Exhibit 10.2
AMENDED AND RESTATED TAX SHARING AGREEMENT
THIS AGREEMENT is entered into as of the 17th day of March, 1999, by and
among XXXXXXXXX GROUP, INC., a Delaware corporation ("JEFG") , JEF HOLDING
COMPANY, INC., a Delaware corporation ("HOLDING"), and INVESTMENT TECHNOLOGY
GROUP, INC., a Delaware corporation ("ITGI").
WITNESSETH:
WHEREAS, as of January 1, 1994, JEFG and ITGI entered into a tax sharing
agreement to define the method by which Federal, state and local income and
franchise taxes would be allocated between JEFG as the common parent and ITGI as
a subsidiary of JEFG (the "1994 Tax Sharing Agreement"); and
WHEREAS, the JEFG Board of Directors has determined that it is appropriate
and desirable to distribute all of the shares of HOLDING common stock that it
owns to the holders of JEFG common stock (the "Distribution") in a transaction
intended to qualify as a tax-free distribution for federal income tax purposes
under Section 355 of the Internal Revenue Code of 1986, as amended (the "Code");
and
WHEREAS, JEFG has applied to the Internal Revenue Service for a private
letter ruling (the "Ruling") to the effect that the Distribution will qualify as
a tax-free distribution for federal income tax purposes under Section 355 of the
Code; and
WHEREAS, ITGI will be the principal subsidiary of JEFG immediately after
the Distribution; and
WHEREAS, it is intended that ITGI will merge with and into JEFG
following the Distribution (the "Merger"); and
WHEREAS, it is intended that HOLDING and its subsidiaries will
accordingly cease to be members of the affiliated group (within the meaning of
Section 1504(a) of the Code) of which JEFG is the common parent, effective on or
about [April 27, 1999] (the "Effective Date"); and
WHEREAS, JEFG, HOLDING and ITGI have entered into a tax sharing and
indemnification agreement, dated as of March 17, 1999, which is to apply
only to the 1999 taxable year (the "Tax Sharing and Indemnification Agreement");
and
WHEREAS, the parties desire to amend the 1994 Tax Sharing Agreement in
certain respects, including but not limited to the addition of HOLDING as a
party and the exclusion of the 1999 taxable year (the "1999 Taxable Year") and
all subsequent taxable years from its coverage, and to restate the 1994 Tax
Sharing Agreement in its entirety,
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises, covenants and conditions hereinafter contained, the parties hereto
agree that the 1994 Tax Sharing Agreement is hereby amended and restated in its
entirety as follows:
1. DEFINITIONS
The following terms as used in this Agreement shall have the meanings
set forth below:
(a) "Additional Amount" shall mean the amount determined under
Section 3 hereof.
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(b) "Consolidated Return" shall mean a consolidated Federal
income tax return filed pursuant to Section 1501 of the Code.
(c) "Consolidated Taxable Income" shall mean the consolidated
Federal taxable income of the JEFG Group for any taxable year for which the JEFG
Group files a Consolidated Return.
(d) "Consolidated Tax Liability" shall mean the consolidated
Federal income tax liability of the JEFG Group for any taxable year for which
the JEFG Group files a Consolidated Return.
(e) "IRS" shall mean the Internal Revenue Service.
(f) "JEFG Group" shall mean the affiliated group of corporations
of which JEFG is the common parent. In the event that the merger takes place as
contemplated and JEFG changes its name to Investment Technology Group, Inc.
("New ITGI"), the term "JEFG Group" shall include the affiliated group of
corporations of which New ITGI is the common parent.
(g) "Loss Amount" shall mean the amount determined under Section
2 hereof.
(h) "Member" shall mean each includible member of the JEFG Group.
(i) "Regulations" shall mean the Treasury Regulations as in
effect from time to time.
(j) "Separate Return Tax Liability" shall mean the Federal income
tax liability of a Member and its subsidiaries computed as if they had filed a
separate Federal income
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tax return for the applicable taxable year with the modifications set forth in
Section 1.1552-1(a)(2)(ii) of the Regulations. If the computation of a Member's
Separate Return Tax Liability as provided herein does not result in a positive
amount, such Member's Separate Return Tax Liability shall be deemed to be zero.
(k) "Separate Taxable Income" shall mean an amount determined
with respect to a Member and its subsidiaries in accordance with Section
1.1502-12 of the Regulations with the adjustments contained in Section
1.1552-1(a)(1)(ii) of the Regulations. If the computation of a Member's Separate
Taxable Income as provided herein does not result in a positive amount, such
Member's Separate Taxable Income shall be deemed to be zero.
(l) "Separate Tax Liability" shall mean the amount determined
under Section 2 hereof.
2. SEPARATE TAX LIABILITY
(a) The Separate Tax Liability of ITGI for each taxable year
shall be the amount set forth in paragraph (b) hereof as modified by paragraphs
(c) and (d) hereof.
(b) The amount referred to in this paragraph (b) shall be an
amount equal to that portion of the Consolidated Tax Liability for such taxable
year that the Separate Taxable Income of ITGI for such taxable year bears to the
sum of the Separate Taxable Incomes of all Members for such taxable year;
PROVIDED, HOWEVER, that such amount shall not exceed the Consolidated Tax
Liability for such taxable year.
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(c) The amount computed pursuant to paragraph (b) above shall be
increased by 100% of the excess, if any, of the ITGI Separate Return Tax
Liability for such taxable year over such amount (the "Loss Amount").
(d) Any federal, state or local income tax deduction resulting
from (i) the payment to the JEFG Pension Plan described in Section 3.03(a) of
the Benefits Agreement (or from benefits distributions related thereto), or (ii)
the payment of benefits under the JEFG CAP Plan to JEFG employees (each as
defined in the Benefits Agreement), shall be for the benefit of ITGI (and the
JEFG Group after the Distribution) and not for the benefit of HOLDING.
3. ADDITIONAL AMOUNT
The Additional Amount for each taxable year shall be equal to
100% of the amount, if any, by which the Consolidated Tax Liability has been
decreased by reason of the inclusion of ITGI and its subsidiaries in the JEFG
Group for such taxable year.
4. FILING AND PAYMENTS
(a) HOLDING shall file or cause to be filed the Consolidated
Return for the JEFG Group for the 1998 taxable year.
(b) JEFG shall file or cause to be filed the Consolidated Return
for the JEFG Group for all taxable periods covered under this Agreement other
than the 1998 taxable year.
(c) For any taxable year, payment of (i) the Separate Tax
Liability of ITGI by ITGI (less any Loss Amount paid to HOLDING) to JEFG (or to
the IRS after the
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Merger), (ii) the excess of the Consolidated Liability over the amount described
in (i) (the "Holding Liability") by HOLDING to JEFG (or to ITGI after the
Merger), (iii) the Additional Amount, if any, by HOLDING to ITGI and (iv) the
Loss Amount, if any, by ITGI to HOLDING with respect to such taxable year shall
be made as follows:
(A) For each taxable year, HOLDING has estimated the
Separate Tax Liability (less any Loss Amount to be paid to HOLDING), the
Holding Liability, the Additional Amount and the Loss Amount for such
taxable year.
(B) ITGI and HOLDING have each paid on or before each of the
due dates for HOLDING to make payment of estimates of JEFG Group's Federal
income taxes for each taxable year one-fourth of the amount estimated
pursuant to paragraph (i) above (collectively, the "Estimated Amounts").
If, after paying any such installment of the Estimated Amounts, HOLDING
made a new estimate, the amount of each remaining installment (if any) was
equal to the amount which would have been payable if the new estimate had
been made when the first estimate for the taxable year was made, increased
or decreased, as applicable, by the amount computed by dividing:
(1) the difference between (1) the amount of the
Estimated Amounts required to be paid before the date on which the new
estimate is made, and (2) the amount of the Estimated Amounts which
would have been required to be paid before such date if the new
estimate had been made when the first estimate was made, by
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(2) the number of installments remaining to be paid on
or after the date on which the new estimate is made.
(d) If, after the end of any taxable year, at the time of the
filing of an application for extension of the time to file the tax return for
such taxable year, if so filed, it is determined that the estimated Separate Tax
Liability of ITGI (less any Loss Amount paid to HOLDING), Holding Liability,
Additional Amount or Loss Amount for such taxable period exceeds the aggregate
amount paid pursuant to subparagraph (c), with respect to such taxable period,
then such excess shall be paid on or before the later of (i) the 15th day of the
third month after the end of such taxable period, and (ii) the date on which
such excess is finally determined, which shall be no later than 30 days after
the extension for such taxable period is filed.
(e) If, after the end of each taxable year with respect to which
HOLDING or JEFG filed a Consolidated Return pursuant to this Agreement, it is
determined that the actual Separate Tax Liability of ITGI (less any Loss Amount
paid to HOLDING), Holding Liability, Additional Amount or Loss Amount for such
taxable period exceeds the aggregate amount paid pursuant to subparagraph (c)
and (d), with respect to such taxable period, then such excess shall be paid on
or before the later of (i) the 15th day of the third month after the end of such
taxable period, and (ii) the date on which such excess is finally determined,
which shall be no later than 30 days after the Consolidated Return for such
taxable period is filed.
(f) If it is determined that the amount paid pursuant to
subparagraphs (c), (d), or (e) above with respect to any taxable period exceeds
the actual Separate Tax Liability of ITGI (less any Loss Amount paid to
HOLDING), Holding Liability, Additional Amount or
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Loss Amount for such taxable period, then such excess shall be repaid on or
before the later of (i) the 15th day of the third month after the end of such
taxable period, and (ii) the date on which such excess is finally determined,
which shall be no later than 30 days after the Consolidated Return for such
taxable period is filed.
5. CARRYBACKS
(a) If the JEFG Group has a consolidated unused investment
credit, a consolidated unused foreign tax credit, a consolidated excess
charitable contribution, a consolidated net capital loss or a consolidated net
operating loss, as such terms are defined in the Regulations (a "Consolidated
Excess Amount") for any taxable year, the portion of such Consolidated Excess
Amount which is attributable to a Member (the "Separate Excess Amount") shall be
computed in accordance with Section 1.1502-79 of the Regulations. Any
consolidated unused research and experimentation credit of the JEFG Group shall
be treated and calculated in a manner consistent with the foregoing sentence,
and shall be included in the term "Consolidated Excess Amount."
(b) If such Consolidated Excess Amount is carried back to a prior
taxable year of the JEFG Group during which ITGI or one of its subsidiaries was
a Member, then the amounts due under this Agreement for such prior taxable year
shall be redetermined by taking into account such Consolidated Excess Amount and
any Separate Excess Amounts allocable to such taxable year.
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(c) Payment of any amount due under this Section 5 shall be made
on the date that a credit or refund is allowed with respect to the taxable year
to which such payment relates.
6. SUBSEQUENT ADJUSTMENTS AND PROCEDURAL MATTERS
(a) If any adjustments (other than adjustments made pursuant to
Section 5 hereof) are made to the income, gains, losses, deductions or credits
of the JEFG Group for a taxable year during which ITGI or one of its
subsidiaries was a member, whether by reason of the filing of an amended return
or a claim for refund with respect to such taxable year or an audit with respect
to such taxable year by the IRS, the amounts due under this Agreement for such
taxable year shall be redetermined by taking into account such adjustments. If,
as a result of such redetermination, any amounts due under this Agreement shall
differ from the amounts previously paid, then payment of such difference shall
be made (a) in the case of an adjustment resulting in a credit or refund, on the
date on which such credit or refund is allowed with respect to such adjustment
or (b) in the case of an adjustment resulting in the assertion of a deficiency,
on the date such deficiency is paid. Any amounts due under this paragraph (a)
shall include any interest attributable thereto computed in accordance with
Sections 6601 or 6611 of the Code, as the case may be, and any penalties or
additional amounts which may be imposed.
(b) If any tax audit is undertaken by any tax authority, HOLDING
shall initially have primary control of any dealings with such tax authority.
Upon a determination that such audit could give rise to an increase in either
HOLDING's or ITGI's liability under this Agreement, then HOLDING or ITGI, as the
case may be shall be given
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primary control of any dealings with such tax authority; provided, however, that
the other party will be consulted with respect to any matters which could result
in an increase in the other party's liability under this Agreement.
(c) If any adjustment or deficiency is proposed, asserted or
assessed by any tax authority which would give rise to an increase in either
HOLDING's or ITGI's liability under this Agreement, then HOLDING or ITGI, as the
case may be, shall have the primary right to contest, compromise or settle any
such adjustment or deficiency; provided, however, that the other party will be
consulted with respect to any matters which could result in an increase in such
other party's liability under this Agreement. If such adjustment or deficiency
would give rise to an increase in both HOLDING's and ITGI's liability under this
Agreement, then HOLDING and ITGI shall jointly have the right to contest,
compromise or settle any such adjustment or deficiency.
7. CARRYBACKS FROM SEPARATE RETURN YEARS
This Agreement shall have no application to the carryback of a
net operating loss or credit from a separate return year (within the meaning of
Section 1.1502-1(e) of the Treasury Regulations) to any taxable year of JEFG
Group, and no recomputation or other payment shall be made in respect of such
carryback.
8. FILING OF CALIFORNIA SINGLE RETURNS
HOLDING may file or cause to be filed a single return for
California franchise and income tax purposes ("California Single Return") for
those affiliated corporations that are includible in a California combined
report (the "JEFG Combined Group") for each of the
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taxable years for which the JEFG Combined Group is required or permitted to file
such a return. To the extent that it qualifies under California law, JEFG shall
be the "key corporation" with respect to any such California Single Return and,
to the extent that it does not so qualify, shall designate a "key corporation"
from among the members of the JEFG Combined Group that does so qualify. Each
party to this Agreement hereby consents to any such designation on behalf of
itself and any direct or indirect subsidiary thereof. With regard to any income
year with respect to which the JEFG Combined Group files, or it is reasonably
anticipated that the JEFG Combined Group will file, a California Single Return
which includes ITGI, the estimated and final California tax liability of each
member of the JEFG Combined Group shall be determined, to the extent permitted
by California law, in a manner consistent with the principles set forth in this
Agreement, and payments of the estimated and final tax liability so determined
shall be made to the key corporation at the time that payments of corresponding
Federal payments are due.
9. FILING OF STATE CONSOLIDATED RETURNS
To the extent permitted or required by the applicable laws of any
state other than California, JEFG and its affiliated corporations (the "state
consolidated group"), at the election of HOLDING in its sole discretion, may
join for any taxable year in the filing of a single, combined or consolidated
franchise or income tax return ("state consolidated return") with any such
corporation required to file a franchise or income tax return in such state for
such taxable year. With regard to any taxable year with respect to which the
state consolidated group files, or it is reasonably anticipated will file, a
state consolidated return which includes ITGI, the
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estimated and final state tax liability of each member of the state consolidated
group shall be determined, to the extent permitted by law of the state in which
the return is to be filed, in a manner consistent with the principles set forth
in this Agreement, and payments of the estimated and final tax liability so
determined shall be made to the member of the state consolidated group
responsible for payment of the state consolidated group's tax liability at the
time that payments of corresponding Federal payments are due.
10. FURTHER ACTIONS
Each of the parties hereto agrees, and agrees to cause any direct
or indirect subsidiary of such party, to file such consents, elections and other
documents and take such other action as may be necessary or appropriate to carry
out the purpose of this Agreement.
11. RECORD RETENTION AND COSTS
(a) HOLDING will retain all records relating to the determination
of taxes hereunder as agent and custodian for JEFG, and HOLDING will make such
records available to JEFG.
(b) HOLDING and ITGI agree to split equally the third-party costs
arising from the preparation and filing of all tax returns filed pursuant to
this Agreement (including any applicable computations relating to carrybacks).
12. DETERMINATIONS
All determinations required hereunder shall be made by KPMG LLP.
Such determinations shall be binding and conclusive upon the parties for
purposes hereof.
13. INTEREST
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If any payment required to be made pursuant to Section 4, 5, 8 or
9 of this Agreement is not made within the time periods specified in those
Sections, the delinquent payment shall bear interest from its due date until the
date of actual payment at the rate (or rates) charged by the Internal Revenue
Service on underpayments of tax for the periods in question.
14. MISCELLANEOUS PROVISIONS
(a) All references and provisions under this Agreement that refer
to ITGI shall be deemed to refer also to JEFG with respect to any period after
the Merger.
(b) This Agreement applies only to all taxable periods prior to
the 1999 taxable year (which is covered by the Tax Sharing and Indemnification
Agreement) in which ITGI is included in the JEFG Group.
(c) This Agreement contains the entire understanding of the
parties hereto with respect to the subject matter contained herein. No
alteration, amendment or modification of any of the terms of this Agreement
shall be valid unless made by an instrument signed in writing by an authorized
officer of each party hereto.
(d) This Agreement has been made in and shall be construed and
enforced in accordance with the laws of the State of New York from time to time
obtaining.
(e) This Agreement shall be binding upon and inure to the benefit
of each party hereto and their respective successors and assigns.
(f) This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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(g) All notices and other communications hereunder shall be
deemed to have been duly given if given in writing and delivered by either in
person or by facsimile with receipt acknowledged or confirmed or by certified or
registered mail, return receipt requested, postage prepaid and addressed as
follows:
(i) If to JEFG or any of its successors prior to the Distribution
at:
Xxxxxxxxx Group, Inc.
00000 Xxxxx Xxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Facsimile: 000-000-0000
With a copy to:
Xxxxxx, Xxxxx & Bockius LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Esq.
(ii) If to JEFG or any of its successors after the Distribution
at:
Investment Technology Group, Inc.
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Financial Officer
Facsimile: 000-000-0000
With a copy to:
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxx, Esq.
(iii) If to ITGI or any of its successors at:
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Investment Technology Group, Inc.
000 Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Financial Officer
Facsimile: 000-000-0000
With a copy to:
Xxxxxx Xxxxxx & Xxxxxxx
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx Xxxx, Esq.
(iv) If to HOLDING at:
Xxxxxxxxx Group, Inc.
JEF Holding Company, Inc.
00000 Xxxxx Xxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Financial Officer
With a copy to:
Xxxxxx, Xxxxx & Xxxxxxx LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Esq.
(h) The headings of the paragraphs of this Agreement are inserted
for convenience only and shall not constitute a part hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and their respective corporate seals to be affixed hereto,
all on the date and year first above written.
"JEFG" XXXXXXXXX GROUP, INC.,
a Delaware corporation
By: /s/ XXXXXXXX X. XXXXXXX
-----------------------------------
Xxxxxxxx X. Xxxxxxx,
Executive Vice President and CFO
"ITGI" INVESTMENT TECHNOLOGY GROUP, INC.
a Delaware corporation
By: /s/ XXXXXXX XXXXXXX
-----------------------------------
Xxxxxxx Xxxxxxx, President/CEO
"HOLDING" JEF HOLDING COMPANY, INC.
A Delaware corporation
By: /s/ XXXXX X. XXXXX
-----------------------------------
Xxxxx X. Xxxxx, General Counsel
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