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EXHIBIT 10.4
FORM OF
TAX INDEMNIFICATION AND ALLOCATION AGREEMENT
THIS TAX INDEMNIFICATION AND ALLOCATION AGREEMENT ("Agreement") is
entered into as of ___________, 1998 by and between REPUBLIC INDUSTRIES, INC., a
Delaware corporation ("Distributing Co.") and REPUBLIC SERVICES, INC., a
Delaware corporation ("Controlled Co.") (Distributing Co. and Controlled Co. are
sometimes collectively referred to herein as the "Companies"). Capitalized terms
used in this Agreement are defined in Section 1 below. Unless otherwise
indicated, all "Section" references in this Agreement are to sections of this
Agreement.
PRELIMINARY STATEMENTS
A. As of the date hereof, Distributing Co. is the common parent of an
affiliated group of corporations, including Controlled Co., which has elected to
file consolidated Federal income tax returns.
B. Incident to an initial public offering ("IPO") of Class A Common
Stock of Controlled Co. in connection with the separation and distribution of
Controlled Co. from Distributing Co. pursuant to one overall integrated plan,
the Companies have entered into a Separation and Distribution Agreement (the
"Distribution Agreement").
C. As a result of the IPO, Controlled Co. and its subsidiaries (as
constituted immediately after the consummation of the IPO) will cease to be
members of the affiliated group of which Distributing Co. is the common parent
(the "Offerings Closing Date").
D. The Distribution Agreement also sets forth certain transactions
whereby certain assets held by the Distributing Group will be transferred in
connection with the IPO and separation to Republic Resources and, prior to the
Offerings Closing Date, all of the capital stock of Republic Resources held by
Controlled Co. will be distributed to Distributing Co. in a transaction intended
to qualify as a tax-free distribution by Controlled Co. to Distributing Co.
under Section 355 of the Internal Revenue Code of 1986, as amended.
E. The Distribution Agreement also sets forth corporate transactions
pursuant to which Distributing Co. may sell capital stock of Controlled Co. and
will distribute, subject to the satisfaction of certain terms and conditions,
all of the capital stock of Controlled Co. held by Distributing Co. to
Distributing Co.'s shareholders in a transaction intended to qualify as a
tax-free distribution to Distributing Co. and its shareholders under Section 355
of the Internal Revenue Code of 1986, as amended.
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F. The Companies desire to provide for and agree upon the allocation
between the parties of liabilities for Taxes arising prior to, as a result of,
and subsequent to the transactions contemplated by the Distribution Agreement,
and to provide for and agree upon other matters relating to Taxes.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, the mutual covenants
set forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. DEFINITION OF TERMS. For purposes of this Agreement
(including the recitals hereof), the following terms have the following
meanings:
"Accounting Cutoff Date" means, with respect to Controlled
Co., any date as of the end of which there is a closing of the
financial accounting records for such entity.
"Accounting Firm" shall have the meaning provided in Section
15.
"Adjustment Request" means any formal or informal claim or
request filed with any Tax Authority, or with any administrative agency
or court, for the adjustment, refund, or credit of Taxes, including (a)
any amended Tax return claiming adjustment to the Taxes as reported on
the Tax Return or, if applicable, as previously adjusted, or (b) any
claim for refund or credit of Taxes previously paid.
"Affiliate" means any entity that directly or indirectly is
"controlled" by the person or entity in question. "Control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through
ownership of voting securities, by contract or otherwise. Except as
otherwise provided herein, the term Affiliate shall refer to Affiliates
of a person as determined immediately after the Distribution. The term
"Affiliate" includes a Subsidiary of an entity.
"Agreement" shall mean this Tax Indemnification and Allocation
Agreement.
"Allocated Federal Tax Liability" shall have the meaning
provided in Section 5.1(b)(i).
"Carryback" means any net operating loss, net capital loss,
excess tax credit, or other similar Tax item which may or must be
carried from one Tax Period to an earlier Tax Period under the Code or
other applicable Tax Law.
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"Code" means the U.S. Internal Revenue Code of 1986, as
amended, or any successor law.
"Companies" means Distributing Co. and Controlled Co.,
collectively, and "Company" means any one of Distributing Co. and
Controlled Co.
"Consolidated or Combined Income Tax" means any Income Tax
computed by reference to the assets or activities of members of more
than one Group.
"Consolidated or Combined State Income Tax" means any State
Income Tax computed by reference to the assets or activities of members
of more than one Group.
"Consolidated Tax Liability" means, with respect to any
Distributing Co. Federal Consolidated Return, the tax liability of the
group as that term is used in Treasury Regulation Section
1.1552-1(a)(1) (including applicable interest, additions to the tax,
additional amounts, and penalties as provided in the Code), adjusted as
follows:
(i) such tax liability be treated as including any alternative
minimum tax liability under Code Section 55; and
(ii) in the case of the Tax Period which includes the
Offerings Closing Date, the Consolidated Tax Liability shall be
computed as if the Offerings Closing Date were the last day of the Tax
Period.
"Controlled Adjustment" means any proposed adjustment by a Tax
Authority or claim for refund asserted in a Tax Contest to the extent
Controlled Co. would be exclusively liable for any resulting Tax under
this Agreement and exclusively entitled to receive any resulting Tax
Benefit under this Agreement.
"Controlled Group" means Controlled Co. and its Subsidiaries
and wholly- owned limited liability companies as determined immediately
after the Offerings Closing Date.
"Controlled Group Disqualifying Event" means any event
involving the direct or indirect acquisition of shares of the capital
stock of any member of the Controlled Group after the Distribution
which has the effect of disqualifying the Distribution or any part
thereof from tax-free treatment under Code section 355, whether or not
such event is the result of direct actions of, or within the control
of, the Controlled Co. or its Subsidiaries, or which otherwise is
inconsistent with representations relating to Controlled Co. and the
ownership of its capital stock, as set forth in the Ruling Request.
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"Controlled Group Prior Federal Tax Liability" shall have the
meaning provided in Section 2.2(b)(ii).
"Controlled Group Prior State Tax Liability" shall have the
meaning provided in Section 2.3(b)(ii)(B).
"Controlled Group Recomputed Federal Tax Liability" shall have
the meaning provided in Section 2.2(b)(i).
"Controlled Group Recomputed State Tax Liability" shall have
the meaning provided in Section 2.3(b)(ii)(A).
"Cumulative Federal Tax Payment" shall have the meaning
provided in Section 5.1(b)(ii).
"Distributing Adjustment" means any proposed adjustment by a
Tax Authority or claim for refund asserted in a Tax Contest to the
extent Distributing Co. would be exclusively liable for any resulting
Tax under this Agreement and exclusively entitled to receive any
resulting Tax Benefit under this Agreement.
"Distributing Co. Federal Consolidated Return" means any
United States Federal Tax Return for the affiliated group (as that term
is defined in Code Section 1504) that includes Distributing Co. as the
common parent and any member of the Controlled Group.
"Distributing Group" means Distributing Co. and its
Subsidiaries and wholly- owned limited liability companies, excluding
any entity that is a member of the Controlled Group.
"Distribution" means the distribution to Distributing Co.
shareholders on the Distribution Date of all of the outstanding capital
stock of Controlled Co. owned by Distributing Co.
"Distribution Agreement" means the Separation and Distribution
Agreement dated as of the date of this Agreement between the
Distributing Co. and the Controlled Co.
"Distribution Date" means the Distribution Date as that term
is defined in the Distribution Agreement.
"Distribution Tax" means the Taxes described in Section
2.5(a)(ii).
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"Federal Allocation Method" shall have the meaning provided in
Section 2.2(a).
"Federal Income Tax" means any Tax imposed by Subtitle A or F
of the Code.
"Federal Tax Adjustment" shall have the meaning provided in
Section 2.2(b).
"Foreign Income Tax" means any Tax imposed by any foreign
country or any possession of the United States, or by any political
subdivision of any foreign country or United States possession, which
is an income tax as defined in Treasury Regulation Section 1.901-2.
"Group" means the Distributing Co. Group or the Controlled Co.
Group, as the context requires.
"Income Tax" means any Federal Income Tax, State Income Tax,
or Foreign Income Tax.
"Internal Restructuring" means the distribution of all of the
shares of capital stock of Republic Resources held by Controlled Co.
and/or its Subsidiaries to Distributing Co., all distributions,
transfers and exchanges of said capital stock within the Controlled
Group in connection with and prior to the distribution of said capital
stock by Controlled Co. to Distributing Co., and all transfers and
exchanges of assets by members of the Distributing Group or members of
the Controlled Group to Republic Resources or entities owned by
Republic Resources in connection with the distribution, transfer and
exchange of shares of capital stock of Republic Resources within the
Controlled Group and the distribution of such stock to the Distributing
Co.
"Joint Adjustment" means any proposed adjustment resulting
from a Tax Contest that is not a (i) Controlled Adjustment, (ii) a
Distributing Adjustment, or (iii) any other type of adjustment that
give rise to an indemnification payment by one Company to the other
Company pursuant to this Agreement.
"Payment Date" means (i) with respect to any Distributing Co.
Federal Consolidated 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 Tax Return for any Consolidated or
Combined State Income Tax, the corresponding dates determined under the
applicable Tax Law.
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"Post-IPO Period" means any Tax Period beginning after the
Offerings Closing Date, and, in the case of any Straddle Period, the
portion of such Straddle Period beginning the day after the Offerings
Closing Date.
"Pre-IPO Period" means any Tax Period ending on or before the
Offerings Closing Date, and, in the case of any Straddle Period, the
portion of such Straddle Period ending on the Offerings Closing Date.
"Prime Rate" means the base rate on corporate loans charged by
Citibank, N.A., New York, New York from time to time, compounded daily
on the basis of a year of 365 or 366 (as applicable) days and actual
days elapsed.
"Prohibited Action" shall have the meaning provided in Section
11.
"Republic Resources" means Republic Resources Company, Inc., a
Delaware corporation.
"Responsible Company" means, with respect to any Tax Return,
the Company having responsibility for preparing and filing such Tax
Return under this Agreement.
"Ruling Request" means the letter to be filed by Distributing
Co. with the Internal Revenue Service requesting a ruling from the
Internal Revenue Service regarding certain tax consequences of the
Distribution and Transactions (including all attachments, exhibits, and
other materials submitted with such ruling request letter) and any
amendment or supplement to such ruling request letter.
"Separate Company Tax" means any Tax computed by reference to
the assets and activities of a member or members of a single Group.
"Straddle Period" means any Tax Period that begins on or
before and ends after the Offerings Closing Date.
"State Income Tax" means any Tax imposed by any State of the
United States or by any political subdivision of any such State which
is imposed on or measured by net income, including state and local
franchise or similar Taxes measured by net income.
"Subsidiary" shall have the meaning set forth in Treasury
Regulations section 1.1502-1(c).
"Tax" or "Taxes" means any income, gross income, gross
receipts, profits, capital stock, franchise, withholding, payroll,
social security, workers compensation,
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unemployment, disability, property, ad valorem, stamp, excise,
severance, occupation, service, sales, use, license, lease, transfer,
import, export, value added, alternative minimum, estimated or other
similar tax (including any fee, assessment, or other charge in the
nature of or in lieu of any tax) imposed by any governmental entity or
political subdivision thereof, and any interest, penalties, additions
to tax, or additional amounts in respect of the foregoing.
"Tax Authority" means, with respect to any Tax, the
governmental entity or political subdivision thereof that imposes such
Tax, and the agency (if any) charged with the collection of such Tax
for such entity or subdivision.
"Tax Benefit" means any refund, credit, or other reduction in
otherwise required Tax payments (including any reduction in estimated
tax payments).
"Tax Contest" means an audit, review, examination, or any
other administrative or judicial proceeding with the purpose or effect
of redetermining Taxes of any of the Companies or their Affiliates
(including any administrative or judicial review of any claim for
refund) for any Tax Period ending on or before the Offerings Closing
Date or any Straddle Period.
"Tax Contest Committee" shall have the meaning provided in
Section 9.2(b).
"Tax Item" means, with respect to any Income Tax, any item of
income, gain, loss, deduction, and credit.
"Tax Law" means the law of any governmental entity or
political subdivision thereof relating to any Tax.
"Tax Period" means, with respect to any Tax, the period for
which the Tax is reported as provided under the Code or other
applicable Tax Law.
"Tax Records" means Tax Returns, Tax Return workpapers,
documentation relating to any Tax Contests, and any other books of
account or records required to be maintained under the Code or other
applicable Tax Laws or under any record retention agreement with any
Tax Authority.
"Tax 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, or document required
to be filed under the Code or other Tax Law, including any attachments,
exhibits, or other materials submitted with any of the foregoing, and
including any amendments or supplements to any of the foregoing.
"Transactions" means the transactions relating to the Internal
Restructuring.
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"Treasury Regulations" means the regulations promulgated from
time to time under the Code as in effect for the relevant Tax Period.
Section 2. ALLOCATION OF TAX LIABILITIES. The provisions of this
Section 2 are intended to determine each Company's liability for Taxes with
respect to Pre-IPO Periods. The provisions of Section 2.5(a)(ii) and (b) are
intended to determine each Company's liability for Distribution Taxes, if any,
even though such Taxes arise in a Post-IPO Period. Once the liability has been
determined under this Section 2, Section 5 determines the time when payment of
the liability is to be made, and whether the payment is to be made to the Tax
Authority directly or to the other Company.
2.1 GENERAL RULE
(a) DISTRIBUTING CO. LIABILITY. Distributing Co. shall be liable
for Taxes not specifically allocated to the Controlled Co. under this Section 2.
Distributing Co. shall indemnify and hold harmless the Controlled Group from and
against any liability for Taxes for which Distributing Co. is liable under this
Section 2.1(a).
(b) CONTROLLED CO. LIABILITY. Controlled Co. shall be liable for,
and shall indemnify and hold harmless the Distributing Group from and against
any liability for, Taxes which
are allocated to Controlled Co. under this Agreement.
2.2 ALLOCATION OF UNITED STATES FEDERAL INCOME TAX. Except as provided
in Section 2.5:
(a) ALLOCATION OF TAX RELATING TO FEDERAL CONSOLIDATED RETURNS.
With respect to any Distributing Co. Federal Consolidated Tax Return filed after
the Offerings Closing Date, the Consolidated Tax Liability shall be allocated
between the Groups in accordance with the method prescribed in Treasury
Regulation Section 1.1552-1(a)(1) (as in effect on the date hereof) determined
by aggregating the amounts allocable to the members of each respective Group
into a single amount for each Group (the "Federal Allocation Method"). For
purposes of such allocation, the excess, if any, of (i) Consolidated Tax
Liability over (ii) Consolidated Tax Liability determined without regard to any
alternative minimum tax liability under Code Section 55, shall be allocated
among the Groups in accordance with their respective amounts of alternative
minimum taxable income, and any corresponding alternative minimum tax credit
shall be allocated in accordance with the allocation of such alternative minimum
tax liability. Any amount so allocated to the Controlled Group shall be a
liability of Controlled Co. to Distributing Co. under this Section 2. Amounts
described in Code Section 1561 (relating to limitations on certain multiple
benefits) shall be divided equally among the Distributing Group and Controlled
Group to the extent permitted by the Code.
(b) ALLOCATION OF FEDERAL CONSOLIDATED RETURN TAX ADJUSTMENTS. If
there is any adjustment to the reported Tax liability with respect to any
Distributing Co. Federal Consolidated Return, or to such Tax liability as
previously adjusted, Controlled Co. shall be liable to Distributing Co. for the
excess (if any) of--
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(i) the share of the Consolidated Tax Liability of
the Controlled Group computed in accordance with paragraph (a) based on the Tax
Items of members of the Controlled Group as so adjusted (the "Controlled Group
Recomputed Federal Tax Liability"); minus
(ii) the share of the Consolidated Tax Liability of
the Controlled Group computed in accordance with paragraph (a) based on the Tax
Items of such members as reported (or, if applicable, as previously adjusted)
(the "Controlled Group Prior Federal Tax Liability").
If the Controlled Group Prior Federal Tax Liability exceeds the Controlled Group
Recomputed Federal Tax Liability, Distributing Co. shall be liable to Controlled
Co. for such excess. For purposes of the preceding sentence, if the Controlled
Group has a net operating loss after taking into account the adjustments
allocable to such group, the Controlled Group Recomputed Federal Tax Liability
shall be less than zero to the extent such net operating loss produces a Tax
Benefit for the applicable taxable year, and the amount that Distributing Co.
shall be liable to Controlled Co. pursuant to the preceding sentence shall be
equal to the sum of the Controlled Group Prior Federal Tax Liability and the
amount of such Tax Benefit.
2.3 ALLOCATION OF STATE INCOME TAXES. Except as provided in Section
2.5, State Income Taxes shall be allocated as follows:
(a) SEPARATE COMPANY TAXES. In the case of any State Income Tax
which is a Separate Company Tax, Controlled Co. shall be liable for such Tax
imposed on any members of the Controlled Group.
(b) CONSOLIDATED OR COMBINED STATE INCOME TAXES. In the case of any
Consolidated or Combined State Income Tax, the liability of Controlled Co. with
respect to such Tax for any Tax Period shall be computed as follows:
(i) ALLOCATION OF TAX REPORTED ON TAX RETURNS. In the
case of any Consolidated or Combined State Income Tax reported on any Tax Return
to be filed after the Offerings Closing Date, Controlled Co. shall be liable to
Distributing Co. for the State Income Tax liability computed as if all members
of the Controlled Group included in the computation of such Tax had filed a
consolidated or combined Tax Return for such Controlled Group members based on
the income, apportionment factors, and other items of such members.
(ii) ALLOCATION OF COMBINED OR CONSOLIDATED STATE
INCOME TAX ADJUSTMENTS. If there is any adjustment to the amount of Consolidated
or Combined State Income Tax reported on any Tax Return (or as previously
adjusted), the liability of the Controlled Group shall be recomputed as provided
in this subparagraph. Controlled Co. shall be liable to Distributing Co. for the
excess (if any) of-
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(A) the State Income Tax liability computed in
accordance with paragraph (b)(i) based on the income, apportionment factors, and
other items of such members as so adjusted (the "Controlled Group Recomputed
State Tax Liability"); minus
(B) the State Income Tax liability computed in
accordance with paragraph (b)(i) based on the income, apportionment factors, and
other items of such members as reported (or, if applicable, as previously
adjusted) (the "Controlled Group Prior State Tax Liability").
If the Controlled Group Prior State Tax Liability exceeds the Controlled Co.
Group Recomputed State Tax Liability, Distributing Co. shall be liable to
Controlled Co. for such excess. For purposes of the preceding sentence, if the
Controlled Group has a net operating loss after taking into account the
adjustments allocable to such group, the Controlled Group Recomputed State Tax
Liability shall be less than zero to the extent such net operating loss produces
a Tax Benefit in consolidation for the applicable taxable year, and the amount
that Distributing Co. shall be liable to Controlled Co. pursuant to the
preceding sentence shall be equal to the sum of the Controlled Group Prior State
Tax Liability and the amount of such Tax Benefit.
2.4 ALLOCATION OF OTHER TAXES. Except as provided in Section 2.5, all
Taxes other than those specifically allocated pursuant to Section 2.3 shall be
allocated based on the legal entity on which the legal incidence of the Tax is
imposed. As between the parties to this Agreement, Controlled Co. shall be
liable for all Taxes imposed on any member of the Controlled Group. The
Companies believe that there is no Tax not specifically allocated pursuant to
Section 2.3 which is legally imposed on more than one legal entity (e.g., joint
and several liability); however, if there is any such Tax, it shall be allocated
in accordance with past practices as reasonably determined by the affected
Companies, or in the absence of such practices, in accordance with any
allocation method agreed upon by the affected Companies.
2.5 TRANSACTION AND OTHER TAXES
(a) DISTRIBUTING CO. LIABILITY. Except as otherwise provided in
this Section 2.5, Distributing Co. shall be liable for, and shall indemnify and
hold harmless the Controlled Group from and against any liability for, all Taxes
resulting from the Distribution and the Transactions, including:
(i) Any sales and use, gross receipts, or other
similar transfer Taxes imposed on the transfers occurring pursuant to the
Transactions and the Distribution;
(ii) any Federal Income Tax or State Income Tax
resulting from any income or gain recognized by Distributing Co. as a result of
the Distribution or the distribution to Distributing Co. of all of the shares of
capital stock of Republic Resources held by Controlled Co. failing to qualify
for tax-free treatment pursuant to Section 355 of the Code and related
provisions;
(iii) any Tax resulting from the Internal
Restructuring.
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(b) INDEMNITY FOR CERTAIN ACTS. Controlled Co. shall be liable for,
and shall indemnify and hold harmless the Distributing Group from and against
any liability for, any Distribution Tax (described in subparagraph (ii) above)
to the extent arising as a result after the Distribution Date of Controlled
Co.'s engaging in any Prohibited Action, the occurrence of a Controlled Group
Disqualifying Event, or a breach by Controlled Co. of its representations,
warranties and covenants set forth in Section 11.
Section 3. PRORATION OF TAXES FOR STRADDLE PERIODS
3.1 GENERAL METHOD OF PRORATION. In the case of any Straddle Period,
Tax Items shall be apportioned between Pre-IPO Periods and Post-IPO Periods in
accordance with the principles of Treasury Regulation Section 1.1502-76(b) as
reasonably interpreted and applied by the Companies.
3.2 TRANSACTION TREATED AS EXTRAORDINARY ITEM. In determining the
apportionment of Tax Items between Pre-IPO Periods and Post-IPO Periods, any Tax
Items relating to the Transactions shall be treated as extraordinary items
described in Treasury Regulation Section 1.1502-76(b)(2)(ii)(C) and shall be
allocated to Pre-IPO Periods].
Section 4. PREPARATION AND FILING OF TAX RETURNS
4.1 GENERAL. Except as otherwise provided in this Section 4, Tax
Returns shall be prepared and filed when due (including extensions) by the
person obligated to file such Tax Returns under the Code or applicable Tax Law.
The Companies shall provide, and shall cause their Affiliates to provide,
assistance and cooperate with one another in accordance with Section 7 with
respect to the preparation and filing of Tax Returns, including providing
information required to be provided in Section 7.
4.2 DISTRIBUTING CO.'S RESPONSIBILITY. Distributing Co. has the
exclusive obligation and right to prepare and file, or to cause to be prepared
and filed:
(a) Distributing Co. Federal Consolidated Returns for any Periods
ending on, before or after the Offerings Closing Date.
(b) Consolidated or Combined State Income Tax Returns for Tax
Periods ending on or before the Offerings Closing Date or for any Straddle
Period.
(c) Tax Returns for State Income Taxes (including Tax Returns with
respect to State Income Taxes that are Separate Company Taxes) for members of
the Distributing Group.
4.3 CONTROLLED CO. RESPONSIBILITY. Controlled Co. shall prepare and
file, or shall cause to be prepared and filed, all Tax Returns required to be
filed by or with respect to the Controlled Co.
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or members of the Controlled Group other than those Tax Returns which
Distributing Co. is required to prepare and file under Section 4.2.
4.4 TAX ACCOUNTING PRACTICES
(a) GENERAL RULE. Except as otherwise provided in this Section 4.4,
any Tax Return for any Pre-IPO Period or any Straddle Period, and any Tax Return
for any Post-IPO Period to the extent items reported on such Tax Return might
reasonably affect items reported on any Tax Return for any Pre-IPO Period or any
Straddle Period, shall be prepared in accordance with past Tax accounting
practices used with respect to the Tax Returns in question (unless such past
practices are no longer permissible under the Code or other applicable Tax Law),
and to the extent any items are not covered by past practices (or in the event
such past practices are no longer permissible under the Code or other applicable
Tax Law), in accordance with reasonable Tax accounting practices selected by the
Responsible Company.
(b) REPORTING OF TRANSACTION TAX ITEMS. The tax treatment reported
on any Tax Return of Tax Items relating to the Transactions shall be consistent
with the treatment of such item in the IRS Ruling Letter (as such term is
defined in the Distribution Agreement) (unless such treatment is not permissible
under the Code). To the extent there is a Tax Item relating to the Transactions
which is not covered by the IRS Ruling Letter, the Companies shall agree on the
tax treatment of any such Tax Item reported on any Tax Return. For this purpose,
the tax treatment of such Tax Items on a Tax Return shall be determined by the
Responsible Company with respect to such Tax Return and shall be agreed to by
the other Company unless either (i) there is no reasonable basis as defined
under Section 6662 of the Code for such tax treatment, or (ii) such tax
treatment would have a material impact on the other Company or the Ruling
Request. Such Tax Return shall be submitted for review pursuant to Section
4.6(a), and any dispute regarding such proper tax treatment shall be referred
for resolution pursuant to Section 15, sufficiently in advance of the filing
date of such Tax Return (including extensions) to permit timely filing of the
return.
4.5 CONSOLIDATED OR COMBINED RETURNS. The Companies will elect and
join, and will cause their respective Affiliates to elect and join, in filing
consolidated, unitary, combined, or other similar joint Tax Returns, to the
extent each entity is eligible to join in such Tax Returns, if the Companies
reasonably determine that the filing of such Tax Returns is consistent with past
reporting practices, or in the absence of applicable past practices, will result
in the minimization of the net present value of the aggregate Tax to the
entities eligible to join in such Tax Returns.
4.6 RIGHT TO REVIEW TAX RETURNS
(a) GENERAL. The Responsible Company with respect to any Tax Return
shall make such Tax Return and related workpapers available for review by the
other Companies, if requested, to the extent (i) such Tax Return relates to
Taxes for which the requesting party may be liable, (ii) such Tax Return relates
to Taxes for which the requesting party may be liable in whole or in part or for
any additional Taxes owing as a result of adjustments to the amount of Taxes
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reported on such Tax Return, (iii) such Tax Return relates to Taxes for which
the requesting party may have a claim for Tax Benefits under this Agreement, or
(iv) the requesting party reasonably determines that it must inspect such Tax
Return to confirm compliance with the terms of this Agreement. The Responsible
Company shall use its reasonable best efforts to make such Tax Return available
for review as required under this paragraph sufficiently in advance of the due
date for filing such Tax Returns to provide the requesting party with a
meaningful opportunity to analyze and comment on such Tax Returns and have such
Tax Returns modified before filing, taking into account the person responsible
for payment of the tax (if any) reported on such Tax Return and the materiality
of the amount of Tax liability with respect to such Tax Return. The Companies
shall attempt in good faith to resolve any issues arising out of the review of
such Tax Returns. Issues that cannot be resolved by the Companies shall be
resolved in the manner set forth in Section 15.
(b) EXECUTION OF RETURNS PREPARED BY OTHER PARTY. In the case of
any Tax Return which is required to be prepared and filed by one Company under
this Agreement and which is required by law to be signed by another Company (or
by its authorized representative), the Company which is legally required to sign
such Tax Return shall not be required to sign such Tax Return under this
Agreement if there is no reasonable basis for the tax treatment of any material
items reported on the Tax Return.
4.7 CLAIMS FOR REFUND, CARRYBACKS, AND SELF-AUDIT ADJUSTMENTS
("ADJUSTMENT REQUESTS")
(a) CONSENT REQUIRED FOR ADJUSTMENT REQUESTS RELATED TO
CONSOLIDATED OR COMBINED INCOME TAXES. Except as provided in paragraph (b)
below, each of the Companies hereby agrees that, unless each of the other
Companies consents in writing, which consent shall not be unreasonably withheld,
(i) no Adjustment Request with respect to any Consolidated or Combined Income
Tax for a Pre- IPO Period shall be filed, and (ii) any available elections to
waive the right to claim in any Pre-IPO Period with respect to any Consolidated
or Combined Income Tax any Carryback arising in a Post-IPO Period shall be made,
and no affirmative election shall be made to claim any such Carryback. Any
Adjustment Request which the Companies consent to make under this Section 4.7
shall be prepared and filed by the Responsible Company under Section 4.2 for the
Tax Return to be adjusted. The Company requesting the Adjustment Request shall
provide to the Responsible Company all information required for the preparation
and filing of such Adjustment Request in such form and detail as reasonably
requested by the Responsible Company. Notwithstanding anything to the contrary
in this paragraph (a), the consent of the Controlled Co. shall not be necessary
for any Carryback by Distributing Co. or any member of the Distributing Group
provided such Carryback constitutes a Distributing Adjustment in the year (or
years) such Carryback is absorbed.
(b) EXCEPTION FOR ADJUSTMENT REQUESTS RELATED TO AUDIT ADJUSTMENTS.
Controlled Co. shall be entitled, without the consent of Distributing Co., to
require Distributing Co. to file an Adjustment Request to take into account any
net operating loss, net capital loss, deduction, credit, or other adjustment
attributable to such Controlled Co. or any member of its Group corresponding
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to any adjustment resulting from any audit by the Internal Revenue Service or
other Tax Authority with respect to Consolidated or Combined Income Taxes for
any Pre-IPO Tax Period. For example, if the Internal Revenue Service requires
Controlled Co. to capitalize an item deducted for the taxable year 1996,
Controlled Co. shall be entitled, without the consent of Distributing Co., to
require Distributing Co. to file an Adjustment Request for the taxable year 1997
(and later years) to take into account any depreciation or amortization
deductions in such years directly related to the item capitalized in 1996.
(c) OTHER ADJUSTMENT REQUESTS PERMITTED. Nothing in this Section
4.7 shall prevent any Company or its Affiliates from filing any Adjustment
Request with respect to Income Taxes which are not Consolidated or Combined
Income Taxes or with respect to any Taxes other than Income Taxes. Any refund or
credit obtained as a result of any such Adjustment Request (or otherwise) shall
be for the account of the person liable for the Tax under this Agreement.
(d) PAYMENT OF REFUNDS. Any refunds or other Tax Benefits received
by any Company (or any of its Affiliates) as a result of any Adjustment Request
which are for the account of another Company (or member of such other Company's
Group) shall be paid by the Company receiving (or whose Affiliate received) such
refund or Tax Benefit to such other Company in accordance with Section 6.
Section 5. TAX PAYMENTS AND INTERCOMPANY ▇▇▇▇▇▇▇▇
5.1 PAYMENT OF TAXES WITH RESPECT TO DISTRIBUTING CO. FEDERAL
CONSOLIDATION RETURNS FILED AFTER THE OFFERINGS CLOSING DATE. In the case of any
Distributing Co. Federal Consolidated Return the due date for which (including
extensions) is after the Offerings Closing Date:
(a) COMPUTATION AND PAYMENT OF TAX DUE. At least three business
days prior to any Payment Date, Distributing Co. shall compute the amount of Tax
required to be paid to the Internal Revenue Service (taking into account the
requirements of Section 4.4 relating to consistent accounting practices) with
respect to such Tax Return on such Payment Date and shall pay such amount to the
Internal Revenue Service on or before such Payment Date.
(b) COMPUTATION AND PAYMENT OF CONTROLLED CO. LIABILITY WITH
RESPECT TO TAX DUE. Within 90 days following any Payment Date, Controlled Co.
will pay to Distributing Co. the excess (if any) of --
(i) the Consolidated Tax Liability determined as of
such Payment Date with respect to the applicable Tax Period allocable to the
members of the Controlled Group as determined by the Distributing Co. in a
manner consistent with the Section 2.2(a) (relating to allocation of the
Consolidated Tax Liability in accordance with the Federal Allocation Method)
(the "Allocated Federal Tax Liability"), over
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(ii) the cumulative net payment with respect to such
Tax Return prior to such Payment Date by the members of the Controlled Group
(the "Cumulative Federal Tax Payment").
If the Controlled Group Cumulative Federal Tax Payment is greater than the
Controlled Group Allocated Federal Tax Liability as of any Payment Date, then
Distributing Co. shall pay such excess to Controlled Co. within 90 days of
Distributing Co.'s receipt of the corresponding Tax Benefit (i.e., through
either a reduction in Distributing Co.'s otherwise required Tax payment or a
credit or refund of prior tax payments).
(c) DEEMED CUMULATIVE FEDERAL TAX PAYMENTS; AMOUNT DUE FOR PRIOR
PERIODS. For purposes of Section 5.1(b)(ii) with respect to the Distributing Co.
Federal Consolidated Tax Return for the taxable year ending on the dates set
forth below, the Controlled Co. Group's Cumulative Federal Tax Payment through
the date of this Agreement is equal to the amounts set forth below:
Taxable Year Ending Controlled Group's Cumulative
December 31 Federal Tax Payment
----------- -------------------
1997 $
1998 $
Subject to adjustments as set forth in Sections 2.2(b) and 2.3(b)(ii),
no amounts are currently due and owing by the Controlled Co. to the Distributing
Co. with respect to any Consolidated or Combined Income Tax or Consolidated or
Combined State Income Tax for periods prior to the year ended on December 31,
1997.
(d) INTEREST ON INTERGROUP TAX ALLOCATION PAYMENTS. In the case of
any payments to Distributing Co. required under paragraph (b) of this subsection
5.1, Controlled Co. shall also pay to Distributing Co. an amount of interest
computed at the Prime Rate on the amount of the payment required based on the
number of days from the applicable Payment Date to the date of payment. In the
case of any payments by Distributing Co. required under paragraph (b) of this
subsection 5.1, Distributing Co. shall also pay to Controlled Co. an amount of
interest computed at the Prime Rate on the amount of the payment required based
on the number of days from the date of receipt of the Tax Benefit to the date of
payment of such amount to Controlled Co.
5.2 PAYMENT OF FEDERAL INCOME TAX RELATED TO ADJUSTMENTS
(a) ADJUSTMENTS RESULTING IN UNDERPAYMENTS. Distributing Co. shall
pay to the Internal Revenue Service when due any additional Federal Income Tax
required to be paid as a result of adjustment to the Tax liability with respect
to any Distributing Co. Federal Consolidated Return. The Distributing Co. shall
compute the amount attributable to the Controlled Group in accordance
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with Section 2.2(b) and Controlled Co. shall pay to Distributing Co. any amount
due Distributing Co. under Section 2.2(b) within ninety (90) days from the later
of (i) the date the additional Tax was paid by Distributing Co. or (ii) the date
of receipt by Controlled Co. of a written notice and demand from Distributing
Co. for payment of the amount due, accompanied by evidence of payment and a
statement detailing the Taxes paid and describing in reasonable detail the
particulars relating thereto. Any payments required under this Section 5.2(a)
shall include interest computed at the Prime Rate based on the number of days
from the date the additional Tax was paid by Distributing Co. to the date of the
payment under this Section 5.2(a).
(b) ADJUSTMENTS RESULTING IN OVERPAYMENTS. Within ninety (90) days
of receipt by Distributing Co. of any Tax Benefit resulting from any adjustment
to the Consolidated Tax Liability with respect to any Distributing Co. Federal
Consolidated Return, Distributing Co. shall pay to Controlled Co., or Controlled
Co. shall pay to Distributing Co. (as the case may be), their respective amounts
due from or to Distributing Co. as determined by the Responsible Company in
accordance with Section 2.2(b). Any payments required under this Section 5.2(b)
shall include interest computed at the Prime Rate based on the number of days
from the date the Tax Benefit was received by Distributing Co. to the date of
payment to Controlled Co. under this Section 5.2(b).
5.3 PAYMENT OF STATE INCOME TAX WITH RESPECT TO RETURNS FILED AFTER THE
OFFERINGS CLOSING DATE
(a) COMPUTATION AND PAYMENT OF TAX DUE. At least three business
days prior to any Payment Date for any Tax Return with respect to any State
Income Tax, the Responsible Company shall compute the amount of Tax required to
be paid to the applicable Tax Authority (taking into account the requirements of
Section 4.4 relating to consistent accounting practices) with respect to such
Tax Return on such Payment Date and -
(i) If such Tax Return is with respect to a
Consolidated or Combined State Income Tax, the Responsible Company shall, if
Distributing Co. is not the Responsible Company with respect to such Tax Return,
notify Distributing Co. in writing of the amount of Tax required to be paid on
such Payment Date. Distributing Co. will pay such amount to such Tax Authority
on or before such Payment Date.
(ii) If such Tax Return is with respect to a Separate
Company Tax, the Responsible Company shall, if it is not the Company liable for
the Tax reported on such Tax Return, notify the Company liable for such Tax in
writing of the amount of Tax required to be paid on such Payment Date. The
Company liable for such Tax will pay such amount to such Tax Authority on or
before such Payment Date.
(b) COMPUTATION AND PAYMENT OF CONTROLLED CO. LIABILITY WITH
RESPECT TO TAX DUE. Within ninety (90) days following the due date (including
extensions) for filing any Tax Return for any Consolidated or Combined State
Income Tax (excluding any Tax Return with respect to payment of estimated Taxes
or Taxes due with a request for extension of time to file), (i) Controlled
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Co. shall pay to Distributing Co. the tax liability allocable to the Controlled
Group as determined by the Responsible Company under the provisions of Section
2.3(b)(i), plus interest computed at the Prime Rate on the amount of the payment
based on the number of days from the due date (including extensions) to the date
of payment by Controlled Co. to Distributing Co., and (ii) the Responsible
Company shall notify Distributing Co. (if Distributing Co. is not the
Responsible Company with respect to such Tax Return).
5.4 PAYMENT OF STATE INCOME TAXES RELATED TO ADJUSTMENTS
(a) ADJUSTMENTS RESULTING IN UNDERPAYMENTS. Distributing Co. shall
pay to the applicable Tax Authority when due any additional State Income Tax
required to be paid as a result of any adjustment to the tax liability with
respect to any Tax Return for any Consolidated or Combined State Income Tax for
any Pre-IPO Period. Controlled Co. shall pay to Distributing Co. its respective
share of any such additional Tax payment determined by the Responsible Company
in accordance with Section 2.3(b)(ii) within ninety (90) days from the later of
(i) the date the additional Tax was paid by Distributing Co. or (ii) the date of
receipt by Controlled Co. of a written notice and demand from Distributing Co.
for payment of the amount due, accompanied by evidence of payment and a
statement detailing the Taxes paid and describing in reasonable detail the
particulars relating thereto. Controlled Co. shall also pay to Distributing Co.
interest on its respective share of such Tax computed at the Prime Rate based on
the number of days from the date the additional Tax was paid by Distributing Co.
to the date of its payment to Distributing Co. under this Section 5.4(a).
(b) ADJUSTMENTS RESULTING IN OVERPAYMENTS. Within ninety (90) days
of receipt by Distributing Co. of any Tax Benefit resulting from any adjustment
to the tax liability with respect to any Tax Return for any Consolidated or
Combined State Income Tax for any Pre-IPO Period, Distributing Co. shall pay to
Controlled Co. its respective share of any such Tax Benefit determined by the
Responsible Company in accordance with Section 2.3(b)(ii). Distributing Co.
shall also pay to Controlled Co. interest on its respective share of such Tax
Benefit computed at the Prime Rate based on the number of days from the date the
Tax Benefit was received by Distributing Co. to the date of payment to
Controlled Co. under this Section 5.4(b).
5.5 PAYMENT OF SEPARATE COMPANY TAXES. Each Company shall pay, or shall
cause to be paid, to the applicable Tax Authority when due all Separate Company
Taxes owed by such Company or a member of such Company's Group.
5.6 INDEMNIFICATION PAYMENTS. If any Company (the "payor") is required
to pay to a Tax Authority a Tax that is properly allocated to another Company
(the "responsible party") under this Agreement, the responsible party shall
reimburse the payor within ninety (90) days of delivery by the payor to the
responsible party of an invoice for the amount due, accompanied by evidence of
payment and a statement detailing the Taxes paid and describing in reasonable
detail the particulars relating thereto. The reimbursement shall include
interest on the Tax payment computed at the
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Prime Rate based on the number of days from the date of the payment to the Tax
Authority to the date of reimbursement under this Section 5.6.
Section 6. TAX BENEFITS. If a member of one Group receives any Tax
Benefit with respect to any Taxes for which a member of another Group is liable
hereunder, the Company receiving such Tax Benefit shall make a payment to the
Company who is liable for such Taxes hereunder within ninety (90) days following
receipt of the Tax Benefit in an amount equal to the Tax Benefit (including any
Tax Benefit realized as a result of the payment), plus interest on such amount
computed at the Prime Rate based on the number of days from the date of receipt
of the Tax Benefit to the date of payment of such amount under this Section 6.
Section 7. ASSISTANCE AND COOPERATION
7.1 GENERAL. After the Offerings Closing Date, each of the Companies
shall cooperate (and cause their respective Affiliates to cooperate) with each
other and with each other's agents, including accounting firms and legal
counsel, in connection with Tax matters relating to the Companies and their
Affiliates including (i) preparation and filing of Tax Returns, (ii) determining
the liability for and amount of any Taxes due (including estimated Taxes) or the
right to and amount of any refund of Taxes, (iii) examinations of Tax Returns,
and (iv) any administrative or judicial proceeding in respect of Taxes assessed
or proposed to be assessed. Such cooperation shall include making all
information and documents in their possession relating to the other Company and
their Affiliates available to such other Company as provided in Section 8. Each
of the Companies shall also make available to each other, as reasonably
requested and available, personnel (including officers, directors, employees and
agents of the Companies or their respective Affiliates) responsible for
preparing, maintaining, and interpreting information and documents relevant to
Taxes, and personnel reasonably required as witnesses or for purposes of
providing information or documents in connection with any administrative or
judicial proceedings relating to Taxes. Any information or documents provided
under this Section 7 shall be kept confidential by the Company receiving the
information or documents, except as may otherwise be necessary in connection
with the filing of Tax Returns or in connection with any administrative or
judicial proceedings relating to Taxes.
7.2 INCOME TAX RETURN INFORMATION. Each Company will provide to the
other Company information and documents relating to their respective Groups
required by the other Company to prepare Tax Returns. The Responsible Company
shall determine a reasonable compliance schedule for such purpose in accordance
with Distributing Co.'s past practices. Any additional information or documents
the Responsible Company requires to prepare such Tax Returns will be provided in
accordance with past practices, if any, or as the Responsible Company reasonably
requests and in sufficient time for the Responsible Company to file such Tax
Returns on a timely basis.
Section 8. TAX RECORDS
8.1 RETENTION OF TAX RECORDS. Except as provided in Section 8.2, each
Company shall preserve and keep all Tax Records exclusively relating to the
assets and activities of its respective
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Group for Pre-IPO Tax Periods, and Distributing Co. shall preserve and keep all
other Tax Records relating to Taxes of the Groups for Pre-IPO Tax Periods, for
so long as the contents thereof may become material in the administration of any
matter under the Code or other applicable Tax Law, but in any event until the
later of (i) the expiration of any applicable statutes of limitation, and (ii)
seven years after the Offerings Closing Date. If, prior to the expiration of the
applicable statute of limitation and such seven-year period, a Company
reasonably determines that any Tax Records which it is required to preserve and
keep under this Section 8 are no longer material in the administration of any
matter under the Code or other applicable Tax Law, such Company may dispose of
such records upon 90 days prior notice to the other Company. Such notice shall
include a list of the records to be disposed of describing in reasonable detail
each file, book, or other records being disposed. The notified Company shall
have the opportunity, at its cost and expense, to copy or remove, within such
90-day period, all or any part of such Tax Records.
8.2 STATE INCOME TAX RETURNS. Tax Returns with respect to State Income
Taxes and workpapers prepared in connection with preparing such Tax Returns
shall be preserved and kept, in accordance with the terms of Section 8.1, by the
Company having liability for the Tax.
8.3 ACCESS TO TAX RECORDS. The Companies and their respective
Affiliates shall make available to each other for inspection and copying during
normal business hours upon reasonable notice all Tax Records in their possession
to the extent reasonably required by the other Company in connection with the
preparation of Tax Returns, audits, litigation, or the resolution of items under
this Agreement.
Section 9. TAX CONTESTS
9.1 NOTICE. Each of the Companies shall provide prompt notice to the
other Company of any pending or threatened Tax audit, assessment or proceeding
or other Tax Contest of which it becomes aware related to Taxes for Tax Periods
for which it is indemnified by the other Company hereunder. Such notice shall
contain factual information (to the extent known) describing any asserted Tax
liability in reasonable detail and shall be accompanied by copies of any notice
and other documents received from any Tax Authority in respect of any such
matters. If an indemnified party has knowledge of an asserted Tax liability with
respect to a matter for which it is to be indemnified hereunder and such party
fails to give the indemnifying party prompt notice of such asserted Tax
liability, then (i) if the indemnifying party is precluded from contesting the
asserted Tax liability in any forum as a result of the failure to give prompt
notice, the indemnifying party shall have no obligation to indemnify the
indemnified party for any Taxes arising out of such asserted Tax liability, and
(ii) if the indemnifying party is not precluded from contesting the asserted Tax
liability in any forum, but such failure to give prompt notice results in a
monetary detriment to the indemnifying party, then any amount which the
indemnifying party is otherwise required to pay the indemnified party pursuant
to this Agreement shall be reduced by the amount of such detriment.
9.2 CONTROL OF TAX CONTESTS
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(a) SEPARATE COMPANY TAXES. In the case of any Tax Contest with
respect to any Separate Company Tax, the Company having liability for the Tax
shall have exclusive control over the Tax Contest, including exclusive authority
with respect to any settlement of such Tax liability.
(b) CONSOLIDATED OR COMBINED INCOME TAXES. In the case of any Tax
Contest with respect to any Consolidated or Combined Income Tax, (i)
Distributing Co. shall control the defense or prosecution of the portion of the
Tax Contest directly and exclusively related to any Distributing Adjustment,
including settlement of any such Distributing Adjustment and (ii) Controlled Co.
shall control the defense or prosecution of the portion of the Tax Contest
directly and exclusively related to any Controlled Adjustment, including
settlement of any such Controlled Adjustment, and (iii) the Tax Contest
Committee shall control the defense or prosecution of Joint Adjustments,
including settlement of any such Joint Adjustment, and any and all
administrative matters not directly and exclusively related to any Distributing
Adjustment or Controlled Adjustment. The Tax Contest Committee shall be
comprised of two persons, one person selected by Distributing Co. (as designated
in writing to Controlled Co.) and one person selected by Controlled Co. (as
designated in writing to Distributing Co.). Each person serving on the Tax
Contest Committee shall continue to serve unless and until he or she is replaced
by the party designating such person. Any and all matters to be decided by the
Tax Contest Committee shall require the approval of both persons serving on the
committee. In the event the Tax Contest Committee shall be deadlocked on any
matter, the provisions of Section 15 of this Agreement shall apply. A Company
shall not agree to any Tax liability for which another Company may be liable
under this Agreement, or compromise any claim for any Tax Benefit which another
Company may be entitled under this Agreement, without such other Company's
written consent (which consent may be given or withheld at the sole discretion
of the Company from which the consent would be required). The Distributing Co.,
in the case of any examination or audit of a Distributing Co. Federal
Consolidation Return, and the Responsible Company in the case of any examination
or audit of a Consolidated or Combined State Income Tax Return, shall be the
only parties representing the members of the Group before any Federal or State
Tax Authority in connection with the examination or audit. Notwithstanding the
representation by the Distributing Co. or Responsible Company before such Tax
Authority, the Distributing Co. or Responsible Company shall (a) provide the
Controlled Co. with all information reasonably requested relating to any
Controlled Adjustment or Joint Adjustment; (b) submit to such Tax Authority any
facts, legal arguments or other matters deemed advisable by Controlled Co. and
provided by it to Distributing Co. or the Responsible Company; (c) not have the
authority to settle or otherwise compromise a Controlled Adjustment; and (d) not
have the authority to settle or otherwise compromise a Joint Adjustment other
than through the Tax Contest Committee procedures set forth in this Section
9.2(b).
Section 10. EFFECTIVE DATE. This Agreement shall be effective on the
Offerings Closing Date.
Section 11. NO INCONSISTENT ACTIONS. Each of the Companies covenants
and agrees that it will not take any action, and it will cause its Affiliates to
refrain from taking any action, which is inconsistent with the Tax treatment of
the Distribution as contemplated in the Ruling Request (any
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such action is referred to in this Section 11 as a "Prohibited Action"), unless
such Prohibited Action is required by law, or the person acting has obtained the
prior written consent of each of the other parties (which consent shall not be
unreasonably withheld). With respect to any Prohibited Action proposed by a
Company (the "Requesting Party"), the other party (the "Requested Party") shall
grant its consent to such Prohibited Action if the Requesting Party obtains a
ruling with respect to the Prohibited Action from the Internal Revenue Service
or other applicable Tax Authority that is reasonably satisfactory to the
Requested Party (except that the Requesting Party shall not submit any such
ruling request if a Requested Party determines in good faith that filing such
request might have a materially adverse effect upon such Requested Party).
Without limiting the foregoing:
(a) NO INCONSISTENT PLAN OR INTENT. Controlled Co. and Distributing
Co. each represents and warrants that neither it nor any of its Affiliates has
any plan or intent to take any action which is inconsistent with any factual
statements or representations in the Ruling Request. Regardless of any change in
circumstances, Controlled Co. and Distributing Co. each covenant and agree that
it will not take, and it will cause its Affiliates to refrain from taking, any
such inconsistent action on or before the last day of the calendar year ending
after the second anniversary of the Distribution Date other than as permitted in
this Section 11.
(b) AMENDED OR SUPPLEMENTAL RULINGS . Each of the Companies
covenants and agrees that it will not file, and it will cause its Affiliates to
refrain from filing, any amendment or supplement to the Ruling Request
subsequent to the Distribution Date without the consent of the other Company,
which consent shall not be unreasonably withheld.
Section 12. SURVIVAL OF OBLIGATIONS . The representations, warranties,
covenants and agreements set forth in this Agreement shall be unconditional and
absolute and shall remain in effect without limitation as to time.
Section 13. EMPLOYEE MATTERS . To the extent applicable, each of the
Companies agrees to utilize, or cause its Affiliates to utilize, the alternative
procedure set forth in Revenue Procedure 96-60, 1996-2 C.B. 399, with respect to
wage reporting.
Section 14. TREATMENT OF PAYMENTS; TAX GROSS UP
14.1 TREATMENT OF TAX INDEMNITY AND TAX BENEFIT PAYMENTS. In the
absence of any change in tax treatment under the Code or other applicable Tax
Law,
(a) any Tax indemnity payments made by a Company under Section 5
shall be reported for Tax purposes by the payor and the recipient as
distributions or capital contributions, as appropriate, occurring immediately
before the Offerings Closing Date, but only to the extent the payment does not
relate to a Tax allocated to the payor in accordance with Treasury Regulation
Section 1.1502-33(d) (or under corresponding principles of other applicable Tax
Laws), and
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(b) any Tax Benefit payments made by a Company under Section 6,
shall be reported for Tax purposes by the payor and the recipient as
distributions or capital contributions, as appropriate, occurring immediately
before the Offerings Closing Date, but only to the extent the payment does not
relate to a Tax allocated to the payor in accordance with Treasury Regulation
Section 1.1502-33(d) (or under corresponding principles of other applicable Tax
Laws).
14.2 TAX GROSS UP. If notwithstanding the manner in which Tax indemnity
payments and Tax Benefit payments were reported, there is an adjustment to the
Tax liability of a Company as a result of its receipt of a payment pursuant to
this Agreement, such payment shall be appropriately adjusted so that the amount
of such payment, reduced by the amount of all Income Taxes payable with respect
to the receipt thereof (but taking into account all correlative Tax Benefits
resulting from the payment of such Income Taxes), shall equal the amount of the
payment which the Company receiving such payment would otherwise be entitled to
receive pursuant to this Agreement.
14.3 INTEREST UNDER THIS AGREEMENT. Anything herein to the contrary
notwithstanding, to the extent one Company ("indemnitor") makes a payment of
interest to another Company ("indemnitee") under this Agreement with respect to
the period from the date that the indemnitee made a payment of Tax to a Tax
Authority to the date that the indemnitor reimbursed the indemnitee for such Tax
payment, or with respect to the period from the date that the indemnitor
received a Tax Benefit to the date indemnitor paid the Tax Benefit to the
indemnitee, the interest payment shall be treated as interest expense to the
indemnitor (deductible to the extent provided by law) and as interest income by
the indemnitee (includible in income to the extent provided by law). The amount
of the payment shall not be adjusted under Section 14.2 to take into account any
associated Tax Benefit to the indemnitor or increase in Tax to the indemnitee.
Section 15. DISAGREEMENTS. If after good faith negotiations the parties
cannot agree on the application of this Agreement to any matter, then the matter
will be referred to a nationally recognized accounting firm acceptable to each
of the parties (the "Accounting Firm"). The Accounting Firm shall furnish
written notice to the parties of its resolution of any such disagreement as soon
as practical, but in any event no later than 45 days after its acceptance of the
matter for resolution. Any such resolution by the Accounting Firm will be
conclusive and binding on all parties to this Agreement. In accordance with
Section 17, each party shall pay its own fees and expenses (including the fees
and expenses of its representatives) incurred in connection with the referral of
the matter to the Accounting Firm. All fees and expenses of the Accounting Firm
in connection with such referral shall be shared equally by the parties affected
by the matter.
Section 16. LATE PAYMENTS . Any amount owed by one party to another
party under this Agreement which is not paid when due shall bear interest at the
Prime Rate plus two percent, compounded semiannually, from the due date of the
payment to the date paid. To the extent interest required to be paid under this
Section 16 duplicates interest required to be paid under any other provision of
this Agreement, interest shall be computed at the higher of the interest rate
provided under this Section 16 or the interest rate provided under such other
provision.
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Section 17. EXPENSES. Except as provided in Section 15, each party and
its Affiliates shall bear their own expenses incurred in connection with
preparation of Tax Returns, Tax Contests, and other matters related to Taxes
under the provisions of this Agreement.
Section 18. GENERAL PROVISIONS
18.1 ADDRESSES AND NOTICES. Any notice, demand, request or report
required or permitted to be given or made to any party under this Agreement
shall be in writing and shall be deemed given or made when delivered in party or
when sent by first class mail or by other commercially reasonable means of
written communication (including delivery by an internationally recognized
courier service or by facsimile transmission) to the party at the party's
principal business address. A party may change the address for receiving notices
under this Agreement by providing written notice of the change of address to the
other parties.
18.2 BINDING EFFECT . This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their successors and assigns.
18.3 WAIVER. No failure by any party to insist upon the strict
performance of any obligation under this Agreement or to exercise any right or
remedy under this Agreement shall constitute waiver of any such obligation,
right, or remedy or any other obligation, rights, or remedies under this
Agreement.
18.4 INVALIDITY OF PROVISIONS. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity,
legality, and enforceability of the remaining provisions contained herein shall
not be affected thereby.
18.5 FURTHER ACTION. The parties shall execute and deliver all
documents, provide all information, and take or refrain from taking action as
may be necessary or appropriate to achieve the purposes of this Agreement,
including the execution and delivery to the other parties and their Affiliates
and representatives of such powers of attorney or other authorizing
documentation as is reasonably necessary or appropriate in connection with Tax
Contests (or portions thereof) under the control of such other parties in
accordance with Section 9.
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18.6 INTEGRATION. This Agreement constitutes the entire agreement among
the parties pertaining to the subject matter of this Agreement and supersedes
all prior agreements and understandings pertaining thereto. In the event of any
inconsistency between this Agreement and the Distribution Agreement or any other
agreements relating to the transactions contemplated by the Distribution
Agreement, the provisions of this Agreement shall control.
18.7 CONSTRUCTION. The language in all parts of this Agreement shall in
all cases be construed according to its fair meaning and shall not be strictly
construed for or against any party.
18.8 NO DOUBLE RECOVERY; SUBROGATION. No provision of this Agreement
shall be construed to provide an indemnity or other recovery for any costs,
damages, or other amounts for which the damaged party has been fully compensated
under any other provision of this Agreement or under any other agreement or
action at law or equity. Unless expressly required in this Agreement, a party
shall not be required to exhaust all remedies available under other agreements
or at law or equity before recovering under the remedies provided in this
Agreement. Subject to any limitations provided in this Agreement (for example,
the limitation on filing claims for refund in Section 4.7), the indemnifying
party shall be subrogated to all rights of the indemnified party for recovery
from any third party.
18.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.
18.10 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida applicable to contracts
executed in and to be performed in that State.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers as of the date first written above.
REPUBLIC INDUSTRIES, INC.
By:
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Name:
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Title:
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REPUBLIC SERVICES, INC.
By:
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Name:
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Title:
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