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Exhibit
10.1
TAX SHARING
AGREEMENT
This Tax Sharing Agreement
(this “ Agreement ”) is entered into as of July
16, 2007 among American Standard Companies Inc., a Delaware
corporation (“ ASD ”), WABCO Holdings Inc, a
Delaware corporation and wholly-owned subsidiary of ASD (“
WABCO ”), Trane L.P., a Bermuda LP treated as a
corporation for U.S. federal income tax purposes (“
TBLP ”), American Standard Europe L.P., a Bermuda
limited partnership treated as a corporation for U.S. federal
income tax purposes (“ WLP ”), Ideal Standard
Wabco Trane Indústria E Comércio Ltda., a Brazilian
limited company treated as a disregarded entity for U.S. federal
income tax purposes (“ Trane Brazil ”), and
WABCO do Brasil Industria e Comercio de Freios Ltda., a Brazilian
company treated as a corporation for U.S. federal income tax
purposes (“ WABCO Brazil ” and, together with
ASD, WABCO, TBLP, WLP and Trane Brazil, the “ Parties
”). Capitalized terms used in this Agreement and not
otherwise defined herein shall have the meanings ascribed to such
terms in the Separation and Distribution Agreement, dated as of
July 16, 2007, between ASD and WABCO (the “ Distribution
Agreement ”).
RECITALS
WHEREAS, ASD is the common
parent corporation of an affiliated group of corporations within
the meaning of Section 1504(a) of the Internal Revenue Code of
1986, as amended (the “ Code ”), that has filed
consolidated federal income tax returns.
WHEREAS, WABCO is a
newly-formed, wholly-owned subsidiary of ASD.
WHEREAS, ASD will effect the
restructuring transactions described in the Distribution Agreement
for the purpose of aggregating the VCS Business in the WABCO Group
prior to the Distribution (collectively, the “
Reorganization ”).
WHEREAS, on the Distribution
Date, ASD will distribute all of the issued and outstanding shares
of WABCO Common Stock on a pro rata basis to holders of ASD Common
Stock (the “ Distribution ”).
WHEREAS, the Parties intend
that the Distribution will qualify as a non-taxable transaction
under Section 355 of the Code, after which none of WABCO or
its Subsidiaries will be a member of the ASD Group for federal
income tax purposes.
WHEREAS, the Parties desire
to set forth their rights and obligations with respect to Taxes (as
defined herein) due for periods before and after the Distribution
Date.
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NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereto agree as
follows:
ARTICLE I.
DEFINITIONS
1.01 GENERAL. As used in this
Agreement, the following terms shall have the following
meanings:
“ Affiliate
” shall have the meaning set forth in the Distribution
Agreement.
“ Agreement
” shall have the meaning set forth in the Preamble to this
Agreement.
“ ASD ”
shall have the meaning set forth in the Preamble to this
Agreement.
“ ASD Common
Stock ” shall have the meaning set forth in the
Distribution Agreement.
“ ASD Filed Tax
Return ” shall have the meaning set forth in
Section 2.01(a).
“ ASD Group
” shall have the meaning set forth in the Distribution
Agreement.
“ ASD Taxes
” shall have the meaning set forth in
Section 2.03(a).
“ B&K
Business ” shall have the meaning set forth in the
Distribution Agreement.
“ B&K Foreign
Tax Liability ” shall have the meaning set forth in
Section 2.03(a).
“ Benefit Item
” shall have the meaning set forth in Schedule
2.03(d).
“ Business Day
” shall have the meaning set forth in the Distribution
Agreement.
“ Claim ”
shall have the meaning set forth in Section 4.02.
“ Code ”
shall have the meaning set forth in the Recitals.
“ Dispute
” shall have the meaning set forth in
Section 8.01.
“ Distribution
” shall have the meaning set forth in the
Recitals.
“ Distribution
Agreement ” shall have the meaning set forth in the
Preamble to this Agreement.
“ Distribution
Date ” shall have the meaning set forth in the
Distribution Agreement.
“ External
Distribution Tax Liability ” shall have the meaning set
forth in Section 2.03(a).
“ Final
Determination ” shall mean a determination within the
meaning of Section 1313 of the Code or any similar provision
of state or local Tax law.
“ Foreign Taxes
” shall mean all Taxes imposed by a Taxing Authority of any
jurisdiction outside of the United States.
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“ Governmental
Entity ” shall have the meaning set forth in the
Distribution Agreement.
“ Indemnifiable
Losses ” shall have the meaning set forth in the
Distribution Agreement.
“ Indemnified
Party ” shall have the meaning set forth in
Section 4.02.
“ Indemnifying
Party ” shall have the meaning set forth in
Section 4.02.
“ Parties
” shall have the meaning set forth in the Preamble to this
Agreement.
“ Person ”
shall have the meaning set forth in the Distribution
Agreement.
“ Post-Distribution
Period ” shall mean any taxable year or other taxable
period beginning after the Distribution Date and, in the case of
any taxable year or other taxable period that begins before and
ends after the Distribution Date, that part of the taxable year or
other taxable period that begins at the beginning of the day after
the Distribution Date.
“ Pre-Distribution
Period ” shall mean any taxable year or other taxable
period that ends on or before the Distribution Date and, in the
case of any taxable year or other taxable period that begins before
and ends after the Distribution Date, that part of the taxable year
or other taxable period through the close of the Distribution
Date.
“ Preliminary Tax
Advisor ” shall have the meaning set forth in
Section 8.01.
“ Prime Rate
” shall have the meaning set forth in the Distribution
Agreement.
“ Prohibited
Acts ” shall have the meaning set forth in
Section 3.02.
“ Proposed
Acquisition Transaction ” means a transaction or series
of related transactions (or any agreement, understanding,
arrangement or substantial negotiations, within the meaning of
Section 355(e) of the Code and the Treasury Regulations
promulgated thereunder, to enter into a transaction or series of
related transactions), as a result of which WABCO (or any successor
thereto) would merge or consolidate with any other Person or as a
result of which any Person or any group of Persons would (directly
or indirectly) acquire, or have the right to acquire (through an
option or otherwise) from WABCO (or any successor thereto) and/or
one or more holders of WABCO common stock, respectively, any amount
of stock of WABCO, that would, when combined with any other changes
in ownership of the stock of WABCO pertinent for purposes of
Section 355(e) of the Code and the Treasury Regulations
promulgated thereunder, comprise more than thirty-five percent
(35%) of the value of all outstanding stock of WABCO 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;
provided , however , that the foregoing shall not
include an acquisition (other than involving a public offering)
with respect to which there were no agreement, understanding,
arrangement or substantial negotiations, within the meaning of
Section 355(e) of the Code and the Treasury Regulations
promulgated thereunder, regarding the acquisition or a similar
acquisition at any time during the two year period ending on the
date of the Distribution. For purposes of determining whether a
transaction constitutes an indirect acquisition for purposes of the
first sentence of this definition, any recapitalization resulting
in a shift of voting power or any redemption of shares of stock
(including any redemption of WABCO equity pursuant to the exception
in Section 3.02(iii)) shall be treated as an indirect
acquisition of stock by the non-exchanging
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shareholders. This definition
and the application thereof is intended to monitor compliance with
Section 355(e) of the Code and the Treasury Regulations
promulgated thereunder and shall be interpreted accordingly by the
Parties in good faith.
“ Remainco
Business ” shall have the meaning set forth in the
Distribution Agreement.
“ Reorganization
” shall have the meaning set forth in the
Recitals.
“ Restructuring Tax
Liability ” shall have the meaning set forth in
Section 2.03(a).
“ Ruling ”
shall have the meaning set forth in
Section 2.01(b).
“ Ruling Request
” shall mean the request for rulings submitted by ASD to the
Internal Revenue Service on March 15, 2007, including the
exhibits attached thereto, and all related supplements.
“ Subsidiary
” shall have the meaning set forth in the Distribution
Agreement.
“ Tax ” or
“ Taxes ” shall mean (i) all taxes,
charges, fees, duties, levies, imposts, rates or other assessments
or governmental charges of any kind imposed by any federal, state,
local or foreign Governmental Entity, including, without
limitation, income, gross receipts, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental, custom
duties, property, sales, use, license, capital stock, transfer,
franchise, registration, payroll, withholding, social security,
unemployment, disability, value added, alternative or add-on
minimum or other taxes, whether disputed or not, and including any
interest, penalties, charges or additions attributable thereto,
(ii) liability for the payment of any amount of the type
described in clause (i) above arising as a result of being (or
having been) a member of any group or being (or having been)
included or required to be included in any Tax Return related
thereto, and (iii) liability for the payment of any amount of
the type described in clauses (i) or (ii) above as a
result of any express or implied obligation to indemnify or
otherwise assume or succeed to the liability of any other
Person.
“ Tax Advisor
” shall have the meaning set forth in
Section 8.01.
“ Tax Benefit
” shall mean the reduction in Tax liability of the
Indemnified Party arising in connection with any Claim determined,
without duplication, as the sum of (i) the product of any
deduction available to the Indemnified Party (whether or not
currently used or usable) and the actual combined income tax rate
of the Indemnified Party in the year the Claim arose, (ii) the
amount of any refund and (iii) the amount of reduction in
Taxes for any credit utilized in the year the Claim arose.
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“ Tax
Certificates ” shall mean certificates of officers of ASD
and WABCO, dated as of July 31, 2007, provided to Skadden, Arps,
Slate, Meagher & Flom LLP in connection with the Tax
Opinion.
“ Tax Contest
” shall have the meaning set forth in
Section 5.01.
“ Tax Cost
” shall mean the increase in Tax liability of the Indemnified
Party arising in connection with any Claim determined as the
product of any income or gain resulting from the payment of such
Claim by the Indemnifying Party and the actual combined income tax
rate of the Indemnified Party in the year the indemnification
payment is accrued by the Indemnified Party.
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“ Tax Information
Packages ” shall mean any information required in order
to prepare and file any ASD Filed Tax Return.
“ Taxing
Authority ” shall mean any Governmental Entity having
jurisdiction over the assessment, determination, collection or
imposition of any Tax.
“ Tax Materials
” shall have the meaning set forth in
Section 3.01(a).
“ Tax Opinion
” shall mean the written opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, dated as of July 31, 2007, regarding
certain U.S. federal income tax consequences of certain
transactions executed as part of the Reorganization and the
Distribution.
“ Tax Return
” shall mean any return, report, certificate, form or similar
statement or document (including any related supporting information
or schedule attached thereto and any information return, amended
tax return, claim for refund or declaration of estimated tax)
required to be supplied to, or filed with, a Governmental Entity,
or any bill for or notice related to ad valorem or other similar
Taxes received from a Governmental Entity, in each case, in
connection with the determination, assessment or collection of any
Tax or the administration of any laws, regulations or
administrative requirements relating to any Tax.
“ TBLP ”
shall have the meaning set forth in the Preamble to this
Agreement.
“ Trane Brazil
” shall have the meaning set forth in the Preamble to this
Agreement.
“ Trane Brazil
Contribution ” shall mean Trane Brazil’s
contribution of its assets relating to the VCS Business to WABCO
Brazil as part of the Reorganization.
“ VCS Assets
” shall have the meaning set forth in the Distribution
Agreement.
“ VCS Business
” shall have the meaning set forth in the Distribution
Agreement.
“ VCS Tax
Liability ” shall have the meaning set forth in
Section 2.03(a).
“ WABCO ”
shall have the meaning set forth in the Preamble to this
Agreement.
“ WABCO Brazil
” shall have the meaning set forth in the Preamble to this
Agreement.
“ WABCO Brazil
Restructuring Tax Liability ” shall have the meaning set
forth in Section 2.03(b).
“ WABCO Common
Stock ” shall have the meaning set forth in the
Distribution Agreement.
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“ WABCO Filed Tax
Return ” shall have the meaning set forth in
Section 2.01(b).
“ WABCO Group
” shall have the meaning set forth in the Distribution
Agreement.
“ WABCO Taxes
” shall have the meaning set forth in
Section 2.03(b).
“ WLP ”
shall have the meaning set forth in the Preamble to this
Agreement.
“ WLP
Contribution ” shall mean WLP’s contribution of its
assets relating to the Trane and B&K Businesses to TBLP as part
of the Restructuring.
“ WLP Restructuring
Tax Liability ” shall have the meaning set forth in
Section 2.03(b).
1.02 INTERPRETATION. For all
purposes of this Agreement: (i) the terms defined in this
Agreement include the plural as well as the singular; (ii) all
references in this Agreement to “Preamble”,
“Recitals”, “Articles”,
“Sections” and other subdivisions are to the designated
Preamble, Recitals, Articles, Sections and other subdivisions of
the body of this Agreement; (iii) pronouns of either gender or
neuter include, as appropriate, the other pronoun forms;
(iv) the words “herein,” “hereof” and
“hereunder” and other words of similar import refer to
this Agreement as a whole and not to any particular Article,
Section or other subdivision; (v) “or” is not
exclusive; (vi) “including” shall be deemed to be
followed by “but not limited to”; and (vii) any
definition of or reference to any statute shall be construed as
referring also to any rules and regulations promulgated
thereunder.
ARTICLE II. TAX
RETURNS AND TAX PAYMENTS
2.01 OBLIGATIONS TO FILE TAX
RETURNS.
(a) The ASD Group shall have
the sole and exclusive responsibility for the preparation and
filing of each Tax Return filed after the Distribution Date that
includes any member of the ASD Group or any assets or operations of
the Remainco Business other than Tax Returns listed on Schedule
2.01(a) (each, an “ ASD Filed Tax Return ”);
provided , however , that (x) WABCO shall
prepare and deliver to ASD in a manner consistent with past
practices pro forma Tax Returns and Tax Information Packages with
respect to each member of the WABCO Group or portion of the VCS
Business included in, or reflected on, an ASD Filed Tax Return no
later than ninety (90) days before the due date for the filing
of the relevant Tax Return, (y) ASD shall provide to WABCO no
later than thirty (30) days in advance of the due date for the
filing thereof, and WABCO shall have a reasonable opportunity to
review and comment on, any such ASD Filed Tax Return (or the
relevant portion thereof) to the extent that WABCO is responsible
for any portion of the Taxes reported on such ASD Filed Tax Return,
and (z) in the case of any ASD Filed Tax Return that includes
any member of the WABCO Group or the VCS Business only for the
portion of the relevant taxable period that ends on the
Distribution Date, taxable income, assets or other attributes of
the VCS Business shall be allocated by ASD to the portion of such
taxable period that ends on the Distribution Date based on an
actual or hypothetical closing of the books at the close of the
Distribution Date performed by ASD. Each member of the WABCO Group
hereby irrevocably authorizes and designates ASD as its agent,
coordinator and administrator for the purpose of taking any and all
actions necessary or incidental to the filing of any such ASD Filed
Tax Returns and, except as otherwise provided herein, for the
purpose of making payments to, or collecting refunds from, any
Governmental Entity in respect of an ASD Filed Tax Return. Except
as otherwise provided herein, ASD shall have the exclusive right to
file, prosecute,
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compromise or settle any claim for, or
refund of, Taxes in respect of an ASD Filed Tax Return for which
ASD bears responsibility hereunder and to determine whether any
refunds of Taxes to which the ASD Group may be entitled shall be
received by way of refund or credit against the Tax liability of
the ASD Group. For purposes of this Section, validly filed
extensions of time to file tax returns should be treated as
extending the date such returns are required to be
filed.
(b) The WABCO Group shall
have the sole and exclusive responsibility for the preparation and
filing of (A) each Tax Return that is required to be filed
after the Distribution Date that includes any member of the WABCO
Group or any assets or operations of the VCS Business that is not
an ASD Filed Tax Return and (B) Tax Returns listed on Schedule
2.01(a) (each, a “ WABCO Filed Tax Return ”);
provided , however , that, except as otherwise
required by law, (1) all WABCO Filed Tax Returns shall be
prepared on a basis that is consistent with the Tax Opinion and the
private letter ruling received by ASD on July 10, 2007 (the “
Ruling ”) with respect to the Reorganization
transactions addressed therein and the Distribution and consistent
with past practices of ASD, (2) WABCO shall provide to ASD no
later than thirty (30) days in advance of the due date for the
filing thereof, and ASD shall have a reasonable opportunity to
review and comment on, any such WABCO Filed Tax Return (or the
relevant portion thereof) to the extent that ASD is responsible for
any portion of the Taxes reported on such WABCO Filed Tax Return
and (3) in the case of any WABCO Filed Tax Return that
includes any member of the WABCO Group or the VCS Business only for
the portion of the relevant taxable period that begins after the
Distribution Date, taxable income, assets or other attributes of
the VCS Business shall be allocated by ASD to the portion of such
taxable period that begins after
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