TAX DISAFFILIATION AGREEMENT BETWEEN CABLEVISION SYSTEMS CORPORATION AND AMC NETWORKS INC.
Exhibit 10.2
TABLE OF CONTENTS
| Page | ||||
SECTION 1. Definition of Terms |
1 | |||
SECTION 2. Allocation of Taxes and Tax-Related Losses |
9 | |||
2.1 Allocation of Taxes |
9 | |||
2.2 Allocation of Deconsolidation Taxes, Distribution Taxes and Transfer Taxes |
9 | |||
2.3 Tax Payments |
10 | |||
SECTION 3. Preparation and Filing of Tax Returns |
10 | |||
3.1 Combined Returns |
10 | |||
3.2 Separate Returns |
10 | |||
3.3 Agent |
10 | |||
3.4 Provision of Information |
10 | |||
3.5 Special Rules Relating to the Preparation of Tax Returns |
11 | |||
3.6 Refunds, Credits or Offsets |
11 | |||
3.7 Carrybacks |
12 | |||
3.8 Amended Returns |
12 | |||
3.9 Compensatory Equity Interests |
12 | |||
SECTION 4. Tax Payments |
12 | |||
4.1 Payment of Taxes to Tax Authority |
12 | |||
4.2 Indemnification Payments |
12 | |||
4.3 Interest on Late Payments |
12 | |||
4.4 Tax Consequences of Payments |
13 | |||
4.5 Section 336(e) Election |
13 | |||
4.6 Certain Final Determinations |
13 | |||
SECTION 5. Cooperation and Tax Contests |
13 | |||
5.1 Cooperation |
13 | |||
5.2 Notices of Tax Contests |
13 | |||
5.3 Control of Tax Contests |
14 | |||
5.4 Cooperation Regarding Tax Contests |
14 | |||
SECTION 6. Tax Records |
14 | |||
6.1 Retention of Tax Records |
14 | |||
6.2 Access to Tax Records |
15 | |||
6.3 Confidentiality |
15 | |||
SECTION 7. Representations and Covenants |
15 | |||
7.1 Covenants of Cablevision and AMC |
15 | |||
7.2 Private Letter Ruling |
15 | |||
7.3 Covenants of AMC |
16 | |||
7.4 Covenants of Cablevision |
16 | |||
7.5 Exceptions |
17 | |||
7.6 Injunctive Relief |
17 | |||
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| Page | ||||
7.7 Further Assurances |
17 | |||
SECTION 8. General Provisions |
17 | |||
8.1 Predecessors or Successors |
18 | |||
8.2 Construction |
18 | |||
8.3 Ancillary Agreements |
18 | |||
8.4 Counterparts |
18 | |||
8.5 Notices |
18 | |||
8.6 Amendments |
18 | |||
8.7 Assignment |
18 | |||
8.8 Successors and Assigns |
19 | |||
8.9 Change in Law |
19 | |||
8.10 Authorization, Etc. |
19 | |||
8.11 Termination |
19 | |||
8.12 Subsidiaries |
19 | |||
8.13 Third-Party Beneficiaries |
19 | |||
8.14 Titles and Headings |
19 | |||
8.15 Governing Law |
19 | |||
8.16 Waiver of Jury Trial |
19 | |||
8.17 Severability |
19 | |||
8.18 No Strict Construction; Interpretation |
19 | |||
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THIS
TAX DISAFFILIATION AGREEMENT (the “Agreement”) is
dated as of June
_______, 2011 by and between
Cablevision Systems Corporation, a Delaware corporation (“Cablevision”), and AMC Networks Inc., a
Delaware corporation and a wholly-owned subsidiary of Cablevision (“AMC” and, together with
Cablevision, the “Parties”). Unless otherwise indicated, all “Section” references in this Agreement
are to sections of the Agreement.
RECITALS
WHEREAS, the Board of Directors of Cablevision determined that, based on the Corporate
Business Purposes, it is in the best interests of Cablevision and its stockholders to separate the
businesses of AMC, all as more fully described in AMC’s registration statement on Form 10, from
Cablevision’s other businesses on the terms and conditions set forth in the Distribution Agreement
between Cablevision and AMC dated on or about the date hereof (the “Distribution Agreement”);
WHEREAS, the Board of Directors of CSC Holdings, LLC (“CSC”) authorized the distribution to
Cablevision, as the sole stockholder of CSC, of all the AMC Common Stock (the “CSC Distribution”)
and has determined that, based on the Corporate Business Purposes, the CSC Distribution, including
the Debt Exchange (as defined below), is in the best interests of CSC and its stockholder and has
approved the Distribution Agreement;
WHEREAS, the Board of Directors of Cablevision has authorized the distribution to the holders
of the issued and outstanding shares of NY Group Class A Common Stock, par value $0.01 per share,
of Cablevision (“Cablevision Class A Stock”) and NY Group Class B Common Stock, par value $0.01 per
share, of Cablevision (“Cablevision Class B Stock” and, together with the Cablevision Class A
Stock, the “Cablevision Common Stock”), as of the record date for the distribution, of all the
issued and outstanding shares of Class A common stock, par value $0.01 per share, of AMC (the “AMC
Class A Common Shares”) and Class B common stock, par value $0.01 per share, of AMC (the “AMC Class
B Common Shares”) (each such AMC Class A Common Share and AMC Class B Common Share is individually
referred to as an “AMC Share” and collectively referred to as the “AMC Shares”), respectively, on
the basis of one AMC Share for each [•] shares of Cablevision Common Stock, and to distribute
certain obligations of AMC in exchange for certain obligations of CSC pursuant to the Debt
Exchange, as defined below (such steps collectively, the “Distribution”);
WHEREAS, Cablevision intends the Distribution to qualify as a tax-free transaction described
under Sections 368(a)(1)(D), 355, and 361 of the Code;
WHEREAS, the Boards of Directors of Cablevision and AMC have each determined that the
Distribution and the other transactions contemplated by the Distribution Agreement, and the
Ancillary Agreements (as defined below) are in furtherance of and consistent with the Corporate
Business Purposes and, as such, are in the best interests of their respective companies and
stockholders or sole stockholder, as applicable, and have approved the Distribution Agreement, and
each of the Ancillary Agreements;
WHEREAS, the Parties set forth in the Distribution Agreement the principal arrangements
between them regarding the separation of the AMC Group from the Cablevision Group; and
WHEREAS, the Parties desire to provide for and agree upon the allocation between the Parties
of liabilities for Taxes arising prior to, as a result of, and subsequent to the Distribution, and
to provide for and agree upon other matters relating to Taxes.
NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, the
Parties hereby agree as follows:
SECTION 1. Definition of Terms. For purposes of this Agreement (including the recitals
hereof), the following terms have the following meanings:
“Affiliate” means, when used with respect to any specified Person, a Person that directly or
indirectly Controls, is Controlled by, or is under common Control with such specified Person.
Unless explicitly provided herein to the contrary, (x) neither Cablevision nor any member of the
Cablevision Group shall be deemed to be an Affiliate of AMC or any of its Subsidiaries; (y) neither
AMC nor any member of the AMC Group shall be deemed to be an Affiliate of Cablevision or any of its
Subsidiaries; and (z) neither MSG nor any member of the MSG Group shall be deemed to be an
Affiliate of Cablevision (or any of its Subsidiaries) or of AMC (or any of its Subsidiaries).
“Agreement” has the meaning set forth in the preamble hereof.
“AMC” has the meaning set forth in the preamble hereof.
“AMC Business” means the “IFC Business” as set forth in the Ruling Request that constitutes an
active trade or business, within the meaning of Section 355(b) of the Code, of the separate
affiliated group of AMC, as determined in the Ruling.
| “AMC Class A Common Shares” has the meaning set forth in the recitals to this Agreement. |
“AMC Class B Common Shares” has the meaning set forth in the recitals to this Agreement.
“AMC Management Fee Agreement” means that certain Consulting Agreement, dated as of March 29,
2001, among CSC, American Movie Classics Company, and WE: Women’s Entertainment LLC.
“AMC Group” means (x) with respect to any Tax Year (or portion thereof) ending at or before
the Effective Time, AMC and each of its Subsidiaries at the Effective Time; and (y) with respect to
any Tax Year (or portion thereof) beginning after the Effective Time, AMC and each Subsidiary of
AMC (but only while such Subsidiary is a Subsidiary of AMC).
“AMC Indemnified Party” includes each member of the AMC Group, each of their representatives
and Affiliates, each of their respective directors, officers, managers and employees, and each of
their heirs, executors, trustees, administrators, successors and assigns.
“AMC Shares” has the meaning set forth in the recitals to this Agreement.
“AMC Tainting Act” means a breach of the covenant made by AMC in Section 7.1 of this Agreement
or the taking of a Restricted Action, if as a result of such breach or taking of a Restricted
Action a Final Determination is made that the Contribution and Distribution failed to be tax-free
by reason of (i) failing to qualify as a distribution described in Sections 355 and 368(a)(1)(D) of
the Code, (ii) any stock or obligations (including, for the avoidance of doubt, the Senior Notes
and the Term Loan B) of AMC failing to qualify as “qualified property” within the meaning of
Section 355(c)(2) of the Code or, where applicable, failing to be stock or securities permitted to
be received without recognition of gain or loss under Section 361(a) of the Code, or (iii) the
application of Sections 355(d) or 355(e) of the Code to the Distribution.
| “Ancillary Agreements” means the agreements encompassed by such term in the Distribution Agreement. |
“Business Day” has the meaning set forth in the Distribution Agreement.
| “Cablevision” has the meaning set forth in the preamble hereof. |
“Cablevision Business” means such cable video business as set forth in the Ruling Request that
constitutes an active trade or business, within the meaning of Section 355(b) of the Code, of the
separate affiliated group of Cablevision, as determined in the Ruling.
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“Cablevision Class A Common Stock” has the meaning set forth in the recitals to this
Agreement.
“Cablevision Class B Common Stock” has the meaning set forth in the recitals to this
Agreement.
“Cablevision Common Stock” has the meaning set forth in the recitals to this Agreement.
“Cablevision Group” means Cablevision and each Subsidiary of Cablevision (but only while such
Subsidiary is a Subsidiary of Cablevision) other than any Person that is a member of the AMC Group
(but only during the period such Person is treated as a member of the AMC Group).
“Cablevision Indemnified Party” includes each member of the Cablevision Group, each of their
representatives and Affiliates, each of their respective directors, officers, managers and
employees, and each of their heirs, executors, trustees, administrators, successors and assigns.
“Cablevision Tainting Act” means any breach of a representation or covenant made by
Cablevision in Section 7.1 or Section 7.4 of this Agreement, if as a result of such breach a Final
Determination is made that the Contribution and Distribution failed to be tax-free by reason of (i)
failing to qualify as a distribution described in Sections 355 and 368(a)(1)(D) of the Code, (ii)
any stock or obligations (including, for the avoidance of doubt, the Senior Notes and the Term Loan
B) of AMC failing to qualify as “qualified property” within the meaning of Section 355(c)(2) of the
Code or, where applicable, failing to be stock or securities permitted to be received without
recognition of gain or loss under Section 361(a) of the Code, or (iii) the application of Sections
355(d) or 355(e) of the Code to the Distribution.
“Code” means the U.S. Internal Revenue Code of 1986, as amended.
“Combined Return” means a consolidated, combined or unitary Tax Return that includes, by
election or otherwise, one or more members of the Cablevision Group and one or more members of the
AMC Group.
“Companies” means Cablevision and AMC.
“Company” means Cablevision or AMC, as the context requires.
“Compensatory Equity Interests” means options, stock appreciation rights, restricted stock,
restricted stock units or other rights with respect to Cablevision Common Stock or AMC Shares that
are granted by Cablevision, AMC or any of their respective Subsidiaries in connection with employee
or director compensation or other employee benefits.
“Compensatory Equity Net Share Settlements” means “net share settlement” transactions with
respect to Compensatory Equity Interests between either Party (or any of their respective
Subsidiaries) on the one hand and the employee (or director, as the case may be) of such Party or
the other Party (or any of their respective Subsidiaries) on the other hand, in each case pursuant
to the terms of the relevant agreement with respect to such Compensatory Equity Interests.
“Contribution” means the contribution by Cablevision (through entities disregarded as separate
from Cablevision for U.S. federal tax purposes) to AMC of all of the membership interests of
Rainbow Media Holdings LLC, a Delaware limited liability company, in exchange for the AMC Shares,
obligations of AMC (including the Senior Notes and the Term Loan B), termination of the AMC
Management Fee Agreement and the potential assumption of liabilities by AMC.
“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
3
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.
“Controlling Party” means, with respect to a Tax Contest, the Person that has responsibility,
control and discretion in handling, defending, settling or contesting such Tax Contest.
“Corporate Business Purposes” means the Corporate Business Purposes as set forth in the Tax
Opinion Representations and the “Reasons for the Distribution” in AMC’s registration statement on
Form 10.
“Covered Income Taxes” means any Income Taxes other than New York City Unincorporated Business
Tax as currently imposed by Section 11-503 of the New York City Administrative Code or any
successor thereto.
“Credit Agreement” means the Credit Agreement dated as of [•] entered into by AMC.
“CSC” has the meaning set forth in the recitals to this Agreement.
“CSC Distribution” has the meaning set forth in the recitals to this Agreement.
“Debt Exchange” shall mean the exchange of the Senior Notes and the Term Loan B for
obligations of [•] as set forth in one or more agreements titled [•] entered into [on or about the
date hereof].
“Deconsolidation Taxes” means any Taxes imposed on any member of the Cablevision Group or the
AMC Group as a result of or in connection with the Contribution and the Distribution (or any
portion thereof), including, but not limited to, any Taxes imposed pursuant to or as a result of
Section 311 or 1502 of the Code or the Treasury Regulations thereunder (and under any applicable
similar state, local or foreign law), but excluding any Transfer Taxes and Distribution Taxes.
“Disclosing Party” has the meaning set forth in Section 6.3.
“Distribution” has the meaning set forth in the recitals hereof.
“Distribution Agreement” has the meaning set forth in the recitals hereof.
“Distribution Date” means the date on which the Distribution occurs.
“Distribution Taxes” means any Taxes arising from a Final Determination that the Contribution
and Distribution failed to be tax-free to Cablevision in accordance with the requirements of
Section 355 or 368(a)(1)(D) of the Code (including any Taxes resulting from the application of
Section 355(d) or (e) to the Distribution), or that any stock or obligations (including, for the
avoidance of doubt, the Senior Notes and the Term Loan B) of AMC failed to qualify as “qualified
property” within the meaning of Section 355(c)(2) of the Code or, where applicable, failed to be
stock or securities permitted to be received without recognition of gain or loss under Section
361(a) of the Code, and shall include any Taxes resulting from an election under Section 336(e) of
the Code in the circumstances set forth in Section 4.5 hereof.
“Due Date” has the meaning set forth in Section 4.3.
“Effective Time” shall mean 11:59 p.m., New York City time, on the Distribution Date.
“Employee Matters Agreement” means the Employee Matters Agreement by and between Cablevision
and AMC entered into on or about the date hereof.
4
“Excess Taxes” means the excess of (x) the Taxes for which Cablevision Group is liable if an
election is made pursuant to Section 336(e) of the Code under Section 4.5 of this Agreement,
over (y) the Taxes for which Cablevision Group is liable if such an election is not made,
in each case taking into account the allocation of Taxes that is otherwise applicable in this
Agreement but without regard to Section 4.5 hereof.
“Expert Law Firm” means a law firm nationally recognized for its expertise in the matter for
which its opinion is sought.
“Fifty-Percent Equity Interest” means, in respect of any corporation (within the meaning of
the Code), stock or other equity interests of such corporation possessing (i) at least fifty
percent (50%) of the total combined voting power of all classes of stock or equity interests
entitled to vote, or (ii) at least fifty percent (50%) of the total value of shares of all classes
of stock or of the total value of all equity interests.
“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 Cablevision Group or the AMC Group, as the context requires.
“Income Taxes” means any Tax which is based upon, measured by, or calculated with respect to
(i) net income or profits (including, but not limited to, any capital gains, gross receipts, value
added or minimum Tax) or (ii) multiple bases (including, but not limited to, corporate franchise,
doing business or occupation Taxes) if one or more of the bases upon which such Tax may be based,
by which it may be measured, or with respect to which it may be calculated is described in clause
(i) of this sentence.
“Indemnified Party” shall mean each AMC Indemnified Party and each Cablevision Indemnified
Party, as the context requires.
“Indemnifying Party” has the meaning set forth in Section 4.4.
“Indenture” means the [Indenture] dated as of [•] among [AMC and other parties].
“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., New York time, two
Business Days before the first Interest Rate Determination Date equal to: (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%, or (y) if higher and if with respect to a
payment to indemnify for a Tax to which the “large corporate underpayment” provision within the
meaning of Section 6621(c) applies, such interest rate that would be applicable at such time to
such “large corporate underpayment.”
“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. |
“MSG” and “MSG Group” have the meanings set forth for such terms, respectively, in the MSG
TDA.
“MSG Taxes” means any (i) Taxes described in Section 2.1(b) of the MSG TDA (as qualified by
Section 2.1(c) thereof) or (ii) any “Deconsolidation Taxes” or “Distribution Taxes” as defined in
the MSG TDA (in each case under this clause (ii), for the avoidance of doubt, as such Taxes relate
to the MSG Transaction).
5
“MSG TDA” means that certain Tax Disaffiliation Agreement dated January 12, 2011 between
Cablevision Systems Corporation and Madison Square Garden, Inc.
“MSG Transaction” means the “Distribution” as set forth in the MSG TDA.
“Non-Controlling Party” has the meaning set forth in Section 5.3(a).
“Non-Preparer” means any Company that is not responsible for the preparation and filing of the
applicable Tax Return pursuant to Sections 3.1 or 3.2.
“Parties” has the meaning set forth in the preamble hereof.
“Payment Date” means (x) with respect to any U.S. federal income tax return, the date on which
any required installment of estimated taxes determined under Section 6655 of the Code is due, the
date on which (determined without regard to extensions) filing the return determined under Section
6072 of the Code is required, 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.
“Permitted Acquisition” means any acquisition (as a result of the Distribution) of AMC Shares
solely by reason of holding Cablevision Common Stock, but does not include such an acquisition if
such Cablevision Common Stock, before such acquisition, was itself acquired in a manner to which
the flush language of Section 355(e)(3)(A) of the Code applies (thus causing, for the avoidance of
doubt, Section 355(e)(3)(A)(i), (ii), (iii) or (iv) not to apply).
“Person” means any individual, corporation, company, partnership, trust, incorporated or
unincorporated association, joint venture or other entity of any kind.
“Post-Distribution Period” means any Tax Year or other taxable period beginning after the
Distribution Date and, in the case of any Straddle Period, that part of the Tax Year or other
taxable period that begins at the beginning of the day after the Distribution Date.
“Pre-Distribution Period” means any Tax Year or other taxable period that ends on or before
the Distribution Date and, in the case of any Straddle Period, that part of the Tax Year or other
taxable period through the end of the day on the Distribution Date.
“Preparer” means the Company that is responsible for the preparation and filing of the
applicable Tax Return pursuant to Sections 3.1 or 3.2.
“Receiving Party” has the meaning set forth in Section 6.3.
“Residual Taxes” means all Taxes other than Covered Income Taxes.
“Restricted Action” means any action by AMC or any of its Subsidiaries inconsistent with the
covenants set forth in Section 7.3; and, for the avoidance of doubt, an action shall be and remain
a Restricted Action even if AMC or any of its Subsidiaries is permitted to take such an action
pursuant to Section 7.5.
“Restriction Period” means the period beginning on the Distribution Date and ending
twenty-four (24) months after the Distribution Date.
“Ruling” means the private letter ruling that was issued to Cablevision in response to the
Ruling Request.
6
“Ruling Request” means the request for ruling in connection with the Distribution filed by
Cablevision with the IRS, as amended or supplemented, including any appendices and exhibits
attached thereto or included therewith and including so much of the pre-submission materials
submitted by Cablevision to the IRS, as relate to the Distribution, and including,
for the avoidance of doubt, the communication with the IRS set forth in Annex 2 to the Tax Opinion.
“Satisfactory Guidance” means either a ruling from the IRS or an Unqualified Opinion, in
either case reasonably satisfactory to Cablevision in both form and substance.
“Senior Notes” means the Senior Notes issued under the [Indenture].
“Separate Return” means (a) in the case of any Tax Return required under relevant Tax Law to
be filed by any member of the Cablevision Group (including any consolidated, combined or unitary
Tax Return), any such Tax Return that does not include any member of the AMC Group, and (b) in the
case of any Tax Return required under relevant Tax Law to be filed by any member of the AMC Group
(including any consolidated, combined or unitary Tax Return), any such Tax Return that does not
include any member of the Cablevision Group.
“Straddle Period” means any taxable period beginning on or prior to, and ending after, the
Distribution Date.
“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 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 ownership 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.
“Tax” or “Taxes” means any income, gross income, gross receipts, profits, capital stock,
franchise, withholding, payroll, social security, workers’ compensation, employment, unemployment,
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, any liability attributable to any escheat, abandoned, or unclaimed
property law, and any interest, penalties, additions to tax, or additional amounts in respect of
the foregoing, together with any reasonable expenses, including attorneys’ fees, incurred in
defending against any such Tax.
“Tax Adjustment” has the meaning set forth in Section 4.6.
“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.
7
“Tax Benefit” means a reduction in the Tax liability of a taxpayer (or of the affiliated group
of which it is a member) for any taxable period. Except as otherwise provided in this Agreement, a
Tax Benefit shall be deemed to have been realized or received from a Tax Item in a taxable period
only if and to the extent that the Tax liability of the taxpayer (or of the affiliated group of
which it is a member) for such period, after taking into account the effect of the Tax Item on the
Tax liability of such taxpayer in the current period and all prior periods, is less than it would
have been if such Tax liability were determined without regard to such Tax Item.
“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 ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP.
“Tax-Free Status” means the qualification of the Contribution and Distribution (a) as a
transaction described in Sections 355(a) and 368(a)(1)(D) of the Code and (b) as a transaction in
which the stock and obligations distributed thereby are “qualified property” for purposes of
Section 361(c) of the Code.
“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 Opinion” means the opinion to be delivered by Tax Counsel to Cablevision in connection
with the Distribution to the effect that (i) the Contribution and Distribution, taken together,
will qualify as a reorganization under Section 368(a)(1)(D) of the Code, (ii) neither Cablevision
nor AMC will recognize gain or loss upon the Contribution, (iii) Cablevision will not recognize
gain or loss upon the Distribution under Section 361(c) of the Code except in respect of (a) deductions attributable to any obligations of [•] redeemed in the Debt Exchange at a premium,
(b) income attributable to any obligations of [•] redeemed in the Debt Exchange at a discount, and
(c) interest expense accrued in respect of any obligations of [•], and
(iv) shareholders of Cablevision
will not recognize gain or loss upon the Distribution under Section 355(a) of the Code, and no
amount will be included in such shareholders’ income, except in respect of cash received in lieu of
fractional shares of AMC.
“Tax Opinion Representations” means the representations made to Tax Counsel in connection with
the Tax Opinion.
“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 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.
“Term Loan B” shall have the meaning set forth in the Credit Agreement.
8
“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 Distribution.
“Treasury Regulations” means the regulations promulgated from time to time under the Code as
in effect for the relevant Tax Year.
“Unqualified Opinion” means an unqualified “will” opinion of an Expert Law Firm that permits
reliance by Cablevision. For the avoidance of doubt, an Unqualified Opinion may be based on
factual representations and assumptions that are reasonably satisfactory to Cablevision.
SECTION 2. Allocation of Taxes and Tax-Related Losses.
2.1 Allocation of Taxes. Except as provided in Section 2.2 (Allocation of Deconsolidation
Taxes, Distribution Taxes and Transfer Taxes), Taxes shall be allocated as follows:
(a) Cablevision shall be liable for and shall be allocated (i) any Taxes attributable
to members of the Cablevision Group for all periods, (ii) any Covered Income Taxes
attributable to members of the AMC Group for a Pre-Distribution Period, and (iii) for the
avoidance of doubt, any MSG Taxes.
(b) AMC shall be liable for and shall be allocated (i) any Residual Taxes attributable
to members of the AMC Group for a Pre-Distribution Period, and (ii) any Taxes attributable
to members of the AMC Group for any Post-Distribution Period.
(c) Notwithstanding the provisions of Sections 2.1(a) and 2.1(b) (but subject to the
provisions of Section 2.2), Taxes attributable to any transaction or action taken by or with
respect to any member of the AMC Group before the Effective Time on the Distribution Date
shall be allocated to the Pre-Distribution Period, and Taxes attributable to any transaction
or action taken by or with respect to any member of the AMC Group after the Effective Time
on the Distribution Date shall be allocated to the Post-Distribution Period.
2.2 Allocation of Deconsolidation Taxes, Distribution Taxes and Transfer Taxes.
Notwithstanding any other provision of this Agreement:
(a) Any and all Deconsolidation Taxes shall be borne by Cablevision.
(b) AMC shall indemnify and hold harmless each Cablevision Indemnified Party from and
against any liability of Cablevision for Distribution Taxes to the extent such Distribution
Taxes are attributable to an AMC Tainting Act, provided, however, that AMC
shall have no obligation to indemnify any Cablevision Indemnified Party hereunder if there
has occurred, prior to such AMC Tainting Act, a Cablevision Tainting Act.
(c) Cablevision shall indemnify and hold harmless each AMC Indemnified Party from and
against any liability of AMC for Distribution Taxes to the extent that AMC is not liable for
such Taxes pursuant to Section 2.2(b).
(d) The Companies shall cooperate with each other and use their commercially reasonable
efforts to reduce and/or eliminate any Transfer Taxes. If any Transfer Tax remains payable
after application of the first sentence of this Section 2.2(d) and notwithstanding any other
provision in this Section 2, all Transfer Taxes shall be allocated to Cablevision.
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2.3 Tax Payments. Each Company shall be liable for and shall pay the Taxes allocated to it by
this Section 2 either to the applicable Tax Authority or to the other Company in accordance with
Section 4 and the other applicable provisions of this Agreement.
SECTION 3. Preparation and Filing of Tax Returns.
3.1 Combined Returns. Cablevision shall be responsible for preparing and filing (or causing
to be prepared and filed) all Combined Returns for any Tax Year, provided, however,
that AMC shall furnish any relevant information, including pro-forma returns, disclosures,
apportionment data and supporting schedules, relating to any member of the AMC Group necessary for
completing any Combined Return for any Tax Year in a format suitable for inclusion in such return,
and provided further, that AMC shall have the right to review and comment with
respect to items on such returns if and to the extent such items directly relate to Taxes for which
AMC would be liable under Section 2.1(b)(i), such comment not to be unreasonably rejected.
3.2 Separate Returns.
(a) Tax Returns to be Prepared by Cablevision. Cablevision shall be responsible for
preparing and filing (or causing to be prepared and filed):
(i) all Separate Returns which relate to one or more members of the Cablevision
Group for any Tax Year, and
(ii) all Separate Returns which relate to one or more members of the AMC Group
for any Pre-Distribution Period or Straddle Period if such return is in respect of
Covered Income Taxes, provided, however, that AMC shall furnish any
relevant information, including pro-forma returns, disclosures, apportionment data
and supporting schedules, relating to any member of the AMC Group necessary for
completing any Separate Return for any Pre-Distribution Period or Straddle Period in
a format suitable for inclusion in such return, and provided
further, that AMC shall have the right to review and comment with respect to
items on such returns if and to the extent such items directly relate to a Tax for
which AMC would be liable under Section 2.1(b)(i), such comment not to be
unreasonably rejected.
(b) Tax Returns to be Prepared by AMC. AMC shall be responsible for preparing and
filing (or causing to be prepared and filed) all Separate Returns which relate to one or
more members of the AMC Group and for which Cablevision is not responsible under Section
3.2(a), provided, however, that in the case of such returns in respect of
any Pre-Distribution Period or Straddle Period, Cablevision shall have the right to review
and comment on such returns, such comment not to be unreasonably rejected.
3.3 Agent. Subject to the other applicable provisions of this Agreement (including, without
limitation, Section 5), AMC irrevocably designates, and agrees to cause each AMC Affiliate so to
designate, Cablevision as its sole and exclusive agent and attorney-in-fact to take such action
(including execution of documents) as Cablevision may deem reasonably appropriate in matters
relating to the preparation or filing of any Tax Return described in Sections 3.1 and 3.2(a)(ii).
3.4 Provision of Information.
(a) Cablevision shall provide to AMC, and AMC shall provide to Cablevision, any
information about members of the Cablevision Group or the AMC Group, respectively, that the
Preparer reasonably requires 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.
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(b) If a member of the AMC Group supplies information to a member of the Cablevision
Group, or a member of the Cablevision Group supplies information to a member of the AMC
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.
3.5 Special Rules Relating to the Preparation of Tax Returns.
(a) In General. All Tax Returns that include any members of the AMC Group or
Cablevision Group, or any of their respective Affiliates, shall be prepared in a manner that
is consistent with the Ruling Request, the Ruling, and the Tax Opinion (including, for the
avoidance doubt, the Tax Opinion Representations). Except as otherwise set forth in this
Agreement, all Tax Returns for which Cablevision is responsible under Sections 3.1 and 3.2
shall be prepared (x) in accordance with elections, Tax accounting methods and other
practices used with respect to such Tax Returns filed prior to the Distribution Date (unless
such past practices are not permissible under applicable law), or (y) to the extent any
items are not covered by past practices (or in the event such past practices are not
permissible under applicable Tax Law), in a manner reasonably acceptable to both Parties;
provided, however, that in each case of (x) and (y) to the extent that a
change in such elections, methods or practices would not reasonably be expected to result in
any adverse impact on AMC, such Tax Returns shall be prepared in accordance with reasonable
practices selected by Cablevision.
(b) Election to File Consolidated, Combined or Unitary Tax Returns. Cablevision shall
have the sole discretion in electing to file 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 the relevant Tax Law.
3.6 Refunds, Credits or Offsets.
(a) Any refunds, credits or offsets with respect to Taxes allocated to, and actually
paid by, Cablevision pursuant to this Agreement shall be for the account of Cablevision.
Any refunds, credits or offsets with respect to Taxes, allocated to, and actually paid by,
AMC pursuant to this Agreement shall be for the account of AMC.
(b) Cablevision shall forward to AMC, or reimburse AMC for, any such refunds, credits
or offsets, plus any interest received thereon, net of any Taxes incurred with respect to
the receipt or accrual thereof and any expenses incurred in connection therewith, that are
for the account of AMC within 15 Business Days from receipt thereof by Cablevision or any of
its Affiliates. AMC shall forward to Cablevision, or reimburse Cablevision for, any
refunds, credits or offsets, plus any interest received thereon, net of any Taxes incurred
with respect to the receipt or accrual thereof and any expenses incurred in connection
therewith, that are for the account of Cablevision within 15 Business Days from receipt
thereof by AMC or any of its Affiliates. Any refunds, credits or offsets, plus any interest
received thereon, or reimbursements not forwarded or made within the 15 Business Day period
specified above shall bear interest from the date received by the refunding or reimbursing
party (or its Affiliates) through and including the date of payment at the Interest Rate
(treating the date received as the Due Date for purposes of determining such interest). If,
subsequent to a Tax Authority’s allowance of a refund, credit or offset, such Tax Authority
reduces or eliminates such allowance, any refund, credit or offset, plus any interest
received thereon, forwarded or reimbursed under this Section 3.6 shall be returned to the
party who had forwarded or reimbursed such refund, credit or offset and interest upon the
request of such forwarding party in an amount equal to the applicable reduction, including
any interest received thereon.
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3.7 Carrybacks. To the extent permitted under applicable Tax Laws, the AMC Group shall make
the appropriate elections in respect of any Tax Returns to waive any option to carry back any net
operating loss, any credits or any similar item from a Post-Distribution Period to any
Pre-Distribution Period or to any Straddle Period. Any refund of or credit for Taxes resulting
from any such carryback by a member of the AMC Group that cannot be waived shall be payable to AMC
net of any Taxes incurred with respect to the receipt or accrual thereof and any expenses incurred
in connection therewith.
3.8 Amended Returns. Any amended Tax Return or claim for Tax refund, credit or offset with
respect to any member of the AMC Group may be made only by the Company (or its Affiliates)
responsible for preparing the original Tax Return with respect to such member pursuant to Sections
3.1 or 3.2 (and, for the avoidance of doubt, subject to the same review and comment rights set
forth in Sections 3.1 or 3.2, to the extent applicable). Such Company (or its Affiliates) shall
not, without the prior written consent of the other Company (which consent shall not be
unreasonably withheld or delayed), file, or cause to be filed, any such amended Tax Return or claim
for Tax refund, credit or offset to the extent that such filing, if accepted, is likely to increase
the Taxes allocated to, or the Tax indemnity obligations under this Agreement of, such other
Company for any Tax Year (or portion thereof); provided, however, that such consent
need not be obtained if the Company filing the amended Tax Return by written notice to the other
Company agrees to indemnify the other Company for the incremental Taxes allocated to, or the
incremental Tax indemnity obligation resulting under this Agreement to, such other Company as a
result of the filing of such amended Tax Return.
3.9 Compensatory Equity Interests. Matters relating to Taxes and/or Tax Items with respect to
Compensatory Equity Interests shall be governed by the Employee Matters Agreement.
SECTION 4. Tax Payments.
4.1 Payment of Taxes to Tax Authority. Cablevision 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, and AMC 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.
4.2 Indemnification Payments.
(a) Tax Payments Made by the Cablevision Group. If any member of the Cablevision Group
is required to make a payment to a Tax Authority for Taxes allocated to AMC under this
Agreement, AMC will pay the amount of Taxes allocated to it to Cablevision 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 AMC Group. If any member of the AMC Group is required to
make a payment to a Tax Authority for Taxes allocated to Cablevision under this Agreement,
Cablevision will pay the amount of Taxes allocated to it to AMC 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 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. Interest will be calculated on the basis of a year of 365 days and the actual number of
days for which due.
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4.4 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, as the case may be, immediately prior to the Distribution.
If the receipt or accrual of any indemnity 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. For the avoidance of doubt, any liability for Taxes
due to an increase in taxable income described in the immediately preceding sentence shall be
governed by this Section 4.4 and not by Section 2.2. To the extent that Taxes for which any Party
hereto (the “Indemnifying Party”) is required to pay another 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 actually realized
by 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 4.4 is subsequently decreased or eliminated, then the Indemnifying Party shall
promptly pay the Indemnified Party the amount of the decrease in such Tax Benefit.
4.5 Section 336(e) Election. In the event that Section 355(d) or 355(e) of the Code applies
to the Distribution as a result of a Final Determination, and if the proposed Treasury Regulations
under Section 336(e) of the Code and published at 73 Fed. Reg. 49965-81 (or similar Treasury
Regulations) have been adopted as final, Cablevision agrees (if so requested by AMC in a written
notice) to make an election (if Cablevision is legally able to do so) pursuant to such final
Treasury Regulations to treat the Distribution as an asset sale for U.S. federal tax purposes,
provided that AMC shall indemnify Cablevision for any cost to the Cablevision Group of
making such an election (but it being understood that any such cost arising from Taxes shall be
limited to Excess Taxes).
4.6 Certain Final Determinations. If an adjustment (a “Tax Adjustment”) pursuant to a Final
Determination in a Tax Contest initiated by a Tax Authority results in a Tax greater than the Tax
shown on the relevant Tax Return for any Pre-Distribution Period, the Indemnified Party shall pay
to the Indemnifying Party an amount equal to any Tax Benefit as and when actually realized by such
Indemnified Party as a result of such Tax Adjustment. The Parties agree that if an Indemnified
Party is required to make a payment to an Indemnifying Party pursuant to this Section 4.6, the
Parties shall negotiate in good faith to set off the amount of such payment against any indemnity
payments owed by the Indemnifying Party to the Indemnified Party, taking into account time value
and similar concepts as appropriate.
SECTION 5. Cooperation and Tax Contests.
5.1 Cooperation. In addition to the obligations enumerated in Sections 3.4 and 5.4,
Cablevision and AMC will cooperate (and 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 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 Notices of Tax Contests. Each Company shall provide prompt notice to the other Company of
any pending or threatened Tax audit, assessment or proceeding or other Tax Contest of which it
becomes aware relating to (i) Taxes for which it is or may be indemnified by such other Company
hereunder or (ii) Tax Items that may affect the amount or treatment of Tax Items of such other
Company. Such notice shall contain factual information
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(to the extent known) describing any asserted Tax liability in reasonable detail and shall be
accompanied by copies of any notice and other documents received from any Tax Authority in respect
of any such matters; provided, however, that failure to give such notification
shall not affect the indemnification provided 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 in its possession that the indemnifying Company may reasonably request.
5.3 Control of Tax Contests.
(a) Controlling Party. Subject to the limitations set forth in Section 5.3(b), each
Preparer (or the appropriate member of its Group) shall be the Controlling Party with
respect to 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 (it
being understood, for the avoidance of doubt but subject to the other provisions of this
Section 5.3(a), that Cablevision shall be the Controlling Party with respect to any Tax
Contest involving Distribution Taxes), in which case any Non-Preparer that could have
liability under this Agreement for a Tax to which such Tax Contest relates shall be treated
as the “Non-Controlling Party.” Notwithstanding the immediately preceding sentence, if a
Non-Preparer (x) acknowledges to the Preparer in writing its full liability under this
Agreement to indemnify for any Tax, and (y) provides to the Preparer evidence (that is
satisfactory to the Preparer as determined in the Preparer’s reasonable discretion) of the
Non-Preparer’s financial readiness and capacity to make such indemnity payment, then
thereafter with respect to the Tax Contest relating solely to such Tax the Non-Preparer
shall be the Controlling Party (subject to Section 5.3(b)) and the Preparer shall be treated
as the Non-Controlling Party.
(b) Non-Controlling Party Participation Rights. With respect to a Tax Contest of any
Tax Return that could result in a Tax liability that is allocated under this Agreement, (i)
the Non-Controlling Party shall, at its own cost and expense, be entitled to participate in
such Tax Contest and to provide comments and suggestions to the Controlling Party, such
comments and suggestions not to be unreasonably rejected, (ii) the Controlling Party shall
keep the Non-Controlling Party updated and informed, and shall consult with the
Non-Controlling Party, (iii) the Controlling Party shall act in good faith with a view to
the merits in connection with the Tax Contest, and (iv) the Controlling Party shall not
settle or compromise such Tax Contest without the prior written consent of the
Non-Controlling Party (which consent shall not be unreasonably withheld).
5.4 Cooperation Regarding Tax Contests. The Parties shall provide each other with all
information relating to a Tax Contest which is needed by the other Party to handle, participate in,
defend, settle or contest the Tax Contest. At the request of any party, the other Party shall take
any action (e.g., executing a power of attorney) that is reasonably necessary in order for the
requesting Party to exercise its rights under this Agreement in respect of a Tax Contest. AMC
shall assist Cablevision, and Cablevision shall assist AMC, 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 shall reimburse the Indemnified Party for any reasonable out-of-pocket costs and
expenses incurred in complying with this Section 5.4.
SECTION 6. Tax Records.
6.1 Retention of Tax Records. Each of Cablevision and AMC 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 statute of limitations, as
extended, and (y) seven years after the Distribution Date.
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6.2 Access to Tax Records. AMC shall make available, and cause its Subsidiaries to make
available, to members of the Cablevision 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 Cablevision Group or any of their Affiliates or
with respect to any Tax Contest with respect to such return. Cablevision shall make available, and
cause its Subsidiaries to make available, to members of the AMC Group for inspection and copying
the portion of any Tax Record in their possession that relates to a Pre-Distribution Period and
which is reasonably necessary for the preparation of a Tax Return by a member of the AMC Group or
any of their Affiliates or with respect to any Tax Contest with respect 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 that such information or document (i)
is previously known to or in the possession of the other Party (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.
SECTION 7. Representations and Covenants.
7.1 Covenants of Cablevision and AMC.
(a) Cablevision hereby covenants that, to the fullest extent permissible under United
States federal income and state Tax Laws, it will, and will cause the members of the
Cablevision Group to, treat the Contribution and Distribution in accordance with the
Tax-Free Status. AMC hereby covenants that, to the fullest extent permissible under United
States federal income and state Tax Laws, it will, and will cause each Subsidiary of AMC to,
treat the Contribution and Distribution in accordance with the Tax-Free Status.
(b) Cablevision further covenants that, as of and following the date hereof,
Cablevision shall not and shall cause the members of the Cablevision Group not to take any
action that (or fail to take any action the omission of which) (i) would be inconsistent
with the Contribution and Distribution qualifying, or would preclude the Contribution and
Distribution from qualifying, for the Tax-Free Status, or (ii) would cause any holders of
Cablevision Common Stock that receive stock of AMC in the Distribution to recognize gain or
loss, or otherwise include any amount in income, as a result of the Contribution and/or the
Distribution for U.S. federal income tax purposes (except with respect to cash received in
lieu of fractional shares).
(c) AMC further covenants that, as of and following the date hereof, AMC shall not and
shall cause its Subsidiaries not to take any action that (or fail to take any action the
omission of which) (i) would be inconsistent with the Contribution and Distribution
qualifying, or would preclude the Contribution and Distribution from qualifying, for the
Tax-Free Status, or (ii) would cause any holders of Cablevision Common Stock that receive
stock of AMC in the Distribution to recognize gain or loss, or otherwise include any amount
in income, as a result of the Contribution and/or the Distribution for U.S. federal income
tax purposes (except with respect to cash received in lieu of fractional shares).
7.2 Private Letter Ruling. Cablevision represents that it has provided AMC with a copy of the
Ruling and the Ruling Request submitted on or prior to the Distribution Date, and agrees to provide
AMC with copies of
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any additional documents submitted to the IRS relating to the Ruling Request and prepared
after the Distribution Date prior to the submission of such documents to the IRS in connection with
the Distribution.
7.3 Covenants of AMC.
(a) Without limiting the generality of the provisions of Section 7.1, AMC, on behalf of
itself and its Subsidiaries, agrees and covenants that AMC and each of its Subsidiaries will
not, directly or indirectly, during the Restriction Period, (i) take any action that would
result in AMC’s ceasing to be engaged in the active conduct of the AMC Business with the
result that AMC is not engaged in the active conduct of a trade or business within the
meaning of Section 355(b)(2) of the Code, (ii) redeem or otherwise repurchase (directly or
through an Affiliate of AMC) any of AMC’s outstanding stock, other than (A) through stock
purchases meeting the requirements of section 4.05(1)(b) of Revenue Procedure 96-30, 1996-1
C.B. 696 or (B) as otherwise described in the Ruling Request (but it being understood, for
the avoidance of doubt, that no agreement or covenant under this Section 7.3(a)(ii) is being
entered with respect to Compensatory Equity Net Share Settlements), (iii) amend the
certificate of incorporation (or other organizational documents) of AMC that would affect
the relative voting rights of separate classes of AMC’s stock or would convert one class of
AMC’s stock into another class of its stock, (iv) liquidate (within the meaning of Section
331 of the Code and the Treasury Regulations promulgated thereunder) or partially liquidate
(within the meaning of Section 346 of the Code and the Treasury Regulations promulgated
thereunder) AMC, (v) merge AMC with any other corporation (other than in a transaction that
does not affect the relative shareholding of AMC shareholders), sell or otherwise dispose of
(other than in the ordinary course of business) the assets of AMC and its Subsidiaries, or
take any other action or actions if such merger, sale, other disposition or other action or
actions in the aggregate would have the effect that one or more Persons acquire (or have the
right to acquire), directly or indirectly, as part of a plan or series of related
transactions, assets representing one-half or more of the asset value of the AMC Group, or
(vi) take any other action or actions that in the aggregate would have the effect that one
or more Persons acquire (or have the right to acquire), directly or indirectly, as part of a
plan or series of related transactions, stock or equity securities of AMC representing a
Fifty-Percent Equity Interest in AMC, other than a Permitted Acquisition.
(b) Furthermore, AMC, on behalf of itself and its Subsidiaries, agrees and covenants
that AMC and each of its Subsidiaries (i) will not directly or indirectly, pre-pay, pay
down, redeem, retire or otherwise acquire, however effected, any of the Senior Notes or the
Term Loan B other than in accordance with the description set forth in the Ruling and the
Ruling Request, (ii) will not take or permit to be taken any action at any time, including,
without limitation, any modification to the terms of any of the Senior Notes or the Term
Loan B, that could jeopardize, directly or indirectly, the qualification, in whole or in
part, of any of the Senior Notes or the Term Loan B as “securities” within the meaning of
Section 361(a) of the Code, and (iii) will comply with the terms of the [Indenture] and the
Credit Agreement relating to the Senior Notes and the Term Loan B respectively.
7.4 Covenants of Cablevision.
(a) Without limiting the generality of the provisions of Section 7.1, Cablevision, on
behalf of itself and each member of the Cablevision Group, agrees and covenants that
Cablevision and each member of the Cablevision Group will not, directly or indirectly,
during the Restriction Period, (i) take any action that would result in Cablevision’s
ceasing to be engaged in the active conduct of the Cablevision Business with the result that
Cablevision is not engaged in the active conduct of a trade or business within the meaning
of Section 355(b)(2) of the Code, (ii) redeem or otherwise repurchase (directly or through
an Affiliate of Cablevision) any of Cablevision’s outstanding stock, other than (A) through
stock purchases meeting the requirements of section 4.05(1)(b) of Revenue Procedure 96-30,
1996-1 C.B. 696, or (B) as otherwise described in the Ruling Request (but it being
understood, for the avoidance of doubt, that no
16
agreement or covenant under this Section 7.4(a)(ii) is being entered with respect to
Compensatory Equity Net Share Settlements), (iii) amend the certificate of incorporation (or
other organizational documents) of Cablevision that would affect the relative voting rights
of separate classes of Cablevision’s stock or would convert one class of Cablevision’s stock
into another class of its stock, (iv) liquidate (within the meaning of Section 331 of the
Code and the Treasury Regulations promulgated thereunder) or partially liquidate (within the
meaning of Section 346 of the Code and the Treasury Regulations promulgated thereunder)
Cablevision, (v) merge Cablevision with any other corporation (other than in a transaction
that does not affect the relative shareholding of Cablevision shareholders), sell or
otherwise dispose of (other than in the ordinary course of business) the assets of
Cablevision and its Subsidiaries, or take any other action or actions if such merger, sale,
other disposition or other action or actions in the aggregate would have the effect that one
or more Persons acquire (or have the right to acquire), directly or indirectly, as part of a
plan or series of related transactions, assets representing one-half or more of the asset
value of the Cablevision Group, or (vi) take any other action or actions that in the
aggregate would have the effect that one or more Persons acquire (or have the right to
acquire), directly or indirectly, as part of a plan or series of related transactions, stock
or equity securities of Cablevision representing a Fifty-Percent Equity Interest in
Cablevision.
(b) Nothing in this Section 7 shall be construed to give AMC or any Affiliates of AMC
any right to remedies other than indemnification for any increase in the actual Tax
liability (and/or decrease in Tax Benefit) of AMC or any Affiliate of AMC that results from
Cablevision Group’s failure to comply with the covenants and representations in this Section
7.
7.5 Exceptions.
(a) Notwithstanding Section 7.3 above, AMC or any of its Subsidiaries may take a
Restricted Action if Cablevision consents in writing to such Restricted Action, or if AMC
provides Cablevision with Satisfactory Guidance concluding that such Restricted Action will
not alter the Tax-Free Status of the Contribution and Distribution in respect of Cablevision
and Cablevision’s shareholders.
(b) AMC and each of its Subsidiaries agree that Cablevision and each Cablevision
Affiliate are to have no liability for any Tax resulting from any Restricted Actions
permitted pursuant to this Section 7.5 and, subject to Section 2.2, agree to indemnify and
hold harmless each Cablevision Indemnified Party against any such Tax. AMC shall bear all
costs incurred by it, and all reasonable costs incurred by Cablevision, in connection with
requesting and/or obtaining any Satisfactory Guidance.
7.6 Injunctive Relief. For the avoidance of doubt, Cablevision shall have the right to seek
injunctive relief to prevent AMC or any of its Subsidiaries from taking any action that is not
consistent with the covenants of the AMC or any of its Subsidiaries under Section 7.1 or 7.3.
7.7 Further Assurances. For the avoidance of doubt, (i) neither Cablevision nor a member of
the Cablevision Group shall take any action on the Distribution Date that would result in an
increase of the actual Tax liability (and/or decrease of any Tax Benefit) of AMC or any of its
Subsidiaries, other than in the ordinary course of business, except for actions undertaken in
connection with the Distribution, which actions are described in the Ruling Request or the Ruling,
and (ii) neither AMC nor any of its Subsidiaries shall take any action on the Distribution Date
that would result in an increase of the actual Tax liability (and/or decrease of any Tax Benefit)
of Cablevision or a member of the Cablevision Group, other than in the ordinary course of business,
except for actions undertaken in connection with the Distribution, which actions are described in
the Ruling Request or the Ruling.
SECTION 8. General Provisions.
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8.1 Predecessors or Successors. Any reference to Cablevision, AMC, a Person, or a Subsidiary
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 Cablevision, AMC, such Person, or such Subsidiary, respectively, including within the meaning of
Section 355(e)(4)(D) of the Code and the Treasury Regulations promulgated thereunder. For the
avoidance of doubt, no member of the Cablevision Group shall be deemed to be a predecessor or
successor of AMC and no member of the AMC Group shall be deemed to be a predecessor or successor of
Cablevision.
8.2 Construction. This Agreement shall constitute the entire agreement (except insofar and to
the extent that it specifically and expressly references the Distribution Agreement and any other
Ancillary Agreement) between the Parties with respect to the subject matter hereof and shall
supersede all previous negotiations, commitments and writings with respect to such subject matter.
8.3 Ancillary Agreements. This Agreement is not intended to address, and should not be
interpreted to address, the matters specifically and expressly covered by the Distribution
Agreement or any other Ancillary Agreement.
8.4 Counterparts. This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement, and shall become effective when one or more such
counterparts have been signed by each of the Parties and delivered to the other Party.
8.5 Notices. All notices and other communications hereunder shall be in writing, shall
reference this Agreement and shall be hand delivered or mailed by registered or certified mail
(return receipt requested) to the Parties at the following addresses (or at such other addresses
for a Party as shall be specified by like notice) and will be deemed given on the date on which
such notice is received:
To Cablevision:
Cablevision Systems Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
To AMC:
8.6 Amendments. This Agreement may not be modified or amended except by an agreement in
writing signed by each of the Parties.
8.7 Assignment. This Agreement shall not be assignable, in whole or in part, directly or
indirectly, by any Party without the prior written consent of the other Party, and any attempt to
assign any rights or obligations arising under this Agreement without such consent shall be void;
provided that, subject to compliance with Section 7, if applicable, either Party may assign
this Agreement to a purchaser of all or substantially all of the properties and assets of such
Party so long as such purchaser expressly assumes, in a written instrument in form reasonably
satisfactory to the non-assigning Party, the due and punctual performance or observance of every
agreement and covenant of this Agreement on the part of the assigning Party to be performed or
observed.
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8.8 Successors and Assigns. The provisions to this Agreement shall be binding upon, inure to
the benefit of and be enforceable by the Parties and their respective successors and permitted
assigns.
8.9 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.
8.10 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 the Party’s charter or bylaws or any agreement, instrument or order binding
such Party.
8.11 Termination. This Agreement may be terminated at any time prior to the Distribution by
and in the sole discretion of Cablevision without the approval of AMC or the stockholders of
Cablevision. In the event of such termination, no Party shall have any liability of any kind to
any other Party or any other Person. After the Distribution, this Agreement may not be terminated
except by an agreement in writing signed by the Parties.
8.12 Subsidiaries. Each of the Parties shall cause to be performed, and hereby guarantees the
performance of, all actions, agreements and obligations set forth herein to be performed by any
entity that is contemplated to be a Subsidiary of such Party after the Distribution Date.
8.13 Third-Party Beneficiaries. Except with respect to Cablevision Indemnified Parties and
AMC Indemnified Parties, and in each case, only where and as indicated herein, this Agreement is
solely for the benefit of the Parties and their respective Subsidiaries and Affiliates and should
not be deemed to confer upon any other Person any remedy, claim, liability, reimbursement, cause of
action or other right in excess of those existing without reference to this Agreement.
Notwithstanding anything in this Agreement to the contrary, this Agreement is not intended to
confer upon any AMC Indemnified Parties any rights or remedies against AMC hereunder, and this
Agreement is not intended to confer upon any Cablevision Indemnified Parties any rights or remedies
against Cablevision hereunder.
8.14 Titles and Headings. Titles and headings to Sections herein are inserted for convenience
of reference only and are not intended to be a part of or to affect the meaning or interpretation
of this Agreement.
8.15 Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and to be performed in the State of New
York.
8.16 Waiver of Jury Trial. The Parties hereby irrevocably waive any and all right to trial by
jury in any legal proceeding arising out of or related to this Agreement or the transactions
contemplated hereby.
8.17 Severability. In the event any one or more of the provisions contained in this Agreement
should be held invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The Parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable provisions.
8.18 No Strict Construction; Interpretation.
(a) Each of Cablevision and AMC acknowledges that this Agreement has been prepared
jointly by the Parties hereto and shall not be strictly construed against any Party hereto.
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(b) 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 “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.
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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.
| CABLEVISION SYSTEMS CORPORATION | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| AMC NETWORKS INC. | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
[Signature Page to Tax Disaffiliation Agreement]