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EXHIBIT 10.11
TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT ("Agreement") is entered into as of the
25th day of September, 1992, among TCH Corporation, a Delaware corporation, and
its direct and indirect corporate subsidiaries listed on the signature pages
(hereinafter the "Subsidiaries" and individually a "Subsidiary") with respect
to the following facts:
A. Parent is the common parent of an affiliated group of corporations
within the meaning of section 1504(a) of the Code (the "Parent Consolidated
Group"), which files a federal consolidated income tax return;
B. The Subsidiaries and their successors are includible corporations,
within the meaning of section 1504(b) of the Code, in the Parent Consolidated
Group;
C. The Subsidiaries and Parent wish to provide the basis on which
they are to compute and pay amounts reflecting their federal and state income
and franchise tax liability, and to agree upon the procedures to be followed in
connection with the filing and audit of their consolidated federal income tax
returns and their state combined and consolidated corporation income and
franchise tax returns.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the parties agree as follows:
1. (a) Definitions
"Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor federal tax code or statute, and any reference to any
statutory provision shall be deemed when appropriate to be a reference to any
successor provision or provisions.
"Consolidated Return" shall mean a consolidated federal income
tax return for an affiliated group of corporations filed pursuant to section
1501 of the Code.
"Filed Separate Tax Liability," with respect to a taxable
year, shall be determined in accordance with Section 5 so as to cause such
liability to reflect properly the elections made and the items reported in the
consolidated federal income tax return of the Parent Consolidated Group for
such taxable year, as amended pursuant to Section 5(f)(iii).
"Hypothetical Basis." Whenever, in this Agreement, a
computation is to be made on a Hypothetical Basis, it shall be made on a pro
forma basis, as if the Subsidiary filed a separate federal income tax return
for each Subsidiary Taxable Period.
"IRS" shall mean the Internal Revenue Service.
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"Parent" means (i) TCH Corporation, a Delaware corporation,
(ii) any successor common parent corporation described in Treas. Reg. Section
1.1502-75(d)(2)(i) or (ii), or (iii) any corporation as to which TCH
Corporation (or a successor corporation described in clause (ii)) is the
"predecessor" within the meaning of Treas. Reg. Section 1.1502-1(f)(1), if
such corporation acquires Parent (or a successor corporation described in
clause (ii)) in a "reverse acquisition" within the meaning of Treas. Reg.
Section 1.1502-75(d)(3) or in any other transaction which results in the Parent
Consolidated Group remaining in existence.
"Parent Consolidated Return" shall mean a Consolidated Return
for which Parent or any successor within the meaning of Treasury Regulation
section 1.1502-75 is the common parent.
"Parent Taxable Period" shall mean any taxable year of the
Parent Consolidated Group within the meaning of section 441(b) of the Code.
"Separate Tax Benefit" of a Subsidiary shall mean the amount
by which the Tax liability shown on the Parent Consolidated Return was reduced
as a result of a tax credit or of a Separate Taxable Loss or the carryforward
or carryback of a Separate Taxable Loss attributable to such Subsidiary from
any Subsidiary Taxable Period. The amount of reduction of Tax liability on a
Parent Consolidated Return attributable to a Subsidiary shall be computed by
calculating the difference between (i) the Tax liability of the Parent
Consolidated Group computed as a flat tax at the highest marginal rate for each
taxing system provided under the Code and (ii) the Tax liability of the Parent
Consolidated Group excluding the items of income, deduction, loss and credit
attributable to the Subsidiary in question computed as a flat tax at the
highest marginal rate for each taxing system provided under the Code. The
ordering and allocation of the use of credits, net operating losses and capital
losses of Subsidiaries will be determined under the Code, the regulations
thereunder and the generally accepted procedures of tax accounting.
Notwithstanding the foregoing, the computation provided in clause (ii) above
will be made based only on the items included for purposes of making the
computation provided in clause (i) above; no additional losses or credits of
other Subsidiaries are to be considered in making the computation provided in
clause (ii).
"Separate Tax Liability" of a Subsidiary shall mean an amount
equal to any Tax computed as a flat tax at the highest marginal rate, without
exemptions, under each respective Tax provision (including, without limitation,
that imposed under Sections 11, 55 and 1201(a) of the Code) with respect to the
Separate Taxable Income of such Subsidiary, reduced by current credits, if any,
against Tax, allowable in respect of such Separate Taxable Income, without
giving effect to any otherwise allowable carryover or carryback of a Separate
Taxable Loss or credits from any other taxable year of such Subsidiary, all as
computed on a Hypothetical Basis.
"Separate Taxable Income" of a Subsidiary shall mean the
amount of taxable income of the Subsidiary for any period for which the
Subsidiary has positive taxable income
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(including, but not limited to, alternative minimum taxable income), computed
on a Hypothetical Basis pursuant to the method of federal income tax accounting
employed by each such Subsidiary.
"Separate Taxable Loss" of the Subsidiary shall mean the
amount of any net operating loss or net capital loss of the Subsidiary for any
period pursuant to section 172 and section 1211 of the Code, respectively,
computed using the principles applicable to a determination of Separate Taxable
Income.
"Subsidiary Adjustment" means, with respect to any taxable
year, (i) the Separate Tax Liability of such Subsidiary for such year
calculated based upon the theories and assumptions used to compute the amount
of a Tax Payment, less (ii) the Filed Separate Tax Liability of such
Subsidiary.
"Subsidiary Notification Period" is defined in Section 5(d).
"Subsidiary Tax Issue" shall mean any proposed deficiency or
other adjustment relating to the Subsidiary which arises during an audit of any
Parent Taxable Period which would affect the liability of the Subsidiary or of
Parent under this Agreement.
"Subsidiary Taxable Period" shall mean any taxable year of a
Subsidiary during which such Subsidiary was or is a member of the Parent
Consolidated Group.
"Tax" shall mean the federal or state (as required by the
context) tax liability of the applicable corporation or corporations, imposed
on or computed by reference to income, including any interest thereon, any
additions to tax, and assessable penalties charged with respect thereto.
"Tax Payment" means the payment or refund of any Tax by or to
Parent or a Subsidiary with respect to any item adjusted by a Taxing Authority.
"Taxing Authority" is any governmental authority that imposes
a Tax.
Any capitalized terms not otherwise defined in this Agreement
shall have the meaning ascribed to them in the Code.
2. Separate Tax Payments
(a) After the date of this Agreement, whenever a Parent
Consolidated Return is filed which includes a Subsidiary for all or any portion
of the Parent Taxable Period, such Subsidiary shall pay to Parent, at the times
provided in Sections 6(a), (b) and (c) of this
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Agreement an amount equal to the Separate Tax Liability, if any, of the
Subsidiary, for each Subsidiary Taxable Period which terminates prior to or at
the close of the Parent Taxable Period.
(b) After the date of this Agreement, whenever a Parent
Consolidated Return is filed which includes a Subsidiary for all or any portion
of the Parent Taxable Period, Parent shall pay to such Subsidiary, at the time
provided in Section 6(c) of this Agreement an amount equal to the Separate Tax
Benefit, if any, of the Subsidiary, for each Subsidiary Taxable Period which
terminates prior to or at the close of the Parent Taxable Period; provided,
however, that if such Separate Tax Benefit results from a carryback of a tax
attribute of a Subsidiary which arose in a taxable period in which the
Subsidiary was not a member of the Parent Consolidated Group, this Section 2(b)
shall not apply and the provisions of Section 3 shall govern.
3. Carrybacks
(a) If a Subsidiary generates a Separate Taxable Loss during a
taxable year of such Subsidiary in which such Subsidiary is a member of the
Parent Consolidated Group which is carried back to a Parent Consolidated Return
and such carryback results in a refund to Parent of Taxes (the "Tax Refund"),
Parent shall pay to such Subsidiary the amount of any such Tax Refund within 10
days of the receipt of such refund by Parent or notice from the IRS that such
Tax Refund has been applied to other Tax liabilities of Parent.
(b) If a Subsidiary ceases to be a member of the Parent
Consolidated Group and, for any taxable year beginning on or after the date on
which such Subsidiary ceased to be a member of the Parent Consolidated Group,
such Subsidiary (or a successor to such Subsidiary) incurs a net operating loss
that may be carried back to a Parent Taxable Period in which such Subsidiary
was a member of the Parent Consolidated Group, such Subsidiary (or its
successor) shall make an election pursuant to section 172(b)(3) of the Code.
(c) If a Subsidiary ceases to be a member of the Parent
Consolidated Group and, for any taxable year beginning on or after the date on
which such Subsidiary ceased to be a member of the Parent Consolidated Group,
such Subsidiary (or a successor to such Subsidiary) incurs a net capital loss,
business credit, or foreign tax credit (each a "Carryback Item") that may be
carried back to a Parent Consolidated Return, such Subsidiary (or such
successor to such Subsidiary) may file a refund claim pursuant to Code section
6411 reflecting such Carryback Item. In the event that such Subsidiary (or
such successor to such Subsidiary) shall not elect to file such a claim (or
shall not be eligible to file such claim under applicable law), Parent shall,
at the request and expense of such Subsidiary (or such successor to such
Subsidiary), file amended returns or refund claims reflecting such Carryback
Item. Such Subsidiary will be compensated for the use of such Carryback Item
as follows:
(i) Parent shall, within 10 days after receipt, pay
to such Subsidiary (or such successor to such Subsidiary) any
refunds received by Parent resulting
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from the filing of a refund claim with respect to such
Subsidiary's Carryback Item pursuant to the foregoing
provisions of this Section 3(c) (whether by such Subsidiary,
its successor or Parent), together with interest received with
respect thereto. In the event that Parent would have received
a refund (including interest) with respect to such claim had
such refund not been offset by the United States Government
against deficiencies, interest or penalties assessed against
the Parent Consolidated Group or any member thereof (other
than deficiencies, interest or penalties attributable to (A)
the operations of such Subsidiary and with respect to which
such Subsidiary would otherwise be responsible under the terms
of this Agreement or (B) a taxable year of the Parent
Consolidated Group for which the statute of limitations has
expired), Parent shall pay to such Subsidiary (or such
successor to such Subsidiary), within 10 days after receipt of
notice of such offset, an amount equal to the amount of such
offset, together with interest determined as provided in
paragraph (iv) below on such amount.
(ii) Notwithstanding the foregoing, if such
Subsidiary generates a Carryback Item in the same year as a
member of the Parent Consolidated Group generates an
equivalent Carryback Item, such Subsidiary will only be
compensated for the use of its Carryback Item as if such
Subsidiary's Carryback Item were utilized after the equivalent
Carryback Items of members of the Parent Consolidated Group
were utilized. Thus, such Subsidiary will only be compensated
currently for the use of a Carryback Item to the extent that
the amount of equivalent Carryback Items used exceeds the
amount of such equivalent Carryback Items generated by members
of the Parent Consolidated Group. The excess Carryback Items
of such Subsidiary that were actually used will be compensated
for to such Subsidiary at (and only at) the following times:
(A) if such Subsidiary was currently compensated for any
portion of the Carryback Item, at the time when the
carryforward of equivalent Carryback Items generated in the
same year by the members of the Parent Consolidated Group are
utilized, or (B) if such Subsidiary was not currently
compensated for any portion of the Carryback Item actually
used in the Parent Consolidated Return, at the time when the
carryforward of equivalent Carryback Items generated in the
same year by the members of the Parent Consolidated Group are
utilized, but only after an amount of carryforward of
equivalent Carryback Items equal to the difference between the
total amount of such carryforwards and the amount of Carryback
Items generated by such Subsidiary which were actually used in
the Parent Consolidated return have been utilized and then
only to the extent that the remaining carryforwards are
utilized. For purposes of this clause (ii), a carryforward of
equivalent Carryback Items generated in the same year by the
members of the Parent Consolidated Group shall be deemed to be
utilized to the extent and at the time that any portion of
such carryforward is allocated to a
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member of the Parent Consolidated Group and such member leaves
the Parent Consolidated Group.
(iii) To the extent that a member of the Parent
Group or such Subsidiary receives a double benefit (in actual,
as opposed to potential, tax savings) as a result of this
Section 3(c) and the operation of the Code, Parent or such
Subsidiary, respectively, will compensate such Subsidiary or
Parent, respectively, for the duplication of the benefit.
(iv) Interest payable to such Subsidiary pursuant to
the foregoing provisions of this Section 3(c) shall be
computed at the rate determined under the provisions of
sections 6621(a)(1) and 6622 of the Code (the "Section 3
Rate") for the period commencing with the filing date
specified in section 6611(f) of the Code and ending on the
date of the payment by Parent to such Subsidiary.
(v) If, for any taxable year, Parent is required to
and does make a repayment to the Internal Revenue Service of
any portion of a refund described herein, then, such
Subsidiary shall pay to Parent, within 10 days following the
date Parent notifies such Subsidiary of such repayment, the
amount of such repayment plus interest at the Section 3 Rate
for the period commencing with the filing date specified in
section 6611(f) of the Code and ending on the date of payment
by such Subsidiary to Parent.
4. Indemnity by Parent
Parent hereby agrees to indemnify and hold each Subsidiary
harmless with respect to:
(a) any liability for Taxes attributable to any Subsidiary
Taxable Period for which such Subsidiary has paid Parent its Separate Tax
Liability, if any, in accordance with this Agreement (including any
recomputations in accordance with Section 5(c) hereof); and
(b) any liability for Taxes of the Parent Consolidated Group
for a Parent Taxable Period where such liability arises solely by reason of any
Subsidiary being severally liable for any Taxes of the Parent Consolidated
Group pursuant to Treas. Reg. Section 1.1502-6.
Payment pursuant to the indemnity in this Section 4 shall be
made within the time provided in Section 6(d).
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5. Procedural Matters
(a) Parent shall prepare and file Consolidated Returns and any
other returns, ruling or similar requests, documents or statements ("Returns")
required to be filed with the IRS with respect to the determination of the Tax
liability of the Parent Consolidated Group for all Parent Taxable Periods.
Parent shall have the sole right, in its reasonable discretion: (i) to
determine (A) the manner in which such Returns shall be prepared and filed,
including, without limitation, the manner in which any item of income, gain,
loss, deduction or credit shall be reported; provided, however, that Parent
shall consider in good faith any treatment proposed by any Subsidiary and (B)
the elections that will be made pursuant to the Code on behalf of any member of
the Parent Consolidated Group; (ii) to contest, compromise or settle any
adjustment or deficiency proposed, asserted or assessed as a result of any
audit of any such Returns at any stage in the Tax controversy process,
including without limitation an audit, a protest to the Appeals Division of the
IRS (or similar state appellate authority), and litigation in Tax Court or any
other court of competent jurisdiction; (iii) to file, prosecute, compromise or
settle any claim for refund; and (iv) to determine whether any refunds to which
the Parent Consolidated Group may be entitled shall be paid by way of refund or
credited against the tax liability of the Parent Consolidated Group.
(b) On or before the fifteenth day of the second month
following the close of each taxable year, each Subsidiary shall deliver to
Parent all information (including, without limitation, schedules, statements
and supporting documentation) as Parent may reasonably request from time to
time, with respect to such Subsidiary, for the preparation of the tax return of
the Parent Consolidated Group for the preceding taxable year and thereafter
update such information as more definitive information becomes available. All
information provided by each Subsidiary pursuant to this paragraph shall
correctly reflect the facts regarding the income, properties, operations and
status of such Subsidiary and shall be prepared applying elections and methods
of accounting that are consistent with those made or used by the Parent
Consolidated Group. If a Subsidiary fails to deliver the requested information
by the above-specified date, Parent shall have the right, but not the
obligation, to send its own personnel, at the Subsidiary's expense, to such
Subsidiary to collect the requested information. If Parent should exercise
such right, it shall not be considered to have waived any of its rights
pursuant to this Agreement and shall be entitled to exercise all of its rights
as if it had not so acted.
(c) Parent may review all work papers and procedures used by
Subsidiaries to prepare the information submitted pursuant to paragraph (b)
above, and may adjust any item so submitted (i) to reflect correctly the facts
regarding the income, properties, operations or status of any entity for which
information was required to be submitted, or (ii) so as to cause such
information to reflect properly elections or methods of accounting or
consolidation adjustments in a manner consistent with those made or used by the
Parent Consolidated Group. Parent shall prepare the consolidated federal
income tax returns for the Parent Consolidated Group. Parent shall then
compute the Separate Tax Liability for each Subsidiary. Parent shall notify
each
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Subsidiary in writing of the amount of such Subsidiary's Separate Tax Liability
and any adjustments it has made to the information provided by such Subsidiary
within 120 days of the later of (i) the last date upon which such Subsidiary
may deliver such information under paragraph (b) above or (ii) the date on
which such Subsidiary actually delivered such information. Such notification
shall include an explanation of the basis for any such adjustments and a copy
of the calculations of the Separate Tax Liability of such Subsidiary. Upon
request by a Subsidiary, Parent shall provide a copy of the portions of the
consolidated federal income tax return of the Parent Consolidated Group
relevant to such Subsidiary.
(d) In the event that a Subsidiary shall disagree with the
arithmetic calculation of any adjustment or its Separate Tax Liability made
under paragraph (c) or the factual basis of any adjustment made pursuant to
clause (i) of paragraph (c) above, such Subsidiary shall so notify Parent in
writing within 30 days following the receipt of such notification from Parent
described in paragraph (c) above (the "Subsidiary Notification Period"). Such
notification shall state the amount of adjustment or calculation with which
such Subsidiary disagrees and the basis for such disagreement. If such
disagreement is not resolved by Parent and such Subsidiary within 90 days, such
disagreement shall be resolved in accordance with the procedures set forth in
Section 8. The Separate Tax Liability of such Subsidiary shall be adjusted (if
at all) pursuant to the agreement of the parties or the procedures set forth in
Section 8, as the case may be, and, after adjustment, shall be the Filed
Separate Tax Liability of such Subsidiary. If a Subsidiary does not so notify
Parent within the Subsidiary Notification Period of any disagreement with the
calculations or adjustments made pursuant to paragraph (c), the amount of such
Subsidiary's Separate Tax Liability so calculated by Parent shall be the Filed
Separate Tax Liability of such Subsidiary.
(e) Notwithstanding anything to the contrary contained in
Section 4 hereof, within 10 days of any agreement by Parent to make or receive
a Tax Payment respecting an actual or asserted Federal Tax liability involving
a Subsidiary Tax Issue resulting in a Subsidiary Adjustment, Parent shall
notify the respective Subsidiary of the amount of such resulting Subsidiary
Adjustment. If the Tax Payment results from a settlement with the Internal
Revenue Service or a failure to appeal an adverse court decision and such
Subsidiary does not agree with Parent's decision to settle or not to appeal, it
shall notify Parent in writing within the Subsidiary Notification Period.
Within 10 days of Parent's notice of the amount of the Subsidiary Adjustment,
the respective Subsidiary may request in writing, copies of documents provided
to and correspondence with the Internal Revenue Service relating to the taxable
year or years to which such Tax Payment relates and reasonably related to the
determination of such Tax Payment. If the respective Subsidiary makes such
request, the Subsidiary Notification Period shall not begin until Parent
provides the requested copies. Such notification shall also state the amount
of the Subsidiary Adjustment with which it disagrees and the basis for such
disagreement. If such disagreement is not resolved by the parties within 90
days, such disagreement shall be resolved and the amount of the Subsidiary
Adjustment shall be determined in accordance with the procedures set forth in
Section 8. If the Subsidiary Adjustment is
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positive, the respective Subsidiary shall pay the amount of such adjustment to
Parent. If the Subsidiary Adjustment is negative, Parent shall pay the amount
of such adjustment to the respective Subsidiary. If such Subsidiary no longer
exists at the time such payment is to be made, the appropriate payment shall be
made by the entity succeeding to the assets of such former Subsidiary. This
Section 5(e) shall apply to all Subsidiaries and their successors at all times
hereafter, regardless of whether such Subsidiaries remain members of the Parent
Consolidated Group.
(f) (i) Parent shall notify a Subsidiary 30 days before filing
an amended return on behalf of the Parent Consolidated Group that would result
in an increase or decrease in the Separate Tax Liability of such Subsidiary for
such period. Parent shall provide such Subsidiary a reasonable opportunity to
comment on any items in such return that affect such Subsidiary. If such
Subsidiary shall disagree with any aspect of the amended return affecting it,
such Subsidiary shall so notify Parent in writing within 15 days of receipt of
the notice from Parent. Such notice shall identify the items in the amended
return affecting such Subsidiary with which it disagrees and shall state the
basis for such disagreement. If such disagreement is not resolved by the
respective parties within 90 days, such disagreement shall be resolved and the
amount due to Parent or such Subsidiary, as the case may be, if any, shall be
determined in accordance with the procedures set forth in Section 8. If such
Subsidiary does not so notify Parent within the time period specified in this
Section 5(f)(i) of any disagreement with items in the amended return affecting
such Subsidiary, such Subsidiary shall promptly pay to Parent the full amount
of any increase, or Parent shall promptly (upon receipt of payment from the
Internal Revenue Service) pay to such Subsidiary the full amount of any
decrease, as the case may be, in the Separate Tax Liability of such Subsidiary
(including any interest or penalties due thereon, if any) resulting from the
filing of an amended return in the form last presented to Subsidiary by Parent.
Nothing in this Section 5(f) shall be construed to prevent Parent from filing
an amended return as it, in its sole discretion, deems appropriate.
(ii) If the filing of an amended return on
behalf of the Parent Consolidated Group would result in a decrease in the
Separate Tax Liability of a Subsidiary, or if Parent has the opportunity to
assert a claim for a refund of Federal Tax in any audit or other proceeding
that would decrease Separate Tax Liability of a Subsidiary then, at the written
request of such Subsidiary delivered reasonably in advance of the expiration of
the applicable limitations period, Parent shall either (A) take action before
the expiration of the applicable limitations period to claim such refund or
file such amended return and shall pay to such Subsidiary the amount of any
refund resulting from such decrease, plus any interest received by Parent
attributable thereto within 30 days of such receipt or (B) elect not to file
such an amended return or assert such a claim for a refund and pay to such
Subsidiary the reasonable value, taking into account all relevant facts and
circumstances, of such claim as agreed to by the parties. If Parent believes
such reasonable value is less than the amount of the refund specified in the
written request of such Subsidiary, it shall notify such Subsidiary in writing
of such disagreement and state the value it believes to be reasonable within 30
days of receipt of the written request of such
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Subsidiary. If such disagreement is not resolved by the parties within 90 days
of Parent's notice, such disagreement shall be resolved and the amount due to
such Subsidiary, if any, shall be determined in accordance with the procedures
set forth in Section 8.
(iii) Any items in the amended returns filed
pursuant to paragraphs (i) and (ii) above that would affect the Separate Tax
Liability of a Subsidiary shall be deemed to amend and be incorporated in the
Filed Separate Tax Liability of such Subsidiary, except to the extent such
Subsidiary has not made a full payment to Parent with respect to any such item.
Any amount paid to a Subsidiary by Parent with respect to items for which
Parent elected not to file an amended return shall only be deemed to reduce the
Filed Separate Tax Liability of such Subsidiary to the extent that such items
are later allowed by the Internal Revenue Service and would result in a
reduction of the Separate Tax Liability of such Subsidiary.
(g) All elections made for a Subsidiary on a Hypothetical
Basis only shall be made in the same manner as such elections are made on the
Parent Consolidated Return. All computations of Separate Tax Liability shall be
prepared by Parent and upon request submitted to the respective Subsidiary for
review. In the event of any disagreement as to the method of, or principles
followed in, the computation, or as to the amount of income, deduction, gain,
loss or credit, the parties shall submit the dispute to the certified public
accountants which have been retained by Parent to audit its financial
statements, and the determination of such firm shall be conclusive and binding.
(h) Each Subsidiary hereby irrevocably designates Parent
as its agent and attorney in fact (and shall execute any necessary powers of
attorney) for the purpose of taking any and all actions necessary or incidental
to the filing of federal income tax returns for any period during which such
Subsidiary is or was a member of the Parent Consolidated Group. Parent shall
keep each Subsidiary reasonably informed of, and shall reasonably consult with
such Subsidiary with respect to, all actions to be taken on behalf of such
Subsidiary. Parent and each Subsidiary will each furnish the other any and all
information, execute any documents and do all other things which the other may
reasonably request in order to carry out the provisions of this Agreement and
to enable each party to properly prepare its respective tax returns. Each
Subsidiary will retain all books, records, documentation or other information
relating to any Parent Consolidated Return until the expiration of the
applicable statute of limitations (giving effect to any extension, waiver, or
mitigation thereof).
(i) Parent shall, to the extent such information is
available, promptly notify the respective Subsidiary of any Subsidiary Tax
Issue involving it, on request shall furnish such Subsidiary with a copy of any
material concerning such issue, and on request shall advise and consult in good
faith with such Subsidiary with respect to contest, compromise or settlement
thereof. Nothing in this Section 5(i) shall be construed to limit the rights
and authority of Parent provided in Section 5(a).
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6. Timing of Payments
(a) Payments by Subsidiaries of their respective amounts
of federal estimated taxes based upon the amount reasonably anticipated to be
due for each period, computed pursuant to the principles set forth in this
Agreement in respect of a Subsidiary Taxable Period, shall be made to Parent in
immediately available funds no later than each date on which such Subsidiaries
would be required to make a payment of Tax for such period on an estimated
basis to the IRS if it were not includible in the Parent Consolidated Group tax
return.
(b) By the fifteenth day of the third month following the
close of each taxable year, each Subsidiary shall in good faith estimate the
amount of its Separate Tax Liability for the preceding Subsidiary Taxable
Period, and pay to Parent the amount, if any, by which such estimate exceeds
the amounts paid to Parent with respect to such Subsidiary's Subsidiary Taxable
Period pursuant to subsection (a) of this Section 6.
(c) Within thirty days after the filing of a Parent
Consolidated Return which includes a Subsidiary, such Subsidiary shall pay to
Parent the excess, if any, of the Filed Separate Tax Liability of such
Subsidiary over amounts previously remitted with respect to such taxable year
pursuant to subsections (a) and (b) of this Section 6, and Parent shall pay to
a Subsidiary any excess of amounts previously received pursuant to subsections
(a) and (b) over the Filed Separate Tax Liability of such Subsidiary and any
Separate Tax Benefit due such Subsidiary.
(d) Any payments required to be made by Parent to a
Subsidiary pursuant to Section 4 of this Agreement shall be made within 10 days
of the receipt by Parent of notice that a payment requiring indemnification
under Section 4 has been made by such Subsidiary.
(e) When any payment required by this Agreement to be
made from one party to the other has not been made by the expiration of 30 days
from the date such payment hereunder is required, any unpaid amounts shall bear
interest from the date such payment is required at LIBOR plus 1% compounded
quarterly.
7. Combined or Consolidated State Tax Liability
(a) Each Subsidiary hereby agrees to pay Parent or the
Subsidiary required to file a combined or consolidated state income or
franchise tax return (the "State Tax Parent") an amount equal to the amount of
any state Tax attributable to the Subsidiary includible in a combined or
consolidated income or franchise tax return filed by the State Tax Parent (the
"Subsidiary State Tax Liability"). For purposes of the preceding sentence, the
Subsidiary State Tax Liability with respect to any combined or consolidated
income or franchise tax return shall be the Separate Tax Liability of the
Subsidiary (applying the provisions of the respective state income tax laws and
regulations, but using the state apportionment factors determined for the
combined or consolidated income or franchise tax return). The Subsidiaries and
Parent hereby
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agree that the substance of all other provisions of this Agreement shall be
reasonably applied in a similar manner in determining the amount and time of
payment by the Subsidiaries to the State Tax Parent in respect of any state Tax
and the amount of all other payments and reimbursements due hereunder to or by
the Subsidiaries.
(b) In the event that a state, local or foreign Taxing
Authority seeks to combine, under unitary tax principles or otherwise, the
items of income and deductions of any members of the Parent Consolidated Group
in a way different than such members have filed returns (a "Unitary Claim"),
then, subject to the provisions of Section 5(a) and (i), Parent shall assume
full responsibility for the audit, adjustment or other claim by such Taxing
Authority. Upon making a Tax Payment with respect to a Unitary Claim, each
Subsidiary shall be allocated liability equal to the amount of the Tax Payment
less the amount that such Tax Payment would have been if such Subsidiary were
not part of the combined or unitary group. If the Subsidiary's allocated
liability, including interest and penalties, is less than the amount of income,
franchise and business Tax it previously paid to such Taxing Authority for such
period, Parent shall pay to such Subsidiary the difference within 10 days of
making or receiving such Tax Payment. If the Subsidiary's allocated liability,
including interest and penalties, is more than the amount of income and
franchise tax it previously paid to such Taxing Authority for such period, such
Subsidiary shall pay to Parent the difference within 10 days of Parent's notice
of such Tax Payment and the amount of such Subsidiary's allocated liability,
which notice shall be made within 10 days of such Tax Payment. Parent shall
pay any deficiency of any Subsidiary ultimately determined to be due, together
with interest and penalties, if any, attributable to such Unitary Claim. Any
disagreement between the parties with respect to the amount of the Tax Payment
or the allocation of the liability for such Tax Payment under this Section 7(b)
shall be resolved under procedures similar to those described in Section 5(e).
8. Resolution of Certain Disputes.
(a) Scope and Timing. Disagreements between Parent, on
the one hand, and any Subsidiary, on the other, with respect to amounts that
Parent claims is owed by such Subsidiary, or that such Subsidiary claims is
owed by Parent, under Sections 5(d), 5(e), 5(f) or 7(b) that are not resolved
by mutual agreement shall be resolved by arbitration pursuant to this Section
8. Upon the expiration of the 90-day dispute resolution period specified in
Sections 5(d), 5(e) and 5(f) until the time of a final resolution by the
arbitrator, the time period for any payments pursuant to Sections 5(d), 5(e),
5(f) and 7(b) shall be tolled. Such tolling shall not affect the accrual of
interest, and for purposes of Section 6, the due date of any payment shall be
that provided in Sections 5(d), 5(e), 5(f) and 7(b).
(b) Selection of the Arbitrator. Any arbitrator selected
pursuant to this Section 8(b) shall have at least five years of experience in
the field of corporate taxation, shall be an attorney licensed to practice law
in any state of the United States and shall not be or have been employed by or
affiliated with either party. The parties shall first attempt to agree on a
mutually
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satisfactory arbitrator. If the parties are unable to agree on a mutually
satisfactory arbitrator within 15 days after expiration of the 90-day dispute
resolution period specified in Sections 5(d), 5(e) and 5(f), each party shall
select an arbitrator. The two arbitrators thus selected shall agree on and
select a third arbitrator. If the two arbitrators cannot agree on such third
arbitrator within 30 days, the parties shall each select a different arbitrator
and renew the above procedure. The third arbitrator selected shall be the sole
arbitrator for the dispute. Each party shall pay the arbitrator they selected
for his time in selecting the third arbitrator. Such payment may be reimbursed
as a cost pursuant to Section 14(a) below. When used hereinafter, the term
"arbitrator" shall refer to this third arbitrator (or the arbitrator agreed to
by the parties, as the case may be) so selected. If the arbitrator vacates
his position for whatever reason, a new arbitrator shall be selected using the
above procedure.
(c) Arbitration Procedure.
(i) The arbitration shall be conducted in
accordance with the rules set forth in Exhibit A. The
arbitration shall not be conducted under the auspices of
the American Arbitration Association.
(ii) Each party within 30 days after engagement
of the arbitrator shall submit to the arbitrator a
written statement of the party's position with respect to
each issue in dispute (including the amount it asserts is
owed by it or is due to it), which position shall be
consistent with the notices exchanged pursuant to
Sections 5(d), 5(e) or 5(f), as the case may be,
together with copies of such notices. No such positions
shall include claims for punitive damages.
(iii) The arbitrator shall base his decision
with respect to each issue in dispute on the following
standards. In the case of a factual dispute between the
parties, the arbitrator shall make a determination of the
correct facts. In the case of a dispute regarding a
legal issue or a settlement amount, the arbitrator shall
consider the strength of Parent's and the respective
Subsidiary's litigation positions (with respect to all
issues raised by the Taxing Authority with whom the
settlement was made in a Revenue Agent's Report or
similar document) relative to the costs and risks of
litigation. A written statement by Parent's accountants
who are responsible for reviewing the Parent Consolidated
Return that they cannot sign such return reporting a
particular item in a particular way (even if disclosed as
required by the relevant penalty provisions of the Code)
shall carry substantial weight in the arbitrator's
decision. With respect to each issue in dispute, the
arbitrator's decision must fall within the range claimed
by the parties. The arbitrator shall not include in his
award any amount for punitive damages.
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(iv) The arbitrator shall render a written
decision stating only the amount of such decision for
each issue and the overall losing party (for purposes of
responsibility for costs and fees under Section 14) as
soon as practicable. The arbitrator shall also orally
explain the bases of such decisions to both parties as
soon as practicable. If and only if both parties
request, the arbitrator shall state the bases of such
decision in writing.
(v) The arbitrator's decision shall be final and
binding on the parties.
(d) Costs and Fees. The losing party, as determined by
the arbitrator, shall be responsible for its costs and the costs of the
prevailing party, including reasonable attorneys' and accountants' fees and the
fees and expenses of the arbitrators (including the arbitrators used to pick
the ultimate arbitrator), with respect to an arbitration pursuant to Section 8
of this Agreement.
9. Costs and Expenses.
(a) Except as expressly set forth in this Agreement,
each party shall bear its own costs and expenses incurred pursuant to this
Agreement regardless of the beneficiary of the items or services relating to
such costs and expenses.
(b) In the event that either party brings any action or
files any proceeding in connection with the enforcement of its rights under
this Agreement or as a consequence of any breach by the other party of its
obligations hereunder, other than a proceeding pursuant to Section 8 of this
Agreement, the prevailing party in such action or proceeding shall be entitled
to recover all costs of suit and reasonable attorneys' fees and expenses.
10. Termination and Survival.
Notwithstanding anything in this Agreement to the
contrary and notwithstanding that from time to time one or more Subsidiaries
may cease to be affiliated with Parent, this Agreement shall remain in effect
and its provisions shall survive for the full period of all applicable statutes
of limitation (giving effect to any extension, waiver or mitigation thereof).
11. Miscellaneous Provisions
(a) This Agreement contains the entire understanding of
the parties hereto with respect to the subject matter contained herein. No
alteration, amendment or modification of any of the terms of this Agreement
shall be valid unless made by an instrument signed by an authorized officer of
Parent and each Subsidiary.
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(b) The provisions of this Agreement may be waived only
if the waiver is in writing and signed by the party making the waiver. No
delay or omission in exercising any right under this Agreement will operate as
a waiver of the right on any further occasion. No waiver of any particular
provision of the Agreement will be treated as a waiver of any other provision,
and no waiver of any rights will be deemed a continuing waiver of the same
right with respect to subsequent occurrences that give rise to it. All rights
given by this Agreement are cumulative to other rights provided for in this
Agreement and to any other rights available under applicable law.
(c) This Agreement has been made in and shall be
construed and enforced in accordance with the laws of the State of California
(regardless of the laws that might be applicable under principles of conflicts
of laws) from time to time obtaining.
(d) Throughout this Agreement, as the context may
require, the singular tense and number includes the plural, and the plural
tense and number includes the singular.
(e) The headings contained in this Agreement are inserted
for convenience only and shall not constitute a part hereof.
12. Notices
Any notice, demand, claim, or other communication under
this Agreement shall be in writing and shall be deemed to have been given upon
the delivery or mailing thereof, as the case may be, if delivered personally or
sent by certified mail, return receipt requested, postage prepaid, to the
parties at the business addresses (or at such other address as a party may
specify by notice to the other) contained in the books and records of Parent.
Failure to provide timely notice under any provision of this Agreement shall
not constitute a breach of this Agreement unless the party to be notified
demonstrates actual prejudice or damage (including, but not limited to,
prejudice or damage under the operative provisions of this Agreement) as a
result of such failure.
13. Confidentiality.
Each party shall hold and shall cause its consultants and
advisors to hold in strict confidence, unless compelled to disclose by judicial
or administrative process or, in the opinion of its counsel, by other
requirements of law, all information (other than any such information relating
solely to the business or affairs of such party) concerning the other parties
hereto furnished it by such other party or its representatives pursuant to this
Agreement (except to the extent that such information can be shown to have been
(a) previously known by the party to which it was furnished, (b) in the public
domain through no fault of such party, or (c) later lawfully acquired from
other sources by the party to which it was furnished), and each party shall not
release or disclose such information to any other person, except its auditors,
attorneys,
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financial advisors, bankers and other consultants and advisors who shall be
advised of the provisions of this Section 13. Each party shall be deemed to
have satisfied its obligation to hold confidential information concerning or
supplied by the other party if it exercises the same care as it takes to
preserve confidentiality for its own similar information.
14. Counterparts
This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
15. Assignments, Third Party Beneficiaries
This Agreement shall be binding upon and shall inure only
to the benefit of the parties hereto and their respective successors and
assigns. This Agreement is not intended to benefit any person, other than the
parties hereto and such successors and assigns, and no such person shall be a
third party beneficiary hereof.
16. Severability.
If any term, provision, condition or covenant of this
Agreement, or the application thereof to any party or circumstance shall be
held by a court of competent jurisdiction to be invalid, unenforceable or void,
the remainder of this instrument, or the application of such term, provision,
condition or covenant to persons or circumstances other than those as to whom
or which it is held invalid or unenforceable, shall not be affected thereby,
and each term and provision of this Agreement shall be valid and enforceable to
the fullest extent permitted by law.
17. New Subsidiaries
Any corporation formed or acquired by Parent or a
Subsidiary, directly or indirectly, which would be treated as a member of the
Parent Consolidated Group shall be a Subsidiary for purposes of this Agreement
and shall be required to sign a consent in the form of Exhibit B, attached
hereto. The direct parent of such new Subsidiary hereby agrees to require such
new Subsidiary to sign such consent. Upon the signing of such consent, the
parties to this Agreement hereby agree to be bound with respect to such new
Subsidiary in the same manner as they are bound with respect to any other
Subsidiary.
18. Fair Meaning.
This Agreement shall be construed in accordance with its
fair meaning and shall not be construed strictly against the drafter.
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19. Obligations Under Tax Indemnity Agreement.
The parties acknowledge that there are certain ongoing
obligations under that certain Tax Indemnity Agreement dated September 25,
1992, on the parties hereto that constitute the Thrifty Group as therein
defined. Each of such parties agrees to perform its obligations as provided in
that Tax Indemnity Agreement and to bear its share of any liabilities as may be
allocable to such party.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the day and year first above written.
"PARENT" TCH CORPORATION
a Delaware corporation
_________________________
By:
Title:
"SUBSIDIARIES" THRIFTY HOLDINGS, INC.
a California corporation
_________________________
By:
Title:
THRIFTY CORPORATION
a California corporation
_________________________
By:
Title:
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THRIFTY REALTY CORPORATION
a California corporation
_________________________
By:
Title:
THRIFTY-WILSHIRE, INC.
a California corporation
_________________________
By:
Title:
MICHIGAN SPORTING GOODS DISTRIBUTORS,
INC.
a Michigan corporation
_________________________
By:
Title:
βββββ'β SPORTING GOODS, INC.
an Illnois corporation
_________________________
By:
Title:
GART SPORTS COMPANY
a Delaware corporation
_________________________
By:
Title:
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GART BROS. SPORTING GOODS COMPANY
a Colorado corporation
_________________________
By:
Title:
COLORADO WHOLESALE SPORTING GOODS
CO., INC.
a Colorado corporation
_________________________
By:
Title:
SPORTS CASTLE TRAVEL, INC.
a Colorado corporation
_________________________
By:
Title:
BI-MART CORPORATION
a California corporation
_________________________
By:
Title:
BI-MART REALTY CORP.
a Delaware corporation
_________________________
By:
Title:
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EXHIBIT "A"
ARBITRATION PROCEDURAL RULES
1. Administrative Conference and Preliminary Hearing
(a) At the request of any party or at the discretion
of the arbitrator, an administrative conference with the arbitrator and the
parties and/or their representatives will be scheduled in appropriate cases to
expedite the arbitration proceedings.
(b) In large or complex cases, at the request of any
party or at the discretion of the arbitrator, a preliminary hearing with the
parties and/or their representatives and the arbitrator may be scheduled by the
arbitrator to clarify the issues to be resolved, to stipulate to uncontested
facts, and to consider any other matters that will expedite the arbitration
proceedings. Consistent with the expedited nature of arbitration, the
arbitrator may, at the preliminary hearing, establish (i) the extent of and
schedule for the production of relevant documents and other information, (ii)
the identification of any witnesses to be called, and (iii) a schedule for
further hearings to resolve the dispute.
2. Fixing of Locale
The arbitration shall be held at a locale in Los Angeles,
California, unless the parties to the arbitration agree otherwise. The parties
may mutually agree on the exact locale where the arbitration is to be held. If
the parties cannot agree on the exact locale, the arbitrator shall have the
power to determine the locale (as long as it is located in Los Angeles,
California) and its decision shall be final and binding.
3. Date, Time, and Place of Hearing.
The arbitrator shall set the date, time and place for
each hearing. The arbitrator shall mail to each party notice thereof at least
ten days in advance, unless the parties by mutual agreement waive such notice
or modify the terms thereof.
4. Postponements
The arbitrator for good cause shown may postpone any
hearing upon the request of a party or upon the arbitrator's own initiative,
and shall also grant such postponement when all of the parties agree thereto.
5. Oaths
Before proceeding with the first hearing, each arbitrator
may take an oath of office and, if required by law, shall do so. The
arbitrator may require witnesses to testify under oath
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administered by any duly qualified person and, if it is required by law or
requested by any party, shall do so.
6. Order of Proceeding and Communication with Arbitrator
(a) A hearing shall be opened by the filing of the
oath of the arbitrator, where required; and by the recording of the date, time,
and place of the hearing, and the presence of the arbitrator, the parties, and
their representatives, if any.
(b) The arbitrator may, at the beginning of the
hearing, ask for statements clarifying the issues involved. In some cases,
part or all of the above will have been accomplished at the preliminary hearing
conducted by the arbitrator pursuant to Section 1.
(c) The complaining party shall then present
evidence to support its claim. The defending party shall then present evidence
supporting its defense. Witnesses for each party shall submit to questions or
other examination. The arbitrator has the discretion to vary this procedure
but shall afford a full and equal opportunity to all parties for the
presentation of any material and relevant evidence.
(d) Exhibits, when offered by either party, may be
received in evidence by the arbitrator. The names and addresses of all
witnesses and a description of the exhibits in the order received shall be made
a part of the record.
(e) There shall be no direct communication between
the parties and a neutral arbitrator other than at oral hearing, unless the
parties and the arbitrator agree in writing. Any other oral or written
communication from a party to the neutral arbitrator shall be directed to the
arbitrator selected by such party for transmittal to the neutral arbitrator.
7. Arbitration in the Absence of a Party or Representative
Unless the law provides to the contrary, the arbitration
may proceed in the absence of any party or representative who, after due
notice, fails to be present or fails to obtain a postponement ("absence in
default"). An award shall not be made solely on the default of a party. The
arbitrator shall require the party who is present to submit such evidence as
the arbitrator may require for the making of an award.
8. Evidence
(a) The parties may offer such evidence as is
relevant and material to the dispute and shall produce such evidence as the
arbitrator may deem necessary to an understanding and determination of the
dispute. An arbitrator or other person authorized by law to subpoena witnesses
or documents may do so upon the request of any party or independently.
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(b) The arbitrator shall be the judge of the
relevance and materiality of the evidence offered, and conformity to legal
rules of evidence shall not be necessary. All evidence shall be taken in the
presence of all of the arbitrators and all of the parties, except where any of
the parties is absent in default or has waived the right to be present.
9. Evidence by Affidavit and Post-hearing Filing of
Documents or Other Evidence
(a) The arbitrator may receive and consider the
evidence of witnesses by affidavit, but shall give it only such weight as the
arbitrator deems it entitled to after consideration of any objection made to
its admission.
(b) If the parties agree or the arbitrator directs
that documents or other evidence be submitted to the arbitrator after the
hearing, the documents or other evidence shall be filed with the arbitrator.
All parties shall be afforded an opportunity to examine such documents or other
evidence.
10. Inspection or Investigation
An arbitrator finding it necessary to make an inspection
or investigation in connection with the arbitration shall so advise the
parties. The arbitrator shall set the date and time and shall notify the
parties. Any party who so desires may be present at such an inspection or
investigation. In the event that one or all parties are not present at the
inspection or investigation, the arbitrator shall make a verbal or written
report to the parties and afford them an opportunity to comment.
11. Closing of Hearing
The arbitrator shall specifically inquire of all parties
whether they have any further proof to offer or witnesses to be heard. Upon
receiving negative replies or if satisfied that the record is complete, the
arbitrator shall declare the hearing closed and a minute thereof shall be
recorded. If briefs are to be filed, the hearing shall be declared closed as
of the final date set by the arbitrator for the receipt of briefs. If
documents are to be filed as provided in Section 9 and the date set for their
receipt is later than that set for the receipt of briefs, the later date shall
be the date of closing the hearing. The time limit within which the arbitrator
is required to make the award shall commence to run, in the absence of other
agreements by the parties, upon the closing of the hearing.
12. Reopening of Hearing
The hearing may be reopened on the arbitrator's
initiative, or upon application of a party, at any time before the award is
made. If reopening the hearing would prevent the making of the award within
the specific time agreed on by the parties in the contract(s) out of which the
controversy has arisen, the matter may not be reopened unless the parties agree
on an extension of time. When no specific date is fixed in the contract, the
arbitrator may reopen the hearing and shall have thirty days from the closing
of the reopened hearing within which to make an award.
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13. Waiver of Oral Hearing
The parties may provide, by written agreement, for the
waiver of oral hearings in any case.
14. Waiver of Rules
Any party who proceeds with the arbitration after
knowledge that any provision or requirement of these rules has not been
complied with and who fails to state an objection thereto in writing shall be
deemed to have waived the right to object.
15. Extensions of Time
The parties may modify any period of time by mutual
agreement. The arbitrator may for good cause extend any period of time
established by these rules, except the time for making the award. The
arbitrator shall notify the parties of any extension.
16. Serving of Notice.
Each party shall be deemed to have consented that any
papers, notices, or process necessary or proper for the initiation or
continuation of an arbitration under these rules; for any court action in
connection therewith; or for the entry of judgment on any award made under thee
rules may be served on a party by mail addressed to the party or its
representative at the last known address or by personal service, in or outside
the state where the arbitration is to be held, provided that reasonable
opportunity to be heard with regard thereto has been granted to the party.
17. Time of Award
The award shall be made promptly by the arbitrator and,
unless otherwise agreed by the parties in writing or specified by law, no later
than thirty days from the date of closing the hearing, or, if oral hearings
have been waived, from the date of the arbitrator's transmittal of the final
statements and proofs to the arbitrator.
18. Award upon Settlement
If the parties settle their dispute during the course of
the arbitration, the arbitrator may set forth the terms of the agreed
settlement in an award. Such an award is referred to a consent award.
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19. Delivery of Award to Parties
Parties shall accept as legal delivery of the award the
placing of the award or a true copy thereof in the mail addressed to a party or
its representative at the last known address, personal service of the award, or
the filing of the award in any other manner that is permitted by law.
20. Applications to Court and Exclusion of Liability
(a) No judicial proceeding by a party relating to
the subject matter of the arbitration shall be deemed a waiver of the party's
right to arbitrate.
(b) Parties to these rules shall be deemed to have
consented that judgment upon the arbitration award may be entered in any
federal or state court having jurisdiction thereof.
21. Interpretation and Application of Rules
The arbitrator shall interpret and apply these rules
insofar as they relate to the arbitrator's powers and duties. When there is
more than one arbitrator and a difference arises among them concerning the
meaning or application of these rules, it shall be decided by a majority vote.
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EXHIBIT B
CONSENT OF NEW SUBSIDIARY
The undersigned hereby agrees to be bound as a Subsidiary by the
attached Tax Sharing Agreement, originally dated as of September 25, 1992. By
signing this Consent, the undersigned will have all rights and obligations of a
Subsidiary under said Tax Sharing Agreement.
[NAME OF CORPORATION],
a [state] corporation
_______________________
By:
Title:
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