TAX MATTERS AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WHEREAS the Board of Directors of Brink’s has determined that it is in the best interests of Brink’s and its shareholders to completely separate the BHS Business (as defined below) from Brink’s;

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

WHEREAS Brink’s and BHS have entered into the Separation and Distribution Agreement (as defined below), pursuant to which Brink’s agreed to contribute and otherwise transfer to BHS, and BHS agreed to receive and assume, the assets and liabilities then associated with the BHS Business as described therein;

WHEREAS Brink’s intends to distribute to shareholders of Brink’s all the outstanding shares of BHS Common Stock;

WHEREAS, pursuant to the Distribution (as defined in the Separation and Distribution Agreement), BHS and its subsidiaries will cease to be members of the affiliated group (as that term is defined in Section 1504 of the Code (as defined below)) of which Brink’s is the common parent; and

WHEREAS the Companies (as defined below) desire to provide for and agree upon the allocation between the Companies of liabilities for Taxes (as defined below) arising prior to, as a result of, and subsequent to the Distribution, and to provide for and agree upon other matters relating to Taxes.

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

ARTICLE I

Definition of Terms

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

“ Accountant ” shall have the meaning set forth in Section 8.02(c).

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

“ Active Trade or Business ” means the active conduct (within the meaning of Section 355(b) of the Code and the regulations thereunder) by BHS of the BHS Business.

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

“ Affiliate ” means any entity that is directly or indirectly “ controlled ” by either the person in question or an Affiliate of such person.  For purposes of the definition of “ Affiliate ”, “ control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through ownership of voting securities, by contract or otherwise.

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

“ Ancillary Agreements ” means the Brand Licensing Agreement, the Employee Matters Agreement, the Non-Compete Agreement, the Transition Services Agreement (each as defined in the Separation and Distribution Agreement) and the instruments, assignments and other documents and agreements executed in connection with the implementation of the transactions contemplated by the Separation and Distribution Agreement, including Article II of the Separation and Distribution Agreement.

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

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

“ BHS Business ” means the business of providing security alarm monitoring services for residential and commercial properties.

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

“ BHS Carryback ” means any net operating loss, net capital loss, excess Tax credit or other similar Tax item of any member of the BHS Group that may or must be carried from one Tax Period to another prior Tax Period under the Code or other applicable Tax Law.

“ BHS Common Stock ” has the meaning set forth in the Separation and Distribution Agreement.

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

“ BHS Group ” means BHS and its Subsidiaries, as determined immediately after the Distribution.

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

“ Board Certificate ” shall have the meaning set forth in Section 7.02(d).

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

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

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

“ Brink’s Group ” means Brink’s and its Subsidiaries, excluding any entity that is a member of the BHS Group.

“ Brink’s Separate Return ” means any Separate Return of Brink’s or any member of the Brink’s Group.

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

“ Closing Date ” means the date of the Distribution.

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

“ Companies ” means Brink’s and BHS, collectively, and “ Company ”, as the context requires, means either Brink’s or BHS.

“ Contribution ” means the contribution of assets by Brink’s itself directly to BHS itself pursuant to Section 2.01 of the Separation and Distribution Agreement.

“ Distribution ” has the meaning set forth in the Separation and Distribution Agreement.

“ Distribution-Related Proceeding ” means any Tax Contest in which the IRS, another Tax Authority or any other party asserts a position that could reasonably be expected to adversely affect the Tax-Free Status.

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

“ Filing Date ” shall have the meaning set forth in Section 7.04(d).

“ Final Determination ” means the final resolution of liability for any Tax, which resolution may be for a specific issue or adjustment or for a taxable period, (a) by IRS Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance by or on behalf of the taxpayer, or by a comparable form under the laws of a State, local, or foreign taxing jurisdiction, except that a Form 870 or 870-AD or comparable form shall not constitute a Final Determination to the extent that it reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for refund or the right of the Tax Authority to assert a further deficiency in respect of such issue or adjustment or for such taxable period (as the case may be); (b) by a decision, judgment, decree or other order by a court of competent jurisdiction, which has become final and unappealable; (c) by a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the laws of a State, local or foreign taxing jurisdiction; (d) by any allowance of a refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such refund may be recovered (including by way of offset) by the jurisdiction imposing such Tax; (e) by a final settlement resulting from a treaty-based competent authority determination; or (f) by any other final disposition, including by reason of the expiration of the applicable statute of limitations or by mutual agreement of the parties.

“ First Internal Distribution ” shall have the meaning ascribed to it in the Ruling Request filed with the IRS on June 30, 2008.  For the avoidance of doubt, Brink’s Holding Company is the distributing corporation in the First Internal Distribution, and Brink’s Home Security, Inc. is the controlled corporation in the First Internal Distribution.

“ Group ” means the Brink’s Group or the BHS Group, or both, as the context requires.

“ High-Level Dispute ” means any dispute or disagreement (a) relating to liability under Section 7.04 of this Agreement or (b) in which the amount of the liability in dispute exceeds $2  million.

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

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

“ IRS ” means the United States Internal Revenue Service.

“ Joint Return ” means any Tax Return that includes at least one member of the Brink’s Group and at least one member of the BHS Group.

“ Notified Action ” shall have the meaning set forth in Section 7.03(a).

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

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

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

“ Post-Closing Period ” means any Tax Period that, to the extent it relates to a member of the BHS Group, begins after the Closing Date.

“ Pre-Closing Period ” means any Tax Period that, to the extent it relates to a member of the BHS Group, ends on or before the Closing Date.

“ Prime Rate ” has the meaning set forth in the Separation and Distribution Agreement.

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

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

“ Representation Letters ” means the representation letters and any other materials delivered or deliverable by Brink’s, BHS or others in connection with the rendering by Tax Advisors of any opinions in connection with the Transactions.

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

“ Ruling ” means (a) the private letter ruling (and any supplemental private letter ruling) issued by the IRS to Brink’s in connection with the Transactions and (b) any similar ruling (including any supplemental ruling) issued by any Tax Authority other than the IRS in connection with the Transactions.

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

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

“ Second Internal Distribution ” shall have the meaning ascribed to it in the Ruling Request filed with the IRS on June 30, 2008.  For the avoidance of doubt, Pittston Services Group, Inc. is the distributing corporation in the Second Internal Distribution, and Brink’s Home Security, Inc. is the controlled corporation in the Second Internal Distribution.

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

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

“ Separation and Distribution Agreement ” means the Separation and Distribution Agreement, as amended from time to time, by and between Brink’s and BHS dated as of October 31, 2008.

“ Signing Group ” shall have the meaning set forth in Section 8.03.

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

“ Supplier Group ” shall have the meaning set forth in Section 8.03.

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

“ Tax Advisor ” means a United States tax counsel or accountant of recognized national standing.

“ Tax Arbitrator ” shall have the meaning set forth in Article XIV.

“ Tax Arbitrator Dispute ” shall have the meaning set forth in Article XIV.

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

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

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

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

“ Tax Detriment ” means any increase in required Tax payments (or, without duplication, the reduction in any refund or credit).

“ Tax-Free Status ” means the qualification of (a) the First Internal Distribution and the Second Internal Distribution, respectively, each as (i) a distribution described in Section 355(a) of the Code, (ii) as a transaction in which the stock distributed thereby is “qualified property” for purposes of Sections 355(d) and 355(e) of the Code and (iii) as a transaction in which Brink’s Holding Company, Pittston Services Group, Inc., Brink’s Home Security, Inc., Brink's and BHS recognize no income or gain for U.S. Federal income tax purposes pursuant to Section 355 of the Code and (b) the Contribution and Distribution, taken together, as (i) a reorganization described in Sections 355(a) and 368(a)(1)(D) of the Code and (ii) as a transaction in which the stock distributed thereby is “qualified property” for purposes of Sections 355(d), 355(e) and 361(c) of the Code and (c) as a transaction in which Brink’s, BHS, and the shareholders of Brink’s recognize no income or gain for U.S. Federal income tax purposes pursuant to Sections 355, 361 and 1032 of the Code.  For the avoidance of doubt, recognition of income or gain by Brink’s or BHS as a result of taking into account intercompany items or excess loss accounts pursuant to the Treasury Regulations promulgated pursuant to Section 1502 of the Code shall not mean that the Transactions do not have Tax-Free Status.

“ Tax Item ” means, with respect to any income Tax, any item of income, gain, loss, deduction or credit.

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

“ Tax Opinions/Rulings ” means the opinions of Tax Advisors and the Ruling deliverable to Brink’s in connection with the Transactions.

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

“ Tax Records ” means Tax Returns, Tax Return workpapers, documentation relating to any Tax Contests and any other books of account or records required to be maintained under the Code or other applicable Tax Laws or under any record retention agreement with any Tax Authority.

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

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

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

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

“ Unqualified Tax Opinion ” means a “will” opinion, without qualifications, of a Tax Advisor, which Tax Advisor is reasonably acceptable to Brink’s, on which Brink’s may rely to the effect that a transaction will not affect the Tax-Free Status.  Any such opinion must assume that the First Internal Distribution, the Second Internal Distribution, and the Contribution and Distribution (taken together) would have qualified for Tax-Free Status if the transaction in question did not occur.

ARTICLE II

Allocation of Tax Liabilities

ARTICLE III

Proration of Tax Items

ARTICLE IV

Preparation and Filing of Tax Returns