinCo or any SpinCo Affiliate described in Section 7.02 (regardless whether
such act or failure to act is covered by a Ruling, Unqualified Tax Opinion or
waiver described in clause (A), (B) or (C) of Section 7.02(d), a Board
Certificate described in Section 7.02(e) or a consent described in
Section 7.02(f) or (g)) or (E) any breach by SpinCo of its agreement and
representation set forth in Section 7.01(a).

 

(b) SpinCo shall pay Distributing the amount of any Tax-Related Losses for which
SpinCo is responsible under this Section 7.05 (calculated on the basis that
Distributing is a Distributing Full Taxpayer): (A) in the case of Tax-Related
Losses described in clause (i) of the definition of Tax-Related Losses no later
than two (2) Business Days after receipt by SpinCo of notice of the settlement,
Final Determination, judgment or other action imposing the Taxes described in
such clause (i) with respect to the Tax Return for the year of the Contribution
or Distribution, as applicable (provided that if such Tax-Related Losses arise
pursuant to a Final Determination described in clause (a), (b) or (c) of the
definition of “Final Determination,” then SpinCo shall pay Distributing no later
than two (2) Business Days after receipt by SpinCo of notice of such Final
Determination) and (B) in the case of Tax-Related Losses described in clause
(ii) or (iii) of the definition of Tax-Related Losses, no later than two
(2) Business Days after the date on which SpinCo receives notice from
Distributing evidencing Distributing’s payment of such Tax-Related Losses.

 

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Section 8. Assistance and Cooperation.

 

Section 8.01 Assistance and Cooperation.

 

(a) The Companies shall cooperate (and cause their respective Affiliates to
cooperate) with each other and with each other’s agents, including accounting
firms and legal counsel, in connection with Tax matters relating to the
Companies and their Affiliates including (i) preparation and filing of Tax
Returns, (ii) determining the liability for and amount of any Taxes due
(including estimated Taxes) or the right to and amount of any refund of Taxes,
(iii) examinations of Tax Returns, and (iv) any administrative or judicial
proceeding in respect of Taxes assessed or proposed to be assessed. Such
cooperation shall include making all information and documents in their
possession relating to the other Company and its Affiliates available to such
other Company as provided in Section 9. Each of the Companies shall also make
available to the other, as reasonably requested and available, personnel
(including officers, directors, employees and agents of the Companies or their
respective Affiliates) responsible for preparing, maintaining, and interpreting
information and documents relevant to Taxes, and personnel reasonably required
as witnesses or for purposes of providing information or documents in connection
with any administrative or judicial proceedings relating to Taxes.

 

(b) Any information or documents provided under this Section 8 shall be kept
confidential by the Company receiving the information or documents, except as
may otherwise be necessary in connection with the filing of Tax Returns or in
connection with any administrative or judicial proceedings relating to Taxes.
Notwithstanding any other provision of this Agreement or any other agreement,
(i) neither Distributing nor any Distributing Affiliate shall be required to
provide SpinCo or any SpinCo Affiliate or any other Person access to or copies
of any information or procedures (including the proceedings of any Tax Contest)
other than information or procedures that relate solely to SpinCo, the business
or assets of SpinCo or any SpinCo Affiliate and (ii) in no event shall
Distributing or any Distributing Affiliate be required to provide SpinCo, any
SpinCo Affiliate or any other Person access to or copies of any information if
such action could reasonably be expected to result in the waiver of any
Privilege. In addition, in the event that Distributing determines that the
provision of any information to SpinCo or any SpinCo Affiliate could be
commercially detrimental, violate any law or agreement or waive any Privilege,
the parties shall use reasonable best efforts to permit compliance with its
obligations under this Section 8 in a manner that avoids any such harm or
consequence.

 

Section 8.02 Income Tax Return Information.

 

(a) SpinCo and Distributing acknowledge that time is of the essence in relation
to any request for information, assistance or cooperation made by Distributing
or SpinCo pursuant to Section 8.01 or this Section 8.02. SpinCo and Distributing
acknowledge that failure to conform to the deadlines set forth herein or
reasonable deadlines otherwise set by Distributing or SpinCo could cause
irreparable harm.

 

(b) Each Company shall provide to the other Company information and documents
relating to its Group required by the other Company to prepare Tax Returns. Any
information or documents the Responsible Company requires to prepare such Tax
Returns shall be provided in such form as the Responsible Company reasonably
requests and in sufficient time for the Responsible Company to file such Tax
Returns on a timely basis.

 

Section 9. Tax Records.

 

Section 9.01 Retention of Tax Records. Each Company shall preserve and keep all
Tax Records exclusively relating to the assets and activities of its Group for
Pre-Deconsolidation Periods, and Distributing shall preserve and keep all other
Tax Records relating to Taxes of the Groups for Pre-Deconsolidation Tax Periods,
for so long as the contents thereof may become material in the administration of
any matter under the Code or other applicable Tax Law, but in any event until
the later of (i) the expiration of any applicable statutes of limitations, or
(ii) seven years after the Deconsolidation Date (such later date, the “Retention
Date”). After the Retention Date, each Company may dispose of such Tax Records
upon ninety (90) days’ prior written notice to the other Company. If, prior to
the Retention Date, (a) a Company reasonably determines that any Tax Records
which it would otherwise be required to preserve and keep under this Section 9
are no longer material in the administration of any matter under the Code or
other applicable Tax Law and the other Company agrees, then such first Company
may dispose of such Tax Records upon ninety (90) days’ prior notice to the other
Company. Any notice of an intent to dispose given pursuant to this Section 9.01
shall include a list of the Tax Records to be disposed of describing in
reasonable detail each file, book, or other record accumulation being disposed.
The notified Company shall have the opportunity, at its cost and expense, to
copy or remove, within such 90-day period, all or any part of such Tax Records.
If, at any time prior to the Retention Date, SpinCo determine to decommission or
otherwise discontinue any computer program or information technology system used
to access or store any Tax Records, then SpinCo may decommission or discontinue
such program or system upon ninety (90) days’ prior notice to Distributing and
Distributing shall have the opportunity, at its cost and expense, to copy,
within such 90-day period, all or any part of the underlying data relating to
the Tax Records accessed by or stored on such program or system.

 

18

 

 

Section 9.02 Access to Tax Records. The Companies and their respective
Affiliates shall make available to each other for inspection and copying during
normal business hours upon reasonable notice all Tax Records (and, for the
avoidance of doubt, any pertinent underlying data accessed or stored on any
computer program or information technology system) in their possession and shall
permit the other Company and its Affiliates, authorized agents and
representatives and any representative of a Taxing Authority or other Tax
auditor direct access during normal business hours upon reasonable notice to any
computer program or information technology system used to access or store any
Tax Records, in each case to the extent reasonably required by the other Company
in connection with the preparation of Tax Returns or financial accounting
statements, audits, litigation, or the resolution of items under this Agreement.

 

Section 10. Tax Contests.

 

Section 10.01 Notice. Each of the Companies shall provide prompt notice to the
other Company of any written communication from a Tax Authority regarding any
pending or threatened Tax audit, assessment or proceeding or other Tax Contest
of which it becomes aware related to Taxes for Tax Periods for which it is
indemnified by the other Company hereunder, provided, however, that the
indemnifying Company shall not be relieved of its obligations hereunder by
reason of any failure by the indemnified Company to so notify except to the
extent such failure materially prejudices the indemnifying Company. Such notice
shall attach copies of the pertinent portion of any written communication from a
Tax Authority and contain factual information (to the extent known) describing
any asserted Tax liability in reasonable detail and shall be accompanied by
copies of any notice and other documents received from any Tax Authority in
respect of any such matters.

 

Section 10.02 Control of Tax Contests.

 

(a) Separate Company Taxes.

 

(i) In the case of any Tax Contest with respect to any Separate Return relating
to Income Taxes for Tax Periods beginning prior to the Deconsolidation Date,
Distributing shall have exclusive control over the Tax Contest, including
exclusive authority with respect to any settlement of such Tax liability,
subject to Sections 10.02(c) and (d) below. SpinCo shall bear reasonable, out of
pocket expenses incurred by Distributing in connection with the control of any
Tax Contest described in this Section 10.02(a)(i) provided that any outside
counsel, accountants or other advisors shall be mutually selected by
Distributing and SpinCo.

 

(ii) In the case of any Tax Contest with respect to any Separate Return (other
than a Separate Return that is subject to Section 10.02(a)(i)), if any, the
Company having liability for the Tax shall have exclusive control over the Tax
Contest including exclusive authority with respect to any settlement of such Tax
liability, subject to Sections 10.02(c) and (d) below.

 

(b) Joint Returns and Certain Other Returns. In the case of any Tax Contest with
respect to any Distributing Federal Consolidated Income Tax Return or
Distributing State Combined Income Tax Return, Distributing shall have exclusive
control over the Tax Contest, including exclusive authority with respect to any
settlement of such Tax liability, subject to Sections 10.02(c) and (d) below.

 

(c) Settlement Rights. The Controlling Party shall have the sole right to
contest, litigate, compromise and settle any Tax Contest without obtaining the
prior consent of the Non-Controlling Party. Unless waived by the parties in
writing, in connection with any potential adjustment in a Tax Contest as a
result of which adjustment the Non-Controlling Party may reasonably be expected
to become liable to make any indemnification payment (or any payment under
Section 6) to the Controlling Party under this Agreement: (i) the Controlling
Party shall keep the Non-Controlling Party informed in a timely manner of all
actions taken or proposed to be taken by the Controlling Party with respect to
such potential adjustment in such Tax Contest; (ii) the Controlling Party shall
provide the Non-Controlling Party copies of any written materials relating to
such potential adjustment in such Tax Contest received from any Tax Authority;
(iii) the Controlling Party shall timely provide the Non-Controlling Party with
copies of any correspondence or filings submitted to any Tax Authority or
judicial authority in connection with such potential adjustment in such Tax
Contest; and (iv) the Controlling Party shall consult with the Non-Controlling
Party and offer the Non-Controlling Party a reasonable opportunity to comment
before submitting any written materials prepared or furnished in connection with
such potential adjustment in such Tax Contest. The failure of the Controlling
Party to take any action specified in the preceding sentence with respect to the
Non-Controlling Party shall not relieve the Non-Controlling Party of any
liability and/or obligation which it may have to the Controlling Party under
this Agreement except to the extent that the Non-Controlling Party was actually
harmed by such failure, and in no event shall such failure relieve the
Non-Controlling Party from any other liability or obligation which it may have
to the Controlling Party. In the case of any Tax Contest described in
Section 10.02(a) or (b), “Controlling Party” means the Company entitled to
control the Tax Contest under such Section and “Non-Controlling Party” means the
other Company.

 

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(d) Tax Contest Participation. Unless waived by the parties in writing, the
Controlling Party shall provide the Non-Controlling Party with written notice
reasonably in advance of, and the Non-Controlling Party shall have the right to
request to attend, any formally scheduled meetings with Tax Authorities or
hearings or proceedings before any judicial authorities in connection with any
potential adjustment in a Tax Contest pursuant to which the Non-Controlling
Party may reasonably be expected to become liable to make any indemnification
payment (or any payment under Section 6) to the Controlling Party under this
Agreement. The failure of the Controlling Party to provide any notice specified
in this Section 10.02(d) to the Non-Controlling Party shall not relieve the
Non-Controlling Party of any liability and/or obligation which it may have to
the Controlling Party under this Agreement except to the extent that the
Non-Controlling Party was actually harmed by such failure, and in no event shall
such failure relieve the Non-Controlling Party from any other liability or
obligation which it may have to the Controlling Party.

 

(e) Power of Attorney. Each member of the SpinCo Group shall execute and deliver
to Distributing (or such member of the Distributing Group as Distributing shall
designate) any power of attorney or other similar document reasonably requested
by Distributing (or such designee) in connection with any Tax Contest (as to
which Distributing is the Controlling Party) described in this Section 10.

 

Section 11. Effective Date; Termination of Prior Intercompany Tax Allocation
Agreements. This Agreement shall be effective as of the date hereof. As of the
date hereof, (i) all prior intercompany Tax allocation agreements or
arrangements shall be terminated, and (ii) amounts due under or contemplated by
such agreements or arrangements as of the date hereof shall be settled as of the
date hereof. Upon such termination and settlement, no further payments by or to
Distributing or by or to SpinCo, with respect to such agreements or arrangements
shall be made, and all other rights and obligations resulting from such
agreements or arrangements between the Companies and their Affiliates shall
cease at such time. Any payments pursuant to such agreements or arrangements
shall be disregarded for purposes of computing amounts due under this Agreement.

 

Section 12. Survival of Obligations. The representations, warranties, covenants
and agreements set forth in this Agreement shall be unconditional and absolute
and shall remain in effect without limitation as to time.

 

Section 13. Treatment of Payments; Tax Gross Up.

 

Section 13.01 Treatment of Tax Indemnity and Tax Benefit Payments. In the
absence of any change in Tax treatment under the Code or other applicable Tax
Law any payments made under this Agreement (and any deemed distributions or
contributions relating to Taxes or Tax Attributes) shall be reported for Tax
purposes by the payor and the recipient as occurring immediately before the
Contribution.

 

Section 13.02 Tax Gross Up. If notwithstanding the manner in which Tax indemnity
payments and Tax Benefit payments were reported, there is an adjustment to the
Tax liability of a Company as a result of its receipt of a payment pursuant to
this Agreement, such payment shall be appropriately adjusted so that the amount
of such payment, reduced by the amount of all Income Taxes payable as a Full
Taxpayer with respect to the receipt thereof (but taking into account all
correlative Tax Benefits resulting from the payment of such Income Taxes), shall
equal the amount of the payment which the Company receiving such payment would
otherwise be entitled to receive pursuant to this Agreement.

 

Section 13.03 Interest Under This Agreement. Anything herein to the contrary
notwithstanding, to the extent one Company (“Indemnitor”) makes a payment of
interest to another Company (“Indemnitee”) under this Agreement with respect to
the period from the date that the Indemnitee made a payment of Tax to a Tax
Authority to the date that the Indemnitor reimbursed the Indemnitee for such Tax
payment, the interest payment shall be treated as interest expense to the
Indemnitor (deductible to the extent provided by law) and as interest income by
the Indemnitee (includible in income to the extent provided by law). The amount
of the payment shall not be adjusted under Section 2.02 to take into account any
associated Tax Benefit to the Indemnitor or increase in Tax to the Indemnitee.

 

20

 

 

Section 14. Disagreements. The Companies mutually desire that friendly
collaboration will continue between them. Accordingly, they will try, and they
will cause their respective Group members to try, to resolve in an amicable
manner all disagreements and misunderstandings connected with their respective
rights and obligations under this Agreement, including any amendments hereto. In
furtherance thereof, in the event of any dispute or disagreement (a “Tax
Dispute”) between any member of the Distributing Group and any member of the
SpinCo Group as to the interpretation of any provision of this Agreement or the
performance of obligations hereunder, the Tax departments of the Companies shall
negotiate in good faith to resolve the Tax Dispute. If such good faith
negotiations do not resolve the Tax Dispute within thirty (30) days after the
initial written notice of the Tax Dispute (or such longer period that the
parties hereto agree to), then the matter shall be resolved pursuant to the
procedures set forth in Article IX of the Separation and Distribution Agreement,
provided, however, that upon the request of either Company, the arbitrator
selected by each of the parties pursuant to Article IX shall be a recognized tax
professional, such as a United States tax counsel or accountant of recognized
national standing. Nothing in this Section 14 will prevent either Company from
seeking injunctive relief if any delay resulting from the efforts to resolve the
Tax Dispute through the procedures set forth in Article IX of the Separation and
Distribution Agreement could result in serious and irreparable injury to either
Company. Notwithstanding anything to the contrary in this Agreement, the
Separation and Distribution Agreement or any Ancillary Agreement, Distributing
and SpinCo are the only members of their respective Group entitled to commence a
dispute resolution procedure under this Agreement, and each of Distributing and
SpinCo will cause its respective Group members not to commence any dispute
resolution procedure other than through such party as provided in this
Section 14.

 

Section 15. Reserved.

 

Section 16. Expenses. Except as otherwise provided in this Agreement, each party
and its Affiliates shall bear their own expenses incurred in connection with
preparation of Tax Returns, Tax Contests, and other matters related to Taxes
under the provisions of this Agreement.

 

Section 17. General Provisions.

 

Section 17.01 Addresses and Notices. Each party giving any notice required or
permitted under this Agreement will give the notice in writing and use one of
the following methods of delivery to the party to be notified, at the address
set forth below or another address of which the sending party has been notified
in accordance with this Section 17.01: (a) personal delivery; (b) facsimile or
telecopy transmission with a reasonable method of confirming transmission;
(c) commercial overnight courier with a reasonable method of confirming
delivery; or (d) pre-paid, United States of America certified or registered
mail, return receipt requested. Notice to a party is effective for purposes of
this Agreement only if given as provided in this Section 17.01 and shall be
deemed given on the date that the intended addressee actually receives the
notice.

 

If to Distributing:

 

Harvard Bioscience, Inc.

84 October Hill Road
Holliston, Massachusetts 01746

Attention: Chief Financial Officer

 

If to SpinCo:

 

Harvard Apparatus Regenerative Technology, Inc.

84 October Hill Road
Holliston, Massachusetts 01746

Attention: Chief Financial Officer

 

A party may change the address for receiving notices under this Agreement by
providing written notice of the change of address to the other parties.

 

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Section 17.02 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their successors and assigns.

 

Section 17.03 Waiver. The parties may waive a provision of this Agreement only
by a writing signed by the party intended to be bound by the waiver. A party is
not prevented from enforcing any right, remedy or condition in the party’s favor
because of any failure or delay in exercising any right or remedy or in
requiring satisfaction of any condition, except to the extent that the party
specifically waives the same in writing. A written waiver given for one matter
or occasion is effective only in that instance and only for the purpose stated.
A waiver once given is not to be construed as a waiver for any other matter or
occasion. Any enumeration of a party’s rights and remedies in this Agreement is
not intended to be exclusive, and a party’s rights and remedies are intended to
be cumulative to the extent permitted by law and include any rights and remedies
authorized in law or in equity.

 

Section 17.04 Severability. If any provision of this Agreement is determined to
be invalid, illegal or unenforceable, the remaining provisions of this Agreement
remain in full force, if the essential terms and conditions of this Agreement
for each party remain valid, binding and enforceable.

 

Section 17.05 Authority. Each of the parties represents to the other that (a) it
has the corporate or other requisite power and authority to execute, deliver and
perform this Agreement, (b) the execution, delivery and performance of this
Agreement have been duly authorized by all necessary corporate or other action,
(c) it has duly and validly executed and delivered this Agreement, and (d) this
Agreement is a legal, valid and binding obligation, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors’ rights
generally and general equity principles.

 

Section 17.06 Further Action. The parties shall execute and deliver all
documents, provide all information, and take or refrain from taking action as
may be necessary or appropriate to achieve the purposes of this Agreement,
including the execution and delivery to the other parties and their Affiliates
and representatives of such powers of attorney or other authorizing
documentation as is reasonably necessary or appropriate in connection with Tax
Contests (or portions thereof) under the control of such other parties in
accordance with Section 10.

 

Section 17.07 Integration. This Agreement, together with each of the exhibits
and schedules appended hereto, constitutes the final agreement between the
parties, and is the complete and exclusive statement of the parties’ agreement
on the matters contained herein. All prior and contemporaneous negotiations and
agreements between the parties with respect to the matters contained herein are
superseded by this Agreement, as applicable. In the event of any inconsistency
between this Agreement and the Separation and Distribution Agreement, or any
other agreements relating to the transactions contemplated by the Separation and
Distribution Agreement, with respect to matters addressed herein, the provisions
of this Agreement shall control.

 

Section 17.08 Construction. The language in all parts of this Agreement shall in
all cases be construed according to its fair meaning and shall not be strictly
construed for or against any party. The captions, titles and headings included
in this Agreement are for convenience only, and do not affect this Agreement’s
construction or interpretation. Unless otherwise indicated, all “Section”
references in this Agreement are to sections of this Agreement.

 

Section 17.09 No Double Recovery. No provision of this Agreement shall be
construed to provide an indemnity or other recovery for any costs, damages, or
other amounts for which the damaged party has been fully compensated under any
other provision of this Agreement or under any other agreement or action at law
or equity. Unless expressly required in this Agreement, a party shall not be
required to exhaust all remedies available under other agreements or at law or
equity before recovering under the remedies provided in this Agreement.

 

Section 17.10 Counterparts. The parties may execute this Agreement in multiple
counterparts, each of which constitutes an original as against the party that
signed it, and all of which together constitute one agreement. This Agreement is
effective upon delivery of one executed counterpart from each party to the other
party. The signatures of the parties need not appear on the same counterpart.
The delivery of signed counterparts by facsimile or email transmission that
includes a copy of the sending party’s signature is as effective as signing and
delivering the counterpart in person.

 

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Section 17.11 Governing Law. The internal laws of the Commonwealth of
Massachusetts (without reference to its principles of conflicts of law) govern
the construction, interpretation and other matters arising out of or in
connection with this Agreement and each of the exhibits and schedules hereto and
thereto (whether arising in contract, tort, equity or otherwise).

 

Section 17.12 Jurisdiction. If any dispute arises out of or in connection with
this Agreement, except as expressly contemplated by another provision of this
Agreement, the parties irrevocably (and the parties will cause each other member
of their respective Group to irrevocably) (a) consent and submit to the
exclusive jurisdiction of federal and state courts located in Commonwealth of
Massachusetts, (b) waive any objection to that choice of forum based on venue or
to the effect that the forum is not convenient, and (c) WAIVE TO THE FULLEST
EXTENT PERMITTED BY LAW ANY RIGHT TO TRIAL OR ADJUDICATION BY JURY.

 

Section 17.13 Amendment. Except as otherwise expressly provided herein with
respect to the Schedules hereto, the parties may amend this Agreement only by a
written agreement signed by each party to be bound by the amendment and that
identifies itself as an amendment to this Agreement.

 

Section 17.14 SpinCo Subsidiaries. If, at any time, SpinCo acquires or creates
one or more subsidiaries that are includable in the SpinCo Group, they shall be
subject to this Agreement and all references to the SpinCo Group herein shall
thereafter include a reference to such subsidiaries.

 

Section 17.15 Successors. This Agreement shall be binding on and inure to the
benefit of any successor by merger, acquisition of assets, or otherwise, to any
of the parties hereto (including but not limited to any successor of
Distributing or SpinCo succeeding to the Tax Attributes of either under
Section 381 of the Code), to the same extent as if such successor had been an
original party to this Agreement.

 

Section 17.16 Injunctions. The parties acknowledge that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with its specific terms or were otherwise breached. The
parties hereto shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof in any court having jurisdiction, such remedy being
in addition to any other remedy to which they may be entitled at law or in
equity.

 

[signatures on following page]

 

23

 

 

IN WITNESS WHEREOF, each party has caused this Agreement to be executed on its
behalf by a duly authorized officer on the date first set forth above.

 

“Distributing”   “SpinCo”       Harvard Bioscience, Inc., a Delaware corporation
  Harvard Apparatus Regenerative Technology, Inc., a Delaware corporation, for
itself and on behalf of each member of the SpinCo Group

 

By: /s/ Jeffrey A. Duchemin      

 

  Name: Jeffrey A. Duchemin   By:  /s/ David Green   Title: Chief Executive
Officer     Name: David Green       Title: Chief Executive Officer