TAX SHARING AND INDEMNIFICATION AGREEMENT
This Tax Sharing and Indemnification Agreement (the "Agreement") is
entered into as of ______________, 2003, among Pelican Financial, Inc., a
Delaware corporation ("PFI"), The Washtenaw Group, Inc., a Michigan corporation
("TWG"), and Washtenaw Mortgage Company, a Michigan corporation ("WMC")
(collectively, the "Parties").
RECITALS
WHEREAS, PFI currently owns all of the issued and outstanding common
stock of TWG, $0.01 par value (the "TWG Shares");
WHEREAS, TWG currently owns all of the issued and outstanding common
stock of WMC, $1.00 par value;
WHEREAS, the Boards of Directors of PFI and TWG have determined that it
would be appropriate and desirable for PFI distribute to the holders of its
common stock all of the TWG Shares by means of a pro rata distribution (the
"Distribution");
WHEREAS, on _________, 2003, the IRS issued a private letter ruling
confirming that the Distribution will qualify as a tax-free distribution under
Section 355 of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, the Parties wish to (a) provide for the payment of tax
liabilities and entitlement to refunds thereof, allocate responsibility for, and
cooperation in, the filing of Federal and state tax returns and provide for
certain other matters relating to taxes, and (b) set forth certain covenants and
indemnities relating to the preservation of the tax-free status of the
Distribution.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth, the Parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 "Acquisition Tax" means any Tax imposed by reason of the
application of Section 355(d) or (e) of the Code or any similar state or local
Tax that would not have been imposed had the Distribution not occurred, other
than such a tax resulting from an acquisition by one or more persons of a "fifty
percent or greater interest" (within the meaning of Section 355(d)(4) of the
Code) in PFI.
1.2 "After-tax Amount" means an additional amount necessary to reflect
the hypothetical Tax consequences of the receipt or accrual of any payment,
using the maximum statutory rate or rates applicable to the recipient of such
payment for the relevant tax periods, and reflecting for example, the effect of
the deductions available for interest paid or accrued and for Taxes such as
state and local income Taxes.
1.3 "Code" has the meaning set forth in the Recitals.
1.4 "Combined State Tax" means, with respect to each United States
state or local taxing jurisdiction, any income, franchise or similar Tax payable
to such state or local taxing jurisdiction in which TWG or WMC files Returns
with PFI, on a consolidated, combined or unitary basis for purposes of such Tax.
1.5 "Distribution" has the meaning set forth in the Recitals.
1.6 "Distribution Date" means the date on which the Distribution is
effected.
1.7 "Expenses" shall have the meaning ascribed to such term in Section
9.2.
1.8 "Federal Tax" means any Tax imposed under the Code, including any
interest, penalty or other additions to Tax imposed under Subtitle F of the
Code.
1.9 "Final Determination" means (a) 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, (b) the expiration of a statute of limitations
or (c) the payment of or liability for Tax or any other amount where PFI
determines that no action should be taken to recoup such payment or contest such
liability.
1.10 "IRS" means the Internal Revenue Service.
1.11 "PFI Consolidated Group" means, at any time, PFI and each entity
that joins with PFI, with respect to Federal Taxes, in the filing of a
consolidated Federal Tax Return and with respect to Combined State Taxes, in the
filing of a Combined State Tax Return.
1.12 "PFI Installment Payment" means (a) any estimated Federal Tax
installment that PFI is required to pay or (b) any payment required to be made
on the due date, without extensions, of a Return that PFI is required to file
under the Code, or in either case, any corresponding provision of state or local
law.
1.13 "Post-Distribution Tax Period" means (a) any tax period beginning
and ending after the Distribution Date and (b) with respect to a tax period that
begins on or before and ends after the Distribution Date, such portion of the
tax period that commences on the day immediately after the Distribution Date.
1.14 "Pre-Distribution Tax Period" means (a) any tax period beginning
and ending before or on the Distribution Date and (b) with respect to a period
that begins on or before and ends after the Distribution Date, such portion of
the tax period ending on and including the Distribution Date.
1.15 "Privilege" means any privilege or similar evidentiary rule that
may be asserted under applicable law including any privilege arising under or
relating to the attorney-client relationship (including the attorney-client and
work product privileges) and any accountant-client privilege.
1.16 "Pro Forma Combined State Return" has the meaning set forth in
Section 3.3(a).
1.17 "Pro Forma Federal Return" has the meaning set forth in Section
3.3(a).
1.18 "Pro Forma Returns" has the meaning set forth in Section 3.3(a).
1.19 "Restructuring Tax" shall mean any Tax imposed in connection with
the Restructuring on PFI, TWG or WMC that would not have been imposed had the
Restructuring not occurred.
1.20 "Return" means any tax return, statement, report or form
(including estimated tax returns and reports, extension requests and forms,
information returns and reports, amended returns and requests for refunds)
required to be filed with any Tax Authority.
1.21 "Ruling Documents" means (a) any request for a ruling filed with
any Tax Authority together with any supplemental filings or ruling requests or
other materials subsequently submitted on behalf of PFI, its subsidiaries and/or
its shareholders to such Tax Authority, the appendices and exhibits thereto, and
any rulings issued by a Tax Authority to PFI, TWG or WMC, in connection with the
Restructuring or (b) any materials submitted to any outside counsel in
connection with obtaining an opinion relating to the Tax status of the
Restructuring.
1.22 "Tax" means any net income, gross income, gross receipts,
alternative or add-on minimum, sales, use, business and occupation, value-added,
trade, goods and services, ad valorem, franchise, profits, license, business
royalty, withholding, payroll, employment, capital, excise, transfer, recording,
severance, stamp, occupation, premium, property, asset, real estate acquisition,
environmental, custom duty, or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest and any
penalty, addition to tax or additional amount imposed by a Tax Authority.
1.23 "Tax Asset" means any Tax Item that may have the effect of
reducing any Tax, including, without limitation, any net operating loss, net
capital loss, investment tax credit, foreign tax credit, or charitable deduction
or any deductions and credits related to alternative minimum taxes.
1.24 "Tax Authority" means any governmental authority or any
subdivision, agency, commission or authority thereof or any quasi-governmental
or private body having jurisdiction pursuant to applicable law over the
assessment, determination, collection or imposition of any Tax (including the
IRS).
1.25 "Tax Item" means any item of income, gain, loss, deduction or
credit, or other attribute that may have the effect of increasing or decreasing
any Tax.
1.26 "Tax Proceeding" means any tax audit, dispute or proceeding
(whether administrative or judicial), including a refund claim or any proceeding
arising therefrom.
1.27 "TWG Combined State Tax Liability" means, with respect to any tax
period beginning on or after January 1, 2003 in any jurisdiction, an amount of
Combined State Taxes determined in accordance with the principles set forth in
the definition of TWG Federal Tax Liability.
1.28 "TWG Federal Tax Liability" means, with respect to any tax period
beginning on or after January 1, 2003, the Federal Tax liability for such
period, computed in accordance with the positions, elections, accounting
methods, conventions, and computational methodology used by PFI in preparing the
PFI Consolidated Group's Return for such period, but taking into account only
the Tax Items of TWG that are included in such Return for such tax period. Such
computation shall be made (a) as though the highest rate of tax specified in
Section 11(b) of the Code (or any other similar rates applicable to specific
types of income) were the only rate set forth in that subsection, and (b) by not
permitting TWG any compensation deductions arising in respect of any options on
PFI stock.
1.29 "TWG Shares" has the meaning set forth in the Recitals.
1.30 "TWG Tax Liability" means, with respect to any tax period, the sum
of the TWG Combined State Tax Liability for each jurisdiction and the TWG
Federal Tax Liability.
1.31 "WMC Combined State Tax Liability" means, with respect to any tax
period beginning on or after January 1, 2003 in any jurisdiction, an amount of
Combined State Taxes determined in accordance with the principles set forth in
the definition of WMC Federal Tax Liability.
1.32 "WMC Federal Tax Liability" means, with respect to any tax period
beginning on or after January 1, 2003, the Federal Tax liability for such
period, computed in accordance with the positions, elections, accounting
methods, conventions, and computational methodology used by PFI in preparing the
PFI Consolidated Group's Return for such period, but taking into account only
the Tax Items of WMC that are included in such Return for such tax period. Such
computation shall be made (a) as though the highest rate of tax specified in
Section 11(b) of the Code (or any other similar rates applicable to specific
types of income) were the only rate set forth in that subsection, and (b) by not
permitting WMC any compensation deductions arising in respect of any options on
PFI stock.
1.33 "WMC Tax Liability" means, with respect to any tax period, the sum
of the WMC Combined State Tax Liability for each jurisdiction and the WMC
Federal Tax Liability.
ARTICLE II
ADMINISTRATIVE AND COMPLIANCE MATTERS
2.1 Pre-Distribution Tax Period; PFI Consolidated Returns. PFI will
prepare, with the assistance of TWG and WMC, the consolidated Federal Tax
Returns and Combined State Tax Returns of the PFI Consolidated Group for all
Pre-Distribution Tax Periods. Except as provided in the next sentence with
respect to such Returns, PFI shall determine the manner in which any Tax Item
shall be reported, whether any extensions should be requested, and the elections
that will be made by TWG or WMC. Subject to PFI's approval, TWG and WMC may
decide the manner in which any Tax Item of TWG and WMC shall be reported, and
the elections that will be made by each. PFI shall have the exclusive right to
file, prosecute, compromise or settle any claim for refund, and determine
whether any refunds to which the PFI Consolidated Group may be entitled shall be
received by way of refund or credit against the Tax liability of the PFI
Consolidated Group.
2.2 Allocation. PFI may, at its option, elect and TWG and WMC shall, if
necessary for a valid election, join PFI in electing to ratably allocate Tax
Items of TWG and WMC in accordance with relevant provisions of the Treasury
Regulations Section 1.1502-76. If PFI exercises its option to make the election,
TWG and WMC will each provide a statement stating its consent to such election
as required under the regulations.
2.3 Other TWG and WMC Returns. TWG and WMC shall each be solely
responsible for the preparation and filing of all other Returns of TWG and WMC,
other than Returns described in Section 2.1. TWG and WMC shall be responsible
for paying to the applicable Tax Authorities all Taxes shown as due from TWG and
WMC on such Returns.
2.4 Post-Distribution Conduct of TWG and WMC. On or after the
Distribution Date, neither TWG nor WMC will make or change any accounting
method, change its taxable year, amend any Return or take any Tax position on
any Return, take any other action, omit to take any action or enter into any
transaction that may reasonably be expected to result in and does result in any
increased Tax liability or reduction of any Tax Asset of the PFI Consolidated
Group or PFI.
2.5 Deductions and Certain Taxes Related to Options. To the extent
permissible under applicable law, PFI shall file Returns claiming (a) the Tax
deductions attributable to options to purchase stock of PFI or other PFI
long-term incentive compensation held by employees and former employees of TWG
and WMC, (b) any deductions for current or deferred compensation incurred or
paid by PFI, and (c) any other similar compensation related Tax deductions. The
Returns of PFI, TWG and WMC shall reflect the entitlement of PFI to such
deductions. PFI shall prepare and file all applicable Returns and pay the
related Tax liability under the Federal Insurance Contributions Act, the Federal
Unemployment Tax Act or any state employment tax law.
ARTICLE III
TAX SHARING
3.1 General. For each tax period of the PFI Consolidated Group
beginning on or after January 1, 2003 during which any Tax Item of TWG or WMC is
includible in the consolidated Federal Tax Return of the PFI Consolidated Group,
TWG or WMC, as the case may be, shall pay to PFI an amount equal to the TWG
Federal Tax Liability or the WMC Federal Tax Liability. For each tax period
beginning on or after January 1, 2003 during which any Tax Item of TWG or WMC is
includible in a Return relating to a Combined State Tax, TWG or WMC, as the case
may be, shall pay PFI an amount equal to the TWG Combined State Tax Liability or
the WMC Combined State Tax Liability, as the case may be, for such tax period,
each as shown on the Pro Forma Returns.
3.2 Estimated Payments. PFI shall determine the amount of the
corresponding TWG Federal Tax Liability and TWG Combined State Tax Liability,
and the WMC Federal Tax Liability and WMC Combined State Tax Liability, as the
case may be, in connection with any PFI Installment Payment made with respect to
any Pre-Distribution Tax Period. PFI shall provide TWG and WMC with notice of
such determination no later than 10 days before the date that the applicable
payment by PFI is due. TWG and WMC shall, no later than 1 day prior to the due
date of PFI's payment, pay to PFI the amount so determined.
3.3 Payment of Taxes at Year-End.
(a) Not later than 30 days after the due date (including all
extensions) for the PFI Consolidated Group's Federal Tax Return, PFI shall
deliver to TWG and WMC a pro forma Federal Tax Return (a "Pro Forma Federal
Return") reflecting the TWG Federal Tax Liability and the WMC Federal Tax
Liability. Not later than 30 days after the due date (including all extensions)
for each Combined State Tax Return, PFI shall deliver to TWG and WMC the
relevant pro forma Combined State Tax Return (each a "Pro Forma Combined State
Return," and together with the Pro Forma Federal Return, the "Pro Forma
Returns") reflecting the relevant TWG Combined State Tax Liability and the WMC
Combined State Tax Liability. The Pro Forma Returns shall be prepared in good
faith in a manner generally consistent with past practice. Each Pro Forma Return
shall be delivered together with a statement showing a calculation of the amount
to be paid pursuant to Section 3.3(b).
(b) Not later than 10 days after the receipt of each Pro Forma
Return, TWG and WMC shall pay to PFI, or PFI shall pay to TWG and WMC, as
appropriate, an amount equal to the difference, if any, between (i) the TWG
Federal Tax Liability and the TWG Combined State Tax Liability, and (ii) the WMC
Federal Tax Liability and the WMC Combined State Tax Liability, as the case may
be, reflected on such Pro Forma Return for such period and the aggregate of any
payments made by TWG pursuant to Section 3.2 in respect of such period.
3.4 Tax Adjustments.
(a) Except as otherwise provided in this Agreement, PFI shall
be liable for any Tax increase, and shall be entitled to any refund or other
benefit, that results from any Tax Proceeding relating to any Tax Return of the
PFI Consolidated Group. Except as otherwise provided in this Agreement, TWG and
WMC shall be liable for any Tax increase, and shall be entitled to any Tax
refund or other benefit, that results from any Tax Proceeding relating to any
Tax Return of TWG and WMC other than a Tax Return of the PFI Consolidated Group.
(b) If any Tax Proceeding described in Section 3.4(a) results
in (i) an increase or decrease in a Tax Item of PFI, TWG or WMC for a particular
tax period, and (ii) a corresponding increase or decrease in a Tax Item of the
other parties for a different period (other than by way of Tax carrybacks or
carryovers), the party incurring a Tax benefit shall pay to the parties
incurring a Tax detriment the lesser of the amount of such benefit and the
amount of such detriment. The amount of any payments made pursuant to this
Section 3.4 shall be determined by employing the highest rate of Tax specified
in Section 11(b) of the Code or the corresponding provision of any applicable
state or local Tax. The amount of any Tax benefit or detriment shall be
determined taking into account interest received from or paid to the relevant
Tax Authority. Payments required under this Section 3.4(b) shall be made at the
later of (i) such time or times that the Tax benefits is realized as a refund, a
reduction of Tax shown on a Return, or a result of a Tax Authority offsetting
the amount due, and (ii) such time or times that the Tax detriment is realized
as an additional assessed amount or as an increase of Tax shown on a Return. The
party incurring the Tax detriment shall have the right to review the Tax benefit
utilization by the other party.
(c) In the event that there is a Final Determination that
results in a disallowance of a deduction taken by PFI pursuant to Section 2.5,
TWG and WMC shall pay to PFI an amount equal to such disallowance determined by
employing the highest rate of Tax specified in Section 11(b) of the Code or the
corresponding provision of any applicable state or local law.
3.5 Allocation of Tax Assets. Except to the extent applicable law or
regulations expressly so require, no Tax Assets will be allocated to TWG or WMC
for use in Post-Distribution Tax Periods. PFI will allocate to TWG and WMC only
those portions, if any, of particular Tax Assets for use in Post-Distribution
Tax Periods as applicable laws or regulations expressly require to be so
allocated.
3.6 TWG and WMC Carrybacks. Whenever permitted to do so by applicable
law, TWG and WMC shall elect to relinquish any carryback period, which would
include any Pre-Distribution Tax Period.
3.7 Use of TWG and WMC Tax Assets. PFI shall have no obligation to
indemnify TWG or WMC for the use by PFI of any Tax Asset thereof.
3.8 Restructuring Taxes. Notwithstanding any other provision of this
Agreement or of any other agreement among the Parties, TWG and WMC shall bear
the burden of any Acquisition Tax. In addition, TWG and WMC shall bear the
burden of: (a) any transfer (including sales and use, real estate transfer and
property taxes), stamp, recording or similar Tax imposed on the Parties in
connection with the Restructuring; and (b) any Restructuring Tax for which TWG
and WMC otherwise have an obligation to indemnify PFI under a provision of this
Agreement other than this Section 3.8. PFI shall bear the burden of all other
Restructuring Taxes.
ARTICLE IV
REPRESENTATIONS AND COVENANTS
4.1 Representations.
(a) TWG and WMC Representations. TWG and WMC represent that
the information and representations furnished in any Ruling Document (as
modified, qualified or elaborated in any subsequent Ruling Documents) are
accurate and complete as of the date hereof, to the extent that such information
and representations relate to TWG or WMC, or their respective businesses or
activities.
(b) PFI Representations. PFI represents that, as of the date
hereof, there is no plan or intention to take any action inconsistent with the
information and representations furnished in any Ruling Document (as modified,
qualified or elaborated in any subsequent Ruling Documents).
(c) Representations of the Parties. The Parties represent
that, as of the date hereof, they are not aware of any plan or intention by the
current shareholders of PFI to sell, exchange, transfer by gift, or otherwise
dispose of any of their stock in, or securities of, PFI, TWG or WMC subsequent
to the Distribution.
(d) Covenants of the Parties. TWG, WMC and PFI each covenant
(i) to use its best efforts to verify that the foregoing representations made by
it in this Section 4.1 are accurate and complete as of the Distribution Date,
and (ii) if, after the date hereof, it obtains information indicating, or
otherwise becomes aware, that any such representations are or may be inaccurate
or incomplete, to promptly inform the other party.
4.2 TWG and WMC Covenants. TWG and WMC covenant to PFI that:
---------------------
(a) TWG and WMC will not take any action or fail to take any
action, which would cause the Distribution to fail to qualify under Section 355
of the Code or any corresponding provision of state or local law. Without
limiting the foregoing, TWG and WMC covenant to PFI that:
(i) during the six-month period following the
Distribution Date, neither TWG nor WMC will liquidate, merge
or consolidate with any other person;
(ii) during the six-month period following the
Distribution Date, neither TWG nor WMC will sell, exchange,
distribute or otherwise dispose of assets, except in the
ordinary course of business;
(iii) following the Distribution, TWG (through WMC)
will continue the active conduct of the mortgage banking
business;
(iv) neither TWG nor WMC will take any action
inconsistent with the information and representations in the
Ruling Documents;
(v) neither TWG nor WMC will repurchase stock of TWG
in a manner contrary to the requirements of Revenue Procedure
96-30 or in a manner contrary to the representations made in
Ruling Documents; and
(vi) neither TWG nor WMC will enter into any
negotiations, agreements or arrangements with respect to any
of the foregoing.
(b) neither TWG nor WMC will take or omit to take any action
that results in any Restructuring Tax being imposed on PFI in excess of the
amount of such Restructuring Tax for which PFI would be liable under applicable
law, based on
(i) any specific agreements among the Parties as to
the manner in which the Restructuring and any other relevant
transactions are to be treated for tax purposes, and
(ii) to the extent not contrary to the agreements
described in Section 4.2(b)(i), the form of the Restructuring
and any other relevant transactions as set forth in agreements
among the Parties.
(c) neither TWG nor WMC will take any action (including stock
issuances, whether pursuant to the exercise of options or otherwise, option
grants, capital contributions, or redemptions) or omit to take any action which
may, either alone or in combination with actions or omissions by TWG, WMC or any
other party, result in the imposition of any Acquisition Tax.
ARTICLE V
INDEMNITIES
5.1 TWG and WMC Indemnity. TWG and WMC will indemnify PFI against and
hold it harmless from:
(a) any state and local Tax attributable to TWG or WMC,
excluding (i) any Combined State Tax and (ii) any Restructuring Tax;
(b) any liability or damage (including Restructuring Taxes)
resulting from a violation by TWG or WMC of (i) any representation or covenant
in a Ruling Document (as such representation or covenant is modified, qualified,
or elaborated in any subsequent Ruling Documents), (ii) any representation,
covenant or other agreement set forth in this Agreement, or (iii) any agreements
or covenants among the Parties pertaining to the Tax matters;
(c) any Acquisition Tax;
(d) any Restructuring Tax allocated to TWG or WMC under this
Agreement;
(e) any Tax increase or Tax detriment allocated to TWG or WMC
under Section 3.4;
(f) any Tax imposed on PFI as a result of a failure by TWG or
WMC to cooperate with PFI under Article 6; and
(g) all liabilities, costs, expenses (including reasonable
expenses of investigation and attorneys' fees and expenses), losses, damages,
assessments, settlements or judgments arising out of or incident to the
imposition, assessment or assertion of any tax liability or damage described in
Section 5.1(a) through (f), including those incurred in any contest relating to
the imposition, assessment or assertion of any such tax, liability or damage.
5.2 PFI Indemnity. PFI will indemnify TWG and WMC against and hold them
harmless from:
(a) any PFI Consolidated Group Tax liability not allocable to
TWG or WMC;
(b) any separate state or local Tax of PFI;
(c) any liability or damage (including Restructuring Taxes)
resulting from a violation by PFI of any representation or covenant in a Ruling
Document (as such representation or covenant is modified, qualified, or
elaborated in any subsequent Ruling Documents);
(d) any Tax liability resulting from an acquisition by one or
more persons of a "fifty percent or greater interest" (within the meaning of
Section 355(d)(4) of the Code) in PFI;
(e) any Restructuring Tax allocated to PFI under this
Agreement;
(f) any Tax increase or Tax detriment allocated to PFI under
Section 3(d);
(g) any Tax imposed on TWG or WMC (other than a Restructuring
Tax) as a result of PFI's failure to cooperate with TWG or WMC under Article 6;
and
(h) all liabilities, costs, expenses (including, without
limitation, reasonable expenses of investigation and attorneys' fees and
expenses), losses, damages, assessments, settlements or judgments arising out of
or incident to the imposition, assessment or assertion of any tax liability or
damage described in Section 5.2(a) through (g) including those incurred in any
contest to the imposition, assessment or assertion of any such tax, liability or
damage; provided that, PFI will not be required to indemnify TWG or WMC under
this Section 5.2 to the extent that any liability set forth in this Section 5.2
is described in Section 5.1.
5.3 Discharge of Indemnity. The Parties shall discharge their
respective obligations under Sections 5.1 and 5.2 herein by paying the relevant
amount to the indemnified party no later than 30 days after the date of
receiving notice from the other parties of a payment made, or a liability of a
specified amount, based on a Final Determination.
ARTICLE VI
COMMUNICATION AND COOPERATION
6.1 Consult and Cooperate. TWG, WMC and PFI shall consult and cooperate
fully at such time and to the extent reasonably requested by the other party in
connection with all matters subject to this Agreement. Such cooperation shall
include:
(a) the retention, consistent with PFI's past practice, of all
information pertaining to Tax matters relating to PFI, TWG or WMC for the
Pre-Distribution Tax Periods, until two years after the expiration of all
applicable statutes of limitation (giving effect to any extension, waiver, or
mitigation thereof), including all books, records, documentation or other
information relating thereto;
(b) the provision, upon reasonable request, of the information
described in this Section 6.1, including any necessary explanations of such
information, and including access to the necessary personnel to provide such
information or explanations;
(c) the execution of any document that may be necessary or
helpful in connection with any required Return or in connection with any audit,
proceeding, suit or action; and
(d) the procurement of any documentation from a governmental
authority or a third party that may be necessary or helpful in connection with
the foregoing.
Such cooperation also shall include the matters set forth in Section
6.2.
6.2 Provision of Tax Return Information.
(a) TWG and WMC shall provide PFI with all documents and
information, and make available employees and officers of TWG and WMC as PFI
reasonably requests to prepare any Return described in Section 2.2 or to contest
any Tax Proceeding for any such Return.
(b) In the case of any Return for a Pre-Distribution Tax
Period that is in PFI's possession and is filed after the date of this
Agreement, PFI shall provide TWG and WMC access to and allow TWG and WMC to copy
that portion of each such Return to the extent it relates to TWG or WMC,
together with all related Tax accounting work papers, not later than 30 days
after the date of filing of such Return.
(c) In the case of any Return in PFI's possession that was
filed before the date of this Agreement, PFI shall use reasonable efforts to
provide TWG and WMC access to and allow TWG and WMC to copy that portion of each
such Return to the extent that it relates to TWG or WMC, together with all
related Tax accounting work papers, beginning as soon as reasonably practicable
after the date of this Agreement, but in no event beginning later than 15 days
after the Distribution Date.
(d) After the date of this Agreement, PFI shall grant TWG and
WMC access to employees of PFI on a mutually convenient basis during normal
business hours to the extent such access may reasonably be required by TWG or
WMC to prepare any Return including any Post-Distribution Tax Period Return of
TWG or WMC or to contest any Tax Proceeding.
(e) Notwithstanding any other provision of this Agreement, PFI
shall not be required to provide TWG and WMC access to or copies of (a) any
information with respect to which PFI is entitled to assert the protection of
any Privilege, or (b) any information as to which PFI is subject to an
obligation to maintain the confidentiality of such information. PFI shall use
reasonable efforts to separate any such information from any other information
to which TWG or WMC are entitled to access or to which TWG or WMC are entitled
to copy under this Agreement, to the extent consistent with preserving PFI's
rights under this Section 6.2.
6.3 Failure to Cooperate.
(a) TWG and WMC shall be liable for any Tax imposed on PFI
that results from the failure by them to (i) cooperate under this Article 6 or
(ii) keep and make available to PFI the records provided by PFI to TWG or WMC.
(b) PFI shall be liable for any Tax imposed on TWG or WMC
(other than a Restructuring Tax) as a result of the failure of PFI to cooperate
under this Article 6.
6.4 Provision of Information Relating to Material Developments. The
Parties shall keep each other fully informed with respect to any material
development relating to the matters subject to this Agreement. The obligations
of the Parties described in the preceding sentence shall include the obligations
to inform one another as set forth in Section 9.1.
ARTICLE VII
TAX PROCEEDINGS
7.1 In General. Each of TWG and WMC shall have the exclusive right, in
its sole discretion, to control, contest, and represent its own interests in any
Tax Proceeding and to resolve, settle, or agree to any deficiency, claim or
adjustment proposed, asserted or assessed in connection with or as a result of
any such Tax Proceeding. TWG and WMC shall each consult with PFI regarding their
conduct of any such Tax Proceeding the outcome of which may have an impact on
the Tax liability of PFI, and shall promptly notify PFI of the commencement of
such Tax Proceeding. After the Distribution Date, the Parties shall cooperate in
order to transfer to such exclusive right to TWG or WMC, as the case may be.
7.2 Notice. If after the Distribution Date PFI receives written notice
of, or relating to, a Tax Proceeding from a Tax Authority that asserts, proposes
or recommends a deficiency, claim or adjustment that, if sustained, would result
in any Restructuring Taxes for which TWG or WMC could be responsible under this
Agreement, PFI shall notify TWG and WMC in writing of such deficiency, claim or
adjustment within 30 days of its receipt. If TWG or WMC receives written notice
of, or relating to, a Tax Proceeding from a Tax Authority with respect to a
Return described in Section 2.2, TWG or WMC shall provide a copy of such notice
to PFI within 30 days of receiving such notice of such Tax Proceeding, provided
that in no case shall such notice be provided later than 30 days before a
response is required to be provided to the relevant Tax Authority.
7.3 Participation Rights. If a Tax Authority asserts, proposes or
recommends a deficiency, claim or adjustment that, if sustained, would result in
Restructuring Taxes for which TWG or WMC could be responsible under this
Agreement:
(a) in the case of any material correspondence or filing
submitted to the Tax Authority or any judicial authority that relates to the
merits of such deficiency, claim or adjustment, PFI shall (i) reasonably in
advance of such submission, but subject to applicable time constraints imposed
by such Tax Authority or judicial authority, provide TWG and WMC, as the case
may be, with a draft copy of the portion of such correspondence or filing that
relates solely to such deficiency, claim or adjustment, (ii) consider, subject
to applicable time constraints imposed by such Tax Authority or judicial
authority, TWG's and WMC's comments on such draft copy of such correspondence or
filing, and (iii) provide TWG and WMC with a final copy of the portion of such
correspondence or filing that relates solely to such deficiency, claim or
adjustment.
(b) If TWG or WMC acknowledge in writing to PFI that, as
between TWG or WMC and PFI, TWG or WMC shall be liable for an amount equal to
100% of any such Restructuring Taxes that are determined pursuant to a Final
Determination, then (i) PFI shall take all actions requested by TWG or WMC to
contest such deficiency, claim or adjustment, including administrative and
judicial proceedings, (ii) TWG and WMC shall have the right to fully participate
with respect to such deficiency, claim or adjustment and related proceedings and
PFI shall accept all reasonable suggestions by TWG or WMC in connection with the
management and substance of such proceedings, and (iii) in no event shall PFI
settle or compromise any such deficiency, claim or adjustment without the
written consent of TWG or WMC, which consent shall not be unreasonably withheld.
ARTICLE VIII
PAYMENTS
8.1 Procedure for Making Payments. All payments required to be made
under this Agreement shall be made in immediately available funds. Except as
otherwise provided in this Agreement, all payments required to be made pursuant
to this Agreement will be due 30 days after the receipt of notice of such
payment being owed. Payments shall be deemed made when received.
8.2 Setoff. No party shall set off any payment due to it against any
payment required to be made under this Agreement by it to the other party.
8.3 Interest on Late Payments. Any payment required to be made pursuant
to this Agreement that is not made on or before the due date for such payment
shall bear interest from the date after the due date to and including the date
of payment at a rate determined under Code Section 6621(a)(2). Such interest
shall be paid at the same time as the payment to which it relates. Any interest
payable here that is not paid when due shall bear interest computed in the
manner described in this Section 8.3.
8.4 Character of Payments. For Tax purposes, the Parties agree to treat
any payment pursuant to this Agreement as a capital contribution by PFI to TWG
or WMC, or a distribution by TWG or WMC to PFI, as the case may be, made in the
last tax period beginning before the Distribution and, accordingly, as not
includible in the taxable income of the recipient and not deductible by the
payor. If pursuant to a Final Determination it is determined that the receipt or
accrual of any payment made under this Agreement is subject to any Tax, the
party making such payment shall be liable for the After-Tax Amount with respect
to such payment. A party may choose not to specify an After-Tax Amount in a
demand for payment pursuant to this Agreement without thereby being deemed to
have waived its right subsequently to demand an After-Tax Amount with respect to
such payment.
ARTICLE IX
MISCELLANEOUS
9.1 Notices. Any notice, demand, offer, request or other communication
required or permitted to be given by either party pursuant to the terms of this
Agreement shall be in writing and shall be deemed effectively given the earlier
of (a) when received, (b) when delivered personally, (c) one (1) business day
after being delivered by facsimile (with receipt of appropriate confirmation),
(d) one (1) business day after being deposited with an overnight courier service
or (e) four (4) days after being deposited in the U.S. mail, First Class with
postage prepaid, and addressed to the attention of the party's Chief Executive
Officer or President at the address of its principal executive office or such
other address as a party may request by notifying the other in writing.
9.2 Costs and Expenses.
(a) PFI may provide tax services to TWG or WMC for
compensation approximately the same as that payable between unrelated Parties
dealing at arm's length.
(b) Except as expressly set forth in this Agreement, each
party shall bear its own costs and expenses incurred pursuant to this Agreement.
For purposes of this Agreement, "Expenses" shall include, without limitation,
reasonable attorney's fees, accountant's fees and other related professional
fees and disbursements.
9.3 Termination and Survival. All rights and obligations arising
hereunder with respect to a Pre-Distribution Tax Period shall survive until they
are fully effectuated or performed provided, that notwithstanding anything in
this Agreement to the contrary, this Agreement shall remain in effect and its
provisions shall survive for the full period of all applicable statutes of
limitation (giving effect to any extension, waiver or mitigation thereof).
9.4 Section Headings. The headings contained in this Agreement are
inserted for convenience only and shall not constitute a part hereof or in any
way affect the meaning or interpretation of this Agreement.
9.5 Entire Agreement. This Agreement, including the exhibits,
appendices and other attachments hereto contains the entire understanding of the
Parties hereto with respect to the subject matter contained herein. No
alteration, amendment, modification, or waiver of any of the terms of this
Agreement shall be valid unless made by an instrument signed by an authorized
officer of each of PFI, TWG and WMC, or in the case of a waiver, by the party
against whom the waiver is to be effective.
9.6 Waivers. No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver hereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any right, power or privilege.
9.7 Severability. If any provision of this Agreement or the application
of any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid, illegal or unenforceable to any
extent, this Agreement or such provision or the application of such provision to
such party or shall remain in full force and effect to the fullest extent
permitted by law and shall not be affected thereby, unless such a construction
would be unreasonable.
9.8 Governing Law and Interpretation. This Agreement has been made in
and shall be construed and enforced in accordance with the laws of the State of
Delaware without giving effect to laws and principles relating to conflicts of
law.
9.9 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.
9.10 Assignments; Third Party Beneficiaries. This Agreement shall be
binding upon and shall inure only to the benefit of the Parties hereto and their
respective successors and assigns, by merger, acquisition of assets or otherwise
(including but not limited to any successor of a party hereto succeeding to the
Tax attributes of such party under applicable law). This Agreement is not
intended to benefit any person other than the Parties hereto and such successors
and assigns, and no such other person shall be a third party beneficiary hereof.
9.11 Further Assurances. The Parties hereto shall execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such
instruments and take such other action as may be necessary or advisable to carry
out their obligations under this Agreement and under any exhibit, document or
other instrument delivered pursuant hereto.
9.12 Authorization. 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.
IN WITNESS WHEREOF, the Parties have signed this Tax Sharing and
Indemnification Agreement, effective as of the date first set forth above.
PELICAN FINANCIAL, INC.
By:
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Name:
Title:
THE WASHTENAW GROUP, INC.
By:
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Name:
Title:
WASHTENAW MORTGAGE COMPANY
By:
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Name:
Title:
