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EXHIBIT 10.41
TAX SHARING AGREEMENT
Agreement entered into as of [____], 1999 by and between The Xxxxxxxx
Companies, Inc., a Delaware corporation ("Xxxxxxxx"), and Xxxxxxxx
Communications Group, Inc., a Delaware corporation ("Communications").
Recitals
Xxxxxxxx and Communications are includible corporations in an
affiliated group of corporations of which Xxxxxxxx is the common parent, all
within the meaning of Section 1504 of the Internal Revenue Code of 1986, as
amended (the "Code").
Xxxxxxxx intends to file consolidated Federal income tax returns on
behalf of itself, Communications and the other members of the "Group" (as
hereinafter defined).
Xxxxxxxx and Communications wish to allocate and settle among
themselves the consolidated Federal income tax liabilities of the Group, the
unitary, combined, consolidated or similar state income tax liabilities of the
parties and, if and as determined by Xxxxxxxx, certain other tax liabilities.
Agreements
Accordingly, the parties agree as follows:
ARTICLE I
Certain Definitions
The defined terms used in this Agreement shall, except as otherwise
expressly provided or unless the context otherwise requires, have the meanings
specified in this Article I. The singular shall include the plural and the
masculine gender shall include the feminine, the neuter and vice versa, as the
context requires.
"Estimated Tax Payments" means, for any Taxable Period, the aggregate
payments for such Taxable Period provided in Section 2.04.
"Final Determination" means a closing agreement or an accepted offer in
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compromise with the Internal Revenue Service, a claim for refund that has been
allowed, a deficiency notice with respect to which the period for filing a
petition with the Tax Court has expired, or a decision of any court of competent
jurisdiction that is not subject to appeal or the time for appeal of which has
expired.
"Group" means Xxxxxxxx and all other corporations (whether now existing
or hereafter formed or acquired) that at the time would be entitled or required
to join with Xxxxxxxx in filing a consolidated Federal income tax return.
"IPO Date" means the date of the initial public offering of stock of
Communications.
"Subsidiary Separate Tax" means, with respect to any Taxable Period and
subject to the rules set forth below in this definition and Section 2.05, a
hypothetical Federal income tax liability that WCG would have for such Taxable
Period determined as if WCG had filed its own separate Federal income tax return
for such Taxable Period (or for any Taxable Period prior thereto) and calculated
by (x) imposing a tax on the taxable income or alternative minimum taxable
income, as the case may be, of WCG at a rate equal to the highest marginal rate
of corporate tax specified under the Code and applicable to that Taxable Period
and (y) employing the methods and principles of accounting, elections and
conventions that are used by the Group. For purposes of determining Subsidiary
Separate Tax with respect to any Taxable Period, the following special rules
shall apply:
(i) Subsidiary Separate Tax shall include the combined results of
WCG.
(ii) Any loss or credit carryover or other similar attribute of
WCG existing on the date preceding the IPO Date shall be deemed to be an
attribute of Xxxxxxxx for all purposes of this Agreement. For this purpose,
Xxxxxxxx shall allocate any loss, credit or other similar attribute realized by
WCG in the taxable year that includes the IPO Date between the period beginning
on January 1, 1999 and ending on the date preceding the IPO Date, on the one
hand, and the period beginning on the IPO Date and ending on December 31, 1999,
on the other hand, on a pro rata basis or any other reasonable method as
determined by Xxxxxxxx in its sole and absolute discretion with due regard to
clauses (iv) and (v) of this definition of Subsidiary Separate Tax.
(iii) Any loss or credit carryover or other similar attribute of
WCG not in existence on the IPO Date (as determined by Xxxxxxxx pursuant to
clause (ii) above) and arising thereafter shall, unless otherwise provided by
this Agreement, be deemed to be an attribute of WCG solely for purposes of
future determinations of Subsidiary Separate Tax.
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(iv) Any limitations or special rules relating to the recognition,
allowance or other treatment of any item of income, gain, loss, deduction,
expense or basis (including, for example, foreign tax credits, research credits,
capital losses, Section 1231 gains or losses and charitable contribution
deductions) may be determined based on a hypothetical separate Federal income
tax return of WCG or, notwithstanding such hypothetical separate Federal income
tax principles, with due regard to consolidated Federal income tax principles or
based on any hybrid approach, all as determined by Xxxxxxxx in its sole and
absolute discretion.
(v) Xxxxxxxx may from time to time establish any other special
rules that Xxxxxxxx reasonably determines to be necessary or appropriate to
carry out the principles reflected above in the definition of Subsidiary
Separate Tax.
"Taxable Period" means, with respect to any period for which a
consolidated Federal income tax return is filed on behalf of the Group that
includes Communications, (i) the period beginning on the IPO Date and ending on
December 31, 1999 and (ii) thereafter, each annual period ending on December 31
of each year.
"WCG" means the group of corporations consisting of Communications and
all members of the Group owned, directly or indirectly and in whole or in part,
by Communications.
ARTICLE II
Payments
Section 2.01 Payments by Communications to Xxxxxxxx. For every Taxable
Period in which the Subsidiary Separate Tax exceeds the Estimated Tax Payments,
or the Subsidiary Separate Tax as recomputed according to Section 2.05 exceeds
the Subsidiary Separate Tax, Communications shall pay to Xxxxxxxx an amount
equal to such excess.
Section 2.02 Payments by Xxxxxxxx to Communications. For every Taxable
Period in which the Estimated Tax Payments exceed the Subsidiary Separate Tax,
or the Subsidiary Separate Tax exceeds the Subsidiary Separate Tax as recomputed
according to Section 2.05, Xxxxxxxx shall pay to Communications an amount equal
to such excess.
Section 2.03 Time of Payment. Payment pursuant to Sections 2.01 and
2.02 (other than resulting from a recomputation of Subsidiary Separate Tax under
Section 2.05) shall be made no later than seven (7) days prior to the due date
of the Group's consolidated Federal income tax return for the Taxable Period in
question, not including extensions. If the due date for such return is extended,
such payment shall be made on an estimated basis and shall be recalculated no
later than seven (7) days prior to the extended due date for such return, and
any
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difference between such recalculated payments and such estimated payments shall
be paid to the party entitled thereto at the time of such recalculation. The
time that any payment is required to be made pursuant to Sections 2.01 and 2.02
by reason of a recomputation of Subsidiary Separate Tax under Section 2.05 is
set forth in Section 2.05.
Section 2.04 Estimated Tax Payments. For every Taxable Period,
Communications shall pay to Xxxxxxxx no later than seven (7) days prior to the
fifteenth day of the fourth, sixth, ninth and twelfth months of such Taxable
Period 25%, 50%, 75% and 100%, respectively, of the current annual estimated
Federal income taxes that WCG would be required to pay for such Taxable Period,
less any prior payments for such Taxable Period. Such estimated Federal income
tax liability shall be determined in a manner consistent with the definition of
Subsidiary Separate Tax and subject to approval by Xxxxxxxx.
Section 2.05 Adjustments.
(a) Carryovers of Post-IPO Date Losses or Credits. In the event
that WCG realizes a loss, credit or other similar attribute in any Taxable
Period that would be permitted under applicable Federal income tax law to be
carried over to one or more Taxable Periods that precede or follow such Taxable
Period if WCG had filed a separate Federal income tax return for all such
Taxable Periods, the Subsidiary Separate Tax shall be recomputed for such
preceding or subsequent Taxable Periods to take into account such carryover and
the payments pursuant to Sections 2.01 and 2.02 shall be appropriately adjusted.
Any payment from Xxxxxxxx to Communications required by reason of such
adjustment shall be made within 30 days following the earlier of (i) Xxxxxxxx'x
receipt of the related actual refund, if any, from the Internal Revenue Service,
(ii) in the case of a carryback, the date of the filing by Xxxxxxxx of the tax
return for the Taxable Period in which such loss, credit or attribute arises or
(iii) in the case of a carryforward, the date of the filing by Xxxxxxxx of the
tax return for the Taxable Period to which such loss, credit or attribute is
carried.
(b) Redeterminations of Post-IPO Date Tax Liability. In the event
of any redetermination of the consolidated Federal income tax liability of the
Group for any Taxable Period as a result of an audit by the Internal Revenue
Service, the allowance of a claim for refund, court determination or otherwise,
the Subsidiary Separate Tax shall be recomputed for such Taxable Period to take
into account such redetermination in a manner consistent with such revised
treatment and the payments pursuant to Sections 2.01 and 2.02 shall be
appropriately adjusted, which payments shall also include, if and to the extent
applicable, any interest received from the Internal Revenue Service and any
interest, penalties and additions to tax paid to the Internal Revenue Service.
Any payment required to be made by a party hereto by reason of such adjustment
shall be made within 30 days of the date of a Final Determination with respect
to such redetermination or as soon as such adjustment can practicably be
calculated (if later).
(c) Inadvertent Deconsolidation. In the event that Communications
is determined not to have been properly treated as an includible corporation in
the Group with
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respect to any Taxable Period, the amount of any payments made under Sections
2.01, 2.02 and 2.04 with respect to such Taxable Period (taking into account any
adjustments pursuant to Section 2.05(a) and (b)) shall be refunded to the party
entitled to such net amount within 30 days of the date of a Final Determination
of such deconsolidation or as soon as the amount to be refunded can practicably
be determined (if later).
(d) Ceasing to Be a Member of the Group. In the event
Communications or any other member of WCG ceases to be a member of the Group,
(x) Xxxxxxxx shall allocate the income, gain, loss, deduction and expense of WCG
for the Taxable Period in which such deconsolidation occurs between the
pre-deconsolidation period of such Taxable Period and the post-deconsolidation
period of such Taxable Period in accordance with any permitted method under the
consolidation return provisions of the Code and Treasury Regulations thereunder
and (y) the Group consolidated loss or credit carryovers or other similar
attributes attributable to Communications or such other member of WCG, if any
(as determined by Xxxxxxxx in accordance with any permitted method under the
consolidated return provisions of the Code and Treasury Regulations thereunder),
shall constitute attributes of Communications or such other member of WCG. With
respect to any such attribute so attributable to Communications or any other
member of WCG, Communications shall pay to Xxxxxxxx, within 30 days of the date
of filing by Xxxxxxxx of the first tax return thereafter, an amount equal to the
sum of the following: (1) the amount of any Group consolidated tax credit
carryover so attributable to WCG to the extent that such credit is treated as an
attribute of Xxxxxxxx under clause (ii) of the definition of Subsidiary Separate
Tax; (2) the product of (A) the highest marginal Federal corporate income tax
rate and (B) the amount of the Group consolidated loss carryover or other
similar attribute (other than credit carryovers) so attributable to WCG to the
extent that such attribute is treated as an attribute of Xxxxxxxx under clause
(ii) of the definition of Subsidiary Separate Tax; (3) the amount of any Group
consolidated tax credit carryover so attributable to WCG to the extent that such
attribute (i) relates to periods beginning on or after the IPO Date and (ii)
reduced the amount of Subsidiary Separate Tax; and (4) the product of (A) the
highest marginal Federal corporate income tax rate and (B) the amount of the
Group consolidated loss carryover or other similar attribute (other than credit
carryovers) so attributable to WCG to the extent that such attribute (i) relates
to periods beginning on or after the IPO Date and (ii) reduced the amount of
Subsidiary Separate Tax. No adjustment to Sections 2.01 and 2.02 shall be made
in the event that Communications ceases to be a member of the Group and
thereafter realizes in any taxable year a loss, credit or other attribute that
would be permitted under applicable Federal income tax law to be carried back to
one or more Taxable Periods that precede such taxable year.
Section 2.06 Payments in Respect of Redeterminations of Pre-IPO Date
Tax Liability. In the event of any Final Determination for a period prior to the
IPO Date and pursuant to which there is a reduction of any loss or credit
carryover or other similar attribute of WCG existing on the date preceding the
IPO Date as determined under clause (ii) of the definition of
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Subsidiary Separate Tax, Communications shall pay to Xxxxxxxx, within 30 days of
the date of the Final Determination, an amount equal to the sum of (A) the
amount of any consolidated Federal income taxes, interest, penalties and
additions to such taxes payable to the Internal Revenue Service resulting from
such reduction of any such loss or credit carryover or other similar attribute
of WCG, (B) the amount of the reduction of any such credit carryover of WCG to
the extent not covered by the preceding clause (A), and (C) the product of (i)
the highest marginal Federal corporate income tax rate and (ii) the amount of
the reduction of any such loss carryover or other similar attribute (other than
credit carryovers) of WCG to the extent not covered by the preceding clause (A).
In the event of any Final Determination for a period prior to the IPO Date and
pursuant to which there is an increase to any loss or credit carryover or other
similar attribute of WCG existing on the date preceding the IPO Date as
determined under clause (ii) of the definition of Subsidiary Separate Tax,
Xxxxxxxx shall pay to Communications an amount equal to the sum of (1) any
refund of consolidated Federal income taxes, including interest, received from
the Internal Revenue Service within 30 days following Xxxxxxxx' receipt of the
related actual refund from the Internal Revenue Service resulting from such
increase to any loss or credit carryover or other similar attribute of WCG, (2)
the amount of the increase to any such credit carryover of WCG to the extent not
covered by the preceding clause (1) within 30 days of the date of the Final
Determination, and (3) the product of (i) the highest marginal Federal corporate
income tax rate and (ii) the amount of the increase to any such loss carryover
or other similar attribute (other than credit carryovers) of WCG to the extent
not covered by the preceding clause (1) within 30 days of the date of the Final
Determination.
Section 2.07 Form of Payment. Any payment required to be made by a
party pursuant to this Article II shall be made by wire transfer of immediately
available funds or by appropriate adjustment to intercompany indebtedness (as
determined by Xxxxxxxx).
Section 2.08 General. Unless applicable law changes, the parties agree
to treat any payment provided for under this Agreement as a distribution by
Communications to Xxxxxxxx or a capital contribution by Xxxxxxxx to
Communications, as the case may be.
ARTICLE III
Tax Matters; Cooperation; Indemnification
Section 3.01 Xxxxxxxx As Agent. Communications hereby irrevocably
appoints Xxxxxxxx as its agent, and Communications hereby agrees that Xxxxxxxx
shall have sole and absolute authority, for the purposes of (i) preparing and
filing consolidated Federal income tax returns for the Group (including, without
limitation, preparing and filing estimated tax returns, amended tax returns and
claims for refund, determining tax return positions, selecting methods of
accounting and making elections), (ii) representing any member of WCG that is a
member of the Group with respect to any consolidated Federal income tax audit or
consolidated Federal income tax controversy (including, without limitation, any
proceeding with the Internal Revenue Service
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and any judicial proceedings, whether any such proceedings relate to a claim for
additional taxes or a claim for refund of taxes) and settling or compromising
any claim for additional, or any claim for refund of, Federal income taxes of
any member of WCG that is a member of the Group, (iii) engaging outside counsel,
accountants and other experts with respect to Federal income tax matters
relating to any member of WCG that is a member of the Group and (iv) taking any
other action in connection with Federal income tax matters relating to any
member of WCG that is a member of the Group (or relating to any other member of
the Group) as Xxxxxxxx, in its sole and absolute discretion, determines to be
necessary or appropriate.
Section 3.02 Cooperation. Communications shall cooperate (and shall
cause all members of WCG to cooperate) with Xxxxxxxx regarding the application
of all aspects of this Agreement (including, without limitation, the proper and
timely preparation and filing of any tax return to which this Agreement applies,
the calculation or basis of determination of any payment provided for under this
Agreement and the conduct of any tax audit or tax controversy to which this
Agreement applies) (i) by maintaining (or causing all members of WCG to
maintain) such books and records, (ii) by providing (or causing all members of
WCG to provide) such information, (iii) by executing (or causing all members of
WCG to execute) such documents and (iv) by taking (or causing all members of WCG
to take) any such other action (including, without limitation, making any
officers, directors, employees and agents available to Xxxxxxxx), in each such
case as Xxxxxxxx may request from time to time. Communications shall secure (or
shall cause any relevant member of WCG to secure) the covenant of any acquirer
of any member of WCG to comply with this Section 3.02 for the benefit of
Xxxxxxxx and Xxxxxxxx' successors and assigns.
Section 3.03 Indemnification. Communications hereby indemnifies and
holds harmless Xxxxxxxx and the other non-WCG members of the Group against any
interest, penalties, additions to tax, expenses, losses, claims, damages or
liabilities for any failure to file, properly or timely, any tax return to which
this Agreement applies to the extent that such failure is attributable to the
failure of Communications to make the payments required under this Agreement or
the failure of any member of WCG to comply with Section 3.02 (which shall
include, without limitation, the failure of any member of WCG to provide
accurate or complete information or to take proper tax reporting positions).
Upon the proper and timely payment by Communications to Xxxxxxxx of an amount
pursuant to Section 2.01 for any Taxable Period, Xxxxxxxx will indemnify
Communications and the other members of WCG for the Federal income tax
liabilities of the Group for such Taxable Period with the exception of any
adjustment to tax liabilities that are attributable to WCG, as determined by
Sections 2.05(b) and 2.06.
ARTICLE IV
State, Local, Foreign and Other Federal Taxes
The underlying concepts of this Agreement (including, without
limitation, Article II (e.g., treating any loss or credit carryover or other
similar attribute for state income tax
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purposes existing on the date preceding the IPO Date as an attribute of Xxxxxxxx
for all purposes) and Article III) shall apply in the same general manner with
respect to state income taxes (and, in the sole and absolute discretion of
Xxxxxxxx, with respect to any foreign, local, other state and other Federal
taxes) where unitary, combined, consolidated or similar returns that include one
or more members of WCG and one or more non-WCG members of the Group are filed.
The parties recognize that, among other things, the utilization of the
definition of Subsidiary Separate Tax may not be appropriate for unitary,
combined, consolidated or similar state income and other tax purposes, and
Xxxxxxxx is thus authorized to apply, in good faith, such principles as would be
reasonably expected to result in an allocation of liabilities for such tax
purposes in a manner designed to reflect such taxes payable on income of members
of the Group arising in whole or in part by reason of other Group member nexus
with, or other Group member activity in, a particular state or other relevant
tax jurisdiction. All matters relating to any Federal, state, local and foreign
taxes to which this Agreement does not apply (including, without limitation,
preparing and filing such tax returns, paying such taxes and handling such tax
audits or tax controversies) shall be the responsibility of the party that is
the relevant taxpayer.
ARTICLE V
Termination
This Agreement shall cease to be effective with respect to consolidated
Federal income tax or any unitary, combined, consolidated or similar state
income tax at such time as Communications ceases to be a member of,
respectively, the Group or the relevant unitary, combined, consolidated or
similar state income tax group. This Agreement shall cease to be effective with
respect to any foreign, local, other state and other Federal tax to which this
Agreement applies (as determined by Xxxxxxxx pursuant to Article IV) under
analogous concepts or any other concept as Xxxxxxxx, in its sole and absolute
discretion, determines to be necessary or appropriate for such tax purposes.
Notwithstanding all of the foregoing of this Article V, all provisions of this
Agreement (including, without limitation, payment obligations, adjustments to
payment obligations, cooperation and indemnification) with respect to any
Taxable Period, taxable year or other period (as the case may be) commencing on
or before the termination of this Agreement shall survive such termination.
ARTICLE VI
Miscellaneous
Section 6.01 Interpretations and Determinations. The application of
this Agreement and any dispute or ambiguity concerning the subject matter of
this Agreement shall be determined by Xxxxxxxx in its sole and absolute
discretion. Such determination by Xxxxxxxx
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shall be final and binding upon Communications.
Section 6.02 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by either party
without the prior written consent of the other party.
Section 6.03 Expenses. Any direct and indirect cost and expense (such
as fees or expenses for legal, accounting or other services and overhead items)
incurred by Xxxxxxxx in connection with the application of this Agreement
(including, without limitation, the preparation and filing of any tax return to
which this Agreement applies and the conduct of any tax audit or tax controversy
to which this Agreement applies) shall be allocated in accordance with the
Administrative Services Agreement by and between the parties dated ___________,
1999.
Section 6.04 Effect of Agreement. This Agreement shall determine the
rights and liabilities of the parties as to the matters provided for in this
Agreement, whether or not such determination is effective for financial
reporting or other purposes.
Section 6.05 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties in respect of the subject matter
contained in this Agreement and supersedes all prior or contemporaneous
agreements, promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any party or by any officer, employee
or representative of any party.
Section 6.06 Amendments and Waivers. This Agreement shall not be
modified, supplemented or terminated except by a writing duly signed by each of
the parties hereto, and no waiver of any provision of this Agreement shall be
effective unless in a writing duly signed by the party sought to be bound.
Section 6.07 Code References. Any references to Sections of the Code
shall be deemed to refer to any corresponding provisions of succeeding law as in
effect from time to time.
Section 6.08 Notices. Any payment, notice, communication or approval
required or permitted to be given under this Agreement shall be deemed to have
been duly given if delivered by hand or deposited in the United States mail,
postage prepaid and sent by certified or registered mail, if addressed to
Xxxxxxxx, at:
The Xxxxxxxx Companies, Inc.
Xxx Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attention: [________]
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if addressed to Communications, at:
Xxxxxxxx Communications Group, Inc.
Xxx Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Attention: [_________]
Section 6.09 Third Parties. Nothing expressed or implied in this
Agreement is intended or shall be construed to confer upon or give to any person
other than the parties hereto any rights or remedies under or by reason of this
Agreement.
Section 6.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
principles of conflicts of law.
Section 6.11 Severability. If any provision of this Agreement or the
application of this Agreement in any circumstance is held invalid or
unenforceable, the remainder of this Agreement and the application of this
Agreement in any other circumstance shall not be affected thereby, the
provisions of this Agreement being severable in any such instance.
Section 6.12 Counterparts. This Agreement may be executed 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.
The parties hereto have caused this Agreement to be duly executed as of
the date first written above.
THE XXXXXXXX COMPANIES, INC.
By:
Its:
XXXXXXXX COMMUNICATION GROUP, INC.
By:
Its:
