EX-10.2 9 ex10-2.htm EXHIBIT 10.2 ex10-2.htm Exhibit 10.2 TAX MATTERS AGREEMENT between GREATBATCH, INC. and QIG GROUP, LLC (to be converted into NUVECTRA CORPORATION) dated as of March 14, 2016 TABLE OF CONTENTS Page ARTICLE I DEFINITIONS AND EXAMPLES Section 1.1 Definitions 1 ARTICLE II ALLOCATION OF TAXES AND TAX ITEMS 6 Section 2.1 General Rules 6 (a) GB Taxes 6 (b) Nuvectra Taxes 6 Section 2.2 Special Rules 7 (a) Pro Forma Stand-Alone Basis 7 (b) Rules for Determining from which Business a Tax Item Arises 7 (c) Preparation of Pro Forma Calculations and Allocations 8 (d) Differences Between Taxes Shown on Joint Return and Taxes Computed on a Pro Forma Stand-Alone Basis 8 ARTICLE III PREPARATION AND FILING OF TAX RETURNS 9 Section 3.1 Joint Returns 9 Section 3.2 Separate Returns 9 Section 3.3 Rules Relating to the Preparation of Tax Returns 9 (a) General Rule 9 (b) Election to File Joint Returns 9 (c) Nuvectra Returns 9 (d) GB Returns 9 (e) Returns Affecting Liability of Other Party 9 (f) Reimbursement for Costs Incurred by Preparer 10 (g) Allocation of Tax Items Between Joint Return and Related Separate Return 10 (h) Standard of Performance 10 ARTICLE IV TAX PAYMENTS AND INDEMNIFICATION PAYMENTS 11 Section 4.1 Payment of Taxes to Tax Authorities 11 Section 4.2 Indemnification Payments 11 (a) Tax Payments Made by the Nuvectra Group 11 (b) Tax Payments Made by the GB Group 11 (c) Credit for Prior Deemed Tax Payments 11 Section 4.3 Initial Determinations and Subsequent Adjustments 11 (a) Initial Determinations of Payments 11 -i- (b) Redeterminations of Payments and Additional Payments 11 Section 4.4 Payments by or to Other Members of the Groups 12 Section 4.5 Late Payments 12 Section 4.6 Tax Consequences of Payments 12 Section 4.7 Payment Notices 13 ARTICLE V TAX CONTESTS 13 Section 5.1 Notices 13 Section 5.2 Control of Tax Contests 13 (a) General Rule 13 (b) Tax Contests Involving Certain Taxes Reported on a Joint Return 13 (c) Non-Controlling Party Participation Rights 14 ARTICLE VI ASSISTANCE AND COOPERATION 15 Section 6.1 Provision of Information 15 (a) Information with Respect to Joint Returns 15 (b) Information with Respect Tax Payments 15 (c) Information with Respect to Separate Returns 16 (d) Information with Respect to Pro Forma Stand-Alone Basis Computations and Allocations 16 (e) Information with Respect to Tax Contests 16 Section 6.2 Reliance on Exchanged Information 16 Section 6.3 Provision of Assistance and Cooperation 16 (a) Assistance with Respect to Joint Returns 16 (b) Assistance with Respect to Tax Contests 17 (c) Cooperation 17 Section 6.4 Retention of Tax Records 17 Section 6.5 Supplemental Rulings and Supplemental Tax Opinions 17 Section 6.6 Withholding and Reporting 18 ARTICLE VII RESTRICTIONS ON CERTAIN ACTIONS 18 Section 7.1 General Restrictions 18 Section 7.2 Certain Nuvectra Actions Beginning on the Spin-off Date 18 ARTICLE VIII GENERAL PROVISIONS 19 Section 8.1 Authority 20 Section 8.2 Termination 20 Section 8.3 Entire Agreement 20 Section 8.4 Binding Effect; No Third-Party Beneficiaries; Assignment 20 -ii- Section 8.5 Amendment 20 Section 8.6 Failure or Indulgence Not Waiver; Remedies Cumulative 20 Section 8.7 Notices 20 Section 8.8 Counterpart; Facsimile Signatures 21 Section 8.9 Severability 21 Section 8.10 Governing Law 21 Section 8.11 Specific Performance 21 Section 8.12 Construction 21 Section 8.13 Performance 22 Section 8.14 Change in Law 22 Section 8.15 Expenses 22 Section 8.16 Disputes 22 Section 8.17 Confidentiality 22 -iii- TAX MATTERS AGREEMENT THIS TAX MATTERS AGREEMENT (this “Agreement”) is entered into as of March 14, 2016, between Greatbatch, Inc., a Delaware corporation (“GB”), and QiG Group, LLC, a Delaware limited liability company (“QiG”). Unless otherwise indicated, all “Article” and “Section” references in this Agreement are to articles and sections of this Agreement. RECITALS WHEREAS , prior to the Spin-off (as defined below) QiG will be converted into Nuvectra Corporation, a Delaware corporation, and Nuvectra Corporation will be an indirect wholly owned subsidiary of GB that owns and operates the Nuvectra Business (as defined below); WHEREAS , the Board of Directors of GB has determined that it would be appropriate and desirable for GB to separate (the “Separation”) the Nuvectra Business from the GB Business (as defined below); WHEREAS , GB, in connection with the Separation, intends to distribute to its shareholders all of the shares of Nuvectra Corporation stock in a transaction (the “Spin-off”) intended to qualify as a transaction described under Sections 368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended (the “Code”); WHEREAS , the Parties have set forth in a Separation and Distribution Agreement the principal arrangements between them regarding the Separation and the Spin-off; and WHEREAS , the Parties desire to provide for and agree upon the allocation between the Parties of Taxes and Tax Items arising prior to, as a result of, and subsequent to the Spin-off, and to provide for and agree upon other matters relating to Taxes. NOW, THEREFORE , in consideration of the foregoing and the covenants and agreements set forth below, the Parties agree as follows: ARTICLE I DEFINITIONS AND EXAMPLES Section 1.1 Definitions . For purposes of this Agreement, the following terms have the following meanings: “Agreement” has the meaning set forth in the preamble hereto. “Code” has the meaning set forth in the recitals hereto. “Controlling Party” means the Party that has primary responsibility, control and discretion in handling, settling, or conducting a Tax Contest pursuant to Section 5.2. “Effective Time” means the time at which the Spin-off is effected on the Spin-off Date. “GB” has the meaning set forth in the recitals hereto. “GB Business” means the “Greatbatch Business” as defined in the Separation Agreement. “GB Group” means GB and each Subsidiary of GB (but only while such Subsidiary is a Subsidiary of GB) other than a Person that is a member of the Nuvectra Group. “GB Taxes” has the meaning set forth in Section 2.l(a). “IRS” means the Internal Revenue Service. “Joint Return” means any Tax Return that includes Tax Items attributable to both the GB Business and the Nuvectra Business; provided , however , that Tax Items carried forward from a Tax Year beginning on or before the Spin-off Date to a Tax Year beginning after the Spin-off Date shall be ignored for purposes of this determination. “Nuvectra” means (i) with respect to any Tax Year, or portion thereof, ending before the date of the conversion of QiG into Nuvectra Corporation, QiG and (ii) with respect to any Tax Year, or portion thereof, beginning on or after the date of the conversion of QiG into Nuvectra Corporation, Nuvectra Corporation. “Nuvectra Active Trade or Business” means the active conduct (as defined in Section 355(b)(2) of the Code and the Treasury Regulations thereunder) by the Nuvectra Group of the Nuvectra Business as conducted immediately prior to the Spin-off. “Nuvectra Business” has the meaning set forth in the Separation Agreement. “Nuvectra Group” means (i) with respect to any Tax Year, or portion thereof, ending before the Spin-off Date, Nuvectra and each other Subsidiary of GB that is a Subsidiary of Nuvectra on the Spin-off Date and (ii) with respect to any Tax Year, or portion thereof, beginning on or after the Spin-off Date, Nuvectra and each Subsidiary of Nuvectra (but only while such Subsidiary is a Subsidiary of Nuvectra). “Nuvectra Taxes” has the meaning set forth in Section 2.1(b). “Non-Controlling Party” means the Party that does not have primary responsibility, control, and discretion in handling, settling, or conducting a Tax Contest pursuant to Section 5.2. “Non-Controlling Party Item” has the meaning set forth in Section 5.2(c). “Non-Preparer” means the Party that is not responsible for the preparation or filing of a Joint Return or a Separate Return, as applicable, pursuant to Section 3.1 and Section 3.2. “Party” or “Parties” means GB, Nuvectra, or both, as the context requires. “Past Practice” means past customs, practices, accounting methods, elections and conventions. “Payment Date” means (i) with respect to any U.S. federal income Tax Return, the due date for any required installment of estimated taxes determined under Code Section 6655, the due date (determined without regard to extensions) for filing the return determined under Code Section 6072, 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. -2- “Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, a union, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof. “Post-Distribution Tax Period” means any taxable period (or portion thereof) that begins after the Spin-off Date. “Pre-Distribution Tax Period” means any taxable period (or portion thereof) that ends on or before the Spin-off Date. “Preparer” means the Party that is responsible for the preparation and filing of a Joint Return or a Separate Return, as applicable, pursuant to Section 3.1 and Section 3.2. “QiG” has the meaning set forth in the recitals hereto. “Requesting Party” has the meaning set forth in Section 6.5. “Separate Return” means any Tax Return that is not a Joint Return. “Separation” has the meaning set forth in the recitals hereto. “Separation Agreement” means the Separation and Distribution Agreement dated the date hereof between GB and Nuvectra. “Separation Transactions” means the Spin-off and related transactions described in Schedule I to the Separation Agreement. “Spin-off” has the meaning set forth in the recitals hereto. “Spin-off Date” means the date of the Spin-off. “Supplemental Tax Opinion” means, with respect to a specified action, an opinion (other than the Tax Opinion) from Tax Advisors to the effect that (subject to any customary assumptions, qualifications, and limitations set forth therein) such action will not preclude the Spin-off from qualifying as a Tax-free transaction described under Sections 368(a)(l)(D) and 355 of the Code to GB, its shareholders, and Nuvectra (except to the extent such shareholders receive cash in lieu of fractional shares or gain is required to be recognized by GB under Section 357(c) of the Code). The Tax Advisor in issuing a Supplemental Tax Opinion shall be permitted to rely on the validity and correctness, as of the date given, of any previously issued Tax Opinion or private letter ruling, unless such reliance would be unreasonable under the circumstances. “Tax” or “Taxes” means all forms of taxation imposed by any governmental entity or political subdivision, agency, commission or authority thereof, whenever created or imposed, and whether of the United States or elsewhere, and whether imposed by a local, municipal, state, national, federal, or other body, and without limiting the foregoing, shall include 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, recording, import, export, value added, alternative minimum, unclaimed property, escheat, estimated, or other similar tax (including any fee, assessment, or other charge in the nature of or in lieu of any tax), together with any interest, penalties, additions to tax, or additional amounts in respect of the foregoing. -3- “Tax Advisors” means (i) with respect to the Tax Opinion, GB’s third party tax advisor, (ii) with respect to a Supplemental Tax Opinion, Norton Rose Fulbright US LLP or another nationally recognized law firm or accounting firm designated by the Party to whom such opinion is delivered, and (iii) with respect to any dispute arising in connection with this Agreement, including under Section 2.2(c) or Section 3.3(e)(ii), a nationally recognized accounting firm agreed to by both Parties. “Tax Attribute” means Tax basis, net operating and capital loss carryovers or carrybacks, alternative minimum Tax credit carryovers or carrybacks, general business credit carryovers or carrybacks, Tax credits or credits against Tax, disqualified interest and excess limitation carryovers or carrybacks, overall foreign losses, research and experimentation credit base periods, all other items that are determined or computed on an affiliated group basis (as defined in Section 1504(a) of the Code determined without regard to the exclusion contained in Section 1504(b)(3) of the Code) or other consolidated, combined or unitary basis, and any other item of loss, deduction, or credit that could reduce a Tax liability. “Tax Authority” means, with respect to any Tax, the governmental entity or political subdivision, agency, commission, or authority thereof that imposes such Tax, or that is charged with the assessment, determination, or collection of such Tax for such entity or subdivision. “Tax Benefit” means any credit, deduction, or other Tax Attribute that may have the effect of decreasing any Tax. “Tax Contest” means an audit, review, examination, or any other administrative or judicial proceeding with the purpose or effect of examining, determining, redetermining or recovering Taxes of any member of either Group (including any administrative or judicial review of any claim for a refund of any Tax). “Tax Detriment” means any income, gain, or other attribute that may have the effect of increasing any Tax. For the avoidance of doubt, “Tax Detriment” includes the amount of any non-income Tax that is assessed without regard to income, gain or other quantifiable attribute (for example, Transfer Taxes and property Taxes). “Tax Item” means any Tax Benefit or Tax Detriment. “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. -4- “Tax Materials” means (i) the representation letters delivered to the Tax Advisors in connection with the delivery of the Tax Opinion or the Supplemental Tax Opinion, and (ii) any other materials delivered or deliverable by GB, Nuvectra, or others in connection with the rendering by the Tax Advisors of the Tax Opinion or the Supplemental Tax Opinion. “Tax Opinion” means the opinion to be delivered to GB by GB’s third party tax advisor in connection with the Separation Transactions substantially to the effect that (subject to the customary assumptions, qualifications, and limitations set forth therein) for U.S. federal income tax purposes the Spin-off should qualify as a Tax-free transaction described under Sections 368(a)(l)(D) and 355 of the Code to GB, its shareholders, and Nuvectra (except to the extent such shareholders receive cash in lieu of fractional shares or gain is required to be recognized by GB under Section 357(c) of the Code). “Tax Records” means Tax Returns, Tax Return work papers, documentation relating to any Tax Contests, and any 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-Related Costs” means (i) all accounting, legal and other professional fees and court costs incurred, as well as any other out-of-pocket costs incurred and (ii) all costs, expenses and damages associated with stockholder litigation and controversies and any amounts paid in respect of a liability of stockholders, whether paid to stockholders or the IRS or any other Tax Authority, in each case resulting from (A) the failure of the Spin-off from qualifying as a Tax-free transaction described under Sections 368(a)(1)(D) and 355 of the Code to GB and its stockholders (except to the extent such stockholders receive cash in lieu of fractional shares or gain is required to be recognized by GB under Section 357(c) of the Code) or (B) the failure of the Nuvectra stock distributed in the Spin-off from qualifying as “qualified property” for purposes of Section 355(d), 355(e) and 361(c) of the Code. “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, election, notice, or other document required to be filed under any applicable Tax Law (whether or not a payment is required to be made in connection with such filing), including any attachments, exhibits, schedules, or appendices 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 other period, if applicable, for which the Tax is reported as provided under applicable Tax Law. “Transfer Taxes” means all transfer, sales, use, excise, stock, stamp, stamp duty, stamp duty reserve, stamp duty land, documentary, filing, recording, registration, value added and other similar Taxes. “Treasury Regulations” means the regulations promulgated from time to time under the Code as in effect for the relevant Tax Year. -5- Capitalized terms used but not otherwise defined in this Agreement shall have the respective meanings assigned to such terms in the Separation Agreement. Section 1.2 Examples . The operation of various provisions of this Agreement is illustrated by examples in Appendix hereto, and this Agreement shall be interpreted in accordance with such examples. ARTICLE II ALLOCATION OF TAXES AND TAX ITEMS Section 2.1 General Rules . Except as provided in Section 5.1 (Tax Contests-Notices) and ARTICLE VI (Assistance and Cooperation), Taxes and Tax Items shall be allocated as follows: (a) GB Taxes . For any Tax Year, GB shall be liable for and indemnify the Nuvectra Group against GB’s allocable portion of Taxes imposed on the GB Group and the Nuvectra Group (“GB Taxes”). GB’s allocable portion of such Taxes shall be determined by taking into account the following Tax Items on a pro forma stand-alone basis (as determined pursuant to Section 2.2(a)): (i) GB Business Tax Detriments . Tax Detriments (other than Tax Detriments resulting from the Separation Transactions) arising from the operation or ownership of the GB Business, (ii) GB Business Tax Benefits . Tax Benefits (other than Tax Benefits resulting from the Separation Transactions) arising from the operation or ownership of the GB Business, (iii) Separation Transactions - Generally . Tax Items resulting from the Separation Transactions (including, without limitation, but for avoidance of doubt, Transfer Taxes and Taxes attributable to the settlement of any intercompany receivable, payable, loan or other account incident to the Separation Transactions), except those Tax Items that are required to be taken into account by Nuvectra pursuant to Section 2.1(b)(iii), and (iv) Nuvectra Business Tax Benefits . Tax Benefits (other than Tax Benefits resulting from the Separation Transactions) arising from the operation or ownership of the Nuvectra Business for any Pre-Distribution Tax Period, but only to the extent such Tax Benefits are not taken into account in calculating Nuvectra Taxes under Section 2.1(b)(ii). (b) Nuvectra Taxes . For any Pre-Distribution Tax Period, Nuvectra shall be liable for and indemnify the GB Group against Nuvectra’s allocable portion of Taxes imposed on the GB Group and the Nuvectra Group (“Nuvectra Taxes”). Nuvectra’s allocable portion of such Taxes shall be determined by taking into account the following Tax Items on a pro forma stand-alone basis (as determined pursuant to Section 2.2(a)): -6- (i) Nuvectra Business Tax Detriments . Tax Detriments (other than Tax Detriments resulting from the Separation Transactions) arising from the operation or ownership of the Nuvectra Business, (ii) Nuvectra Business Tax Benefits . Tax Benefits (other than Tax Benefits resulting from the Separation Transactions) arising from the operation or ownership of the Nuvectra Business, provided that such Tax Benefits may not be used to reduce any Tax Detriments described in Section 2.1(b)(iii), (iii) Separation Transactions - Breach of Covenants . Tax Items resulting from the Separation Transactions, but only to the extent such Tax Items are directly attributable to Nuvectra’s breach of any of its covenants or representations under ARTICLE VII, and not attributable to any of the events or actions described in clauses (i) – (iii) of Section 7.3(b), and (iv) GB Business Tax Benefits . Tax Benefits (other than Tax Benefits resulting from the Separation Transactions) arising from the operation or ownership of the GB Business, but only to the extent such Tax Benefits are not taken into account in calculating GB Taxes under Section 2.1(a)(ii). Section 2.2 Special Rules. (a) Pro Forma Stand-Alone Basis . For purposes of computing GB Taxes and Nuvectra Taxes on a pro forma stand-alone basis, Tax Items shall be taken into account: (i) only to the extent required or allowable under applicable Tax Law on a pro forma stand-alone basis for such Tax Year, (ii) by assuming that the members of the Nuvectra Group filed on a consolidated basis with Nuvectra as the common parent, (iii) by using all applicable elections, accounting methods, and conventions used on the Tax Return on which such Tax Items are actually reported, (iv) by applying the average Tax rate on such Tax Return ( i.e., the Tax rate, expressed as a percentage, equal to the quotient of total Taxes shown on the Tax Return with respect to a particular Tax base and such applicable Tax base), provided , however , if any category of Tax Items is subject to a different rate of Tax than other categories of Tax Items on such Tax Return, the average Tax rate applicable to such category of Tax Items reported on the Tax Return shall apply with respect to such Tax Items, and (v) by treating Tax Benefits as used in the order specified under applicable Tax Law or, to the extent that such Tax Law does not specify the order of use, as used pro rata. (b) Rules for Determining from which Business a Tax Item Arises . For purposes of ARTICLE II, Tax Items shall be deemed to arise from the operation or ownership of the Business to which such items are more closely related. For the avoidance of doubt, Tax Benefits arising from the vesting or payment of an equity award shall be deemed to arise from the operation or ownership of the Business that received the benefit of the services to which such equity award relates. Notwithstanding the foregoing, with respect to any Tax Year, Tax Items related to overhead costs and similar expenses that do not directly relate to either Business shall be allocated to GB. -7- (c) Preparation of Pro Forma Calculations and Allocations . GB shall be responsible for preparing all pro forma stand-alone basis computations and allocations provided for in this ARTICLE II (including, for the avoidance of doubt, the allocations provided for in Section 2.2(b)); provided, however , GB shall make available and provide to Nuvectra for its review and comment such pro forma stand-alone basis computations and allocations no later than sixty days before the date on which the relevant Tax Return to which such computations and allocations relate is due (taking into account any filed extensions), and, in connection with such review, Nuvectra shall have reasonable access, during normal business hours and upon reasonable notice, to information then in the possession of the GB Group that Nuvectra reasonably requests in order for Nuvectra to review such pro forma stand-alone basis computations and allocations. If Nuvectra disagrees with any aspect of such computations and allocations, it shall, within thirty days after receiving such computations and allocations, provide GB with written notification of such disputed item (or items). Provided that GB has complied with its obligations pursuant to this Section 2.2(c) and the applicable provisions of ARTICLE VI, GB shall have no obligation to consider any comments that are provided more than thirty days after such computations and allocations are made available to Nuvectra. GB and Nuvectra shall act in good faith to resolve any such dispute prior to the date on which the relevant Tax Return to which such disputed item relates is required to be filed. If GB and Nuvectra cannot reach a resolution with respect to any such disputed item, the item in question shall be resolved in accordance with Section 8.16. In the event that any such dispute relating to any Tax Return is not resolved prior to the due date for such Tax Return, the Tax Return shall be timely filed and subsequently amended as necessary to reflect the resolution of the dispute. (d) Differences Between Taxes Shown on Joint Return and Taxes Computed on a Pro Forma Stand-Alone Basis . If the sum of GB Taxes and Nuvectra Taxes relating to a Joint Return is different from the amount of Tax shown on such Joint Return, then the Tax shown on such Joint Return shall be allocated between the Parties in the same proportion as the amount of GB Taxes or Nuvectra Taxes, as appropriate, bears to the sum of GB Taxes and Nuvectra Taxes relating to such Joint Return. (e) Allocation in Straddle Periods . For purposes of Section 2.1 and Section 2.2, Tax Items arising during any Tax Year that begins on or before and ends after the Spin-off Date shall be treated as arising during the Pre-Distribution Tax Period or the Post-Distribution Tax Period based on an interim closing of the books as of and including the day of the Spin-off Date. Notwithstanding the foregoing, Tax Items attributable to any such Tax Year that are calculated on an annualized basis (including depreciation, amortization and depletion deductions) shall be apportioned between the Pre-Distribution Tax Period and the Post-Distribution Tax Period on a daily pro rata basis. -8- ARTICLE III PREPARATION AND FILING OF TAX RETURNS Section 3.1 Joint Returns . GB shall be responsible for preparing and timely filing (or causing to be prepared and filed) all Joint Returns. Section 3.2 Separate Returns . GB shall be responsible for preparing and timely filing (or causing to be prepared and filed) all Tax Returns that it determines in its reasonable discretion are Separate Returns including Tax Items attributable to the GB Business. Nuvectra shall be responsible for preparing and timely filing (or causing to be prepared and filed) all Separate Returns including Tax Items attributable to the Nuvectra Business. Section 3.3 Rules Relating to the Preparation of Tax Returns . (a) General Rule . Except as otherwise provided in this Agreement, the Preparer of a Tax Return shall have the exclusive right, in its sole discretion, with respect to such Tax Return to determine (i) the manner in which such Tax Return shall be prepared and filed, including the elections, methods of accounting, positions, conventions, and principles of taxation to be used and the manner in which any Tax Item shall be reported, (ii) whether any extensions may be requested, (iii) whether an amended Tax Return shall be filed, (iv) whether any claims for refund shall be made, (v) whether any refunds shall be paid by way of refund or credited against any liability for the related Tax, and (vi) whether to retain outside firms to prepare or review such Tax Return. (b) Election to File Joint Returns . GB shall have the sole discretion of whether to file a Joint Return on a consolidated, combined, or joint basis, if the filing of such consolidated, combined, or joint return is elective under the relevant Tax Law. (c) Nuvectra Returns. Except as required by applicable Tax Law, with respect to any Separate Return for which Nuvectra is the Preparer, Nuvectra shall not take (and shall cause the other members of the Nuvectra Group not to take) any position that it knows, or reasonably should know, would adversely affect any member of the GB Group without the prior written consent of GB. Without limiting the foregoing, Nuvectra shall not elect under Section 172(b)(3) of the Code to relinquish the carryback period with respect to a net operating loss if such net operating loss could, absent such an election, be carried back to the GB Group’s 2016 Joint Return. (d) GB Returns . Except as required by applicable Tax Law, with respect to any Separate Return for which GB is the Preparer, GB shall not take (and shall cause the members of the GB Group not to take) any position that it knows, or reasonably should know, would adversely affect any member of the Nuvectra Group without the prior written consent of Nuvectra. (e) Returns Affecting Liability of Other Party . Insofar as a Tax Return prepared by one Party may affect Taxes for which the other Party is liable pursuant to this Agreement or otherwise to any Tax Authority, or would reflect a position that would reasonably be expected to adversely affect the other Group: -9- (i) Consistent With Past Practice . Unless otherwise agreed to by the Parties, and except to the extent otherwise required by applicable Tax Law, each Tax Return shall be prepared in a manner consistent with Past Practice. (ii) Review Prior to Filing . The Preparer of such Tax Return shall make the Tax Return available to the Non-Preparer for its review and comment no later than sixty days before the Tax Return is due, taking into account any extensions that the Preparer files, and, in connection with such review, the Non-Preparer shall have reasonable access, during normal business hours and upon reasonable notice, to the Preparer’s supporting information and schedules, including financial books and records. If the Non-Preparer disagrees with any aspect of such Tax Return, it shall, within thirty days after receiving such Tax Return, provide the Preparer with written notification of such disputed item (or items). Provided the Preparer has complied with its obligations pursuant to this Section 3.3 and the applicable provisions of ARTICLE VI, the Preparer shall have no obligation to consider any comments that are provided more than thirty days after such Tax Return is made available to the Non-Preparer. The Preparer and Non-Preparer shall act in good faith to resolve any such dispute prior to the date on which the relevant Tax Return to which such disputed item relates is required to be filed. If the Preparer and Non-Preparer cannot reach a resolution with respect to any such disputed item, the item in question shall be resolved in accordance with Section 8.16. In the event that any such dispute relating to any Tax Return is not resolved prior to the due date for such Tax Return, the Tax Return shall be timely filed and subsequently amended as necessary to reflect the resolution of the dispute. (f) Reimbursement for Costs Incurred by Preparer . The Non-Preparer of a given Tax Return may request that the Preparer amend such Tax Return for the benefit of the Non-Preparer. If the Preparer agrees, in its sole discretion, to amend such Tax Return, the Preparer shall be entitled to reimbursement from the Non-Preparer for any reasonable third-party costs that are attributable to the Non-Preparer’s request to the extent such costs exceed $50,000 in the aggregate. (g) Allocation of Tax Items Between Joint Return and Related Separate Return . Notwithstanding Section 3.3(a), if Tax Items are allocated between a Joint Return and any related Separate Return, then the Preparer of such Separate Return shall (and shall cause the members of its Group to) file the related Separate Return in a manner that is consistent with the reporting of such Tax Items on the Joint Return except to the extent otherwise required by applicable Tax Law. (h) Standard of Performance . GB shall prepare (or cause to be prepared) Joint Returns with the same general degree of care as it uses in preparing Separate Returns and without Nuvectra’s prior written consent it shall not take any position on any Joint Return that would have the effect of deferring any material item of income or accelerating any material item of deduction that would have the effect of increasing Nuvectra’s Taxes following the Spin-off or its indemnification obligation under this Agreement. Section 3.4 Protective Section 336(e) Elections . Notwithstanding anything to the contrary, GB and Nuvectra shall make a protective election under Section 336(e) of the Code (and any similar election under state or local law) in accordance with Treasury Regulations Section 1.336-2(h) and (j) (and any applicable provisions under state and local law), and shall cooperate in the timely completion and/or filings of such elections and any related filings or procedures (including filing or amending any Tax Returns to implement a protective election that becomes effective). This Section 3.4 is intended to constitute a binding, written agreement to make an election under Section 336(e) of the Code with respect to the Spin-off. -10- ARTICLE IV TAX PAYMENTS AND INDEMNIFICATION PAYMENTS Section 4.1 Payment of Taxes to Tax Authorities. GB shall be responsible for remitting (or causing to be remitted) to the proper Tax Authority all Tax shown (including Taxes for which Nuvectra is wholly or partially liable pursuant to Section 2.1) on any Tax Return for which it is the Preparer, and Nuvectra shall be responsible for remitting (or causing to be remitted) to the proper Tax Authority all Tax shown on any Tax Return for which it is the Preparer. Section 4.2 Indemnification Payments. (a) Tax Payments Made by the Nuvectra Group . If any member of the Nuvectra Group remits a payment to a Tax Authority for any GB Taxes, GB shall remit the amount for which it is liable to Nuvectra pursuant to Section 2.1(a) within thirty days after receiving written notification requesting such amount. (b) Tax Payments Made by the GB Group . If any member of the GB Group remits a payment to a Tax Authority for any Nuvectra Taxes, Nuvectra shall remit the amount for which it is liable to GB pursuant to Section 2.1(b) within thirty days after receiving written notification requesting such amount. (c) Credit for Prior Deemed Tax Payments . For purposes of Section 4.2(b), the portion of Taxes paid by the GB Group to a Tax Authority for which Nuvectra is wholly or partially liable will be determined by assuming that Nuvectra previously paid the full amount of its allocable share of all Taxes paid before the Spin-off, including, without limitation, its share of amounts shown on any Tax Return filed before the Spin-off Date with respect to any Tax Year ending on or before the Spin-off Date. Section 4.3 Initial Determinations and Subsequent Adjustments. (a) Initial Determinations of Payments . The initial determination of the amount of any payment that one Party is required to make to the other Party under this Agreement shall be made on the basis of the Tax Return to which the payment relates as filed, or, if such Tax is not reported on a Tax Return, on the basis of the amount of Tax initially paid to the Tax Authority. (b) Redeterminations of Payments and Additional Payments . The amounts paid under this Agreement will be redetermined, and additional payments relating to such redetermination will be made, as appropriate, if as a result of an audit by a Tax Authority or an amended Tax Return (i) additional Taxes to which such redetermination relates are subsequently paid, (ii) a refund of Taxes (including any interest received relating thereto) is received or a Tax credit becomes available, (iii) the Group to which a Tax Item is allocated changes, or (iv) the amount or character of any Tax Item is adjusted or redetermined. Each Party will promptly notify the other Party in writing of the occurrence of any of the events described in clauses (i) – (iv) above. Each payment required by the immediately preceding sentence (a) as a result of a payment of additional Taxes will be due thirty days after the date on which the additional Taxes were paid or, if later, thirty days after the date of a request from the other Party for the payment, (b) as a result of the receipt of a refund or tax credit will be due thirty days after the refund or tax credit was received, (c) as a result of a change in the allocation of a Tax Item will be due thirty days after the date on which the final action resulting in such change is taken by a Tax Authority or either Party or any member of its Group or (d) as a result of an adjustment or redetermination of the amount or character of a Tax Item will be due thirty days after the date on which the final action resulting in such adjustment or redetermination is taken by a Tax Authority or either Party or any member of its Group. -11- Section 4.4 Payments by or to Other Members of the Groups . When appropriate under the circumstances to reflect the underlying liability for a Tax or entitlement to a Tax refund, credit or Tax Benefit, a payment which is required to be made by or to a Party may be made by or to another member of the Group to which that Party belongs, but nothing in this Section 4.4 shall relieve any Party of its other obligations under this Agreement. Section 4.5 Late Payments . Payments pursuant to this Agreement that are not made within the period prescribed in this Agreement or, if no period is prescribed, within thirty days after written demand for payment is made shall bear interest for the period from and including the date immediately following the last date of such payment period through and including the date of payment at a per annum rate equal to the rate specified in Section 5.5 of the Separation Agreement. Such interest will be payable at the same time as the payment to which it relates and shall be calculated on the basis of a year of 365 days and the actual number of days for which due. If the indemnifying party fails to make a payment to the indemnified party within the time period set forth in this ARTICLE IV, the indemnifying party shall pay to the indemnified party, in addition to interest that accrues pursuant to this Section 4.5, any reasonable out-of pocket costs or expenses incurred by the indemnified party to secure such payment or to satisfy the indemnifying party’s portion of the obligation giving rise to the indemnification payment. Section 4.6 Tax Consequences of Payments . For all Tax purposes and to the extent permitted by applicable Tax Law, the Parties shall characterize any payment made pursuant to this Agreement in the same manner as if such payment were a capital contribution or a distribution, as the case may be, immediately prior to the Effective Time, or as an assumed or retained liability, and, accordingly, as not includible in the taxable income of the recipient. The amount of any payment made pursuant to this Agreement shall be (i) subject to the last sentence of this Section 4.6, increased to take into account any additional Taxes that may be owed by the recipient (or any of the members of its Group) as a result of receiving such payment and (ii) reduced to take into account any Tax Benefit realized by the recipient of such payment as a result of making any payment giving rise to the obligation of the payor to pay the recipient, but only to the extent that such Tax Benefit reduces the liability for Taxes (whether payable to a Tax Authority or to the other Party under this Agreement) of the recipient in the Tax Year during which such payment is received. If the payor reduces any payment by the amount of any Tax Benefit pursuant to this Section 4.6 and such Tax Benefit subsequently is denied or reduced by any Tax Authority, then the payor shall pay the recipient an amount equal to such reduction or denial. In the event that a Tax Authority asserts that G