Exhibit 10.5
SFAC AND SFC GROUP TAX SHARING AGREEMENT
TAX SHARING AGREEMENT, made as of June 11, 1999, by and among
Specialty Foods Acquisition Corporation ("SFAC"), Specialty Foods Corporation
("SFC"), SFC Sub, Inc. ("SFC, Sub") and SFAC New Holdings, Inc. ("SFAC
Holdings"). SFAC and all of the direct or indirect domestic subsidiaries of SFAC
which are includible in the consolidated Federal income tax return
("Consolidated Return") of the affiliated group (within the meaning of Section
1504 of the Internal Revenue Code of 1986, as may be amended from time to time
(the "Code")) of which SFAC is the common parent corporation for any fiscal year
ending on or after December 31, 1999, or portion thereof, shall be hereinafter
referred to as the "SFAC Group." SFC, SFC Sub and SFAC Holdings shall be
hereinafter referred to as the "SFC Group." For the purposes of this Agreement,
a "separate consolidated income tax return" of the SFC Group shall refer to a
consolidated income tax return including solely the members of the SFC Group.
WHEREAS, SFAC, SFC and their subsidiaries contemplate a proposed
corporate and financial restructuring transaction (the "Transaction");
WHEREAS, in connection with the Transaction, SFAC and SFC New
Holdings, Inc. ("SFC Holdings") have entered into an assignment and assumption
agreement dated as of June 11, 1999 whereby SFC Holdings has assumed the rights
and liabilities of SFC under the tax sharing agreement dated as of August 16,
1993 between SFAC and SFC;
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WHEREAS, simultaneously herewith, SFC Holdings is entering into an
amended and restated tax sharing agreement with SFAC;
WHEREAS, SFAC and SFC wish to provide for payment of the
consolidated Federal income tax and certain state and local tax liabilities of
the SFC Group by SFAC; and
WHEREAS, SFAC and SFC wish to provide for the contribution to such
payment by SFC;
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
covenants and promises herein contained, SFAC, SFC Sub, SFAC Holdings and SFC
agree as follows:
1. Allocation and Payment of Tax
Liability of Members of SFAC Group.
1.1 Each member of the SFC Group agrees to join with SFAC in any
Consolidated Return filed by SFAC for any taxable year (or portion thereof) with
respect to the SFC Group.
1.2 Each member of the SFC Group hereby designates SFAC as its
agent, as long as such member of the SFC Group is a member of the SFAC Group,
for the purpose of taking any and all action necessary or incidental to the
filing of Consolidated Returns. Each member of the SFC Group agrees to furnish
SFAC with any and all information requested by SFAC in order to carry out the
provisions of this Agreement; to cooperate with SFAC in filing any return or
consent contemplated by this Agreement; to take such action as SFAC may request,
including, but not limited
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to, the filing of all elections and the filing of requests for the extension of
time within which to file tax returns; and to cooperate in connection with any
refund claim.
1.3 For the fiscal year ended December 31, 1999, and for each
subsequent fiscal year for which this Agreement may remain in effect, SFC shall
be required to pay to SFAC (in the manner provided in Paragraph 1.4 hereof), in
satisfaction of the SFC Group's share of the consolidated Federal income tax
liability (including for all purposes of this Agreement, alternative minimum tax
liability) of the SFAC Group, an amount equal to the product of the actual
consolidated Federal income tax liability of the SFAC Group, as computed by
SFAC, and a fraction, the numerator of which is the Federal income tax liability
that would have been payable by the SFC Group for such year if it had filed a
separate consolidated income tax return for such year and all prior years,
taking into account the adjustments provided for in Treasury Regulation ss.
1.1552-1(a)(2)(ii), and the denominator of which is the sum of such Federal
income tax liability and the (positive) Federal income tax liabilities of all
other members of the SFAC Group computed on a similar basis for such year;
provided, however, that SFC shall not be required to pay to SFAC for any fiscal
year an amount greater than the Federal income tax liability the SFC Group would
have incurred for such year if it had filed a separate consolidated income tax
return for such year and all prior years during which this Agreement is in
effect.
1.4 SFC shall make payment to SFAC of any amount allocated to it
pursuant to this Section 1.4, and SFAC shall have sole responsibility for making
any required payments to the Internal Revenue Service (the "IRS") in
satisfaction of the consolidated Federal income tax liability of the SFAC Group
(including the SFC
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Group) for each fiscal year. SFAC shall provide notice to SFC, in accordance
with Section 12 hereof, of any and all amounts allocated to SFC pursuant to this
Section 1.4 no later than ten (10) days prior to the date on which such payment
is due under this Section 1.4. For each quarter of each fiscal year after the
year ended December 31, 1999, SFC, as long as SFC is a member of the SFAC Group,
shall make payment to SFAC of an amount, determined by SFAC and communicated to
SFC in a notice given in accordance with Section 12 hereof no later than five
(5) days prior to the date on which such payment is due under this Section 1.4,
equal to the product of the installment payment of estimated Federal income tax
that the SFAC Group is required to pay to the IRS for such quarter under Section
6655 of the Code and a fraction, the numerator of which is the amount of the
installment payment of estimated Federal income tax that the SFC Group would
have been required to pay to the IRS for such quarter under Section 6655 of the
Code if the SFC Group were filing a separate consolidated income tax return for
such taxable year, taking into account the adjustments provided for in Treasury
Regulation ss. 1.1552-1(a)(2)(ii), ("Separate Return Installment") and the
denominator of which is the sum of the installment payments of Federal income
tax of each member of the SFAC Group for such quarter determined on such a
separate income tax return method; provided, however, that SFC shall not be
required to make any payment to SFAC pursuant to this Section 1.4 for any
quarter in an amount greater than its Separate Return Installment for such
quarter. Payments pursuant to this Section 1.4 shall be made no later than the
fifth day prior to the due date of an estimated Federal income tax payment or,
if later, the fifth day after notice of the amount of such payment is given by
SFAC. The amount
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of any overpayment or underpayment pursuant to this Section 1.4 shall be
credited against or added to, as the case may be, the amount otherwise required
to be paid for the fiscal quarter within which the amount of such overpayment or
underpayment first becomes reasonably ascertainable, and, in the case of any
such underpayment, notice is provided to SFC by SFAC; provided, however, that,
upon written request (including supporting schedules) of SFC, made after the
close of any fiscal year but within the period described in Section 6425(a)(1)
of the Code, SFAC shall repay to SFC, within the period described in Section
6425(b)(1) of the Code, the amount of any net remaining overpayment of
consolidated tax liability made by SFC for such year.
1.5 For the fiscal year ended December 31, 1999, and for each
subsequent fiscal year for which this Agreement may remain in effect, each of
SFC Sub and SFAC Holdings shall be required to pay to SFC (in the manner
provided in Section 1.6 hereof), as a payment in lieu of SFC Sub's and SFAC
Holding's respective share of the consolidated Federal income tax liability and
alternative minimum tax liability of the SFAC Group, an amount equal to the
Federal income tax liability or alternative minimum tax liability that would
have been payable by each of SFC Sub and SFAC Holdings for such year if it had
filed a separate consolidated income tax return for such year and all prior
years ending after the date hereof for itself. In computing such tax liability,
each of SFC Sub and SFAC Holdings shall be entitled to take into account
deductions and credits attributable to the carryover or carryback of any losses
or credits of each of SFC Sub and SFAC Holdings, respectively, but only after
taking into account any limitations actually imposed on the
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use of such losses and credits (including, but not limited to, limitations
imposed pursuant to Section 172, 382, 383, 384, 904, 1212 or 1502 of the Code or
the regulations thereunder). Payments shall be required to be made in each
fiscal year pursuant to this Section 1.6 without regard to the actual
consolidated Federal income tax liability, if any, of the SFC Group or the SFAC
Group for such year.
1.6 Each of SFC Sub and SFAC Holdings shall make payment to SFC of
any amount allocated to it pursuant to this Section 1.5, and SFC shall have sole
responsibility for making any required payments to SFAC with respect to the
consolidated Federal income tax liability of the SFC Group for each fiscal year.
For each quarter of each fiscal year to which this agreement applies, each of
SFC Sub and SFAC Holdings, as long as it is a member of the SFC Group, shall
make payment to SFC of an amount equal to the amount of the installment payment
of estimated Federal income tax and alternative minimum tax that each would have
been required to pay to the IRS for such quarter under Section 6655 of the Code
if it were filing a separate consolidated income tax return for such taxable
year for itself, no later than the fifth day prior to the date an estimated
Federal income tax payment is due. The amount of any overpayment or underpayment
pursuant to this Section 1.5 shall be credited against or added to, as the case
may be, the amount otherwise required to be paid for the fiscal quarter within
which the amount of such overpayment or underpayment first becomes reasonably
ascertainable; provided, however, that, upon written request (including
supporting schedules) of SFC Sub or SFAC Holdings, made after the close of any
fiscal year but within the period described in Section 6425(a)(1) of the Code,
SFC shall repay to SFC Sub or SFAC Holdings, as the case may be,
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within the period described in Section 6425(b)(1) of the Code, the amount of any
net remaining overpayment of consolidated tax liability made by it for such
year.
2. Adjustments.
Any adjustment of income, deduction or credit of any party to this
Agreement that results after the fiscal year in question by reason of any
carryback, amended return, claim for refund or audit shall be given effect by
redetermining amounts payable and reimbursable for such fiscal year hereunder as
if such adjustment had been part of the original determination hereunder,
whether such adjustment relates to the SFAC Group or any member of the SFC
Group. In the case of a refund, SFAC shall pay to each member of the SFC Group
its share (determined in accordance with the preceding sentence) of the refund
within 20 days after the refund is received, and, in the case of an increase in
tax liability, each member of the SFC Group shall pay to SFAC its share
(determined in accordance with the preceding sentence) of such increased tax
liability within 20 days after receiving notice of such liability from SFAC. If
any interest is to be paid as a result of a consolidated Federal income tax
deficiency or refund, such interest shall be allocated between SFAC and each
member of the SFC Group in the same manner as their shares of the deficiency or
refund. Any penalty imposed with respect to any Consolidated Return filed on
behalf of the SFAC Group shall be the sole responsibility of SFAC.
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3. State Taxes.
3.1 Each member of the SFC Group agrees, at the request of SFAC, to
join with SFAC or any direct or indirect subsidiary of SFAC in any combined or
consolidated state or local income or franchise tax return ("Combined Return")
for any taxable year for which SFAC or any such direct or indirect subsidiary of
SFAC files a Combined Return that may include any member of the SFC Group.
3.2 If, at any time from and after the date of this Agreement, the
liability for any state or local income or franchise tax of any member of the
SFC Group and SFAC or any other direct or indirect subsidiary of SFAC is
determined on a consolidated or combined basis, this Agreement shall be applied
in like manner to all matters relating to such taxes.
4. Adjudications.
In any audit, conference, or other proceeding with the IRS or the
relevant state or local authorities, or in any judicial proceedings concerning
the determination of the Federal income tax liability of the SFAC Group
(including any of the members of the SFC Group) or the state or local income tax
liability of any combined or consolidated group including any member of the SFAC
Group in addition to any member of the SFC Group, SFAC and each relevant member
of the SFC Group shall be represented by persons selected by SFAC. The
settlement and terms of settlement of any issues relating to such proceeding
shall be in the sole discretion of SFAC, and each member of the SFC Group hereby
appoints SFAC as its agent for the purposes of proposing and concluding any such
settlement.
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5. Entire Agreement; Assignment.
This Agreement embodies the entire understanding between the parties
relating to its subject matter and supersedes and terminates all prior
agreements and understandings among the parties with respect to such subject
matter.
6. Termination.
This Agreement may be terminated at any time upon mutual agreement
of the parties hereto; provided, however, that such termination shall not
relieve SFAC or any member of the SFC Group of any obligations pursuant to
Sections 1.4, 1.6, 2 and 3 hereof.
7. Effective Date.
This Agreement shall be effective for the taxable year of the SFAC
Group ended December 31, 1999, and for all taxable years thereafter.
8. Captions.
All section captions contained in this Agreement are for convenience
only and shall not be deemed a part of this Agreement.
9. Counterparts.
This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which, when taken together, shall constitute
one agreement.
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10. Governing Law.
This Agreement shall be governed by the laws applicable to contracts
entered into and to be fully performed within the State of New York by residents
thereof.
11. Successors and Assigns.
This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns.
12. Notices.
Any payment, notice or communication required or permitted to be
given under this Agreement shall be in writing (including telegraphic, telecopy,
telex, facsimile transmission or cable communication) and mailed, telegraphed,
telecopied, telexed, faxed, cabled or delivered:
If to SFAC, to it at:
Specialty Foods Acquisition Corporation
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Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to SFC, to it at:
Specialty Foods Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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If to SFC, Sub, to it at:
SFC Sub, Inc.
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▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to SFAC Holdings, to it at:
SFAC New Holdings, Inc.
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▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as a party shall furnish in writing in a notice
similarly given to the other parties. All such notices and communications shall
be deemed given (i) if mailed, four days after the date of mailing, or (ii) when
delivered to the telegraph company, transmitted by telecopier, confirmed by
telex answerback, sent by facsimile transmission, or delivered to the cable
company, respectively.
13. No Third-Party Beneficiaries.
Nothing in this document shall be deemed to create any right in any
person not a party hereto and this instrument shall not be construed in any
respect to be a contract in whole or in part for the benefit of any third party
except as aforesaid.
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IN WITNESS WHEREOF, SFAC and SFC Holdings have executed this
Agreement as of the day and year first above written.
SPECIALTY FOODS ACQUISITION CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President, Treasurer & Assistant
Secretary
SPECIALTY FOODS CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President, Treasurer & Assistant
Secretary
SFC SUB, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President, Treasurer & Assistant
Secretary
SFAC NEW HOLDINGS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President, Treasurer & Assistant
Secretary