TAX SHARING AGREEMENT
This Tax Sharing Agreement dated as of [ ] is between DecisionOne
Holdings Corporation, a Delaware corporation ("PARENT"), DecisionOne
Corporation, a Delaware corporation ("SUB") and five directly and indirectly
wholly-owned Delaware subsidiaries of Sub, Decision One Supplies, Inc.
("SUB1"), Properties Holding Corporation ("SUB2"), IC Properties Corporation
("SUB3"), Properties Development Corporation ("SUB4") and Decision Data
Investment Corporation ("SUB5"). Sub, Sub1, Sub2, Sub3, Sub4 and Sub5 are each
also referred herein as "SUBSIDIARY".
WHEREAS, PARENT is the common parent corporation of an affiliated
group of corporations (the "PARENT GROUP") within the meaning of Section
1504(a) of the Internal Revenue Code of 1986, as amended (the "CODE"); and
WHEREAS, Sub is a 100% subsidiary of Parent, and Sub1, Sub2, Sub3,
Sub4 and Sub5 are 100% subsidiaries of Sub;
WHEREAS, except as provided below, PARENT and each SUBSIDIARY files
its own tax returns and pays the corresponding tax liabilities;
WHEREAS, the PARENT Group has filed and intends to file consolidated
income tax returns as permitted by Section 1501 of the Code and similar laws of
other jurisdictions; and
WHEREAS, PARENT and each SUBSIDIARY desire to agree upon a method for
determining the financial consequences to each party resulting from the filing
of a consolidated income tax return;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the terms set forth
below shall have the following meanings.
"COMBINED STATE TAX" means, with respect to each state or local taxing
jurisdiction, any income or franchise tax payable to such state or local taxing
jurisdiction in which a SUBSIDIARY files tax returns with PARENT on a
consolidated, combined or unitary basis for purposes of such income or
franchise tax.
"FEDERAL TAX" means any tax imposed under Subtitle A of the Code.
"FINAL DETERMINATION" shall mean (i) with respect to Federal Taxes, a
"determination" as defined in Section 1313 (a) of the Code or execution of an
Internal Revenue Service Form 870AD and, with respect to taxes other than
Federal Taxes, any final determination of liability in respect of a tax that,
under applicable law, is not subject to further appeal, review or modification
through proceedings or otherwise (including the expiration of a statute of
limitations or a period for the filing of claims for refunds, amended returns
or appeals from adverse determinations) or (ii) the payment of tax by PARENT
with respect to any item disallowed or adjusted by a Taxing Authority (as
hereinafter defined), provided that PARENT determines that no action should be
taken to recoup such payment.
"SUBSIDIARY FEDERAL TAX LIABILITY" shall mean, with respect to any
taxable year and with respect to each SUBSIDIARY, the sum of such SUBSIDIARY's
Federal Tax liability and any interest, penalties and other additions to such
taxes for such taxable year, computed as if such SUBSIDIARY were not and never
were part of the PARENT Group, but rather were a separate corporation filing a
separate United States federal income tax return. Such computation shall be
made with respect to each SUBSIDIARY (A) without regard to the income,
deductions (including net operating loss and capital loss deductions) and
credits in any year of PARENT or any other SUBSIDIARY, (B) by taking account of
any Tax Asset of such SUBSIDIARY in accordance with Section 2(c)(ii) hereof,
(C) with regard to net operating loss and capital loss carryforwards and
carrybacks and minimum tax credits from earlier years of such SUBSIDIARY, (D)
as though the highest rate of tax specified in subsection (b) of Section 11 of
the Code were the only rate set forth in that subsection and (E) reflecting the
positions, elections and accounting methods used by PARENT in preparing the
consolidated federal income tax return for the PARENT Group.
"SUBSIDIARY COMBINED STATE TAX LIABILITY" shall mean, with respect to
any taxable year and with respect to each SUBSIDIARY, an amount of Combined
State Taxes determined in accordance with the principles set forth in the
definition of such SUBSIDIARY's SUBSIDIARY Federal Tax Liability and comparable
provisions under applicable law.
"TAX ASSET" means any net operating loss, net capital loss, investment
tax credit, foreign tax credit, charitable deduction or any other deduction,
credit or tax attribute which could reduce taxes (including without limitation
deductions and credits related to alternative minimum taxes).
2
"TAX AUTHORITY" means any governmental authority, including the United
States or any state, province, municipality or other political subdivision
thereof, responsible for the imposition of federal, state or local taxes
covered by this Tax Sharing Agreement.
2. TAX SHARING. (a) General. For each taxable year of the PARENT
Group during which income, losses, or credits against tax of the SUBSIDIARIES
are includible in the consolidated Federal Tax return of the PARENT Group, each
SUBSIDIARY shall pay to PARENT an amount equal to the sum of its
SUBSIDIARY Federal Tax Liability and its SUBSIDIARY Combined State Tax
Liability for such taxable year as determined in paragraph (c) below.
(b) Estimated Payments. Not later than [10] days prior to each date
on which an estimated Federal Tax installment is due (a "FEDERAL TAX PAYMENT
DATE"), PARENT shall determine under Code Section 6655 the estimated amount of
the related installment of each SUBSIDIARY's SUBSIDIARY Federal Tax Liability,
as determined under the principles of Section 2(a) of this Agreement. Each
SUBSIDIARY shall then pay to PARENT not later than each Federal Tax Payment
Date the amount of its SUBSIDIARY Federal Tax Liability thus determined. Not
later than [10] days prior to each date on which an estimated Combined State
Tax installment is due (a "COMBINED STATE TAX PAYMENT DATE"), PARENT shall
determine under provisions of applicable law comparable to Code Section 6655
the estimated amount of the related installment of each SUBSIDIARY's SUBSIDIARY
Combined State Tax Liability, as determined under the principles of Section
2(a) of this Agreement. Each SUBSIDIARY shall then pay to PARENT not later than
each Combined State Tax Payment Date the amount of its SUBSIDIARY Combined
State Tax Liability thus determined.
(c) Payment of Taxes Shown on Return.
(i) On or before the date PARENT files its consolidated Federal Tax
return for any year for which payments are to be made under this
Agreement, with respect to each SUBSIDIARY, SUBSIDIARY shall pay to
PARENT, or PARENT shall pay to SUBSIDIARY, as appropriate, an amount
equal to the difference, if any, between the SUBSIDIARY's SUBSIDIARY
Federal Tax Liability for such year as determined by PARENT and the
aggregate amount of the estimated installments of such SUBSIDIARY's
SUBSIDIARY Federal Tax Liability for such year made pursuant to
Section 2(b). On or before the date PARENT files a Combined State Tax
return for any year for which payments are to be made under this
Agreement with respect to each SUBSIDIARY, SUBSIDIARY shall pay to
PARENT, or PARENT shall pay to
3
SUBSIDIARY, as appropriate, an amount equal to the difference, if any,
between such SUBSIDIARY's SUBSIDIARY Combined State Tax Liability for
such year as determined by PARENT and the aggregate amount of the
estimated installments paid with respect to such SUBSIDIARY's
SUBSIDIARY Combined State Tax Liability pursuant to
Section 2(b).
(ii) If PARENT determines, that a SUBSIDIARY has a Tax Asset that may
under applicable law be used to reduce a Federal Tax or Combined State
Tax liability of the PARENT Group for any taxable period, PARENT shall
pay to such SUBSIDIARY an amount equal to the actual tax saving
produced by such Tax Asset at the time such tax saving is realized by
the PARENT Group. The future calculations of such SUBSIDIARY's
SUBSIDIARY Federal Tax Liability or combined State Tax Liability, as
appropriate, shall be adjusted to reflect such use. The amount of any
such tax saving for any taxable period shall be the amount of any
refund actually received from a Taxing Authority with respect to such
tax period or the reduction in taxes payable to a Taxing Authority
with respect to such tax period as compared to the taxes that would
have been payable to a Taxing Authority by the PARENT Group with
respect to such tax period in the absence of such Tax Asset.
(d) Treatment of Adjustments. If any adjustment is made on a tax
return of the PARENT Group, after the filing thereof, in which income or loss
of a SUBSIDIARY is included, then at the time of a Final Determination of the
adjustment, such SUBSIDIARY shall pay to PARENT or PARENT shall pay to such
SUBSIDIARY, as the case may be, the difference between all payments actually
made under Section 2(a) with respect to the taxable year covered by such tax
return and all payments that would have been made under Section 2(a) taking
such adjustment into account, together with any penalties actually paid and
interest for each day until the date of Final Determination calculated at the
rate determined, in the case of a payment by such SUBSIDIARY, under Section
6621(a)(2) of the Code and, in the case of a payment by PARENT, under Section
6621(a)(1) of the Code.
(e) Preparation of Returns. So long as the PARENT Group elects to
file consolidated Federal Tax returns as permitted by Section 1501 of the Code
or any Combined State Tax Return, PARENT shall prepare and file such returns
and any other returns, documents or statements required to be filed with the
Internal Revenue Service with respect to the determination of the Federal Tax
liability of the PARENT Group and with the appropriate Taxing Authorities with
respect to the determination of the Combined State Tax liability of the PARENT
Group.
4
PARENT shall have the right with respect to any consolidated Federal Tax
returns or Combined State Tax Returns that it has filed or will file to
determine (i) the manner in which such returns, documents or statements shall
be prepared and filed, including, without limitation, the manner in which any
item of income, gain, loss, deduction or credit shall be reported, (ii) whether
any extensions should be requested, and (iii) the elections that will be made
by any member of the PARENT Group. In addition, PARENT shall have the right to
(i) contest, compromise or settle any adjustment or deficiency proposed,
asserted or assessed as a result of any audit of any consolidated or Combined
State Tax return filed by the PARENT Group, (ii) file, prosecute, compromise or
settle any claim for refund, and (iii) determine whether any refunds to which
the PARENT Group may be entitled shall be received by way of refund or credited
against the tax liability of the PARENT Group. Each SUBSIDIARY hereby
irrevocably appoints PARENT as its agent and attorney-in-fact to take any
action (including the execution of documents) as PARENT may deem necessary or
appropriate to effect this Section 2(e). The delegation of powers to PARENT in
this Section 2(e) is in no way intended to limit the agency powers otherwise
provided to the common parent by Treas. Reg. ss. 1.1502-77. In addition, PARENT
shall treat all SUBSIDIARIES equally with respect to the matters covered in
Section 2(e).
(f) Reimbursement for Certain Services and Expenses. PARENT shall
provide services in connection with this Agreement, including but not limited
to, (i) those services relating to the preparation of returns described in
Section 2(b), 2(c) and 2(e) and (ii) services relating to the other activities
(including services relating to audits and contests) described in Section 2(e).
As compensation for these services, each SUBSIDIARY shall pay PARENT a fee
calculated on a basis such that PARENT is reimbursed for all direct and
indirect costs and expenses incurred with respect to each respective
SUBSIDIARY's share of the overall costs and expenses incurred by PARENT with
respect to tax related services, including outside legal and accounting
expenses incurred in the course of the conduct of any audit or contest
regarding the tax liability of the PARENT Group, and any other expenses
incurred in the course of any litigation relating thereto, to the extent such
costs are reasonably attributable to a SUBSIDIARY issue. PARENT shall calculate
the fee payable, invoice each SUBSIDIARY and each SUBSIDIARY will pay the
invoiced amount within [30] days of receipt of such invoice.
3. TERM. This Agreement shall survive until terminated by the parties
hereto.
4. EFFECTIVE DATE. This Agreement shall be effective for all taxable
years ending after the date hereof, and shall supersede all prior agreements as
to
5
the allocation of Federal Tax liability and Combined State Tax liability
between the parties to this Agreement for all such taxable years.
5. COOPERATION. PARENT and each SUBSIDIARY shall cooperate fully in
the implementation of this Agreement, including but not limited to, providing
promptly to the requesting party such assistance and documentation as may be
reasonably requested by such party in connection with any of the activities
described in Sections 2 and 3 of this Agreement. In addition, PARENT and each
SUBSIDIARY shall retain all relevant tax records for relevant open periods in
accordance with past practice.
6. SUCCESSORS. This agreement shall be binding on and inure to the
benefit of any successor, by merger, acquisition of assets or otherwise, to any
of the parties hereto (including but not limited to any successor of PARENT and
SUBSIDIARIES succeeding to the tax attributes of such party under Section 381
of the Code), to the same extent as if such successor had been an original
party hereto.
7. AUTHORIZATION, ETC. Each of the parties hereto hereby represents
and warrants that it has the power and authority to execute, deliver and
perform this Agreement, that this Agreement has been duly authorized by all
necessary corporate action on the part of such party that this Agreement
constitutes a legal, valid and binding obligation of each such party and that
the execution, delivery and performance of this Agreement by such party does
not contravene or conflict with any provision of law or of its charter or
bylaws or any agreement, instrument or order binding on such party.
8. SECTION CAPTIONS. Section captions used in this Agreement are for
convenience and reference only and shall not affect the construction of this
Agreement.
9. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF [DELAWARE] WITHOUT GIVING EFFECT TO
LAWS AND PRINCIPLES RELATING TO CONFLICTS OF LAW.
10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
11. WAIVERS AND AMENDMENTS; FUTURE SUBSIDIARIES. This Agreement
shall not be waived, amended or otherwise modified except in writing, duly
6
executed by all of the parties hereto. PARENT and each SUBSIDIARY agree to
cause any corporation that in the future becomes a member of the PARENT Group
or that files tax returns with PARENT on a consolidated, combined or unitary
basis to become a party to this agreement as an additional "SUBSIDIARY"
hereunder.
7
IN WITNESS WHEREOF, each of the parties hereto has caused this
agreement to be executed by a duly authorized officer as of the date first
above written.
DecisionOne Holding Corp.
By:
------------------------------------
Name:
Title:
DecisionOne Corp.
By:
------------------------------------
Name:
Title:
DecisionOne Corp.
By:
------------------------------------
Name:
Title:
DecisionOne Supplies, Inc.
By:
------------------------------------
Name:
Title:
Properties Holding Corporation
By:
------------------------------------
Name:
8
Title:
IC Properties Corporation
By:
------------------------------------
Name:
Title:
Properties Development Corporation
By:
------------------------------------
Name:
Title:
Decision Data Investment Corporation
By:
------------------------------------
Name:
Title:
9
