Exhibit 10.1

 

TAX SHARING AGREEMENT

 

BETWEEN

 

STARZ

 

AND

 

LIBERTY MEDIA CORPORATION

 











 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
SECTION 1.
    	
Definition of   Terms
    	
1
    
	
 
    	
 
    
	
SECTION 2.
    	
Allocation of   Tax Liabilities, Tax Benefits and Certain Losses
    	
12
    
	
 
    	
 
    	
 
    
	
 2.1
    	
Liability for and the Payment of Taxes
    	
12
    
	
 2.2
    	
Allocation Rules
    	
13
    
	
 
    	
 
    	
 
    
	
SECTION 3.
    	
Preparation   and Filing of Tax Returns
    	
17
    
	
 
    	
 
    	
 
    
	
 3.1
    	
Combined Returns
    	
17
    
	
 3.2
    	
Separate Returns
    	
17
    
	
 3.3
    	
Provision of Information
    	
17
    
	
 3.4
    	
Special Rules Relating to the Preparation of Tax   Returns
    	
17
    
	
 
    	
 
    	
 
    
	
SECTION 4.
    	
Tax Payments
    	
19
    
	
 
    	
 
    	
 
    
	
 4.1
    	
Payment of Taxes to Tax Authority
    	
19
    
	
 4.2
    	
Indemnification Payments
    	
19
    
	
 4.3
    	
Payments for Tax Refunds and Tax Benefits
    	
20
    
	
 4.4
    	
Interest on Late Payments
    	
20
    
	
 4.5
    	
Initial Determinations and Subsequent Adjustments
    	
20
    
	
 4.6
    	
Tax Consequences of Payments
    	
21
    
	
 
    	
 
    	
 
    
	
SECTION 5.
    	
Assistance and   Cooperation
    	
21
    
	
 
    	
 
    	
 
    
	
 5.1
    	
Cooperation
    	
21
    
	
 5.2
    	
Supplemental Rulings
    	
22
    
	
 
    	
 
    	
 
    
	
SECTION 6.
    	
Tax Records
    	
23
    
	
 
    	
 
    	
 
    
	
 6.1
    	
Retention of Tax Records
    	
23
    
	
 6.2
    	
Access to Tax Records
    	
23
    
	
 6.3
    	
Confidentiality
    	
24
    
	
 6.4
    	
Delivery of Tax Records
    	
24
    
	
 
    	
 
    	
 
    
	
SECTION 7.
    	
Restrictions   on Certain Actions of Distributing and Spinco; Indemnity
    	
24
    
	
 
    	
 
    	
 
    
	
 7.1
    	
Restrictive Covenants
    	
24
    
	
 7.2
    	
Distributing Indemnity
    	
25
    
	
 7.3
    	
Spinco Indemnity
    	
26
    
	
 7.4
    	
Scope
    	
26
    
	
 7.5
    	
Notices of Tax Contests
    	
26
    
	
 7.6
    	
Control of Tax Contests Generally
    	
27
    
	
 7.7
    	
Cooperation
    	
27
    
	
 7.8
    	
Joint Claims
    	
27
    
				


 

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 7.9
    	
Spinco Claims
    	
28
    
	
 7.10
    	
Other Claims
    	
28
    
	
 
    	
 
    
	
SECTION 8.
    	
General   Provisions
    	
29
    
	
 
    	
 
    
	
 8.1
    	
Termination
    	
29
    
	
 8.2
    	
Predecessors or Successors
    	
29
    
	
 8.3
    	
Expenses
    	
29
    
	
 8.4
    	
Governing Law; Jurisdiction
    	
29
    
	
 8.5
    	
Waiver of Jury Trial
    	
30
    
	
 8.6
    	
Notices
    	
30
    
	
 8.7
    	
Counterparts
    	
31
    
	
 8.8
    	
Binding Effect; Assignment
    	
31
    
	
 8.9
    	
Severability
    	
31
    
	
 8.10
    	
Amendments; Waivers
    	
31
    
	
 8.11
    	
Effective Date
    	
32
    
	
 8.12
    	
Change in Law
    	
32
    
	
 8.13
    	
Authorization, Etc.
    	
32
    
	
 8.14
    	
No Third Party Beneficiaries
    	
32
    
	
 8.15
    	
Entire Agreement
    	
32
    
	
 8.16
    	
No Strict Construction; Interpretation
    	
32
    
	
 8.17
    	
Headings
    	
33
    
	
 8.18
    	
Assignment of Rights under the Split-off Tax Sharing   Agreement
    	
33
    
				


 

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TAX SHARING AGREEMENT

 

THIS TAX SHARING AGREEMENT (this “Agreement”) is entered into as of January 11, 2013, between Starz, a Delaware corporation formerly known as Liberty Media Corporation (“Distributing”), and Liberty Media Corporation, a Delaware corporation formerly known as Liberty Spinco, Inc. (“Spinco”).  Unless otherwise indicated, all “Section” references in this Agreement are to sections of this Agreement.

 

RECITALS

 

WHEREAS, Spinco is a wholly owned subsidiary of Distributing;

 

WHEREAS, the Board of Directors of Distributing has determined that it would be appropriate and desirable for Distributing to separate the Spinco Business from the Distributing Business;

 

WHEREAS, the Board of Directors of Spinco has approved such transaction;

 

WHEREAS, following the Contribution, Distributing intends to distribute its entire interest in the stock of Spinco to the holders of Liberty Capital Common Stock in what is intended to qualify as a tax-free transaction described under Sections 368(a), 355 and 361 of the Code (the “Distribution”);

 

WHEREAS, the parties set forth in the Reorganization Agreement the principal arrangements between them regarding the separation of the Spinco Business from the Distributing Business; and

 

WHEREAS, the parties desire to provide for and agree upon the allocation between the parties of liabilities for Taxes and credits for Tax Benefits 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 foregoing and the covenants and agreements set forth below, and intending to be legally bound hereby, Distributing and Spinco 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:

 

“Affiliate” means with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person; provided, that, for any purpose hereunder, none of the persons listed in clause (i), (ii) or (iii) shall be deemed to be Affiliates of any person listed in any other such clause:  (i) Spinco and each of the other  members of the Spinco Group, (ii) Distributing and each of the other members of the Distributing Group, and (iii) Liberty Interactive and each of its Subsidiaries.

 

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“Agreement” has the meaning set forth in the preamble hereof.

 

“Ascent” means Ascent Capital Group, Inc., a Delaware corporation.

 

“business day” means any day other than a Saturday, Sunday or a day on which banking institutions in New York City, New York or London, England are authorized or required by law or executive order to close.

 

“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time, or any successor law.

 

“Combined Return” means (i) with respect to any Tax Return for a Tax Year beginning on or before the Distribution Date, any Tax Return that includes Tax Items of both the Distributing Business and the Spinco Business, determined in accordance with the allocation rules of Section 2.2, and (ii) with respect to any Tax Return for a Tax Year beginning after the Distribution Date, any Tax Return that includes one or more members of the Distributing Group and one or more members of the Spinco Group.

 

“Company” means Distributing or Spinco, as the context requires.

 

“Compensatory Equity Interests” means stock, equity interests, options, stock appreciation rights, or other similar rights with respect to the equity of any entity granted prior to the Distribution in connection with employee, independent contractor or director compensation (including, for the avoidance of doubt, stock, equity interests, options, stock appreciation rights, or other similar rights issued in substitution for any of the foregoing by reason of the Distribution or any subsequent transaction).

 

“Consolidated Group” means a group filing (or required to file) consolidated federal income Tax Returns for any Tax Year (or portion thereof), within the meaning of Treasury Regulations Section 1.1502-1(h).

 

“Contribution” has the meaning given to such term in the Reorganization Agreement.

 

“Control” means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through ownership of securities or partnership, membership, limited liability company, or other ownership interests, by contract or otherwise and the terms “Controlling” and “Controlled” have meanings correlative to the foregoing.

 

“Conversion Tax Materials” means the representation letters and any other materials delivered by Distributing to Baker Botts L.L.P. in connection with the delivery of the Starz Conversion Opinion.

 

“Conversion Tax-Related Losses” means any Losses resulting from the failure of the Starz Conversion to qualify (i) as a tax-free transaction described under Section 368(a)(1)(E) of the Code (except with respect to cash received in lieu of 

 

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fractional shares), or (ii) in whole for nonrecognition of income, gain and loss for U.S. federal income tax purposes to Distributing, each of its Subsidiaries at the effective time of the Starz Conversion and the holders of Liberty Starz Common Stock (except with respect to cash received in lieu of fractional shares).

 

“Conversion Transaction Taxes” means any Taxes resulting from the Starz Conversion.

 

“Disclosing Party” has the meaning set forth in Section 6.3.

 

“Discovery” means Discovery Communications, Inc., a Delaware corporation.

 

“Distributing” has the meaning set forth in the preamble hereof.

 

“Distributing Acquired Subsidiary” has the meaning set forth in Section 2.2(j).

 

“Distributing Business” means, (i) with respect to any Tax Year (or portion thereof) ending at or before the Effective Time, the assets, liabilities, and businesses of, and any equity or debt interests in, Starz, LLC, Starz Entertainment LLC, Starz Media, and each of their respective Subsidiaries; and (ii) with respect to any Tax Year (or portion thereof) beginning after the Effective Time, the assets, liabilities, and businesses of the Distributing Group during such Tax Year (or portion thereof).

 

“Distributing Consolidated Group” means a Consolidated Group of which Distributing is the common parent, within the meaning of Section 1504(a)(1) of the Code.

 

“Distributing Group” means, with respect to any Tax Year (or portion thereof) beginning after the Effective Time, Distributing and each Subsidiary of Distributing (but only while such Subsidiary is a Subsidiary of Distributing).

 

“Distributing Indemnitees” has the meaning set forth in Section 7.3.

 

“Distributing Section 355(e) Event” means the application of Section 355(e) of the Code to the Distribution as a result of the Distribution being “part of a plan (or series of related transactions) pursuant to which 1 or more persons acquire directly or indirectly stock representing a 50-percent or greater interest” in Distributing or any successor corporation (within the meaning of Section 355(e) of the Code).

 

“Distributing Section 355(e) Split-off Event” means the application of Section 355(e) of the Code to the Split-off as a result of the Split-off being “part of a plan (or series of related transactions) pursuant to which 1 or more persons acquire directly or indirectly stock representing a 50-percent or greater interest” in Distributing or any successor corporation (within the meaning of Section 355(e) of the Code).

 

“Distribution” has the meaning set forth in the recitals hereof.

 

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“Distribution Date” means the date on which the Distribution occurs.

 

“DTV” means DIRECTV, a Delaware corporation.

 

“Due Date” has the meaning set forth in Section 4.4.

 

“Effective Time” means the time at which the Distribution is effected on the Distribution Date.

 

“Employing Party” means the Company whose Group includes any entity that is required under applicable Tax law to satisfy any Tax reporting obligations with respect to any employee, independent contractor or director compensation attributable to any Compensatory Equity Interests; provided, however, that if an entity in both Groups is permitted under applicable Tax Law to satisfy such Tax reporting obligations, then the Employing Party shall mean the Company to which the Taxes and Tax Items arising with respect to such employee, independent contractor or director compensation are allocated pursuant to Section 2.2(h).

 

“Final Determination” means a determination within the meaning of Section 1313 of the Code or any similar provision of state or local Tax Law.

 

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

 

“Interest Rate” means the Rate determined below, as adjusted as of each Interest Rate Determination Date.  The “Rate,” means, with respect to each period between two consecutive Interest Rate Determination Dates, a rate determined at approximately 11:00 a.m., London time, two London business days before the earlier Interest Rate Determination Date equal to the greater of:  (x) the sum of (i) the six month dollar LIBOR rate as displayed on page “LR” of Bloomberg (or such other appropriate page as may replace such page), plus (ii) 2%, and (y) the interest rate that would be applicable at such time to a “large corporate underpayment” (within the meaning of Section 6621(c) of the Code) under Sections 6601 and 6621 of the Code.  Interest will be calculated on the basis of a year of 365 days and the actual number of days for which due.

 

“Interest Rate Determination Date” means the Due Date and each March 31, June 30, September 30 and December 31 thereafter.

 

“IRS” means the Internal Revenue Service.

 

“IRS Submissions” means the Ruling Request, each supplemental submission and any other correspondence or supplemental materials submitted to the IRS in connection with obtaining the Ruling.

 

“issuing corporation” has the meaning set forth in Section 3.4(f).

 

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“Joint Claim” means any pending or threatened Tax Contest, claim, action, suit, investigation or proceeding brought by a third party relating to (w) any Transaction Taxes or any Transaction Tax-Related Losses, (x) any Conversion Transaction Taxes or any Conversion Tax-Related Losses, (y) any Split-off Transaction Taxes, any Split-off Tax-Related Losses or any Split-off TSA Liabilities arising from any Split-off Transaction Taxes or Split-off Tax-Related Losses, or (z) any Tracking Stock Taxes and Losses, in each case for which one Company is or may be indemnified by the other Company under Section 7.

 

“LGI” means Liberty Global, Inc., a Delaware corporation.

 

“Liberty Capital Common Stock” means Distributing’s Series A Liberty Capital common stock, par value $.01 per share, and Series B Liberty Capital common stock, par value $.01 per share.

 

“Liberty Interactive” means Liberty Interactive Corporation, a Delaware corporation formerly known as Liberty Media Corporation.

 

“Liberty Interactive Common Stock” means Liberty Interactive’s Series A Liberty Interactive common stock, par value $.01 per share, and Series B Liberty Interactive common stock, par value $.01 per share.

 

“Liberty Interactive’s Liberty Starz Common Stock” means Liberty Interactive’s Series A Liberty Starz common stock, par value $.01 per share, and Series B Liberty Starz common stock, par value $.01 per share.  For the avoidance of doubt, such term does not include Liberty Interactive’s Series A Liberty Entertainment common stock, par value $.01 per share, or Series B Liberty Entertainment common stock, par value $.01 per share.

 

“Liberty Interactive LLC” means Liberty Interactive LLC, a Delaware limited liability company formerly known as Liberty Media LLC and Liberty Media Corporation.

 

“Liberty Starz Common Stock” means Distributing’s Series A Liberty Starz common stock, par value $.01 per share, and Series B Liberty Starz common stock, par value $.01 per share.

 

“Losses” means any and all damages, losses, deficiencies, liabilities, obligations, penalties, judgments, settlements, claims, payments, fines, interest, costs and expenses (including, without limitation, the fees and expenses of any and all actions and demands, assessments, judgments, settlements and compromises relating thereto and the costs and expenses of attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense thereof or in asserting, preserving or enforcing an indemnified Person’s rights hereunder);  provided, however, that “Losses” shall exclude any special or punitive damages; provided, further, that the foregoing proviso will not be interpreted to limit indemnification for Losses incurred as a result of the assertion by a claimant (other than the parties hereto and their successors and assigns) in a third-party claim for special or punitive damages.

 

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“Non-Preparer” means the Company that is not responsible for the preparation and filing of the Combined Return or Separate Return, as applicable, pursuant to Section 3.

 

“Payment Date” means (x) with respect to any U.S. federal 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 (y) with respect to any other Tax Return, the corresponding dates determined under the applicable Tax Law.

 

“Person” means any individual, corporation, company, partnership, trust, incorporated or unincorporated association, joint venture or other entity of any kind.

 

“Post-Distribution Period” means all taxable periods (or portions thereof) beginning after the Effective Time.

 

“Pre-Distribution Period” means all taxable periods (or portions thereof) ending before or at the Effective Time.

 

“Preparer” means the Company that is responsible for the preparation and filing of the Combined Return or Separate Return, as applicable, pursuant to Section 3.

 

“Receiving Party” has the meaning set forth in Section 6.3.

 

“Reorganization Agreement” means the Reorganization Agreement between Distributing and Spinco dated January 10, 2013.

 

“Requesting Party” has the meaning set forth in Section 5.2.

 

“Restructuring” has the meaning assigned to such term in the Reorganization Agreement.

 

“Ruling” means PLR 135834-12 that was issued to Distributing on December 19, 2012.

 

“Ruling Request” means the request for rulings, dated August 17, 2012, filed by Distributing with the IRS in connection with the Distribution, as the same shall have been amended or supplemented.

 

“Separate Return” means any Tax Return that is not a Combined Return.

 

“Spinco” has the meaning set forth in the preamble hereof.

 

“Spinco Acquired Subsidiary” has the meaning set forth in Section 2.2(j).

 

“Spinco Business” means:  (i) with respect to any Tax Year (or portion thereof) ending at or before the effective time of the Split-off, the assets, liabilities and

 

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businesses of Liberty Interactive (or its predecessor, Liberty Interactive LLC) and its Subsidiaries, other than (x) the Distributing Business, (y) the assets, liabilities and businesses that were tracked during such Tax Year (or portion thereof), and only for so long as so tracked, by the Liberty Interactive Common Stock (including any equity or debt interests in any entities so tracked), and (z) with respect to any Tax Year (or portion thereof) ending prior to May 9, 2006, any assets, liabilities, and businesses of, and any equity or debt interests in, QVC, Inc., Provide Commerce, Inc., and each of their respective Subsidiaries; (ii) with respect to any Tax Year (or portion thereof) beginning after the effective time of the Split-off and ending at or before the Effective Time, the assets, liabilities and businesses of Distributing and its Subsidiaries, other than the Distributing Business; and (iii) with respect to any Tax Year (or portion thereof) beginning after the Effective Time, the assets, liabilities, and businesses of the Spinco Group during such Tax Year (or portion thereof).

 

“Spinco Claim” means any pending or threatened Tax Contest, claim, action, suit, investigation or proceeding brought by a third party relating to any Split-off TSA Liabilities (other than any Split-off TSA Liabilities arising from any Split-off Transaction Taxes or Split-off Tax-Related Losses) or Split-off TSA Benefits.

 

“Spinco Consolidated Group” means a Consolidated Group of which Spinco is the common parent, within the meaning of Section 1504(a)(1) of the Code.

 

“Spinco Group” means, with respect to any Tax Year (or portion thereof) beginning after the Effective Time, Spinco and each Subsidiary of Spinco (but only while such Subsidiary is a Subsidiary of Spinco).

 

“Spinco Indemnitees” has the meaning set forth in Section 7.2.

 

“Spinco Stock” means Spinco’s Series A common stock, par value $.01 per share, Series B common stock, par value $.01 per share, and if and when issued, Series C common stock, par value $.01 per share, and any series or class of stock into which Spinco’s Series A, Series B, or Series C common stock is redesignated, reclassified, converted or exchanged following the Effective Time.

 

“Split-off” means the distribution effected on September 23, 2011 by Liberty Interactive of all of the stock of Distributing to the holders of Liberty Interactive’s Liberty Capital and Liberty Starz tracking stocks in complete redemption of Liberty Interactive’s Liberty Capital and Liberty Starz tracking stocks.

 

“Split-off IRS Submissions” means the Split-off Ruling Request, each supplemental submission and any other correspondence or supplemental materials submitted to the IRS in connection with obtaining the Split-off Ruling and any request, supplemental submission and any other correspondence or supplemental materials submitted to the IRS in connection with obtaining any private letter ruling which supplements or otherwise modifies the Split-off Ruling.

 

“Split-off Opinion” means the opinion delivered by Baker Botts L.L.P. to Liberty Interactive in connection with the Split-off, which relies on the continued validity

 

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of the Split-off Ruling as to the matters covered by the Split-off Ruling, to the effect that, under applicable U.S. federal income tax law, (i) the Split-off Transaction will qualify as a tax-free transaction described under Sections 355 and 368(a)(1)(D) of the Code, (ii) no gain or loss will be recognized by Liberty Interactive upon the distribution of Distributing stock in the Split-off, (iii) no gain or loss will be recognized by, and no amount will be included in the income of, holders of Liberty Interactive stock upon the exchange of their shares of Liberty Interactive stock for shares of Liberty Capital Common Stock and Liberty Starz Common Stock in the Split-off, (iv) the Liberty Capital Common Stock and Liberty Starz Common Stock issued in the Split-off will be treated as stock of Distributing for U.S. federal income tax purposes, and (v) the Liberty Capital Common Stock and Liberty Starz Common Stock issued in the Split-off will not constitute Section 306 stock within the meaning of Section 306(c) of the Code.

 

“Split-off Ruling” means PLR 201135025 that was issued to Liberty Interactive on March 3, 2011.

 

“Split-off Ruling Request” means the request for rulings, dated July 28, 2010, filed by Liberty Interactive with the IRS in connection with the Split-off, as the same shall have been amended or supplemented.

 

“Split-off Tax Materials” means (i) the Split-off Ruling and any supplemental private letter ruling which supplements or otherwise modifies the Split-off Ruling, (ii) each Split-off IRS Submission, (iii) the representation letters delivered to Baker Botts L.L.P. in connection with the delivery of the Split-off Opinion, and (iv) any other materials delivered by Liberty Interactive or Distributing in connection with the rendering by Baker Botts L.L.P. of the Split-off Opinion or the issuance by the IRS of the Split-off Ruling.

 

“Split-off Tax-Related Losses” means any Losses resulting from the Split-off Transaction as a result of (i) the failure of the Split-off Transaction to qualify as a tax-free transaction described under Sections 368(a), 355 and 361 of the Code; (ii) the failure of the Split-off Transaction to qualify in whole for nonrecognition of income, gain and loss for U.S. federal income tax purposes to Liberty Interactive, Distributing, each of their respective Subsidiaries at the effective time of the Split-off, and the holders of Liberty Interactive stock that received Liberty Capital Common Stock and Liberty Starz Common Stock in the Split-off; (iii) the Liberty Capital Common Stock or Liberty Starz Common Stock not being treated as stock of Distributing, or being treated as Section 306 stock within the meaning of Section 306(c) of the Code, for U.S. federal income tax purposes, or (iv) any of Liberty Interactive’s tracking stocks not being treated as stock of Liberty Interactive, or being treated as Section 306 stock within the meaning of Section 306(c) of the Code, for U.S. federal income tax purposes.

 

“Split-off Tax Sharing Agreement” means the Tax Sharing Agreement dated as of September 23, 2011, by and among Liberty Interactive, Liberty Interactive LLC and Distributing.

 

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“Split-off Transaction” means the “Contribution” and the “Split-off,” in each case as such terms are defined in the Split-off Ruling.

 

“Split-off Transaction Taxes” means any Taxes resulting from the Split-off Transaction, other than any Taxes attributable to “deferred intercompany transactions” or “excess loss accounts” (as those terms are defined by Treasury Regulations) that are triggered as a result of the Split-off.

 

“Split-off TSA Benefits” means any right to receive any payment (including any indemnification payment) from Liberty Interactive, Liberty Interactive LLC, or any member of the Distributing Group (as defined in the Split-off Tax Sharing Agreement) pursuant to the terms of the Split-off Tax Sharing Agreement (and any Taxes and Tax Items arising therefrom).

 

“Split-off TSA Liabilities” means any obligation or liability to make any payment (including any indemnification payment) to Liberty Interactive, Liberty Interactive LLC, any member of the Distributing Group (as defined in the Split-off Tax Sharing Agreement), or any Distributing Indemnitee (as defined in the Split-off Tax Sharing Agreement) pursuant to the terms of the Split-off Tax Sharing Agreement (and any Taxes, Tax Items, and Losses arising therefrom).

 

“Starz Conversion” means the conversion of all of Distributing’s Liberty Starz Common Stock into Liberty Capital Common Stock that was effected on November 28, 2011.

 

“Starz Conversion Opinion” means the tax opinion delivered by Baker Botts L.L.P. to Distributing in connection with the Starz Conversion.

 

“Starz Entities” means Starz, LLC, Starz Entertainment LLC, Starz Media, and each of their respective Subsidiaries and any Person acquired directly or indirectly by Distributing following the Distribution.

 

“Starz Media” means Starz Media Group, LLC, a Delaware limited liability company.

 

“Starz Media Losses” means (x) the capital loss recognized upon the sale by Starz, LLC of 25% of its equity interests in Starz Media to The Weinstein Company LLC and (y) the capital loss recognized under Section 331 with respect to Starz, LLC’s equity interest in Starz Media resulting from the deemed liquidation of Starz Media for U.S. federal income tax purposes on March 31, 2012.

 

“Subsidiary” when used with respect to any Person, means (i)(A) a corporation a majority in voting power of whose share capital or capital stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such Person, by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person, whether or not such power is subject to a voting agreement or similar encumbrance, (B) a partnership or limited liability company in which such Person or a Subsidiary of such Person is, at the date of

 

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determination, (1) in the case of a partnership, a general partner of such partnership with the power affirmatively to direct the policies and management of such partnership or (2) in the case of a limited liability company, the managing member or, in the absence of a managing member, a member with the power affirmatively to direct the policies and management of such limited liability company, or (C) any other Person (other than a corporation) in which such Person, one or more Subsidiaries of such Person or such Person and one or more Subsidiaries of such Person, directly or indirectly, at the date of determination thereof, has or have (1) the power to elect or direct the election of a majority of the members of the governing body of such Person, whether or not such power is subject to a voting agreement or similar encumbrance, or (2) in the absence of such a governing body, at least a majority voting interest or (ii) any other Person of which an aggregate of 50% or more of the equity interests are, at the time, directly or indirectly, owned by such Person and/or one or more Subsidiaries of such Person.

 

“Supplemental IRS Submissions” means any request for a Supplemental Ruling, each supplemental submission and any other correspondence or supplemental materials submitted to the IRS in connection with obtaining any Supplemental Ruling.

 

“Supplemental Ruling” means any private letter ruling obtained by Distributing or Spinco from the IRS which supplements or otherwise modifies the Ruling.

 

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

 

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

 

“Tax Benefit” means a Tax Item which decreases the Tax liability of a taxpayer, including a Tax Refund.

 

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

 

“Tax Counsel” means Skadden, Arps, Slate, Meagher & Flom LLP.

 

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“Tax Item” means, with respect to any Tax, any item of income, gain, loss, deduction, credit or other attribute that may have the effect of increasing or decreasing any Tax.

 

“Tax Law” means the law of any governmental entity or political subdivision thereof, and any controlling judicial or administrative interpretations of such law, relating to any Tax.

 

“Tax Materials” means (i) the Ruling and each Supplemental Ruling issued by the IRS in connection with the Distribution, (ii) each IRS Submission and Supplemental IRS Submission, (iii) the representation letters delivered to Tax Counsel in connection with the delivery of the Tax Opinion, and (iv) any other materials delivered or deliverable by Distributing, Spinco and others in connection with the rendering by Tax Counsel of the Tax Opinion or the issuance by the IRS of the Ruling and any Supplemental Ruling.

 

“Tax Opinion” means the opinion to be delivered by Tax Counsel to Distributing in connection with the Distribution, which will rely on the continued validity of the Ruling as to the matters covered by the Ruling, to the effect that, under applicable U.S. federal income tax law, (i) the Contribution and the Distribution will qualify as a tax-free transaction described under Sections 355 and 368(a)(1)(D) of the Code, (ii) no gain or loss will be recognized by Distributing upon the distribution of Spinco Stock in the Distribution, and (iii) no gain or loss will be recognized by, and no amount will be included in the income of, holders of Liberty Capital Common Stock upon the receipt of Spinco Stock in the Distribution.

 

“Tax Records” means Tax Returns, Tax Return work papers, documentation relating to any Tax Contests, and any other books of account or records required to be maintained under applicable Tax Laws (including but not limited to Section 6001 of the Code) or under any record retention agreement with any Tax Authority.

 

“Tax Refund” means a refund of Taxes previously paid and any overpayment interest within the meaning of Section 6611 of the Code or any similar provision under applicable Tax Law (whether paid by way of a refund or credited against any liability for related Taxes).

 

“Tax Return” means any report of Taxes due, any claims for refund of Taxes paid, any information return with respect to Taxes, or any other similar report, statement, declaration, or document filed or required to be filed (by paper, electronically or otherwise) under any applicable 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.

 

“Tax Year” means, with respect to any Tax, the year, or shorter period, if applicable, for which the Tax is reported as provided under applicable Tax Law.

 

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“Tracking Stock Taxes and Losses” means any Taxes and Losses resulting from (i) the treatment of the Liberty Capital Common Stock or the Liberty Starz Common Stock as other than stock of Distributing, or as Section 306 stock within the meaning of Section 306(c) of the Code, for any Pre-Distribution Period, or (ii) the actual or deemed disposition of any assets caused by the issuance of the Liberty Capital Common Stock or the Liberty Starz Common Stock during any Pre-Distribution Period.

 

“Transaction Taxes” means any Taxes resulting from the Contribution and the Distribution, other than (i) Transfer Taxes, and (ii) any Taxes attributable to “deferred intercompany transactions” or “excess loss accounts” (as those terms are defined by Treasury Regulations) that are triggered as a result of the Contribution and the Distribution.

 

“Transaction Tax-Related Losses” means any Losses resulting from the Contribution and the Distribution as a result of (i) the failure of the Contribution and Distribution to qualify as a tax-free transaction described under Sections 368(a), 355 and 361 of the Code; or (ii) the failure of the Contribution and Distribution to qualify in whole for nonrecognition of income, gain and loss for U.S. federal income tax purposes to Distributing, Spinco, each of their respective Subsidiaries at the Effective Time, and the holders of Liberty Capital Common Stock that receive Spinco Stock in the Distribution.  For the avoidance of doubt, “Transaction Tax-Related Losses” shall not include any (i) Transfer Taxes, or (ii) any Taxes attributable to “deferred intercompany transactions” or “excess loss accounts” (as those terms are defined by Treasury Regulations) that are triggered as a result of the Contribution and the Distribution.

 

“Transfer Taxes” means all U.S. federal, state, local or foreign sales, use, privilege, transfer, documentary, gains, stamp, duties, recording, and similar Taxes and fees (including any penalties, interest or additions thereto) imposed upon any party hereto or any of its Affiliates in connection with the Restructuring or the Distribution.

 

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

 

SECTION 2.  Allocation of Tax Liabilities, Tax Benefits and Certain Losses.

 

2.1                               Liability for and the Payment of Taxes.  Except as provided in Section 3.4(f) (Withholding and Reporting) and Section 7.5 (Notices) and in accordance with Section 4:

 

(a)                                 Distributing Liabilities and Payments.  For any Tax Year (or portion thereof), Distributing shall (i) be liable for the Taxes (determined without regard to Tax Benefits) allocated to it by this Section 2, reduced by any Tax Benefits allocated to Distributing or Spinco that are allowable under applicable Tax Law to reduce such Taxes, (ii) pay such Taxes, as so reduced, either to the applicable Tax Authority or to Spinco as required by Section 4, and (iii) pay Spinco for any Tax Benefits allocated to

 

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Spinco by this Section 2 that Distributing uses to reduce Taxes payable by it pursuant to clause (ii) of this Section 2.1(a).

 

(b)                                 Spinco Liabilities and Payments.  For any Tax Year (or portion thereof), Spinco shall (i) be liable for the Taxes (determined without regard to Tax Benefits) allocated to it by this Section 2, reduced by any Tax Benefits allocated to Distributing or Spinco that are allowable under applicable Tax Law to reduce such Taxes, (ii) pay such Taxes, as so reduced, either to the applicable Tax Authority or to Distributing as required by Section 4, and (iii) pay Distributing for any Tax Benefits allocated to Distributing by this Section 2 that Spinco uses to reduce Taxes payable by it pursuant to clause (ii) of this Section 2.1(b).

 

(c)                                  Use of Tax Benefits.  For purposes of Section 2.1(a)(i), (x) Distributing shall reduce Taxes allocated to it with any Tax Benefits allocated to Distributing that are allowable under applicable Tax Law in the same Tax Year prior to reducing such Taxes with any Tax Benefits allocated to Spinco, and (y) Distributing shall reduce Taxes allocated to it by Tax Benefits allocated to Spinco only to the extent such Tax Benefits are not taken into account by Spinco pursuant to Section 2.1(b)(i) in the same Tax Year.  For purposes of Section 2.1(b)(i), (x) Spinco shall reduce Taxes allocated to it with any Tax Benefits allocated to Spinco that are allowable under applicable Tax Law in the same Tax Year prior to reducing such Taxes with any Tax Benefits allocated to Distributing, and (y) Spinco shall reduce Taxes allocated to it by Tax Benefits allocated to Distributing only to the extent such Tax Benefits are not taken into account by Distributing pursuant to Section 2.1(a)(i) in the same Tax Year.

 

2.2                               Allocation Rules.  For purposes of Section 2.1:

 

(a)                                 General Rule.  Except as otherwise provided in this Section 2.2, Taxes (determined without regard to Tax Benefits) for any Tax Year (or portion thereof) shall be allocated between Spinco and Distributing in proportion to the taxable income or other applicable items attributable to or arising from the respective Spinco Business and Distributing Business (as so defined for such Tax Year or portion thereof) that contribute to such Taxes, and Tax Benefits for any Tax Year (or portion thereof) shall be allocated between Spinco and Distributing in proportion to the losses, credits, or other applicable items attributable to or arising from the respective Spinco Business and Distributing Business (as so defined for such Tax Year or portion thereof) that contribute to such Tax Benefits.

 

(b)                                 Transaction Taxes and Transaction Tax-Related Losses.

 

(i)                                     Spinco shall be allocated all Transaction Taxes and Transaction Tax-Related Losses other than any Transaction Taxes and Transaction Tax-Related Losses allocated to Distributing pursuant to clause (ii) of this Section 2.2(b).

 

(ii)                                  Distributing shall be allocated any Transaction Taxes and Transaction Tax-Related Losses that (x) result primarily from, individually or

 

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in the aggregate, any breach by Distributing of any of its covenants set forth in Section 7.1 hereof, or (y) result from a Distributing Section 355(e) Event.

 

(c)                                  Conversion Transaction Taxes and Conversion Tax-Related Losses.

 

(i)                                     Spinco shall be allocated all Conversion Transaction Taxes and Conversion Tax-Related Losses other than any Conversion Transaction Taxes and Conversion Tax-Related Losses allocated to Distributing pursuant to clause (ii) of this Section 2.2(c).

 

(ii)                                  Distributing shall be allocated any Conversion Transaction Taxes and Conversion Tax-Related Losses that result primarily from, individually or in the aggregate, any breach by Distributing of any of its covenants set forth in Section 7.1 hereof.

 

(d)                                 Split-off Transaction Taxes and Split-off Tax-Related Losses.

 

(i)                                     Spinco shall be allocated all Split-off Transaction Taxes and Split-off Tax-Related Losses other than any Split-off Transaction Taxes and Split-off Tax-Related Losses allocated to Distributing pursuant to clause (ii) of this Section 2.2(d).

 

(ii)                                  Distributing shall be allocated any Split-off Transaction Taxes and Split-off Tax-Related Losses that (x) result primarily from, individually or in the aggregate, any breach by Distributing of any of its covenants set forth in Section 7.1 hereof, or (y) result from a Distributing Section 355(e) Split-off Event.

 

(e)                                  Taxes and Losses with Respect to Tracking Stock.

 

(i)                                     Spinco shall be allocated all Tracking Stock Taxes and Losses other than any Tracking Stock Taxes and Losses allocated to Distributing pursuant to clause (ii) of this Section 2.2(e).

 

(ii)                                  Distributing shall be allocated any Tracking Stock Taxes and Losses that (x) result primarily from, individually or in the aggregate, any breach by Distributing of any of its covenants set forth in Section 7.1 hereof, or (y) result from “deferred intercompany transactions” or “excess loss accounts” (as those terms are defined by Treasury Regulations) that are triggered by the actual or deemed disposition of any assets referred to in clause (ii) of the definition of “Tracking Stock Taxes and Losses” and would otherwise be allocated to Distributing, but for clause (i) of this Section 2.2(e).

 

(f)                                   Carryovers or Carrybacks of Tax Benefits.  If any Tax Item allocable to the Spinco Business in a Tax Year is carried forward or back and utilized as a Tax Benefit in another Tax Year, then, except as provided in Section 2.2(g), the resulting 

 

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Tax Benefit shall be allocated to Spinco.  If any Tax Item allocable to the Distributing Business in a Tax Year is carried forward or back and utilized as a Tax Benefit in another Tax Year, the resulting Tax Benefit shall be allocated to Distributing.

 

(g)                                  Spinco Carrybacks from Post-Distribution Period. If, pursuant to Section 3.4(e), any Tax Item allocable to Spinco in a Tax Year beginning in the Post-Distribution Period is carried back and generates a Tax Benefit on a Combined Return filed with respect to a Tax Year beginning in the Pre-Distribution Period, then, notwithstanding Section 2.2(f), any resulting Tax Benefit shall be allocated to Distributing to the extent, if any, that the carryback of such Tax Item increases the Taxes otherwise allocable to Distributing or reduces the amount of Tax Benefits allocable to Distributing that otherwise could be used with respect to such Tax Year.

 

(h)                                 Employee Compensation and Employee Benefits.

 

(i)                                     Pre-Distribution Period.  For any Pre-Distribution Period:  (x) Taxes and Tax Items arising from the issuance, vesting, exercise or settlement of any Compensatory Equity Interests with respect to any series of Liberty Starz Common Stock or any series of Liberty Interactive’s Liberty Starz Common Stock or in any Starz Entity shall be allocated to Distributing;  (y) Taxes and Tax Items arising from the issuance, vesting, exercise or settlement of any Compensatory Equity Interests with respect to any series of Liberty Capital Common Stock or any class or series of Liberty Interactive’s stock (other than any series of Liberty Interactive Common Stock or Liberty Interactive’s Liberty Starz Common Stock) or in any Person (including DTV,  Discovery, LGI, and Ascent) other than Distributing or any Starz Entity shall be allocated to Spinco, and (z) any other Taxes or Tax Items related to employee, independent contractor or director compensation or employee benefits shall be allocated to Distributing to the extent that the Distributing Business is or was responsible for the underlying obligation and to Spinco to the extent that the Spinco Business is or was responsible for the underlying obligation.

 

(ii)                                  Post-Distribution Period.  For any Post-Distribution Period:  (x) Taxes and Tax Items arising from the issuance, vesting, exercise or settlement of any Compensatory Equity Interests with respect to any class or series of Distributing stock or in any member of the Distributing Group or any Starz Entity shall be allocated to Distributing; (y) Taxes and Tax Items  arising from the issuance, vesting, exercise or settlement of any Compensatory Equity Interests with respect to any class or series of Spinco stock or in any member of the Spinco Group or any Person (including DTV, Discovery, LGI, and Ascent) other than Distributing, any member of the Distributing Group, or any Starz Entity shall be allocated to Spinco, and (z) any other Taxes or Tax Items related to employee, independent contractor or director compensation or employee benefits shall be allocated to Distributing to the extent that the Distributing Business is or was responsible for the underlying obligation and to Spinco to the extent that the Spinco Business is or was responsible for the underlying obligation.

 

(i)                                     Alternative Minimum Tax Credit.  Any credit arising in any Tax Year (or portion thereof) from the payment of any alternative minimum consolidated

 

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federal tax liability on any Combined Return shall be allocated between Distributing and Spinco in a manner that offsets the excess of the net payment or payments previously made by each Company pursuant to this Agreement in respect of such Combined Return over the net payment or payments that would have been made by such Company pursuant to this Agreement in respect of such Combined Return if no alternative minimum consolidated federal tax liability had been owed with respect to such Combined Return.  For purposes of this Section 2.2(i), net payments received shall be treated as a negative amount of net payments made.

 

(j)                                    Acquired Subsidiaries.  If any Person becomes a Subsidiary of any member of the Spinco Group in any transaction after the Distribution (and such Person was not a member of the Spinco Group or the Distributing Group prior to such transaction) (a “Spinco Acquired Subsidiary”), then any Taxes and Tax Items of such Spinco Acquired Subsidiary for any Tax Year (or portion thereof) ending on or prior to the date of such transaction shall be allocated to Spinco. If any Person becomes a Subsidiary of any member of the Distributing Group in any transaction after the Distribution (and such Person was not a member of the Spinco Group or the Distributing Group prior to such transaction) (a “Distributing Acquired Subsidiary”), then any Taxes and Tax Items of such Distributing Acquired Subsidiary for any Tax Year (or portion thereof) ending on or prior to the date of such transaction shall be allocated to Distributing.

 

(k)                                 Starz Media Losses.  Spinco shall be allocated any Tax Benefit resulting from the Starz Media Losses.

 

(l)                                     Transfer Taxes.  All Transfer Taxes shall be allocated 50% to Distributing and 50% to Spinco.

 

(m)                             Split-off Tax Sharing Agreement.

 

(i)                                     Spinco shall be allocated all Split-off TSA Liabilities and Split-off TSA Benefits, other than any Split-off TSA Liabilities and Split-off TSA Benefits allocated to Distributing pursuant to clause (ii) of this Section 2.2(m).

 

(ii)                                  Distributing shall be allocated (x) any Split-off TSA Liabilities and Split-off TSA Benefits that are attributable to (1) the Distributing Business, or (2) any Taxes, Tax Items, or Losses (including any Split-off Transaction Taxes and Split-off Tax-Related Losses) that are specially allocated to Distributing under this Section 2.2; and (y) any Split-off TSA Liabilities that result primarily from, individually or in the aggregate, any breach by Distributing of any of its covenants set forth in Section 7.1 hereof.

 

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SECTION 3.   Preparation and Filing of Tax Returns.

 

3.1                               Combined Returns.  Distributing shall be responsible for preparing and filing (or causing to be prepared and filed) all Combined Returns for any Tax Year.

 

3.2                               Separate Returns.

 

(a)                                 Tax Returns to be Prepared by Distributing.  Distributing shall be responsible for preparing and filing (or causing to be prepared and filed) (i) all Separate Returns for a Tax Year beginning on or before the Distribution Date that include Tax Items of the Distributing Business, determined in accordance with the allocation rules of Section 2.2, and (ii) all Separate Returns for a Tax Year beginning after the Distribution Date that include one or more members of the Distributing Group.

 

(b)                                 Tax Returns to be Prepared by Spinco.  Spinco shall be responsible for preparing and filing (or causing to be prepared and filed) (i) all Separate Returns for a Tax Year beginning on or before the Distribution Date that include Tax Items of the Spinco Business, determined in accordance with the allocation rules of Section 2.2, and (ii) all Separate Returns for a Tax Year beginning after the Distribution Date that include one or more members of the Spinco Group.

 

3.3                               Provision of Information.

 

(a)                                 Distributing shall provide to Spinco, and Spinco shall provide to Distributing, any information about members of the Distributing Group or the Spinco Group, respectively, that the Preparer needs to determine the amount of Taxes due on any Payment Date with respect to a Tax Return for which the Preparer is responsible pursuant to Section 3.1 or 3.2 and to properly and timely file all such Tax Returns.

 

(b)                                 If a member of the Spinco Group supplies information to a member of the Distributing Group, or a member of the Distributing Group supplies information to a member of the Spinco Group, and an officer of the requesting member intends to sign a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then a duly authorized officer of the member supplying such information shall certify, to the best of such officer’s knowledge, the accuracy of the information so supplied.

 

3.4                               Special Rules Relating to the Preparation of Tax Returns.

 

(a)                                 General Rule.  Except as otherwise provided in this Agreement, and subject to Sections 3.4(b) through (e), the Company responsible for preparing and filing (or causing to be prepared and filed) a Tax Return pursuant to Sections 3.1 or 3.2 shall have the right with respect to such Tax Return to determine (i) the manner in which such Tax Return shall be prepared and filed, including the elections, methods of accounting, positions, conventions and principles of taxation to be used and the manner in which any Tax Item shall be reported, (ii) whether any extensions may be requested, (iii) whether an amended Tax Return shall be filed, (iv) whether any claims for refund shall be made, (v) whether any refunds shall be paid by way of refund or credited

 

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against any liability for the related Tax and (vi) whether to retain outside firms to prepare or review such Tax Return.

 

(b)                                 Spinco Consent to Combined Returns. Notwithstanding any provision of this Section  3:

 

(i)            Distributing shall provide to Spinco a copy of a substantially completed draft of any Combined Return at least forty-five business days  prior to its due date (taking into account any extensions), or in the case of a Combined Return with a due date (taking into account any extensions) within forty-five business days following the Distribution Date, as soon as is reasonably practicable before such due date.  Spinco shall thereafter have the right to review and consent (which consent shall not be unreasonably withheld or delayed) to the treatment in such Combined Return of any Tax Items, Taxes, or Tax Benefits allocated to Spinco pursuant to Section 2.2, to the extent such treatment is not otherwise within the sole discretion of Distributing pursuant to Sections 3.4(d) or (e).  Distributing shall provide to Spinco any information relating to any Combined Return that is reasonably necessary for Spinco to be able to provide its consent pursuant to this Section 3.4(b).

 

(ii)           In the case of any Combined Return that is an amended Tax Return, except as required by applicable Tax Law, Distributing shall not, without the prior written consent of Spinco (which consent shall not be unreasonably withheld or delayed), file, or cause to be filed, any such Combined Return to the extent that such Combined Return, if accepted, is likely to increase the Tax liability of, or give rise to a payment under this Agreement, by Spinco for any Tax Year (or portion thereof).

 

(c)                                  Spinco Tax Returns.  With respect to any Separate Return for which Spinco is responsible pursuant to Section 3.2(b), Spinco may not take (and shall cause the members of the Spinco Group not to take) any positions that it knows, or reasonably should know, would adversely affect any member of the Distributing Group, except to the extent that the failure to take such position would be contrary to applicable Tax Law; and Spinco and the other members of the Spinco Group must (x) allocate Tax Items between any Separate Return for which Spinco is responsible and any related Combined Return that is filed with respect to the same Tax Year in a manner that is consistent with the reporting of such Tax Items on such related Combined Return and (y) make any applicable elections required under applicable Tax Law (including, without limitation, under Treasury Regulations Section 1.1502-76(b)(2)), necessary to effect such allocation.

 

(d)                                 Election to File Consolidated, Combined or Unitary Tax Returns.  Distributing shall have the sole discretion of filing any Tax Return on a consolidated, combined or unitary basis, if such Tax Return would include at least one member of each Group and the filing of such Tax Return is elective under applicable Tax Law.

 

(e)                                  Filing Claims for Carrybacks.  If a Tax Item allocable to Spinco is carried back from a Tax Year beginning in the Post-Distribution Period and

 

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generates a Tax Benefit on a Combined Return filed with respect to a Tax Year beginning in the Pre-Distribution Period, then, upon the request of Spinco, Distributing may, in its sole discretion, file a claim for refund arising from such Tax Benefit.  Any resulting Tax Benefit shall be allocated to Spinco pursuant to Section 2.2(f), except as otherwise provided by Section 2.2(g).

 

(f)                                   Withholding and Reporting.  Following the Effective Time, in the event any Compensatory Equity Interests are settled (whether by issuance, exercise, vesting or otherwise) by the corporation that is the issuer or obligor under the Compensatory Equity Interest (the “issuing corporation”) or by another member of the Group to which the issuing corporation belongs, and the issuing corporation is not a member of the same Group as the Employing Party, the Company whose Group includes the issuing corporation shall promptly remit to the Employing Party an amount of cash equal to the amount required to be withheld in respect of any withholding Taxes, and in the application of this Agreement, the Employing Party shall not be liable for such withholding Taxes or for failure to remit to the applicable Tax Authority any amount required to have been withheld from the recipient of the Compensatory Equity Interest in connection with such issuance, exercise, vesting or settlement, except to the extent that the Company whose Group includes the issuing corporation shall have remitted such amount to the Employing Party or to the applicable Tax Authority.  Distributing shall promptly notify Spinco, and Spinco shall promptly notify Distributing, regarding the exercise of any option or the issuance, vesting, exercise or settlement of any other Compensatory Equity Interest to the extent that, as a result of such issuance, exercise, vesting or settlement, any other party may be entitled to a Tax Benefit or required to pay any Tax, or such information otherwise may be relevant to the preparation of any Tax Return or payment of any Tax by such other party or parties.

 

SECTION 4.                         Tax Payments.

 

4.1                               Payment of Taxes to Tax Authority.  Distributing shall be responsible for remitting to the proper Tax Authority the Tax shown on any Tax Return for which it is responsible for the preparation and filing pursuant to Section 3.1 or Section 3.2(a), and Spinco shall be responsible for remitting to the proper Tax Authority the Tax shown on any Tax Return for which it is responsible for the preparation and filing pursuant to Section 3.2(b).

 

4.2                               Indemnification Payments.

 

(a)                                 Tax Payments Made by the Distributing Group.  If any member of the Distributing Group is required to make a payment to a Tax Authority for Taxes allocated to Spinco under this Agreement, Spinco shall pay the amount of Taxes allocated to it to Distributing not later than the later of (i) five business days after receiving notification requesting such amount, and (ii) one business day prior to the date such payment is required to be made to such Tax Authority.

 

(b)                                 Tax Payments Made by the Spinco Group. If any member of the Spinco Group is required to make a payment to a Tax Authority for Taxes

 

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allocated to Distributing under this Agreement, Distributing shall pay the amount of Taxes allocated to it to Spinco not later than the later of (i) five business days after receiving notification requesting such amount, and (ii) one business day prior to the date such payment is required to be made to such Tax Authority.

 

4.3                               Payments for Tax Refunds and Tax Benefits.

 

(a)                                 Tax Refund or Tax Benefit Received by Distributing Group.  If a member of the Distributing Group receives a Tax Refund with respect to Taxes for which Spinco is liable hereunder or uses a Tax Benefit for which Spinco is entitled to reimbursement pursuant to clause (iii) of Section 2.1(a), Distributing shall pay to Spinco, within five business days following the receipt of the Tax Refund or the use of such Tax Benefit, an amount equal to such Tax Refund or Tax Benefit.

 

(b)                                 Tax Refund or Tax Benefit Received by Spinco Group.  If a member of the Spinco Group receives a Tax Refund with respect to Taxes for which Distributing is liable hereunder or uses a Tax Benefit for which Distributing is entitled to reimbursement pursuant to clause (iii) of Section 2.1(b), Spinco shall pay to Distributing, within five business days following the receipt of the Tax Refund or the use of such Tax Benefit, an amount equal to such Tax Refund or Tax Benefit.

 

(c)                                  Rules Regarding Tax Benefits.  For purposes of this Agreement, a Tax Benefit (other than a Tax Refund) shall be considered used or received  (i) at the time the Tax Return is filed with respect to such Tax Benefit, or (ii) if no Tax Return is filed, (x) at the time a Tax Refund generated by use of such Tax Benefit is received or (y) if no Tax Refund is received, at the time the Tax would have been due in the absence of such Tax Benefit.  The amount of such Tax Benefit shall be the amount by which Taxes are actually reduced by such Tax Benefit.

 

4.4                               Interest on Late Payments.  Payments pursuant to this Agreement that are not made by the date prescribed in this Agreement or, if no such date is prescribed, not later than five business days after demand for payment is made (the “Due Date”) shall bear interest for the period from and including the date immediately following the Due Date through and including the date of payment at the Interest Rate.  Such interest will be payable at the same time as the payment to which it relates.

 

4.5                               Initial Determinations and Subsequent Adjustments.  The initial determination of the amount of any payment that one Company is required to make to another under this Agreement shall be made on the basis of the Tax Return as filed, or, if the Tax to which the payment relates is not reported in a Tax Return, on the basis of the amount of Tax initially paid to the Tax Authority.  The amounts paid under this Agreement shall be redetermined, and additional payments relating to such redetermination shall be made, as appropriate, if as a result of an audit by a Tax Authority or for any other reason (w) additional Taxes to which such determination relates are subsequently paid, (x) a Tax Refund or a Tax Benefit relating to such Taxes is received or used, (y) the amount or character of any Tax Item is adjusted or redetermined, or (z) a Tax Benefit allocable to Distributing that is reduced in one Tax Year by reason of the

 

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carryback of a Tax Item allocable to the Spinco Business, resulting in an allocation to Distributing of a Tax Benefit pursuant to Section 2.2(g), is used by Distributing in a subsequent Tax Year.  Each payment required by the immediately preceding sentence (i) as a result of a payment of additional Taxes will be due five business days after the date on which the additional Taxes were paid or, if later, five business days after the date of a request from the other Company for the payment, (ii) as a result of the receipt or use of a Tax Refund or Tax Benefit will be due five business days after the Tax Refund or Tax Benefit was received or used, or (iii) as a result of an adjustment or redetermination of the amount or character of a Tax Item will be due five business days after the date on which the final action resulting in such adjustment or redetermination is taken by a Tax Authority or either Company or any of their Subsidiaries.  If a payment is made as a result of an audit by a Tax Authority which does not conclude the matter, further adjusting payments will be made, as appropriate, to reflect the outcome of subsequent administrative or judicial proceedings.

 

4.6                               Tax Consequences of Payments.  For all Tax purposes and to the extent permitted by applicable Tax Law, the parties hereto shall treat any payment made pursuant to this Agreement as a capital contribution or a distribution between Distributing and Spinco, as the case may be, immediately prior to the Distribution.  If the receipt or accrual of any payment under this Agreement causes, directly or indirectly, an increase in the taxable income of the recipient under one or more applicable Tax Laws, such payment shall be increased so that, after the payment of any Taxes with respect to the payment, the recipient thereof shall have realized the same net amount it would have realized had the payment not resulted in taxable income.  To the extent that Taxes for which any party hereto (the indemnifying party) is required to pay another party (the indemnified party) pursuant to this Agreement may be deducted or credited in determining the amount of any other Taxes required to be paid by the indemnified party (for example, state Taxes which are permitted to be deducted in determining federal Taxes), the amount of any payment made to the indemnified party by the indemnifying party shall be decreased by taking into account any resulting reduction in other Taxes of the indemnified party.  If such a reduction in Taxes of the indemnified party occurs following the payment made to the indemnified Party with respect to the relevant indemnified Taxes, the indemnified party shall promptly repay the indemnifying party the amount of such reduction when actually realized.  If the Tax Benefit arising from the foregoing reduction of Taxes described in this Section 4.6 is subsequently decreased or eliminated, then the indemnifying party shall promptly pay the indemnified party the amount of the decrease in such Tax Benefit.

 

SECTION 5.                         Assistance and Cooperation.

 

5.1                               Cooperation.  In addition to the obligations enumerated in Sections 3.3 and 7.7, Distributing and Spinco shall cooperate (and shall cause their respective Subsidiaries and Affiliates to cooperate) with each other and with each other’s agents, including accounting firms and legal counsel, in connection with Tax matters, including provision of relevant documents and information in their possession and making available to each other, as reasonably requested and available, personnel (including officers, directors, employees and agents of the parties or their respective Subsidiaries or

 

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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.

 

5.2                               Supplemental Rulings.

 

(a)                                 Each of the Companies agrees that, at the reasonable request of the other Company (the “Requesting Party”), each Company shall (and shall cause their respective Subsidiaries and Affiliates to) cooperate and use reasonable best efforts to obtain, as expeditiously as reasonably practicable, a Supplemental Ruling from the IRS.  The Requesting Party shall reimburse the other parties for all reasonable out-of-pocket costs and expenses incurred by such parties or their Subsidiaries or Affiliates in connection with obtaining or requesting such Supplemental Ruling within five business days after receiving an invoice from such party therefor.

 

(b)                                 Distributing shall provide Spinco with a reasonable opportunity to review and comment on each Supplemental IRS Submission to be filed by Distributing prior to the filing of such Supplemental IRS Submission with the IRS, and Spinco shall provide Distributing with a reasonable opportunity to review and comment on each Supplemental IRS Submission to be filed by Spinco prior to the filing of such Supplemental IRS Submission with the IRS.  No Supplemental IRS Submission shall be filed by Spinco with the IRS unless, prior to such filing Distributing shall have agreed as to the contents of such Supplemental IRS Submission to the extent that the Supplemental IRS Submission (i) includes statements or representations relating to facts that are or will be under the control of any member of the Distributing Group or any of its Affiliates or (ii) is relevant to, or creates, any actual or potential obligations of, or limitations on, any member of the Distributing Group or any of their Affiliates; provided, however, that if the IRS requests same-day filing of a Supplemental IRS Submission that does not include any material issue or statement, then Spinco is required only to make a good faith effort to notify Distributing’s representatives and to give such representatives an opportunity to review and comment on such Supplemental IRS Submission prior to filing it with the IRS.  No Supplemental IRS Submission shall be filed by Distributing with the IRS unless, prior to the filing, Spinco shall have agreed as to the contents of such Supplemental IRS Submission to the extent that the Supplemental IRS Submission (i) includes statements or representations relating to facts that are or will be under the control of any member of the Spinco Group or any of its Affiliates or (ii) is relevant to, or creates, any actual or potential obligations of, or limitations on, any member of the Spinco Group or any of their Affiliates; provided, however, that if the IRS requests same-day filing of a Supplemental IRS Submission that does not include any material issue or statement, then Distributing is required only to make a good faith effort to notify Spinco’s representatives and to give such representatives an opportunity to review and comment on such Supplemental IRS Submission prior to filing it with the IRS.  Prior to filing any Supplemental IRS Submission that includes any material issue or statement, each Company shall represent to the other Company that (i) it has reviewed the Supplemental IRS Submission, and (ii) all information and representations, if any, relating to such Company, each member of its Group, and their respective Affiliates that

 

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are contained in the Supplemental IRS Submission are true, correct and complete in all material respects.  Each Company (or its representatives) shall provide the other Company (or its representatives) with copies of each Supplemental IRS Submission filed with the IRS promptly following the filing thereof.

 

(c)                                  Neither Company nor its representatives shall conduct any substantive communications with the IRS regarding any material issue arising with respect to any Supplemental Ruling, including meetings or conferences with IRS personnel, whether telephonically, in person or otherwise, without first notifying the other Company (or its representatives) and giving the other Company (or its representatives) a reasonable opportunity to participate, and a reasonable number of such Company’s representatives shall have an opportunity to participate in all conferences or meetings with IRS personnel that take place in person, regardless of the nature of the issues expected to be discussed; provided, however, that in the case of communications concerning a Supplemental Ruling that occur during an unscheduled conference initiated by the IRS or a conference initiated by a Company or its representatives for a purpose unrelated to a Supplemental Ruling in connection with which it is not reasonably practicable to provide to the other Company or its representatives advance notice and an opportunity to participate, such Company (or its representatives) shall promptly update the other Company and its representatives as to the content of such communications.  Each Company shall promptly provide the other Company (or its representatives) with copies of any correspondence received by such Company (or its representatives) from the IRS relating to any Supplemental Ruling.

 

SECTION 6.                         Tax Records.

 

6.1                               Retention of Tax Records.  Each of Distributing and Spinco shall preserve, and shall cause their respective Subsidiaries to preserve, all Tax Records that are in their possession, and that could affect the liability of any member of the other Group for Taxes, for as long as the contents thereof may become material in the administration of any matter under applicable Tax Law, but in any event until the later of (x) the expiration of any applicable statutes of limitation, as extended, and (y) seven years after the Distribution Date.

 

6.2                               Access to Tax Records.  Spinco shall make available, and cause its Subsidiaries to make available, to members of the Distributing Group for inspection and copying (x) all Tax Records in their possession that relate to a Pre-Distribution Period, and (y) the portion of any Tax Record in their possession that relates to a Post-Distribution Period and which is reasonably necessary for the preparation of a Tax Return by a member of the Distributing Group or any of their Affiliates or with respect to any audit, litigation or other proceeding by a Tax Authority relating to such return.  Distributing shall make available, and cause its Subsidiaries to make available, to members of the Spinco Group for inspection and copying (x) all Tax Records in their possession that relate to a Pre-Distribution Period, and (y) the portion of any Tax Record in their possession that relates to a Post-Distribution Period and which is reasonably necessary for the preparation of a Tax Return by a member of the Spinco Group or any of

 

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their Affiliates or with respect to any audit, litigation or other proceeding by a Tax Authority relating to such return.

 

6.3                               Confidentiality.  Each party hereby agrees that it will hold, and shall use its reasonable best efforts to cause its officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence all records and information prepared and shared by and among the parties in carrying out the intent of this Agreement, except as may otherwise be necessary in connection with the filing of Tax Returns or any administrative or judicial proceedings relating to Taxes or unless disclosure is compelled by a governmental authority.  Information and documents of one party (the “Disclosing Party”) shall not be deemed to be confidential for purposes of this Section 6.3 to the extent such information or document (i) is previously known to or in the possession of the other party or parties (the “Receiving Party”) and is not otherwise subject to a requirement to be kept confidential, (ii) becomes publicly available by means other than unauthorized disclosure under this Agreement by the Receiving Party or (iii) is received from a third party without, to the knowledge of the Receiving Party after reasonable diligence, a duty of confidentiality owed to the Disclosing Party.

 

6.4                               Delivery of Tax Records.  On or before the Distribution Date, Distributing shall provide to Spinco (to the extent not previously provided or held by any member of the Spinco Group on the Distribution Date) copies of (i) the Separate Returns of any member of the Spinco Group, (ii) the relevant portions of any other Tax Returns with respect to any member of the Spinco Group, and (iii) other existing Tax Records (or the relevant portions thereof) reasonably necessary to prepare and file any Tax Returns of, or with respect to, the members of the Spinco Group, or to defend or contest Tax matters relevant to the members of the Spinco Group, including in each case, all Tax Records related to Tax attributes of the members of the Spinco Group and any and all communications or agreements with, or rulings by, any Tax Authority with respect to any member of the Spinco Group.

 

SECTION 7.                         Restrictions on Certain Actions of Distributing and Spinco; Indemnity.

 

7.1                               Restrictive Covenants.

 

(a)                                 General Restrictions.  Following the Effective Time, Spinco shall not, and shall cause the members of the Spinco Group and their Affiliates not to, and Distributing shall not, and shall cause the members of the Distributing Group and their Affiliates not to, take any action that, or fail to take any action the failure of which, (i) would cause Distributing or any Subsidiary of Distributing immediately prior to the Distribution to recognize gain or loss, or otherwise include any amount in income, as a result of the Restructuring for U.S. federal income tax purposes, (ii) would be inconsistent with the Contribution and Distribution qualifying, or would preclude the Contribution and Distribution from qualifying, as a tax-free transaction described under Sections 368(a), 355 and 361 of the Code, (iii) would cause Distributing, Spinco, any of their respective Subsidiaries at the Effective Time, or the holders of Liberty Capital Common Stock that receive stock of Spinco in the Distribution, to recognize gain or loss,

 

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or otherwise include any amount in income, as a result of the Contribution and/or the Distribution for U.S. federal income tax purposes, (iv) would be inconsistent with the Starz Conversion qualifying, or would preclude the Starz Conversion from qualifying, as a tax-free reorganization described under Section 368(a)(1)(E) of the Code (except with respect to cash received in lieu of fractional shares), (v) would cause Distributing, any of its Subsidiaries at the effective time of the Starz Conversion or any holders of Liberty Starz Common Stock that received Liberty Capital Common Stock in the Starz Conversion to recognize gain or loss, or otherwise include any amount in income, as a result of the Starz Conversion (except with respect to cash received in lieu of fractional shares), (vi) would be inconsistent with the Split-off Transaction qualifying, or would preclude the Split-off Transaction from qualifying, as a tax-free transaction described under Sections 368(a), 355 and 361 of the Code, or (vii) would cause Liberty Interactive, any Subsidiary of Liberty Interactive immediately prior to the Split-off Transaction, or the shareholders of Liberty Interactive that received Liberty Capital Common Stock and/or Liberty Starz Common Stock in the Split-off Transaction to recognize gain or loss, or otherwise include any amount in income, as a result of the Split-off Transaction for U.S. federal income tax purposes.

 

(b)                                 Restricted Actions.  Without limiting the provisions of Section 7.1(a) hereof, following the Effective Time, Spinco shall not, and shall cause the members of the Spinco Group and their Affiliates not to, and Distributing shall not, and shall cause the members of the Distributing Group and their Affiliates not to, take any action that, or fail to take any action the failure of which, (i) would be inconsistent with, or would cause any Person to be in breach of, any representation or covenant, or any material statement, made in the Tax Materials, the Conversion Tax Materials or the Split-off Tax Materials, or (ii) would be inconsistent with, or would cause Distributing to be in breach of, any representation or covenant made in the Split-off Tax Sharing Agreement.

 

(c)                                  Reporting.  Unless and until there has been a Final Determination to the contrary, each party agrees not to take any position on any Tax Return, in connection with any Tax Contest, or otherwise for Tax purposes that is inconsistent with the Ruling or the Tax Opinion.

 

7.2                               Distributing Indemnity.  Distributing agrees to indemnify and hold harmless each member of the Spinco Group and their respective directors, officers, employees, agents, successors and assigns (the “Spinco Indemnitees”) from and against any and all (without duplication) (a) Taxes, Tax Items, and Losses allocated to Distributing pursuant to Section 2.2, (b) Transaction Taxes and Transaction Tax-Related Losses allocated to Distributing pursuant to Section 2.2(b), (c) Conversion Transaction Taxes and Conversion Tax-Related Losses allocated to Distributing pursuant to Section 2.2(c), (d) Split-off Transaction Taxes and Split-off Tax-Related Losses allocated to Distributing pursuant to Section 2.2(d), (e) Tracking Stock Taxes and Losses allocated to Distributing pursuant to Section 2.2(e), (f) Taxes and Losses arising out of or based upon any breach or nonperformance of any covenant or agreement made or to be performed by Distributing contained in this Agreement, (g) Transfer Taxes allocated to Distributing pursuant to Section 2.2(l), (h) Split-off TSA Liabilities allocated to Distributing pursuant to Section 2.2(m), and (i) Losses, including reasonable out-of-pocket legal, accounting

 

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and other advisory and court fees and expenses, incurred in connection with the items described in clauses (a) through (h); provided, however, that notwithstanding clauses (a), (f) and (i) of this Section 7.2, Distributing shall not be responsible for, and shall have no obligation to indemnify or hold harmless any Spinco Indemnitee for, (x) any Transaction Taxes, Transaction Tax-Related Losses, Conversion Transaction Taxes, Conversion Tax-Related Losses, Split-off Transaction Taxes, Split-off Tax-Related Losses or Tracking Stock Taxes and Losses that are allocated to Spinco pursuant to Sections 2.2(b)(i), (c)(i), (d)(i) or (e)(i), or (y) any Taxes or Losses arising out of or based upon any breach or nonperformance of any covenant or agreement made or to be performed by Spinco contained in this Agreement.

 

7.3                               Spinco Indemnity.  Spinco agrees to indemnify and hold harmless each member of the Distributing Group and their respective directors, officers, employees, agents, successors and assigns (the “Distributing Indemnitees”) from and against any and all (without duplication) (a) Taxes, Tax Items, and Losses allocated to Spinco pursuant to Section 2.2, (b) Transaction Taxes and Transaction Tax-Related Losses allocated to Spinco pursuant to Section 2.2(b), (c) Conversion Transaction Taxes and Conversion Tax-Related Losses allocated to Spinco pursuant to Section 2.2(c), (d) Split-off Transaction Taxes and Split-off Tax-Related Losses allocated to Spinco pursuant to Section 2.2(d), (e) Tracking Stock Taxes and Losses allocated to Spinco pursuant to Section 2.2(e), (f) Taxes and Losses arising out of or based upon any breach or nonperformance of any covenant or agreement made or to be performed by Spinco contained in this Agreement, (g) Transfer Taxes allocated to Spinco pursuant to Section 2.2(l), (h) Split-off TSA Liabilities allocated to Spinco pursuant to Section 2.2(m), and (i) Losses, including reasonable out-of-pocket legal, accounting and other advisory and court fees, incurred in connection with the items described in clauses (a) through (h); provided, however, that notwithstanding clauses (a), (f) and (i) of this Section 7.3, Spinco shall not be responsible for, and shall have no obligation to indemnify or hold harmless any Distributing Indemnitee for, (x) any Transaction Taxes, Transaction Tax-Related Losses, Conversion Transaction Taxes, Conversion Tax-Related Losses, Split-off Transaction Taxes, Split-off Tax-Related Losses or Tracking Stock Taxes and Losses that are allocated to Distributing pursuant to Sections 2.2(b)(ii), (c)(ii), (d)(ii) or (e)(ii), or (y) any Taxes or Losses arising out of or based upon any breach or nonperformance of any covenant or agreement made or to be performed by Distributing contained in this Agreement.

 

7.4                               Scope.  The provisions of this Section 7 are intended to be for the benefit of, and shall be enforceable by, each Distributing Indemnitee and its successors in interest and each Spinco Indemnitee and its successors in interest.

 

7.5                               Notices of Tax Contests.  Each Company shall provide prompt notice to the other Company of any pending or threatened Tax audit, assessment, proceeding or other Tax Contest, Joint Claim or Spinco Claim of which it becomes aware relating to Taxes, Losses or any other liabilities or amounts for which it is or may be indemnified by such other Company hereunder.  Such notice shall contain (i) factual information (to the extent known) describing any asserted Tax liability or other claim in reasonable detail and shall be accompanied by copies of any notice and other documents

 

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received from any Tax Authority or third party in respect of any such matters, and (ii) the amount of such asserted Tax liability or other claim.  Such notice shall be given within a reasonable period of time after notice thereof was received by such Company, but any failure to give timely notice shall not affect the indemnities given hereunder  except, and only to the extent that, the indemnifying Company shall have been actually prejudiced as a result of such failure.  Thereafter, the indemnified Company shall deliver to the indemnifying Company such additional information with respect to such Tax Contest, Joint Claim or Spinco Claim in its possession that the indemnifying Company may reasonably request.

 

7.6                               Control of Tax Contests Generally.

 

(a)                                 General Rule.  Except as provided in Sections 7.6(b), 7.8, and 7.9, each Company (or the appropriate member of its Group) shall have full responsibility, control and discretion in handling, defending, settling or contesting any Tax Contest involving a Tax reported (or that, it is asserted, should have been reported) on a Tax Return for which such Company is responsible for preparing and filing (or causing to be prepared and filed) pursuant to Section 3 of this Agreement.

 

(b)                                 Non-Preparer Participation Rights.  With respect to a Tax Contest (other than with respect to a Joint Claim or Spinco Claim) of any Tax Return which could result in a Tax liability for which the Non-Preparer may be liable under this Agreement or the reduction in any Tax Benefit to which the Non-Preparer may be entitled to under this Agreement, (i) the Non-Preparer shall, at its own cost and expense, be entitled to participate in such Tax Contest, (ii) the Preparer shall keep the Non-Preparer updated and informed, and shall consult with the Non-Preparer, (iii) the Preparer shall act in good faith with a view to the merits in connection with the Tax Contest, and (iv) the Preparer shall not settle or compromise such Tax Contest without the prior written consent of the Non-Preparer (which consent shall not be unreasonably withheld) if the settlement or compromise could have a more than de minimis impact on the Non-Preparer and the other members of its Group, taken as a whole.

 

7.7                               Cooperation.  The parties shall provide each other with all information relating to a Tax Contest, Joint Claim or Spinco Claim which is needed by the other party or parties to handle, participate in, defend, settle or contest the Tax Contest, Joint Claim or Spinco Claim.  At the request of any party, the other parties shall take any reasonable action (e.g., executing a power of attorney) that is necessary to enable the requesting party to exercise its rights under this Agreement in respect of a Tax Contest, Joint Claim or Spinco Claim.  Spinco shall assist Distributing, and Distributing shall assist Spinco, in taking any remedial actions that are necessary or desirable to minimize the effects of any adjustment made by a Tax Authority.  The indemnifying party or parties shall reimburse the indemnified party or parties for any reasonable out-of-pocket costs and expenses incurred in complying with this Section 7.7.

 

7.8                               Joint Claims.  Distributing and Spinco will have the right to jointly control the defense, compromise or settlement of any Joint Claim; provided, however, that with respect to any Joint Claim arising under the Split-off Tax Sharing Agreement

 

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(or otherwise subject to the indemnification provisions of the Split-off Tax Sharing Agreement), Spinco’s rights to jointly control, or otherwise participate in the defense, compromise or settlement of, any such Joint Claim will be subject to the terms of the Split-off Tax Sharing Agreement.  Distributing shall use reasonable efforts to provide Spinco with the right to jointly control with Distributing and otherwise participate in the defense, compromise or settlement of, any Joint Claim arising under the Split-off Tax Sharing Agreement (or otherwise subject to the indemnification provisions of the Split-off Tax Sharing Agreement), including taking action on behalf of Spinco (at the request of Spinco) to the extent any other party to the Split-off Tax Sharing Agreement does not recognize Spinco’s ability to act thereunder; provided, however, that Distributing shall not be required to relinquish any rights that it has to control the defense, compromise or settlement of any such Joint Claim (other than to Spinco pursuant to the foregoing).  No indemnified Company shall settle or compromise or consent to entry of any judgment with respect to any such Joint Claim without the prior written consent of the indemnifying Company, which consent may be withheld in the indemnifying Company’s sole discretion.  No indemnifying Company shall settle or compromise or consent to entry of any judgment with respect to any such Joint Claim unless such settlement, compromise or consent (x) includes an unconditional release of the indemnified Company and (y) does not enjoin or restrict in any way the future actions or conduct of the indemnified Company (other than with respect to its performance hereunder).

 

7.9                               Spinco Claims.  Spinco will have the right to control, directly or indirectly, the defense, compromise or settlement of any Spinco Claim, and Distributing shall use reasonable efforts to provide Spinco with the right to control, and otherwise participate in the defense, compromise or settlement of, such Spinco Claim arising under the Split-off Tax Sharing Agreement (or otherwise subject to the indemnification provisions of such agreement), including taking action at the direction of Spinco to the extent any other party to the Split-off Tax Sharing Agreement does not recognize Spinco’s ability to act thereunder.  Distributing shall not settle or compromise or consent to entry of any judgment with respect to any Spinco Claim without the prior written consent of Spinco, which consent may be withheld in Spinco’s sole discretion.  Spinco shall not settle or compromise or consent to entry of any judgment with respect to any such Spinco Claim unless such settlement, compromise or consent (x) includes an unconditional release of Distributing and (y) does not enjoin or restrict in any way the future actions or conduct of Distributing (other than with respect to its performance hereunder).

 

7.10                        Other Claims.  In the event any Distributing Indemnitee should have a claim against Spinco, or any Spinco Indemnitee should have a claim against Distributing, under this Section 7 that does not involve a third party action, such indemnified Company (or Distributing on behalf of all Distributing Indemnitees or Spinco on behalf of all Spinco Indemnitees, as applicable) shall as promptly as practicable notify the indemnifying Company of such claim, describing such claim and the factual basis thereof, the amount of such claim (if known) and the method of computation of such amount, all with reasonable particularity.

 

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SECTION 8.                         General Provisions.

 

8.1                               Termination.  This Agreement shall terminate at such time as all obligations and liabilities of the parties hereto have been satisfied.  The obligations and liabilities of the parties arising under this Agreement shall continue in full force and effect until all such obligations have been satisfied and such liabilities have been paid in full, whether by expiration of time, operation of law, or otherwise.

 

8.2                               Predecessors or Successors.  Any reference to Distributing, Spinco, their respective Subsidiaries, or any other Person in this Agreement shall include any predecessors or successors (e.g., by merger or other reorganization, liquidation, conversion, or election under Treasury Regulations Section 301.7701-3) of Distributing, Spinco, such Subsidiary, or such Person, respectively.

 

8.3                               Expenses.  Except as otherwise expressly provided for herein, each Company and its Subsidiaries shall bear their own expenses incurred in connection with the preparation of Tax Returns and other matters related to Taxes under the provisions of this Agreement for which they are liable; provided, however, that any fees or expenses incurred in connection with the preparation of a Combined Return shall be allocated between Distributing and Spinco in a manner resulting in Distributing and Spinco, respectively, bearing a reasonable approximation of the actual amount of such fees or expenses hereunder reasonably related to, and for the benefit of, their respective Groups.

 

8.4                               Governing Law; Jurisdiction.  This Agreement and the legal relations among the parties hereto will be governed in all respects, including validity, interpretation and effect, by the laws of the State of Delaware applicable to contracts made and performed wholly therein, without giving effect to any choice or conflict of laws provisions or rules that would cause the application of the laws of any other jurisdiction. Each of the parties hereto irrevocably agrees that any legal action or proceeding with respect to this Agreement, and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this Agreement, and the rights and obligations arising hereunder brought by the other party hereto or its successors or assigns, shall be brought and determined exclusively in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware).  Each of the parties hereto hereby irrevocably submits with regard to any such action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any action relating to this Agreement or the transactions contemplated hereby in any court other than the aforesaid courts.  Each of the parties hereto hereby irrevocably waives, and agrees not to assert as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement (a) any claim that it is not personally subject to the jurisdiction of the above named courts for any reason other than the failure to serve in accordance with Section 8.6 and this Section 8.4, (b) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of

 

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execution of judgment, execution of judgment or otherwise) and (c) to the fullest extent permitted by applicable law, any claim that (i) the suit, action or proceeding in such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement or the subject matter hereof may not be enforced in or by such courts.  Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 8.6 shall be deemed effective service of process on such party.

 

8.5                               Waiver of Jury Trial.  EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT.  EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF SUCH ACTION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.5.

 

8.6                               Notices.  All notices, requests, and other communications hereunder shall be in writing and shall be delivered in person, by facsimile (with confirming copy sent by one of the other delivery methods specified herein), by overnight courier or sent by certified, registered or express air mail, postage prepaid, and shall be deemed given when so delivered in person, or when so received by facsimile or courier, or, if mailed, three (3) calendar days after the date of mailing, as follows:

 

(a)                                 If to Distributing, to:

 

Starz

8900 Liberty Circle

Englewood, Colorado  80112

 

Attn:  General Counsel

Facsimile:  (720) 852-6279

 

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(b)                                 If to Spinco, to:

 

Liberty Media Corporation

12300 Liberty Boulevard

Englewood, Colorado  80112

 

Attn:  General Counsel

Facsimile:  (720) 875-5382

 

or to such other address as the party to whom notice is given may have previously furnished to the other parties in writing in the manner set forth above.

 

8.7                               Counterparts.  This Agreement may be executed in two or more identical counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same agreement.

 

8.8                               Binding Effect; Assignment.  This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Except with respect to a merger of a party, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto without the prior written consent of the other parties; provided, however, that each of Distributing and Spinco may assign its respective rights, interests, liabilities and obligations under this Agreement to any other member of its Group, but such assignment shall not relieve Distributing or Spinco, as the assignor, of its liabilities or obligations hereunder.

 

8.9                               Severability.  Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.  Upon a determination that any provision of this Agreement is prohibited or unenforceable in any jurisdiction, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the provisions contemplated hereby are consummated as originally contemplated to the fullest extent possible.

 

8.10                        Amendments; Waivers.  Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective.  No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  Except as otherwise provided herein, the rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by applicable law.  Any consent provided under this

 

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Agreement must be in writing, signed by the party against whom enforcement of such consent is sought.

 

8.11                        Effective Date.  This Agreement shall become effective on the date recited above on which the parties entered into this Agreement.

 

8.12                        Change in Law.  Any reference to a provision of the Code or any other Tax Law shall include a reference to any applicable successor provision or law.

 

8.13                        Authorization, Etc.  Each of the parties hereto hereby represents and warrants that it has the power and authority to execute, deliver and perform this Agreement, that this Agreement has been duly authorized by all necessary corporate action on the part of such party, that this Agreement constitutes a legal, valid and binding obligation of such party and that the execution, delivery and performance of this Agreement by such party does not contravene or conflict with any provision of law or of its charter or bylaws or any agreement, instrument or order binding such party.

 

8.14                        No Third Party Beneficiaries.  Except as provided in Sections 7.2, 7.3, and 8.8 of this Agreement, this Agreement is solely for the benefit of the parties and their respective Subsidiaries and is not intended to confer upon any other Person any rights or remedies hereunder.  Notwithstanding anything in this Agreement to the contrary, this Agreement is not intended to confer upon any Spinco Indemnitees any rights or remedies against Spinco hereunder, and this Agreement is not intended to confer upon any Distributing Indemnitees any rights or remedies against Distributing hereunder.

 

8.15                        Entire Agreement.  This Agreement embodies the entire understanding among the parties relating to its subject matter and supersedes and terminates any prior agreements and understandings among the parties with respect to such subject matter, and no party to this Agreement shall have any right, responsibility, obligation or liability under any such prior agreement or understanding.  Any and all prior correspondence, conversations and memoranda are merged herein and shall be without effect hereon.  No promises, covenants or representations of any kind, other than those expressly stated herein, have been made to induce any party to enter into this Agreement.

 

8.16                        No Strict Construction; Interpretation.

 

(a)                                 Distributing and Spinco each acknowledge that this Agreement has been prepared jointly by the parties hereto and shall not be strictly construed against any party hereto.

 

(b)                                 When a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference shall be to an Article of, a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated.  The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.  The words “hereof”, “herein” and

 

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“hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.  The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term.  Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein.  References to a Person are also to its permitted successors and assigns.

 

8.17                        Headings.  The headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement.

 

8.18                        Assignment of Rights under the Split-off Tax Sharing Agreement.  Distributing hereby assigns to Spinco all of its rights to indemnification payments and related rights under the Split-off Tax Sharing Agreement with respect to any liability for Split-off Transaction Taxes, Split-off Tax-Related Losses, or any other Taxes, Tax Items, Losses or payments that, in each case, are allocated to Spinco hereunder and with respect to which Spinco has paid in whole.  If any Joint Claim is made against any member of the Distributing Group or the Spinco Group with respect to any Split-off Transaction Taxes or Split-off Tax-Related Losses, or any other claim is made against any member of the Distributing Group or the Spinco Group with respect to any other Taxes, Tax Items, Losses or payments for which any member of the Distributing Group or the Spinco Group would be entitled to indemnification under the Split-off Tax Sharing Agreement, then at Spinco’s request, Distributing shall assert a claim for indemnification against Liberty Interactive under the Split-off Tax Sharing Agreement in respect of such Split-off Transaction Taxes, Split-off Tax-Related Losses, or other Taxes, Tax Items, Losses, or payments, as applicable, to the extent such a claim would not be frivolous.  Spinco and Distributing shall jointly control the prosecution of any such claim related to Split-off Transaction Taxes or Split-off Tax-Related Losses, under the principles contained in Section 7.8, and the principles of Section 7.9 shall govern any claim that is not a Joint Claim.  Distributing shall not amend, modify or terminate the Split-off Tax Sharing Agreement, or waive any rights thereunder, without the prior written consent of Spinco, which consent shall not be unreasonably withheld.

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by the respective officers as of the date set forth above.

 

 

	
 
    	
STARZ
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Richard N. Baer
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
Richard   N. Baer
    
	
 
    	
 
    	
Title:
    	
Senior   Vice President and General Counsel
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LIBERTY   MEDIA CORPORATION
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
/s/   Albert E. Rosenthaler
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
Albert   E. Rosenthaler
    
	
 
    	
 
    	
Title:
    	
Senior   Vice President
    
					


 

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