This excerpt taken from the ABD 8-K filed Aug 17, 2005.
TAX INDEMNIFICATION; TAX CONTESTS
Section 4.01 Indemnification.
(a) Lane Indemnification. Lane shall be liable for, and shall indemnify, defend and hold harmless GBC, each other GBC Entity, each of their respective Representatives, and each of the heirs, executors, successors and assigns of any of the foregoing, from and against any and all Losses and Expenses arising as a result of or in connection with:
(i) all Taxes imposed on any Lane Entity (other than Taxes imposed with respect to any Combined Group);
(ii) all Taxes imposed with respect to any Combined Group, to the extent such Taxes are allocable to an Lane Entity under Section 3.04;
(iii) the breach by Lane, or any other Lane Entity, of any representation, warranty, covenant or obligation under this Agreement;
(iv) all Taxes attributable to the proposed unagreed audit adjustments for the 1999 taxable year of the Combined Group that are the subject of that certain Appeal and Protest of Proposed Examination Changes filed with the IRS on December 19, 2003 (the 1999 Audit) (it being understood and agreed by the parties that, in determining any Taxes attributable to the 1999 Audit, Lane shall receive the full benefit of any reduction in U.S. federal alternative minimum Tax for any year arising in connection with the resolution of the 1999 Audit); and
(v) all liability for any reasonable legal, accounting, appraisal, consulting or similar fees and expenses relating to the foregoing.
Notwithstanding the foregoing, Lane shall not indemnify, defend or hold harmless any GBC Entity, any of their respective Representatives, nor any of the heirs, executors, successors and assigns of any of the foregoing from any liability for Transfer Taxes incurred in connection with the Merger.
(b) GBC Indemnification. GBC shall be liable for, and shall indemnify, defend and hold harmless Lane, each other Lane Entity, each of their respective Representatives, and each of the heirs, executors, successors and assigns of any of the foregoing, from and against any and all Losses and Expenses arising as a result of or in connection with:
(i) all Taxes imposed on any GBC Entity (other than Taxes imposed with respect to any Combined Group);
(ii) all Taxes imposed with respect to any Combined Group, to the extent such Taxes are allocable to a GBC Entity under Section 3.04;
(iii) without duplication of any liability GBC otherwise has under this Agreement, any recapture of dual consolidated losses (within the meaning of Section 1503 of the Code and applicable Treasury Regulations), including any associated interest charge, relating to GBC or any Person in which GBC directly or indirectly owned or owns an interest (including any actual or deemed branch or unit thereof or relating thereto) (including any Losses or reasonable Expenses arising as a result of or in connection with any closing or other agreement entered into in connection therewith);
(iv) the breach by GBC, or any other GBC Entity, of any representation, warranty, covenant or obligation under this Agreement;
(v) all Transfer Taxes incurred in connection with the Merger; and
(vi) all liability for any reasonable legal, accounting, appraisal, consulting or similar fees and expenses relating to the foregoing.
For the avoidance of doubt, it is understood and agreed that GBC shall be liable for, and shall indemnify, defend and hold harmless Lane, each other Lane Entity, each of their respective Representatives, and each of the heirs, executors, successors and assigns of any of the foregoing, from and against the imposition of Taxes or the reduction or impairment of net operating losses or other Tax attributes (and any and all Losses and Expenses relating thereto) arising as a result of or in connection with any distributions from non-U.S. GBC Entities.
Section 4.02 Notice of Indemnity. Whenever a party hereto (hereinafter an Indemnitee) becomes aware of the existence of an issue raised by any Tax Authority which could reasonably be expected to result in a determination that would require a payment hereunder by the other party (hereinafter an Indemnity Issue), the Indemnitee shall in good faith promptly give notice to such other party (hereinafter the Indemnitor) of such Indemnity Issue. The failure of the Indemnitee to give such notice shall not relieve the Indemnitor of its obligations under this Agreement, except to the extent such Indemnitor or any of its Entities is actually prejudiced by such failure to give notice.
Section 4.03 Payments.
(a) Time for Payment. Except as otherwise provided in this Section 4.03, any indemnity payment required to be made pursuant to this Agreement shall be paid within thirty days after the indemnified party makes written demand upon the indemnifying party, provided that, in the case of any indemnity payment relating to Taxes required to be paid, in no event shall such payment be required to be made earlier than five business days prior to the date on which the relevant Taxes (including estimated Taxes) are required to be paid (or would be required to be paid if no such Taxes are due) to the relevant Tax Authority.
(b) Deductible. Notwithstanding the foregoing, an indemnifying party shall be required to make indemnity payments due pursuant to this Agreement only if the aggregate amount of indemnity payments due from the indemnifying party exceeds $100,000, but if the aggregate amount of all such payments exceeds that amount, then the indemnifying party shall make a payment of the entire amount of indemnity payments due hereunder.
(c) Payments Net of Taxes and Tax Benefits. The amount of any payment under this Agreement shall be (i) reduced to take into account any net Tax benefit realized by the recipients Entities arising from the incurrence or payment by any of such recipients Entities of any amount in respect of which such payment is made and (ii) increased to take into account any net Tax cost incurred by the recipients Entities as a result of the receipt or accrual of payments hereunder (grossed-up for such increase), in each case determined by treating the recipient as recognizing all other items of income, gain, loss, deduction or credit before recognizing any item arising from the receipt or accrual of any payment hereunder; provided, that the parties hereto acknowledge that the tax items giving rise to payments hereunder, and the payments hereunder, may affect computations of earnings and profits and stock basis and that no such effects on earnings and profits or stock basis shall be taken into account in computing the amount of any payment due under this Agreement.
(d) Right to Offset. Any party making a payment under this Agreement shall have the right to reduce any such payment by any undisputed amounts owed to it by the other party to this Agreement.
(e) Characterization of Payments. It is the intention of the parties to this Agreement that payments made pursuant to this Agreement are to be treated as relating back to the time immediately prior to the Merger as an adjustment to capital (i.e., capital contribution or distribution), and the parties shall not take any position inconsistent with such intention before any Tax Authority, except to the extent that a final determination (as defined in Section 1313 of the Code) with respect to the recipient party causes any such payment not to be so treated.
Section 4.04 Tax Contests.
(a) General. The Indemnitor and its Representatives, at the Indemnitors expense, shall be entitled to participate (a) in all conferences, meetings and proceedings with any Tax Authority, the subject matter of which is or includes an Indemnity Issue and (b) in all appearances before any court, the subject matter of which is or includes an Indemnity Issue. The party who has economic responsibility under this Agreement for the Tax issue that is the subject of the contest (the Responsible Party) with respect to which there could be an increase in liability for any Tax or with respect to which a payment could be required hereunder shall have the right to decide as between the parties hereto how such matter is to be dealt with and finally resolved with the appropriate Tax Authority and shall control all audits and similar proceedings; provided, however, that if the amount of the increase of any adjustment would have a material
impact on the earnings or financial condition of the non-Responsible Party, then the non-Responsible Party must consent to any such adjustment, which consent shall not be unreasonably withheld or delayed. The Responsible Party agrees to cooperate in the settlement of any Indemnity Issue with the other party and to take such other partys interests into account.
(b) 1999 Audit. Notwithstanding Section 4.04(a), Lane shall have the sole right, at its expense, to conduct any and all proceedings relating to the 1999 Audit and shall have the sole right to decide as between the parties hereto how the 1999 Audit shall be dealt with and finally resolved and shall control all proceedings with respect thereto.
Section 4.05 Change in Law. Notwithstanding the agreement with respect to reporting of Tax items and the claiming of the deductions set forth in Article 4 of this Agreement, none of the GBC Entities nor any of the Lane Entities shall have any obligation to report any such Tax items or claim such deductions as set forth in such Article in the event that either such party determines, based on an opinion of nationally recognized tax counsel, which opinion shall be reasonably satisfactory to the other party, that there is no substantial authority to support reporting such Tax items or claiming such deductions on a Tax Return filed by such party as a result of a change in or amendment to any law or regulation, or any change in the official interpretation thereof, effective or occurring after the date of this Agreement, and such Entities provide prompt notice to the other Entities of any such determination.
Section 4.06 Interest Charge for Late Payments. Any amount due and owing by one party to the other party pursuant to this Agreement that is not paid when due shall bear interest from the due date thereof until paid at a rate equal to the short-term applicable federal rate in effect on the date such payment was required to be made.