Transaction Tax Deductions. (i) Any liability for, or refund of, Income Taxes attributable to a Pre-Closing Tax Period shall be determined by taking into account all Transaction Tax Deductions properly deductible in a Pre-Closing Tax Period (assuming, for this purpose, that the “next-day rule” contained in Treasury Regulation Section 1.1502-76(b)(1)(ii)(B) is not applicable to any Transaction Tax Deduction, and, unless otherwise determined by Sellers, that the safe harbor election provided for in IRS Revenue Procedure 2011-29 is made with respect to any Transaction Tax Deduction that constitutes a “success-based fee”). (ii) Buyer shall pay to the Sellers an amount equal to any Future Transaction Tax Benefit (as defined below) within fifteen (15) Business Days following the earlier of making any reduced Tax payment with respect to any Income Tax Return (but not including for this purpose any Tax Return relating to payments of estimated Taxes) or the receipt of any Income Tax refund in cash that is attributable to such Future Transaction Tax Benefit. For this purpose, a “Future Transaction Tax Benefit” is any refund of Income Tax or any reduction in the cumulative Income Tax liability of Buyer, the Company or any GMS Entity that is attributable to a carryforward (or carryback) of a net operating loss or other Tax attribute resulting from a Transaction Tax Deduction. The amount of such refund or reduction for any taxable period shall equal the amount by which the hypothetical Income Tax liability of Buyer, the Company and any other GMS Entity, calculated by excluding all Transaction Tax Deductions, exceeds the actual Income Tax liability of Buyer, the Company and its Subsidiaries for such taxable period, treating all Transaction Tax Deductions (and any net operating loss attributable thereto) as the last items claimed for any taxable period (i.e., such refund or reduction shall be calculated using a “with and without methodology”). The amount of such reduction or refund shall take into account the deductibility of state and local income Taxes for U.S. federal income tax purposes and other offsetting costs. Buyer shall, and as applicable shall cause the Company and its Subsidiaries to, prepare all Income Tax Returns in good faith at or before the time and in the same manner that it would have filed such Income Tax Returns absent the provisions of this Section 6.9(c)(ii). Notwithstanding the foregoing, Buyer shall not be required to cause any payments to be made with respect to Future Transaction Tax Benefits realized with respect to taxable periods ending after December 31, 2016. Until such time as all Transaction Tax Deductions have been realized or expired, Buyer shall, within fifteen (15) Business Days after the filing of any Income Tax Return of (or including) Buyer, the Company or any GMS Entity for taxable periods ending on or prior to December 31, 2016 (but not including for this purpose any Tax Return relating to payments of estimated Taxes), deliver to the Sellers a written statement setting forth in reasonable detail the determination of the Future Transaction Tax Benefit reflected on such Income Tax Return. (iii) Buyer shall not waive the carryback period or otherwise fail to carry back any net operating loss for any taxable period that includes a Transaction Tax Deduction or reflects a Future Transaction Tax Benefit.
Appears in 1 contract
Samples: Stock Purchase Agreement (GMS Inc.)
Transaction Tax Deductions. (i) Any liability for, or refund of, Income Taxes attributable to a Pre-Closing Tax Period shall be determined by taking into account all Transaction Tax Deductions properly deductible in a Pre-Closing Tax Period (assuming, for this purpose, that the “next-day rule” contained in Treasury Regulation Section 1.1502-76(b)(1)(ii)(B) is not applicable to any Transaction Tax Deduction, and, unless otherwise determined by Sellers, that the safe harbor election provided for in IRS Revenue Procedure 2011-29 is made with With respect to any Transaction the preparation of income Tax Deduction that constitutes a “success-based fee”).
(ii) Buyer shall pay to the Sellers an amount equal to any Future Transaction Tax Benefit (as defined below) within fifteen (15) Business Days following the earlier Returns of making any reduced Tax payment with respect to any Income Tax Return (but not including for this purpose any Tax Return relating to payments of estimated Taxes) or the receipt of any Income Tax refund in cash that is attributable to such Future Transaction Tax Benefit. For this purpose, a “Future Transaction Tax Benefit” is any refund of Income Tax or any reduction in the cumulative Income Tax liability of Buyer, the Company or any GMS Entity that is attributable to a carryforward (or carryback) of a net operating loss or other Tax attribute resulting from a Transaction Tax Deduction. The amount of such refund or reduction for any taxable period shall equal the amount by which the hypothetical Income Tax liability of Buyerits Subsidiaries, the Company and any other GMS Entity, calculated by excluding all Transaction Tax Deductions, exceeds the actual Income Tax liability of Buyer, the Company and its Subsidiaries for such taxable period, treating agree that all Transaction Tax Deductions will be treated as properly allocable to the Pre-Closing Tax Period that ends on the Closing Date to the extent permitted by applicable Tax Law. In connection with the foregoing, the Parties agree that seventy percent (and 70%) of any net operating loss attributable thereto) as the last items claimed for any taxable period (i.e., such refund or reduction shall success-based fees may be calculated using a “with and without methodology”). The amount of such reduction or refund shall take into account the deductibility of state and local income Taxes deducted for U.S. federal income tax purposes and other offsetting costspursuant to the safe harbor election in Revenue Procedure 2011-29, unless such Revenue Procedure is revoked or otherwise supplanted by any change in applicable Law. Buyer shall, and as applicable The Parties intend that the transactions contemplated by this Agreement shall cause the income Tax year of the Company and its Subsidiaries toto end as of the Closing Date for U.S. federal income Tax purposes (and, prepare all Income Tax Returns in good faith at or before the time and in the same manner that it would have filed such Income Tax Returns absent the provisions of this Section 6.9(c)(ii). Notwithstanding the foregoingconsistent with this, Buyer shall not be required include the Company in its affiliated group filing a consolidated U.S. federal income Tax Return beginning on the date after the Closing Date).
(ii) For purposes of this Agreement, “Transaction Tax Deductions” means (A) all Tax deductible fees, expenses and interest (including amounts treated as interest for income Tax purposes and any breakage fees or accelerated deferred financing fees) incurred by the Company or any of its Subsidiaries with respect to cause the payment of Closing Indebtedness in connection with the Closing, (B) all Tax deductible fees, costs and expenses incurred by the Company or any of its Subsidiaries that are Transaction Expenses under clause (i) of that definition, and (C) all Tax deductible compensatory payments to be made with respect to Future the Closing pursuant to Section 3.6, and, without * Omitted information is the subject of a request for confidential treatment pursuant to Rule 24b-2 under the Securities Exchange Act of 1934 and has been filed separately with the Securities and Exchange Commission. duplication, any Tax deductible amounts that are Transaction Tax Benefits realized Expenses under clauses (ii) and (iii) of that definition and that are paid with respect to taxable periods ending after December 31the Closing, 2016. Until such time as all Transaction Tax Deductions have been realized or expired, Buyer shall, within fifteen (15) Business Days after in the filing case of any Income Tax Return each of (or includingA) Buyer, the Company or any GMS Entity for taxable periods ending on or prior to December 31, 2016 through (but not including for this purpose any Tax Return relating to payments of estimated TaxesC), deliver to the Sellers extent such fees, costs or expenses result in a written statement setting forth reduction in reasonable detail the determination of Merger consideration received by the Future Transaction Tax Benefit reflected on such Income Tax ReturnSecurityholders or constitute amounts for which Buyer is entitled to, and able to obtain, indemnification under Article VIII.
(iii) Buyer shall not waive the carryback period or otherwise fail to carry back any net operating loss for any taxable period that includes a Transaction Tax Deduction or reflects a Future Transaction Tax Benefit.
Appears in 1 contract
Transaction Tax Deductions. (i) Any liability for, Seller shall be entitled to the amount of any Tax refunds (or refund of, Income Taxes attributable to any Tax credits received in lieu thereof) that are actually received in respect of a Pre-Closing Tax Period shall be determined by taking into account all Transaction Tax Deductions properly deductible in a Buyer, any Group Company, or any of their respective Affiliates after the Closing for (A) the overpayment of estimated Taxes for any Pre-Closing Tax Period resulting from the Transaction Tax Deductions or (assumingB) the carryback of any net operating loss resulting from the Transaction Tax Deductions, for this purposein each case, that the “next-day rule” contained in Treasury Regulation Section 1.1502-76(b)(1)(ii)(B) is not applicable to excluding any Transaction Tax DeductionDeductions to the extent included in the final computation of Accrued Taxes and net of any Taxes and reasonable out-of-pocket expenses incurred in connection with obtaining such Tax refunds (or credits) (any such income Tax refund or credit, and, unless otherwise determined by Sellers, that the safe harbor election provided for in IRS Revenue Procedure 2011-29 is made with respect to any Transaction Tax Deduction that constitutes a “success-based feeTax Refund”).
(ii) Buyer Seller shall pay be entitled to the Sellers an amount equal of any actual reduction in cash Tax payments that Buyer, any Group Company, or any of their respective Affiliates would have been required to make for any Future Tax period (or portion thereof) beginning after the Closing Date and ending on or before the third anniversary of the Closing Date to the extent such reduction results directly from the Transaction Tax Benefit Deductions (as defined below) within fifteen (15) Business Days following excluding any Transaction Tax Deductions included in the earlier final computation of making any reduced Tax payment with respect to any Income Tax Return (but not including for this purpose any Tax Return relating to payments of estimated Accrued Taxes) or the receipt , and net of any Income Taxes and reasonable out-of-pocket expenses incurred in connection with obtaining such cash Tax refund in cash that is attributable to savings) (such Future Transaction Tax Benefit. For this purposereduction, a “Future Transaction Tax Benefit” is any refund ”).
(iii) For purposes of Income Tax or determining whether any reduction in the cumulative Income Tax liability of Buyer, the Company or any GMS Entity that is attributable to a carryforward (or carryback) of a net operating loss or other Tax attribute resulting post-Closing Taxes results from a Transaction Tax Deduction. The amount of such refund or reduction for any taxable period Deduction pursuant to this Section 6.10(g) it shall equal the amount by which the hypothetical Income Tax liability of be assumed that Buyer, the Company Group Companies and any each of their respective Affiliates recognize all other GMS Entityitems of income, calculated by excluding gain, loss, deduction or credit and use all Transaction Tax Deductions, exceeds the actual Income Tax liability of Buyer, the Company and its Subsidiaries for such taxable period, treating all Transaction Tax Deductions (and any other net operating loss attributable thereto) as the last items claimed for any taxable period (i.e.carryforwards and carrybacks and all other carryforwards, such refund or reduction shall be calculated using a “with and without methodology”). The amount of such reduction or refund shall take into account the deductibility of state and local income Taxes for U.S. federal income tax purposes carrybacks and other offsetting costs. tax attributes, whether now existing or hereafter available, before receiving any Tax Benefit.
(iv) Buyer shall, and as applicable shall cause the Company and its Subsidiaries to, prepare all Income Tax Returns in good faith at or before the time and in the same manner promptly pay over to Seller any such amounts that it would have filed such Income Tax Returns absent the provisions of Seller is entitled to pursuant to this Section 6.9(c)(ii). Notwithstanding the foregoing, Buyer shall not be required to cause any payments to be made with respect to Future Transaction Tax Benefits realized with respect to taxable periods ending after December 31, 2016. Until such time as all Transaction Tax Deductions have been realized or expired, Buyer shall, 6.10(g) within fifteen twenty (1520) Business Days after the actual filing of any the Income Tax Return related to such Tax Benefit or the actual receipt of such Tax Refund (or including) Buyer, the Company or any GMS Entity for taxable periods ending on or prior with respect to December 31, 2016 (but not including for this purpose any Tax Return relating Refund that is an income Tax credit received in lieu of a cash Income Tax refund, on the filing of the applicable income Tax Return).
(v) Buyer shall use commercially reasonable efforts to payments promptly obtain any Tax Refund or Tax Benefit.
(vi) Upon receipt of estimated Taxes)a reasonable written request from Seller, deliver to the Sellers Buyer shall provide Seller with a written statement calculation and supporting work papers setting forth in reasonable detail the determination computation of any Tax Refunds or Tax Benefits after Buyer prepares and files the Future Transaction Tax Benefit reflected on such Income applicable income Tax Return.
(iiivii) If the amount of any Tax Refund or Tax Benefit is subsequently reduced or eliminated as a result of an examination of a Tax Return of a Group Company by an applicable Governmental Entity and pursuant to a final determination under Section 1313(a) of the Code, Buyer shall not waive be repaid, solely from the carryback period remaining funds (if any) in the Indemnity Escrow Account, any such reduced or otherwise fail eliminated amounts that have already been paid to carry back Seller, and Seller shall have no further obligations to Buyer with respect to such amounts; provided that (i) as a condition to any net operating loss for any taxable period that includes a Transaction Tax Deduction or reflects a Future Transaction Tax Benefitsuch payment to Buyer from the Indemnity Escrow Account, Buyer shall notify Seller in writing of such examination before the Survival Period Termination Date and (ii) Buyer’s recovery under this Section 6.10(g)(vii) shall be limited to remaining funds (if any) in the Indemnity Escrow Account, subject to the limitations and procedures under ARTICLE 9.
Appears in 1 contract
Samples: Stock Purchase Agreement (Fox Factory Holding Corp)
Transaction Tax Deductions. (i) Any liability forTo the extent permitted by applicable Tax law, or refund of, Income Taxes attributable to a Pre-Closing Tax Period shall be determined by taking into account all Transaction Tax Deductions properly deductible in a Pre-Closing Tax Period (assuming, for this purpose, that the “next-day rule” contained in Treasury Regulation Section 1.1502-76(b)(1)(ii)(B) is not applicable to any Transaction Tax Deduction, and, unless otherwise determined by Sellers, that the safe harbor election provided for in IRS Revenue Procedure 2011-29 is made with respect to any Transaction Tax Deduction that constitutes a “success-based fee”).
(ii) Buyer shall pay to the Sellers an amount equal to any Future Transaction Tax Benefit (as defined below) within fifteen (15) Business Days following the earlier of making any reduced Tax payment with respect to any Income Tax Return (but not including for this purpose any Tax Return relating to payments of estimated Taxes) or the receipt of any Income Tax refund in cash that is attributable to such Future Transaction Tax Benefit. For this purpose, a “Future Transaction Tax Benefit” is any refund of Income Tax or any reduction in the cumulative Income Tax liability of Buyer, the Company or any GMS Entity that is attributable to a carryforward (or carryback) of a net operating loss or other Tax attribute resulting from a Transaction Tax Deduction. The amount of such refund or reduction for any taxable period shall equal the amount by which the hypothetical Income Tax liability of Buyer, the Company and any other GMS Entity, calculated by excluding all Transaction Tax Deductions, exceeds the actual Income Tax liability of Buyer, the Company and its Subsidiaries for such taxable period, treating all Transaction Tax Deductions (and any net operating loss attributable thereto) as the last items claimed for any taxable period (i.e., such refund or reduction shall be calculated using a “with and without methodology”). The amount of such reduction or refund shall take into account the deductibility of state and local income Taxes for U.S. federal income tax purposes and other offsetting costs. Buyer shall, and as applicable shall Parent will cause the Company and its Subsidiaries to, prepare all Income Tax Returns in good faith at or before the time and in the same manner that it would have filed such Income Tax Returns absent the provisions of this Section 6.9(c)(ii). Notwithstanding the foregoing, Buyer shall not be required to cause (i) claim any payments to be made with respect to Future Transaction Tax Benefits realized with respect to taxable periods ending after December 31, 2016. Until such time as all Transaction Tax Deductions have been realized or expired, Buyer shall, within fifteen (15) Business Days after the filing of any Income Tax Return of (or including) Buyer, the Company or any GMS Entity for taxable periods in its Pre-Closing Taxable Period ending on or prior to December 31, 2016 the Closing Date and (but not including for this purpose any Tax Return relating to payments of estimated Taxes), deliver to the Sellers a written statement setting forth in reasonable detail the determination of the Future Transaction Tax Benefit reflected on such Income Tax Return.
(iiiii) Buyer shall not waive the carryback period or otherwise fail elect to carry back any net operating loss for such period. The Securityholders shall be entitled to (1) any taxable period refund or credit of Income Taxes actually paid by the Company or its Subsidiaries prior to the Closing Date for any Pre-Closing Taxable Period to the extent that includes a such refund or credit is attributable to the Transaction Tax Deduction Deductions or reflects the carryback of a Future net operating loss attributable to such Transaction Tax BenefitDeductions (with such Transaction Tax Deductions treated as the last deductionsclaimed in such Pre-Closing Taxable Period for this purpose) and (2) the amount by which (x) the Income Tax Reserve exceeds (y) the amount of Income Taxes for any Pre-Closing Taxable Period that are required to be paid after the Closing by the Surviving Corporation, to the extent such difference results from the Transaction Tax Deductions (with such Transaction Tax Deductions treated as the last deductions claimed in any Pre-Closing Taxable Period for this purpose). Parent shall file such Tax Returns (or other requests for refunds, but not any refund claims pursuant to IRS Form 1139 or any similar state processes) for the Pre-Closing Taxable Period as are reasonably requested by the Seller Representative to obtain or secure any amounts to which the Securityholders may be entitled pursuant to the preceding sentence, and Parent shall afford the Seller Representative and its Representatives reasonable access to the books and records and management of the Company and its Subsidiaries in furtherance of the foregoing. The Surviving Corporation shall deliver and pay over to the Paying Agent (on behalf of the Securityholders) any amounts described in the second sentence of this Section 4.13(i) as soon as reasonably practicable after receipt or actual realization thereof (which, in the case of a Tax described in clause (2) of the second sentence of this Section 4.13(i), shall be when such Tax would have been payable to the relevant Tax authority in the absence of Transaction Tax Deductions), net of (a) any Taxes imposed with respect to the receipt or payment of such refund or credit, and (b) the amount of any Closing Tax Refund Payments (as defined below) actually paid to the Optionholders. The Securityholders shall not be entitled to any refund or credit attributable to (i) the carryback ofnet operating losses or other Tax attributes economically generated after the Closing Date or the carryback of losses sustained by the Company or its Subsidiaries after December 31, 2016 and prior to the Closing Date other than in respect of Transaction Tax Deductions or (ii) the use of any net operating loss of the Company attributable to Transaction Tax Deductions in a Post-Closing Taxable Period. At least three (3) business days prior to Closing, the Company shall prepare an estimate of the aggregate amounts -68- **MSPSC Electronic Copy ** 2016-UA-186 Filed on 09/23/2016 ** that would reasonably be expected to be paid to the Securityholders pursuant to this Section 4.13(ik which calculation shall be reasonably acceptable to Parent (the "Estimated Tax Refund Amount"). At Closing, Parent shall pay to the Company, for payment to each of the Optionholders set forth on Section 4.13(j) of the Disclosure Schedule, an amount for each such Optionholder equal to the portion of the Estimated Tax Refund Amount that would be allocable to such Optionholder under Section 1.6(c) (Effect on Company Options) and Section 1.6(e) (Post-Closing Payments) if the entire Estimated Tax Refund Amount were to be paid to all Securityholders at Closing (the "Closing Tax Refund Payments"). Thereafter, any payments payable to the Seller Representative after the Closing pursuant to this Section 4.13(i) (which for the avoidance of doubt shall be determined net of the Closing Tax Refund Payments) (the "Post- Closing Tax Refund Payments") shall be allocated by the Seller Representative among the Securityholders (other than the Optionholders set forth on Section 4.13(†) of the Disclosure Schedule) in accordance with the relative Pro Rata Portions of such other Securityholders (the "Per Share Tax Refund Amounts"), provided, that if the aggregate Per Share Tax Refund Amount exceeds the portion of the Closing Tax Refund Payments that each Optionholder set forth on Section 4.13(i) of the Disclosure Schedule received in respect of each share of Company Capital Stock underlying such Company Options, then the Post-Closing Tax Refund Payments shall be allocated by the Seller Representative among all of the Securityholders (including the Optionholders set forth on Section 4.13(i) of the Disclosure Schedule), such that all Securityholders, on a cumulative basis, receive their Pro Rata Portion of the full amount due to Securityholders under this Section 4.13(j) (it being understood that, post-Closing, the Optionholders set forth on Section 4.13(i) of the Disclosure Schedule shall only receive amounts that are in excess of their applicable portion of the Closing Tax Refund Payments) and the Per Share Tax Refund Amount shall be appropriately adjusted. Notwithstanding anything to the contrary herein, in calculating the Estimated Tax Refund Amount, .the Closing Tax Refund Payments or the Per Share Tax Refund Amounts, any deductions of the Company or its Subsidiaries resulting from or attributable to (i) any expenses incurred or assumed by Parent, MergerSub or their Affiliates (other than the Company and its Subsidiaries), (ii) any activities or transactions on the Closing Date after the Closing outside of the ordinary course of business or (iii) any expenses of Parent, Merger Sub or their Affiliates that are assumed by the Company or its Subsidiaries at or after the Closing, that, in each case, do not constitute Transaction Tax Deductions, shall be taken into account after the Transaction Tax Deductions.
Appears in 1 contract
Samples: Purchase Agreement
