INCOME TAX SHARING AGREEMENT
INCOME TAX SHARING AGREEMENT, dated as of September 27, 1991,
among Transtech Industries, Inc., a Delaware corporation
("Transtech"), THV Acquisition Corp., a Delaware corporation
("THV"), HVHC, Inc., a Texas corporation ("HVHC) and Xxxx Valve
Company, Inc., an Ohio corporation ("Xxxx Valve").
WHEREAS, Transtech, THV, HVHC and Xxxx Valve are members of an
affiliated group within the meaning of Section 1504(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), of which
Transtech is the common parent (the "Transtech Group");
WHEREAS, Transtech, THV, HVHC and Xxxx Valve wish to join in
the filing of a consolidated Federal income tax return pursuant to
Section 1501 of the Code for the taxable year ending December 31,
1991 and each taxable year thereafter during which they are
entitled to do so; and
WHEREAS, Transtech, THV, HVHC and Xxxx Valve wish to establish
a method for the payment of the consolidated Federal income tax
liability of the Transtech Group, and for the payment by THV, HVHC
and Xxxx Valve of their Separate Return Tax Liability (as defined
in Section 1.6 hereof) and for reimbursing THV, HVHC and Xxxx Valve
for the use of their losses and credits in computing the
consolidated Federal income tax liability of the Transtech Group.
NOW, THEREFORE, in consideration of the promises and the
mutual covenants and agreements contained herein, the parties
hereto agree as follows:
1. Definitions.
As used in this Agreement, the following terms shall have the
meanings set forth in this Section 1:
1.1 "Agreement" shall mean this Income Tax Sharing Agreement.
1.2 "Consolidated Subsidiary" of a corporation shall mean
another corporation that is or would be an includible corporation
(within the meaning of Section l504 of the Code) in an affiliated
group of corporations of which the first corporation is or would be
the common parent.
1.3 "IRS" shall mean the Internal Revenue Service.
1.4 "Regulations" shall mean the income tax regulations
promulgated under the Code.
1.5 "Separate Return" shall mean (i) in the case of Transtech,
the Federal income tax return that would have been
required to be filed by Transtech and its Consolidated Subsidiaries
if THV, HVHC and Xxxx Value and their Consolidated Subsidiaries
were not members of the Transtech Group; (ii) in the case of THV,
the Federal income tax return that would have been required to be
filed by THV and its Consolidated Subsidiaries (other than HVHC and
its Consolidated Subsidiaries) if THV were not a member of the
Transtech Group; (iii) in the case of HVHC, the Federal income tax
return that would have been required to be filed by HVHC and its
Consolidated Subsidiaries (other than Xxxx Valve and its
Consolidated Subsidiaries) if HVHC were not a member of the
Transtech Group; and (iv) in the case of Xxxx Valve, the Federal
income tax return that would have been required to be filed by Xxxx
Valve and its Consolidated Subsidiaries if Xxxx Valve were not a
member of the Transtech Group.
1.6 "Separate Return Tax Liability" shall mean the Federal
income tax liability with respect to a taxable year that would have
been payable by Transtech, THV, HVHC and Xxxx Valve, respectively,
if each of them had filed a Separate Return. For purposes of this
Agreement, Separate Return Tax Liability shall be computed (i) by
allowing each of Transtech, THV, HVHC and Xxxx Valve its respective
net operating loss carryforwards and carrybacks, capital loss
carryforwards and carrybacks, and tax credit carryforwards and
carrybacks, if any, which each of Transtech, THV, HVHC or Xxxx
Valve would have been entitled to for such taxable year were it
filing its own Separate Return for such year and had filed its own
Separate Return in all previous years, except to the extent that
such net operating losses, capital losses and tax credits have
resulted in a reimbursement to THV, HVHC and Xxxx Valve pursuant to
Section 3.3 hereof, and (ii) otherwise in the manner provided in
the second sentence of Section 1.1552-l(a)(2)(ii) of the
Regulations.
2. Consolidated Federal Income Tax Returns.
2.1 Filing of Returns. The Transtech Group shall file a
consolidated Federal income tax return for its taxable year ending
December 31, 1991 and for any subsequent taxable period for which
it is required or permitted to file such a return. Transtech, THV,
HVHC and Xxxx Valve agree to file such consents, elections and
other documents and to take such other action as may be necessary
or appropriate to carry out the purpose of this Section 2.1.
2.2 Transtech as Agent. Except as otherwise required by
Section 1.1502-77 of the Regulations, Transtech shall be the sole
agent for each Consolidated Subsidiary in the Transtech Group with
respect to all Federal income tax matters.
2.3 Information and Schedules. Transtech, THV, HVHC and Xxxx
Valve shall each provide, at its own cost and expense, the
information and schedules necessary to compute its respective
Separate Return Tax Liability and for Transtech to prepare the
consolidated Federal income tax return of the Transtech Group.
Except as permitted by this Agreement and the consolidated return
regulations, items of income, deductions, gains, losses, credits or
other items of Transtech, THV, HVHC and Xxxx Valve shall be
reported by the Transtech Group in its consolidated Federal income
tax return in a manner consistent with such information and
schedules. The cost of (i) preparing the consolidated Federal
income tax return or any amended return of the Transtech Group;
(ii) of contesting any audits by the IRS; (iii) seeking to obtain
a final determination (as defined in Section 4) or refund of income
taxes; and (iv) resolving disputes under this Agreement shall be
shared 50% by Xxxx Valve and 50% by Transtech.
3. Payment of Tax Liability.
3.1 Payment of Taxes to the IRS. For each taxable year,
Transtech shall pay to the IRS when due any installment of
estimated taxes and any balance of the final consolidated Federal
income tax liability of the Transtech Group.
3.2 Payment of Taxes by THV, HVHC and Xxxx Valve. On each
date for payment of an installment of estimated taxes by the
Transtech Group during any taxable year in which THV, HVHC and Xxxx
Valve are included in the Transtech Group, each of THV, HVHC and
Xxxx Valve shall pay to Transtech an amount equal to the
installment that it would have been required to pay if it were
filing a Separate Return showing a Separate Return Tax Liability.
For any taxable year, each of THV, HVHC and Xxxx Valve shall pay to
Transtech on the fifteenth day of the third month following the
close of such taxable year any balance of its Separate Return Tax
Liability. If on the date of filing any consolidated Federal income
tax return of the Transtech Group, THV, HVHC or Xxxx Valve has not
fully paid its respective Separate Return Tax Liability to
Transtech, then THV, HVHC or Xxxx Valve, as the case may be, shall
pay to Transtech such additional amount that may be due on the date
of filing. If on such date of filing, THV, HVHC or Xxxx Valve has
paid more than its Separate Return Tax Liability to Transtech,
Transtech shall pay such overpayment to THV, HVHC or Xxxx Valve, as
the case may be, on such date of filing.
3.3 Reimbursement by Transtech.
(a) For any taxable year, Transtech shall reimburse THV, HVHC
and Xxxx Valve as the case may be, to the extent any net operating
loss, net capital loss, net Section 1231 loss or credit of THV (and
its Consolidated Subsidiaries other than HVHC and its Consolidated
Subsidiaries), HVHC (and its Consolidated Subsidiaries other than
Xxxx Valve), or Xxxx Valve (and its Condolidated Subsidiaries) or
any carryover or carryback thereof causes the consolidated Federal
income tax liability of the Transtech Group to be less than the sum
of the Separate Return Tax Liability of each of Transtech, THV,
HVHC and Xxxx Valve. For purposes of determining the amount of any
reimbursement pursuant to this Section 3.3(a), if for any taxable
year the Transtech Group is unable to use all of the losses or
credits of Transtech, THV, HVHC or Xxxx Valve, the Transtech Group
shall allocate such losses and credits in accordance with Sections
1.1502-3(b)(2), 1.1502-4(e)(2), 1.1502-21(b)(3), 1.1502-22(b)(2)
and 1.1502-79 of the Regulations and as otherwise provided in
Section 1.1502 of the Regulations.
(b) Transtech shall reimburse THV, HVHC or Xxxx Valve, as the
case may be, to the extent the Transtech Group receives a refund
from the IRS of any tax paid in respect of prior taxable years or
is allowed a credit or offset against any tax liability for any
prior taxable year, which refund, credit or offset results from a
carryback of net operating loss, net capital loss or credit of THV,
HVHC or Xxxx Valve from any taxable year.
(c) Notwithstanding the foregoing, if in any year the
Separate Return Tax Liability of THV, HVHC, or Xxxx Valve, as the
case may be, is adjsuted for any previous year by giving effect to
any of their respective net operating loss carrybacks, capital loss
carrybacks, or tax credit carrybacks, Transtech shall reimburse
THV, HVHC, or Xxxx Valve, as the case may be, for the amount that
would have been refunded to THV, HVHC, or Xxxx Valve, as the case
may be, by the IRS if THV, HVHC or Xxxx Valve, as the case may be,
had filed a Separate Return and carried back such losses and
credits to the fullest extent permitted by the Code and applicable
Regulations, except to the extent THV, HVHC or Xxxx Valve, as the
case may be, has otherwise received payment from Transtech for the
tax benefit to Transtech associated with such carryback items.
3.4 Timing of Reimbursement Payment.
(a) Transtech shall pay the reimbursement contemplated by
Section 3.3(a) to THV, HVHC or Xxxx Valve, as the case may be, on
each date for payment of any installment of estimated taxes, to the
extent the losses or credits of THV, HVHC or Xxxx Valve reduce the
installment that otherwise would have been payable. For any taxable
year Transtech shall pay to THV, HVHC or Xxxx Valve, as the case
may be, on the fifteenth day of the third month following the close
of such taxable year any balance of the reimbursement contemplated
by Section 3.3(a) with respect to such taxable year to the extent
that the losses or credits of THV, HVHC or Xxxx Valve reduce the
taxes that otherwise would have been payable on such day. If on the
date of filing any consolidated Federal income tax return of the
Transtech Group, Transtech has failed to pay the full amount of the
reimbursement contemplated by Section 3.3(a) with respect to such
taxable year to THV, HVHC or Xxxx Valve, Transtech shall pay to
THV, HVHC or Xxxx Valve, as the case may be, the balance of such
reimbursement on such date of filing. If on such date of filing, it
is determined that Transtech has paid to THV, HVHC or Xxxx Valve an
amount in excess of the reimbursement required to be paid pursuant
to Section 3.3(a), THV, HVHC or Xxxx Valve, as the case may be,
shall pay to Transtech the amount of such overpayment on such date
of filing.
(b) Transtech shall pay the reimbursement contemplated by
Section 3.3(b) to THV, HVHC or Xxxx Valve, as the case may be, at
the time Transtech receives the refund of tax from the IRS or is
allowed a credit or offset against tax by the IRS.
(c) Transtech shall pay the reimbursement contemplated by
Section 3.3(c) to THV, HVHC or Xxxx Valve, as the case may be, on
the fifteenth day of the third month following the close of the
taxable year in which THV, HVHC or Xxxx Valve, as the case may be,
realizes any net operating loss, net capital loss or net credit.
4. Deficiencies or Refunds.
If, for any taxable year, the Separate Return Tax Liability of
Transtech, THV, HVHC or Xxxx Valve or the tax liability of the
Transtech Group is changed and such change is either (i) part of a
"final determination" or (ii) the result of the filing of an
amended Federal income tax return by the Transtech Group, the
payments required to be made to or by Transtech pursuant to Section
3 of this Agreement shall be recomputed to reflect such change for
the taxable year of change and all other taxable years affected
thereby, including any penalties or additions to tax attributable
to such change. For purposes of this section, the term "final
determination" shall mean a "determination" within the meaning of
Section 1313(a) of the Code or any settlement agreement entered
into in connection with an administrative or judicial proceeding.
Promptly after the determination or filing, Transtech shall
notify THV, HVHC and Xxxx Valve of the amounts to be paid by or to
it as a result of the recomputation required by the foregoing
paragraph, which notice shall set forth such recomputation in
reasonable detail. Not later than (i) five days before the due date
for any additional payment of tax by the Transtech Group; or (ii)
five days after receipt of a refund; or (iii) five days after the
determination becomes final or the amended return is filed (if such
determination or amended return does not result in any additional
tax due or the receipt of a refund), THV, HVHC or Xxxx Valve shall
pay to Transtech, or Transtech shall pay to THV, HVHC or Xxxx
Valve, as the case may be, the difference between the amounts as
recomputed by substituting the Separate Return Tax Liability of
each of Transtech, THV, HVHC and Xxxx Valve, and the consolidated
Federal income tax liability of the Transtech Group after the
determination or filing and the amounts previously determined. The
parties recognize that the amount of tax liability as redetermined
pursuant to this paragraph for any taxable year is not necessarily
the final tax liability for that year and, therefore, the amount of
tax liability may be recomputed more than once.
5. Interest.
If for any taxable year any party hereto fails to pay timely
any amount due under the first two sentences of Section 3.2, such
payment shall bear interest at the rate established under Section
6621(a)(2) of the Code from the date such payment was due until the
date it is actually paid.
Any payment under this Agreement with respect to any taxable
year made after the fifteenth day of the third month following the
close of such taxable year shall (a) in the case of any payment
which results from an underpayment of the Separate Return Tax
Liability of Transtech, THV, HVHC or Xxxx Valve, as the case may
be, bear interest from the date determined in accordance with
Section 6601 of the Code to the date of payment at the rate
established under Section 6621(a)(2) of the Code; and (b) in the
case of any payment which results from an overpayment of the
Separate Return Tax Liability of Transtech, THV, HVHC or Xxxx
Valve, as the case may be, bear interest from the date determined
in accordance with Section 6611 of the Code to the date of payment
at the rate established under Section 6621(a)(1) of the Code.
6. IRS Audits.
Transtech shall notify THV, HVHC and Xxxx Valve if the IRS
commences an audit of the consolidated Federal income tax return of
the Transtech Group for any taxable year and shall promptly send to
them copies of any correspondence, notices or other communications
to or from the IRS relating to such audit. Each of THV, HVHC and
Xxxx Valve shall have the right, at its own expense, to participate
with Transtech in any such audit or resulting administrative
proceedings or litigation.
Transtech may take all reasonable actions necessary to contest
any claimed deficiency, including the appointment of outside tax
counsel to contest such claims of deficiency, and shall direct such
counsel to provide THV, HVHC and Xxxx Valve with periodic status
reports. If Transtech decides to contest an IRS assessment by
paying the assessment and suing for a refund, each of THV, HVHC and
Xxxx Valve shall pay to Transtech the portion of such assessment
attributable to an increase in its respective Separate Return Tax
Liability. Transtech shall exercise good faith in settling any
audit adjustments or contests and shall give equal weight to the
interests of each of Transtech, THV, HVHC and Xxxx Valve in
reaching such settlement.
7. Disputed Amounts.
If the parties hereto are unable to agree as to the amount or
timing of any payment under this Agreement, a reasonable
determination of the amount and timing of such payment shall be
made in good faith by the accounting firm that prepares or files
the Transtech Group's consolidated tax return. Any determination
made in accordance with this section shall be binding on the
parties hereto.
8. State and Local Income Taxes.
In the case of state or local taxes based on or measured by
the income of the Transtech Group, or any combination of members
thereof, on a combined, consolidated or unitary basis, the
provisions of this Agreement with respect to sharing of Federal
income tax liability shall apply with equal force to such state or
local tax; provided, however, that references in this Agreement to
provisions of the Code shall be deemed to be references to
applicable provisions of state or local law. Nothing in this
Agreement shall be deemed to constitute a consent by any of the
parties to voluntarily file state or local taxes on a combined,
consolidated or unitary basis.
9. Miscellaneous.
9.1 Payments. All payments to be made pursuant to this
Agreement shall be made in immediately available funds to such bank
and/or account in the continental United States for the account of
the party receiving such payment as from time to time such party
shall have directed the party making such payment in writing. If
the date on which any payment to be made pursuant to this Agreement
shall not be a business day, such payment shall be made on the next
succeeding business day.
9.2 Duration. The provisions of this Agreement shall apply
for so long as the tax liability for any taxable year during which
THV, HVHC or Xxxx Valve is a member of the Transtech Group is
subject to adjustment.
9.3 Amendments, Waivers, etc. Neither this Agreement nor any
of the terms hereof may be amended, supplemented, waived or
modified orally, but only by an instrument in writing signed by the
party against which enforcement of such change is sought.
9.4 Headings. The headings of the sections of this Agreement
are for convenience of reference only and shall not in any way
affect the meaning or interpretation of this Agreement.
9.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws, and not the laws
pertaining to choice or conflicts of laws, of the State of Delaware
applicable to contracts made and to be performed exclusively in
such state.
9.6 Counterparts. This Agreement may be executed in multiple
counterparts, each of which when so executed shall be deemed to be
an original, and such counterparts together shall constitute and be
one and the same instrument.
9.7 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of any successor to or assign of any
of the parties hereto to the same extent as if such successor or
assign had been an original party hereto.
IN WITNESS WHEREOF, Transtech, THV, HVHC and Xxxx Valve have
caused this Agreement to be duly executed by their respective
officers thereunto duly authorized as of September 27, 1991.
TRANSTECH INDUSTRIES, INC.
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title:President
THV ACQUSITION CORP.
By: /s/ Xxxx X. Xxxxx
Name: Xxxx X. Xxxxx
Title:Vice President
HVHC, INC.
By: /s/ H. Xxxxx Xxxxxxx
Name: H. Xxxxx Xxxxxxx
Title:Vice President
