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EXHIBIT 10.4
TAX ALLOCATION AGREEMENT
This TAX ALLOCATION AGREEMENT ("Agreement"), as of dated July 31,
2000, is between B/E Aerospace, Inc. ("B/E Aerospace"), a Delaware
corporation, on behalf of itself, the Affiliated Group (as defined below) and
the B/E Aerospace Subgroup (as defined below), on the one hand, and Advanced
Thermal Technologies, Inc. ("ATT"), a Delaware corporation, on behalf of itself
and the ATT Subgroup (as defined below), on the other hand. Capitalized terms
used herein shall have the meanings assigned to them in Article 1 below.
RECITALS
WHEREAS, for Taxable periods prior to the initial public offering of
ATT (the "Initial Public Offering") B/E Aerospace has been the common parent
corporation of an Affiliated Group of corporations (as defined in Section
1504(a) of the Code) that included ATT;
WHEREAS, the Affiliated Group has filed consolidated U.S. federal
income tax returns under Section 1501 of the Code (the "Consolidated Group
Return"), so that the Tax liability of the Affiliated Group is determined under
Section 1502 of the Code and the Regulations thereunder by consolidating the
income, expenses, gains, losses and credits of all of the members of the
Affiliated Group;
WHEREAS, B/E Aerospace files certain Combined Returns on behalf of
itself and other members of a Combined Group;
WHEREAS, it is the intent and desire of B/E Aerospace, on behalf of
itself and its present and future subsidiaries other than ATT and ATT's present
and future subsidiaries (collectively, the "B/E Aerospace Subgroup"), and ATT,
on behalf of itself and its present and future subsidiaries (collectively, the
"ATT Subgroup") to provide for the allocation and apportionment between the B/E
Aerospace Subgroup and the ATT Subgroup of responsibilities, liabilities, and
benefits relating to Taxes paid or payable by the B/E Aerospace Subgroup, the
ATT Subgroup or any member of any such group for Tax periods in which ATT and
any member of the ATT Subgroup is included in a Consolidated Group Return or
Combined Return; and
WHEREAS, in connection with the Initial Public Offering, B/E
Aerospace and ATT expect that ATT will cease to be a member of the Affiliated
Group and will cease to be included in the Consolidated Group Return;
AGREEMENT
NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties agree as follows:
1. DEFINITIONS
1.1 "Adjustment" means an adjustment determined on an issue-
by-issue or transaction-by-transaction basis, as appropriate, made or proposed
by a Taxing Authority with respect to any amount reflected or required to be
reflected on any Return relating to such Tax.
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1.2 "Affiliated Group" means B/E Aerospace, ATT and all other
corporations which may now or from time to time hereafter be eligible or
required to be included in a Consolidated Group Return with B/E Aerospace as the
common parent corporation.
1.3 "After Tax Basis" in reference to an indemnity payment
under Section 5.3 shall mean an amount that, after (i) subtraction of the
aggregate additional Taxes incurred or to be incurred by the party receiving the
indemnity payment as a result of the receipt of such payment and (ii) addition
of the tax benefit to the party receiving the indemnity payment on account of
the Adjustment to which such indemnity payment relates, is equal to the amount
of the Tax Adjustment. After Tax Basis in reference to a benefit payment under
Section 5.3 shall mean an amount that, after (i) addition of the aggregate
additional Taxes incurred or to be incurred by the party making the benefit
payment on account of the Tax benefit to which such benefit payment relates and
(ii) subtraction of the Tax benefit to the party making the benefit payment as a
result of the making of such payment, is equal to the amount of the Tax benefit.
For purpose of determining such additional Taxes incurred or to be incurred and
such Tax benefit, the following assumptions will be used: (a) in the case of any
income tax, the highest marginal Tax rate or, in the case of any other Tax, the
highest applicable Tax rate, in each case in effect with respect to that Tax for
the Taxable period or any portion of the Taxable period to which the indemnity
payment or benefit payment relates; and (b) such determination shall be made
without regard to whether any actual additional Taxes or Tax benefit will in
fact be realized with respect to the Return to which such payment relates.
1.4 "ATT Tax Adjustment" shall mean, with respect to any
Taxable period or portion of a Taxable period, and as computed separately with
respect to each Tax, the net increase in each such Tax equal to the sum of all
Tax Adjustments made pursuant to a Final Determination with respect to each such
Tax for each such Taxable period or portion of a Taxable period that are
attributable to the income, assets and/or business of any member of the ATT
Subgroup.
1.5 "ATT Tax Benefit" shall mean, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with respect
to each Tax, the net decrease in each such Tax equal to the sum of all Tax
Adjustments made pursuant to a Final Determination with respect to each such Tax
for each such Taxable period or portion of a Taxable period that are
attributable to the income, assets and/or business of any member of the ATT
Subgroup.
1.6 "B/E Aerospace Tax Adjustment" shall mean, with respect
to any Taxable period or portion of a Taxable period, and as computed separately
with respect to each Tax, the net increase in each such Tax equal to the sum of
all Tax Adjustments made pursuant to a Final Determination with respect to each
such Tax for each such Taxable period or portion of a Taxable period that are
attributable to the income, assets and/or business of any member of the B/E
Aerospace Subgroup.
1.7 "B/E Aerospace Tax Benefit" shall mean, with respect to
any Taxable period or portion of a Taxable period, and as computed separately
with respect to each Tax, the net decrease in each such Tax equal to the sum of
all Tax Adjustments made pursuant to a Final Determination with respect to each
such Tax for each such Taxable period or portion of a
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Taxable period that are attributable to the income, assets and/or business of
any member of the B/E Aerospace Subgroup.
1.8 "Carryforward Tax Attribute" means a deductible or
creditable consolidated federal income tax attribute (or an equivalent state,
local or foreign tax attribute), including, but not limited to, (i) a
consolidated net operating loss, a consolidated net capital loss, a consolidated
unused foreign investment credit, a consolidated unused foreign tax credit, or a
consolidated excess charitable contribution (see Section 1.1502-79 of the
Regulations), and (ii) the consolidated minimum tax credit, or other
consolidated general business credits, that can be carried forward from one tax
period to subsequent tax periods.
1.9 "Code" means the U.S. Internal Revenue Code of 1986, as
amended.
1.10 "Combined Group" means B/E Aerospace, ATT and all other
corporations which may now or from time to time hereafter be eligible or
required to be included in a Combined Return with B/E Aerospace.
1.11 "Combined Period" means that period of time during which
ATT is a member of the Combined Group.
1.12 "Combined Return" means a Return of state, local or
foreign income or franchise Tax filed by a group of controlled corporations on a
combined or unitary basis as opposed to a separate company basis.
1.13 "Combined Return Year" means any Taxable year or portion
thereof of the Combined Period.
1.14 "Consolidated Group Return" means, with respect to any
Consolidated Return Year, the federal income tax return of the Affiliated Group
for such Consolidated Return Year.
1.15 "Consolidated Period" means that period of time during
which ATT is a member of the Affiliated Group.
1.16 "Consolidated Return Date" means each date upon which the
Consolidated Group Return is filed.
1.17 "Consolidated Return Year" means any Taxable year or
portion thereof of the Consolidated Period.
1.18 "Estimated Payment Date" means each date occurring during
any Consolidated Return Year or Combined Return Year upon which the Consolidated
Group is required to make a payment of estimated Tax, whether or not such a
payment is due, for such Consolidated Return Year or Combined Return Year, as
applicable.
1.19 "Extension Payment Date" means, with respect to any
Consolidated Return Year, any date upon which the Affiliated Group shall be
required to make a payment of federal income taxes in connection with any
request by B/E Aerospace, on behalf of the
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Affiliated Group, for an extension of the date upon which it would have been
required, absent such extension, to file its federal income tax return for such
Consolidated Return Year.
1.20 "Final Determination" means (a) a decision, judgment,
decree or other order by any court of competent jurisdiction, which has become
final and is either no longer subject to appeal or for which a determination not
to appeal has been made; (b) a closing agreement made under Section 7121 of the
Code or any comparable foreign, state, local, municipal or other Taxing statute;
(c) a final disposition by any Taxing Authority of a claim for refund; or (d)
any other written agreement relating to an Adjustment to which any Taxing
Authority is a party the execution of which is final and prohibits such Taxing
Authority from seeking any further legal or administrative remedies with respect
to such Adjustment.
1.21 "Group Refund Claim" means any claim filed by B/E
Aerospace on behalf of the Affiliated Group for a refund of federal income Taxes
or on behalf of the Combined Group for a refund of state, local or foreign
income Taxes.
1.22 "IRS" means the United States Internal Revenue Service.
1.23 "Person" means an individual, a general or limited
partnership, a corporation, a trust, a joint venture, an unincorporated
organization, a limited liability entity, or any other entity regardless of the
type or nature thereof.
1.24 "Regulations" means the Regulations issued by the
Secretary of the Treasury interpreting the Code.
1.25 "Return" means any return, report, form or similar
statement or document (including, without limitation, any related or supporting
information or schedule attached thereto and any information return, claim for,
amended return and declaration of estimated Tax) that has been or is required to
be filed with any Taxing Authority or that has been or is required to be
furnished to any Taxing Authority in connection with the determination,
assessment or collection of any Taxes or the administration of any laws,
regulations or administrative requirements relating to any Taxes.
1.26 "Separate Return Period" means that period of time during
which ATT is not a member of the Affiliated Group or the Combined Group, as the
case may be.
1.27 "Separation Date" means the date on which ATT, or any
member of the ATT Subgroup, ceases to be includible in the Consolidated Group
Return or the Combined Return, as the case may be.
1.28 "Tax" (and, with correlative meanings, "Taxes" and
"Taxable") means, without limitation, and as determined on a
jurisdiction-by-jurisdiction basis, each foreign or U.S. federal, state, local
or municipal income, alternative or add-on minimum, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, value added
or any other tax, custom, tariff, impost, levy, duty, governmental fee or other
like assessment or charge of any kind whatsoever, together with any interest or
penalty, addition to tax or additional amount related thereto, imposed by any
Taxing Authority.
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1.29 "Tax Adjustment" shall mean the deemed increase or
decrease in a Tax, determined on an issue-by-issue or transaction-by-transaction
basis, as appropriate, and using the assumptions set forth in the next sentence,
resulting from an adjustment made or proposed by a Taxing Authority with respect
to any amount reflected or required to be reflected on any Return relating to
such Tax. For purpose of determining such deemed increase or decrease in a Tax,
the following assumptions will be used: (a) in the case of any income Tax, the
highest marginal Tax rate or, in the case of any other Tax, the highest
applicable Tax rate, in each case in effect with respect to that Tax for the
Taxable period or any portion of the Taxable period to which the adjustment
relates; and (b) such determination shall be made without regard to whether any
actual increase or decrease in such Tax will in fact be realized with respect to
the Return to which such adjustment relates.
1.30 "Taxing Authority" means any governmental authority or
any subdivision, agency, commission or authority thereof, or any
quasi-governmental or private body having jurisdiction over the assessment,
determination, collection or other imposition of Taxes.
1.31 "Tax Contest" means, without limitation, any audit,
examination, claim, suit, action or other proceeding relating to Taxes in which
an Adjustment to Taxes may be proposed, collected or assessed and in respect of
which an indemnity payment, reimbursement or other payment may be sought under
this Agreement.
2. FILING OF CONSOLIDATED AND COMBINED RETURNS
2.1 Consent to File. ATT hereby consents to the filing of
Consolidated Group Returns by B/E Aerospace on behalf of the Affiliated Group,
including ATT and the ATT Subgroup, for each Consolidated Return Year, and to
any applications for extensions of time to file such Returns, which B/E
Aerospace in its sole judgment shall make to the IRS. ATT hereby consents to the
filing of Combined Returns by B/E Aerospace on behalf of the Combined Group,
including ATT and the ATT Subgroup, for each Combined Return Year, and to any
applications for extensions of time to file such Returns, which B/E Aerospace in
its sole judgment shall make to the applicable Taxing Authorities. ATT shall be
responsible for filing all Tax Returns for the ATT Subgroup for any Taxable year
or portion thereof that is not a Consolidated Return Year or Combined Return
Year, as the case may be.
2.2 Responsibility for Preparing and Filing. B/E Aerospace
shall be entitled to prepare and file, and shall be responsible for the
preparation and filing, of the Consolidated Group Returns and any Combined
Returns, including but not limited to determining all Tax Return positions,
paying estimated taxes and other consolidated Taxes and making all federal,
state, local and foreign tax elections for the Affiliated Group and/or the
Combined Group and each member of such groups; provided, however, that at least
30 days prior to filing any Consolidated Group Return or Combined Return, B/E
Aerospace shall provide ATT the opportunity to review the portion of such
Consolidated Group Return or Combined Return that reflects the income and
operations of ATT and the ATT Subgroup. ATT shall communicate its comments, if
any, to B/E Aerospace at least 15 days prior to the due date, including
extensions, for filing such Tax Return. B/E may, in its sole and absolute
discretion, determine whether to incorporate any such comments in such Tax
Return.
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2.3 Further Action. ATT agrees, at B/E Aerospace's request,
to furnish to B/E Aerospace and/or any Taxing Authority any and all information
and to execute all elections and other documents which may be necessary or
appropriate, in the judgment of B/E Aerospace, to evidence ATT's consent or to
facilitate the preparing and filing of such Returns and applications for
extension of time to file such Returns. This obligation applies to all Tax
Returns for any Consolidated Return Year or Combined Return Year even if such
Return is filed after ATT is no longer a member of the Affiliated Group or the
Combined Group.
3. INDEMNITY, ALLOCATION AND PAYMENT OF LIABILITIES FOR TAXES
3.1 Indemnities.
(a) B/E Aerospace shall be responsible for, and indemnify and hold
ATT and the ATT Subgroup harmless for, any Taxes not allocable to ATT and the
ATT Subgroup pursuant to this Article 3 for any Consolidated Return Year or
Combined Return Year.
(b) ATT shall be responsible for, and indemnify and hold B/E
Aerospace and the B/E Aerospace Subgroup harmless for, any Taxes allocable to
ATT and the ATT Subgroup pursuant to this Article 3 for any Consolidated Return
Year or Combined Return Year.
3.2 Federal Income Taxes for the Consolidated Period. B/E
Aerospace, on behalf of itself and other members of the B/E Aerospace Subgroup,
and ATT, on behalf of itself and other members of the ATT Subgroup, agree to
determine and allocate the federal income tax liability of the Affiliated Group
for any Consolidated Group Return Year among themselves in the following manner:
(a) For each Consolidated Return Year, the ATT Subgroup shall be
allocated, and ATT shall pay to B/E Aerospace as provided in this Article 3 and
in Article 4 an amount equal to the federal income tax liability, if any
(including any alternative minimum Tax), of ATT and/or the other member(s) of
the ATT Subgroup included in the Consolidated Group Return, as determined by B/E
Aerospace in accordance with the methods set forth in this Section 3.2. Such
federal income tax liability shall equal the hypothetical tax liability of the
ATT Subgroup, computed as if the ATT Subgroup had filed a separate consolidated
federal income tax Return and not been included in the Consolidated Group
Return. If the ATT Subgroup's federal tax liability as so determined is zero or
less, then ATT shall not be entitled to any current payment from B/E Aerospace.
(b) The ATT Subgroup's federal income tax liability for the Taxable
year during which ATT ceases to be a member of the Affiliated Group shall be
determined in accordance with the provisions of Regulations Section
1.1502-76(b)(2) by closing the books of ATT and the other members of the ATT
Subgroup as of the end of the last day of the Consolidated Return Year and
taking into account only items accruing during the portion of the Taxable year
ending on such date in computing such liability. Items shall not be pro-rated in
accordance with clauses (ii) or (iii) of Section 1.1502-76(b)(2) of the
Regulations except to the extent B/E Aerospace in its discretion determines that
it is imprac ticable to allocate particular items in accordance with the
preceding sentence.
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(c) The parties acknowledge that the allocation of federal income
tax liability provided for by this Section 3.2 is for purposes of determining
the parties' actual payment obligations to each other with respect to Taxes of
the Affiliated Group for the Consolidated Return Year and not for purposes of
computing earnings and profits pursuant to Section 1552 of the Code. B/E
Aerospace and ATT each recognizes that such allocation may differ from the
allocation provided by Section 1552 for earnings and profits purposes.
(d) It is acknowledged that allocation of the consolidated federal
income tax liability for the Affiliated Group under Section 1.1552-1(a) of the
Regulations shall (in accordance with Section 1.1552-1(b)(2) of the
Regulations), in the amount allocated to each member of the B/E Aerospace
Subgroup and the ATT Subgroup, decrease the earnings and profits of such member
and be treated as a liability of such member for such amount. It is further
acknowledged that if allocations of federal income tax liability in accordance
with Section 3.2 of this Agreement differ from the allocations in accordance
with Section 1.1552-1(a)(1), B/E Aerospace and ATT hereby agree that such
differences will not create liabilities and receivables, but rather will be
regarded as distributions with respect to stock, contributions to capital, or
combinations thereof, as applicable.
3.3 State, Local and Foreign Income and Franchise Taxes for
the Combined Period.
(a) For each Combined Return Year, the ATT Subgroup shall be
allocated, and ATT shall pay to B/E Aerospace in accordance with this Article 3
and Article 4 an amount equal to the state, local and foreign income Tax
liability of ATT and/or such other ATT Subgroup members that are so included, as
determined under this Section 3.3. Such state, local or foreign income Tax
liability shall equal the hypothetical state, local or foreign income tax
liability of the ATT Subgroup members so included, computed as if they filed a
separate combined Return (or if only one such member is so included, a separate
state, local or foreign income or franchise Tax return) and not been included in
the Combined Return filed by the Combined Group. If the ATT Subgroup's state,
local or foreign income tax liability as so determined is zero or less, then ATT
shall not be entitled to any current payment from B/E Aerospace.
(b) ATT shall be responsible for payment of any state, local or
foreign taxes due from it or any members of the ATT Subgroup, and B/E Aerospace
shall be responsible for payment of any state, local or foreign Taxes due from
B/E Aerospace or any member of the B/E Aerospace Subgroup, in connection with
state, local or foreign income or franchise Returns that are not Combined
Returns. ATT shall be responsible for preparing and filing any state, local or
foreign Tax returns, other than Combined Returns, for itself and the ATT
Subgroup.
(c) The ATT Subgroup's applicable state, local or foreign Tax
liability for the Taxable year during which ATT ceases to be included in the
applicable Combined Return, absent any required rule to the contrary, shall be
determined in accordance with principles similar to the provisions of
Regulations Section 1.1502-76(b)(2) by closing the books of ATT and the other
members of the ATT Subgroup as of the end of the last day of the Combined Return
Year and taking into account only items accruing during the portion of the
Taxable year ending on such date in computing such liability.
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3.4 Computational Rules. For purposes of determining and
allocating Tax liabilities and payment obligations for the Consolidated Period
and the Combined Period, the ATT Subgroup's federal, state, local and foreign
income Tax liability will be computed by B/E Aerospace in a manner consistent
with B/E Aerospace's policies and procedures for accounting for income taxes for
financial statement purposes. In making such allocation, ATT shall not receive
any benefits from being a member of the Affiliated Group or Combined Group, such
as any benefit of the graduated Tax rates (including the rates provided under
Section 11 of the Code). In the case of any tax benefit where the amount of the
overall benefit to the Affiliated Group or Combined Group is limited, such as
any alternative minimum Tax exemption amount under Section 55 of the Code, the
benefit shall be allocated solely to the B/E Aerospace Subgroup.
3.5 Time of Payment. To the extent that B/E Aerospace pays
any Tax on behalf of any member of the ATT Subgroup, ATT shall reimburse B/E
Aerospace within ten (10) days of receipt of an invoice requesting payment
thereof.
4. ESTIMATED PAYMENTS OF TAX SHARING LIABILITY
4.1 Hypothetical Tax Computation and Payment Thereof. At
least three (3) days prior to each Estimated Payment Date of each Consolidated
Return Year and Combined Return Year, B/E Aerospace shall deliver to ATT
hypothetical computations of estimated Tax for the ATT Subgroup reflecting the
amounts, if any, of the estimated payment of federal, state, local and/or
foreign income taxes for such Consolidated Return Year or Combined Return Year,
as applicable, which the ATT Subgroup would have been required to pay on such
Estimated Payment Date if it were not included in the Affiliated Group or
Combined Group (calculated in accordance with Article 3). ATT shall pay to B/E
Aerospace, on such Estimated Payment Date, the amounts reflected as owing in
such hypothetical computations.
4.2 Extension Payments. Notwithstanding Section 4.1, if B/E
Aerospace shall request an extension of time to file the Consolidated Group
Return and/or the Combined Return for any Consolidated Return Year or Combined
Return Year, B/E Aerospace shall compute the hypothetical amounts of the
federal, state, local and foreign Tax payments, as applicable, which would have
been payable by ATT on such Extension Payment Date had ATT requested such an
extension and had ATT not been included in the Affiliated Group or Combined
Group during such Consolidated Return Year or Combined Return Year (calculated
in accordance with Article 3). ATT shall pay to B/E Aerospace, on such Extension
Payment Date, the amounts computed by B/E Aerospace.
4.3 Waiver. B/E Aerospace, in its sole discretion, may waive
on an annual basis the requirement for ATT to make the estimated Tax payments as
described in this Section 4.
4.4 Date Consolidated Group and/or Combined Return Filed.
B/E Aerospace shall compute the hypothetical amount of the federal, state, local
and/or foreign Tax which would have been payable by the ATT Subgroup on such
actual filing date had the ATT Subgroup not been included in the Affiliated
Group or Combined Group during such Consolidated Return Year or Combined Return
Year (calculated in accordance with Section 3). ATT shall pay to B/E
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Aerospace the amount computed, less the aggregate of any amounts previously paid
on each Estimated Payment Date and Extension Payment Date pursuant to this
Section 4. ATT shall pay B/E Aerospace the computed amount owed within ten (10)
days of the later of (i) the date on which the Tax Return is filed, or (ii)
receipt of an invoice showing the computed amount owed. If the aggregate amounts
paid by ATT on the Estimated Payment Dates and Extension Payment Dates for a
Consolidated Return Year or Combined Return Year exceed the computed
hypothetical federal, state, local and/or foreign income or franchise Tax
payable by ATT, then B/E Aerospace shall refund to ATT any such excess amount
within ten (10) days of filing the applicable Tax Return.
5. DISPUTES WITH TAXING AUTHORITIES
5.1 Confirmation of Authority. In the event of a Tax Contest
with the IRS or any other Taxing Authority concerning the amount of any Tax
liability of or refund due to the Affiliated Group or any member thereof for any
Consolidated Return Year or to the Combined Group or any member thereof for any
Combined Return Year, and in connection with every Group Refund Claim or other
claim for refund of Tax for any Consolidated Return Year or Combined Return
Year, ATT hereby expressly confirms, with respect to federal income tax
liability, the authority granted to B/E Aerospace in Regulations Section
1.1502-77 (and in any successor provision thereto) to act on behalf of ATT and
the ATT Subgroup notwithstanding that ATT may be liable for additional tax or
for additional payments to B/E Aerospace. With respect to such federal income
taxes and all other Taxes, ATT hereby expressly and irrevocably appoints B/E
Aerospace to be its sole agent and expressly relinquishes any rights it may have
to act for or represent itself in any manner in any such Tax Contest or with
respect to any such Group Refund Claim related to the time period in which ATT
and/or any member of the ATT Subgroup is a member of the Affiliated Group. ATT
hereby authorizes B/E Aerospace and its representatives to pursue such Tax
Contest, Group Refund Claim, or other claim for refund of Tax either
administratively or by court action. ATT hereby irrevocably agrees that B/E
Aerospace shall have the exclusive right, on behalf of ATT and the ATT Subgroup,
to make any and all decisions to pursue, settle, or appeal any Tax Contest,
Group Refund Claim or other claim for refund of Tax, and to control all
administrative and court proceedings and any and all negotiations and
settlements related thereto. ATT hereby expressly consents to B/E Aerospace
entering into settlements on its behalf and on behalf of the ATT Subgroup, as
B/E Aerospace deems appropriate in its sole discretion, exercised in good faith;
provided, however, that prior to settling an issue that would give rise to Tax
Adjustment for which ATT or a member of the ATT Subgroup would be liable under
this Agreement, ATT shall have the right and opportunity to review such
settlement. B/E Aerospace may, in its sole and absolute discretion accept or
reject any suggestions made by ATT with respect to such settlement. ATT may
assist in the defense of audit issues arising from its operations, at its own
expense, subject to the direction and control of B/E Aerospace. ATT shall
reimburse B/E Aerospace for all reasonable out-of pocket expenses (including,
with limitation, legal, consulting and accounting fees) in the course of a Tax
Contest regarding an item of the ATT Subgroup for any Taxable period during
which the ATT Subgroup was a member of the Affiliated Group or Combined Group to
the extent such expenses are reasonably attributable to such Tax Contest.
5.2 Agreement to Cooperate. ATT agrees to cooperate and cause
the ATT Subgroup to cooperate fully and in a timely manner with B/E Aerospace in
connection with the
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preparation of Tax Returns, the pursuit of any Group Refund Claim or other claim
for refund of Taxes or the conduct of any Tax Contest for any Consolidated
Return Year or Combined Return Year, at ATT's own expense by taking any and all
action that may be necessary or helpful, as requested by B/E Aerospace,
including (without limitation) furnishing to B/E Aerospace access to and copies
of all records and documents and making personnel available for interviews and
testimony. This agreement to cooperate extends beyond the date after which ATT
is no longer a member of the Affiliated Group or the Combined Group.
5.3 Adjustments.
(a) In the event there is an Adjustment, made pursuant to a Final
Determination, of an item of income, gain, loss, deduction, or credit with
respect to any Return of any member of the Affiliated Group or the Combined
Group for any Taxable period during which ATT and/or any other member of the ATT
Subgroup is or was a member of the Affiliated Group or the Combined Group:
(i) ATT shall be liable for, and shall indemnify and hold
harmless, as appropriate, any member of the B/E Aerospace Subgroup, on
an After Tax Basis against any and all ATT Tax Adjustments;
(ii) ATT shall be entitled to receive on an After Tax Basis the
amount of any ATT Tax Benefits;
(iii) B/E Aerospace shall be liable for, and shall indemnify and
hold harmless, as appropriate, any member of the ATT Subgroup on an
After Tax Basis against any and all B/E Aerospace Tax Adjustments; and
(iv) B/E Aerospace shall be entitled to receive on an After Tax
Basis the amount of any B/E Aerospace Tax Benefits.
(b) B/E Aerospace and ATT shall share the amount of any Tax
Adjustment if, and to the extent, each party is liable for and/or has an
obligation to make, or has the right to receive, as the case may be, any
indemnity payment, or other payment with respect to such Tax Adjustment under
Section 5.3(a), in proportion to the amounts of the underlying Adjustments
giving rise to such Tax Adjustment attributable to the B/E Aerospace Subgroup
and the ATT Subgroup respectively.
(c) Indemnity payments required by Section 5.3(a) and 5.3(b) shall
be paid within 60 days of the date of such Final Determination. B/E Aerospace
shall provide ATT with prompt written notice of each such Final Determination.
6. TAX ATTRIBUTE CARRYOVERS
6.1 Carryforward Tax Attributes. The Carryforward Tax
Attributes available to ATT for Separate Return Periods will be determined by
allocating the Carryforward Tax Attributes of the B/E Aerospace Group to tax
periods beginning after the Separation Date among the B/E Aerospace Subgroup and
ATT Subgroup as described below:
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(a) Federal Tax Attributes. Any federal Carryforward Tax Attributes
allocable to ATT or a member of the ATT Subgroup under Regulations Section
1.502-21 and Proposed Regulations Section 1.41-8 shall remain with ATT or such
member. The portion, if any, of any B/E Aerospace Group consolidated unused
foreign tax credit which is allocable to ATT shall be determined separately with
respect to each of the items of income listed in Section 904(d) of the Code.
(b) State, Local or Foreign Tax Attributes. State, local or foreign
Carryforward Tax Attributes shall not be allocated to ATT or any member of the
ATT Subgroup, unless under the provisions of applicable state, local or foreign
law or regulations such Carryforward Tax Attributes are expressly required to be
allocated to ATT or any member of the ATT Subgroup.
6.2 Carryback Items from Separate Return Tax Periods. With
respect to carrybacks of ATT or net operating losses, net capital losses, unused
tax credits and other deductible or creditable Tax attributes to a Consolidated
Period or Combined Period from a Separate Return Period which would be permitted
under the Code and the Regulations (or comparable state, local or foreign law or
regulations), ATT shall make an irrevocable election under Regulations Section
1.1502-21(b)(3)(i) (or comparable state, local or foreign law or regulations),
to relinquish any carryback period which would include the Consolidated Period.
In cases where ATT cannot relinquish the carryback period or, if the parties
otherwise agree, B/E Aerospace shall cooperate with ATT in seeking Tax refunds
from the appropriate Taxing Authority, at ATT's expense, and ATT shall be
entitled to such refund, including interest paid by the Taxing Authority in
connection with such refund; provided however, that ATT shall indemnify and hold
B/E Aerospace harmless from and against any and all collateral Tax consequences,
including interest, resulting from or caused by the carryback of deductible or
creditable Tax attributes by ATT from a Separate Return Period to a Consolidated
Period, including but not limited to, Tax attributes of B/E Aerospace that
expire unused (including Tax attributes that expire during a Tax period
subsequent to the Tax period during which the ATT Tax attribute carried back was
generated) and which would have been used but for ATT's carryback. The amount of
such indemnity shall be limited to the actual Tax benefits to which B/E
Aerospace would have been entitled in the absence of the carryback of the
deductible or creditable Tax attribute of ATT. ATT shall have the right to
review the collateral Tax consequences being indemnified. The amount of the
refund due to ATT from B/E Aerospace shall be reduced and offset by the amount
of the indemnification, if any.
7. PRIORITY OF AGREEMENT
7.1 Fixing of Liability. The provisions of this Agreement
shall determine and fix the liability of the parties to each other as to the
matters provided for herein, regardless of how the payments made pursuant hereto
are treated for Tax purposes.
8. OTHER GROUP MEMBERS
8.1 Agreements. B/E Aerospace and ATT recognize that other
corporations are now or may from time to time hereafter become members of the
Affiliated Group or the Combined Group and it may become appropriate to adopt
different or additional methods of sharing Taxes. ATT, on behalf of itself and
the ATT Subgroup, hereby authorizes B/E
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Aerospace to enter into the same, similar or different supplemental, conflicting
or replacement Tax sharing agreements on behalf of the Affiliated Group or the
Combined Group (including ATT and the ATT Subgroup), as the case may be with any
corporation which is now or may hereafter become a member of the Affiliated
Group or the Combined Group, as the case may be.
9. RECORDS
9.1 Retention by B/E Aerospace. B/E Aerospace shall, until
the end of the applicable statute of limitations for each Tax year (giving
effect to any extensions thereof), retain all material records, including but
not limited to, returns, supporting schedules, workpapers, correspondence, and
other documents relating to the Consolidated Group Returns and Combined Returns
filed for a Taxable year during which ATT is a member of the Affiliated Group
and/or the Combined Group and shall make such items available to ATT for
inspection or copying (at ATT's expense) during B/E Aerospace's regular business
hours.
9.2 Retention by ATT. ATT shall, until the end of the
applicable statute of limitations for each Tax year (giving effect to any
extensions thereof), retain all material records, including but not limited to
supporting schedules, workpapers, correspondence, and other documents relating
to Consolidated Group Returns and Combined Returns filed for a Taxable year
during which ATT is a member of the Affiliated Group and/or the Combined Group
and shall make such items available to B/E Aerospace for inspection or copying
(at B/E Aerospace's expense) during ATT's regular business hours.
10. MISCELLANEOUS
10.1 Governing Law. The internal laws of the State of New York
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms and the interpretation and enforcement
of the rights and duties of the parties hereto.
10.2 Assignment; Binding Upon Successors and Assigns. ATT may
not assign, whether voluntarily or by operation of law, any of its rights or
obligations hereunder without the prior written consent of B/E Aerospace, which
consent may be withheld in its sole discretion. B/E Aerospace may assign its
rights (but not its obligations) under this Agreement without the consent of
ATT; provided, however, that the rights and obligations of B/E Aerospace may be
assigned, without the consent of ATT, pursuant to a merger, exchange,
recapitalization or other reorganization to which B/E Aerospace is a party or by
operation of law. This Agreement will be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns. Any
member corporation which leaves the Affiliated Group and/or the Combined Group
shall be bound by this Agreement.
10.3 Severability. If any provision of this Agreement, or the
application thereof, will for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances will be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the greatest extent possible, the economic,
business, Tax and other purposes of the void or unenforceable provision.
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10.4 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be an original as regards any party
whose signature appears thereon and all of which together will constitute one
and the same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
all the parties reflected hereon as signatories.
10.5 Other Remedies. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy will not preclude the exercise
of any other.
10.6 Amendment and Waivers. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default. Failure by either party, at any time, to require performance
by the other party or to claim a breach of any provision of this Agreement shall
not be construed as a waiver of any right accruing under this Agreement, nor
shall it affect any subsequent breach or the effectiveness of this Agreement or
any part hereof, or prejudice either party with respect to any subsequent
action.
10.7 Expenses. Unless otherwise provided, all fees and expenses
incurred in connection with this Agreement will be paid by the party incurring
such fees or expenses.
10.8 Attorneys' Fees. Should suit be brought to enforce or
interpret any part of this Agreement, the prevailing party will be entitled to
recover, as an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including, without limitation, costs,
expenses and fees on any appeal). The prevailing party will be entitled to
recover its costs of suit, regardless of whether such suit proceeds to final
judgment.
10.9 Dispute Resolution. The parties shall attempt in good
faith to resolve any dispute arising out of or relating to this Agreement and
shall attempt in good faith to negotiate a settlement of any dispute pursuant to
the following process:
(a) Any party having a dispute or claim shall give the other party
written notice stating the nature of the dispute in reasonable detail. Within
ten (10) business days after delivery of the notice, the receiving party shall
submit to the other a written response also in reasonable detail. Within five
(5) business days after delivery of the written response the Chief Financial
Officer (or other individual who has authority to settle the controversy and who
has direct responsibility for administration of the relationships established
pursuant to this Agreement) for each party shall meet (in person or by
telephone) at a mutually acceptable time and place (including telephonic
conference), and thereafter as often as they reasonably deem necessary, to
attempt to resolve the dispute. All reasonable requests for information made by
one party to the other shall be honored.
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(b) If such matter has not been resolved within ten (10) business
days of the referral of the dispute to the Chief Financial Officers, then the
parties may pursue litigation or, if mutually agreed, alternative dispute
resolution mechanisms.
10.10 Notices. All notices and other communications pursuant to
this Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the addresses indicated on the signature page of this Agreement (or
at such other address for a party as shall be specified by like notice). All
such notices and other communications shall be deemed to have been received (a)
in the case of personal delivery, on the date of such delivery, (b) in the case
of a telecopy, when the party receiving such copy shall have confirmed receipt
of the communication, (c) in the case of delivery by nationally-recognized
overnight courier, on the business day following dispatch, and (d) in the case
of mailing, on the tenth business day following such mailing. Failure of a party
to provide notice in a prescribed time period or in a timely manner shall not
constitute a waiver of the other party's obligation hereunder. Where notice is a
condition to payment, the obligation to make the payment shall not be waived,
forgiven or eliminated by virtue of a failure to give notice; however, the time
period in which an amount must be paid shall be measured from the date on which
notice is actually given.
10.11 Construction of Agreement. A reference to a Section will
mean a Section in this Agreement unless otherwise explicitly set forth. The
titles and headings herein are for reference purposes only and will not in any
manner limit the construction of this Agreement which will be considered as a
whole.
10.12 Jurisdiction and Venue. The parties hereto irrevocably
consent to and agree that any litigation or other dispute resolution proceeding
among the parties relating to this Agreement will take place in Palm Beach
County, Florida. The parties hereby irrevocably consent to the personal
jurisdiction of and the venue in the state and federal court within such county.
10.13 Further Assurances. Each party agrees to cooperate fully
with the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to evidence and reflect the transactions
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
10.14 Entire Agreement. This Agreement constitutes the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and supersedes all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect hereto.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers.
B/E AEROSPACE, INC. ADVANCED THERMAL TECHNOLOGIES, INC.
ON BEHALF OF ITSELF AND THE B/E AEROSPACE ON BEHALF OF ITSELF AND THE ATT SUBGROUP
SUBGROUP
By: /s/ THOMAS P. MCCAFFREY By: /s/ CAMERON H. ADAMSON
------------------------------- -------------------------------
Name: THOMAS P. MCCAFFREY Name: CAMERON H. ADAMSON
----------------------------- -----------------------------
Title: Senior V.P. and C.F.O. Title: CFO
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Address for Notice: Address for Notice:
BE Aerospace, Inc. 3355 E. La Palma Ave.
1400 Corporate Center Way Anaheim, CA 92806
Wellington, FL 33414
Attention: Chief Financial Officer Attention: Chief Financial Officer
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