TAX ALLOCATION AGREEMENT
This Tax Allocation Agreement is effective as of January 29, 1995 by
and among Intelligent Electronics, Inc. ("IE") and each of the undersigned
corporations (the "Subsidiaries").
Missing Link Communications, Inc.
XLConnect Services, Inc.
Intellinet, Ltd.
Intelligent Advanced Systems, Inc.
Intelligent Distribution Services, Inc.
Intelligent Express, Inc.
Intelligent SP, Inc.
Intelligent Systems Group, Inc.
RND, Inc.
The Future Now, Inc.
XLConnect Solutions, Inc.
Intelevest Holdings, Inc.
The Future Now, Inc. of Arkansas
Intellicom Solutions, Inc.
BACKGROUND
Intelligent Electronics, Inc. ("IE") and its affiliated subsidiaries
have been filing a consolidated federal income tax return in accordance with
Section 1501 of the Internal Revenue Code of 1986. No affirmative elections have
been made by IE or its affiliates concerning the allocation or payment of the
consolidated Federal Income Tax Liability. It is the intent and desire of IE and
its affiliates to make the elections described below for the allocation of the
Federal Income Tax Liability, to agree on the payment of such allocations, to
establish a method for compensating a member of the group for tax savings
created by the member, to deal with the administration of the federal income tax
liability and to provide for the allocation and payment of any refund received
in subsequent years.
NOW, THEREFORE, the parties to this Agreement agree as follows:
1. Definitions. The following defined terms shall have the following
meanings when used in this Agreement:
(a) "Agreement" means this Tax Allocation Agreement.
(b) "Affiliates" means all Members of the Consolidated Group, other
than IE.
(c) "Consolidated Group" means the "affiliated group" of
corporations of which IE is the "common parent corporation" as such terms are
defined in (section)1504(a)(1) of the Code.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Consolidated Return" means the consolidated federal income tax
return of the Consolidated Group for each year to be filed by IE on behalf of
the Consolidated Group.
(f) "Consolidated Tax Liability" shall mean with respect to a
taxable year or portion thereof the consolidated federal income tax liability
shown on a Consolidated Return.
(g) "CR Tax" shall mean that portion of the Consolidated Tax
Liability allocated to a Member pursuant to Section 4(a)(i) of this Agreement.
(h) "IRS" means the Internal Revenue Service.
(i) "Loss Member" shall mean a Member whose losses and/or credits
have resulted in Tax Savings for one or more Members.
(j) "Member" shall mean IE and each Subsidiary listed above which is
part of the Consolidated Group, including any corporation which subsequent to
the date of this Agreement is an "includible corporation" as defined in
(section)1504(b) of the Code, for which the ownership requirements of
(section)1504(1) are met, and which becomes a party to this Agreement pursuant
to Section 15 of this Agreement.
(k) "Other Taxes" shall mean any taxes (including any penalties and
interest) other than federal income taxes (e.g., state and local income taxes,
franchise taxes, and various taxes, foreign income, transfer taxes).
(l) "SR Tax" shall mean with respect to a particular tax year the
"separate return tax liability" of a Member as determined pursuant to Treas.
Reg. (section)1.1552-1(a)(2)(ii) except that such determination shall not take
into account any net operating losses or tax credits which are not utilized in
the computation of Consolidated Tax Liability.
(m) "Tax Savings" shall mean with respect to a Member for any
particular tax year, the excess of such corporation's SR Tax over such
corporation's CR Tax.
(n) "Tax Savings Member" with respect to a particular tax year shall
mean a Member who has a Tax Savings.
(o) "Treas. Reg." shall mean the regulations promulgated under the
Code by the United States Department of the Treasury, as such regulations may be
amended from time to time.
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2. Filing Consolidated Return. A Consolidated Return shall be filed by
IE for the taxable year ended February 3, 1996, and for each year thereafter in
which the Consolidated Group is permitted to so file, unless IE, in its sole
discretion, elects to no longer file a Consolidated Return.
(a) The Affiliates agree to furnish all information, execute all
consents and elections, and provide all other documents which may be required or
appropriate to evidence such consent and to prepare and file such Consolidated
Returns, including extensions, as IE may request.
(b) IE shall have the exclusive authority to represent any Member
before the IRS or any other governmental agency or authority or any court
regarding all federal income tax matters relating to the Consolidated Return,
including (i) the exclusive control of any response to any examination by the
IRS or any other taxing authority, and (ii) the exclusive control over any
contest or controversies relating to the Consolidated Return, including whether
and in what forum to conduct such contest and whether and on what basis to
settle such contest. IE shall notify the relevant Affiliate of any
correspondence or other inquiry from the IRS concerning such Affiliate and will
allow such Affiliate to consult with IE concerning the inquiry, examination or
controversy. The agreement in this section 2(b) shall survive the termination of
this Agreement with respect to any taxable year (or portion thereof) ending on
or prior to termination of this Agreement.
3. Allocation of Consolidated Tax Liability. With respect to the
determination of earnings and profits for federal income tax purposes, the
Consolidated Tax Liability for each taxable year shall be allocated among the
Members in accordance with the methods prescribed in Treas. Reg.
(section)1.1552-1(a)(2) and Treas. Reg. (section)1.1502-33(d)(2)(ii) commencing
with the tax year ending February 3, 1996. The fixed percentage to be used for
purposes of Treas. Reg. (section)1.1502-33(d)(2)(ii)(b) is 100 percent.
4. Compensation for Tax Savings.
(a) In order to compensate a Member for the use of its net operating
losses or tax credits in arriving at the Consolidated Tax Liability, the
following steps shall be taken:
(i) The Consolidated Tax Liability shall be determined under
Treasury Regulation (section) 1.1502-2 and shall be allocated to each Member in
accordance with Treasury Regulation (section) 1.1552-1(a)(2). Each Member shall
be liable to IE for the amount of Consolidated Tax Liability allocated to it
pursuant to the provisions of this Section 4(a)(i).
(ii) The Tax Savings shall be calculated with respect to each
Member.
(iii) Each Tax Savings Member shall be liable for and pay,
pursuant to the provisions of paragraph 5 of this Agreement, the amount of its
Tax Savings to
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IE. Any Loss Member or Loss Members which cause a Tax Savings shall be paid the
amount of such Tax Savings by IE in accordance with the "consistent method"
requirements of Treas. Reg. (section)1.1502-33(d)(ii)(c). Such payments will
generally be deemed consistent if the payment to the Loss Member is equal to (a)
in the case of net operating losses, the product of (i) the amount of net
operating losses of such Loss Member claimed as deductions in computing the
Consolidated Tax Liability used in the calculation of the Tax Savings times (ii)
the effective overall tax rate applicable to the Consolidated Return filed for
the taxable year in which the net operating losses are so claimed as deductions
and (b) in the case of tax credits, (i) 100 percent of the tax credits of such
Loss Member utilized in the determination of Consolidated Tax Liability, reduced
by (ii) the amount by which the SR Tax of the Loss Member computed without
regard to such credits exceeds the CR Tax of the Loss Member.
(b) In determining the "net operating loss" of a Loss Member, the
principles of Revenue Ruling 66-374, 1966-2 C.B. 427, shall be utilized; thus,
the "net operating loss" of a Loss Member is the deduction which such Loss
Member would have had available if it actually filed a separate return for the
year and would not include any portion of a Loss Member's net operating loss
sustained in a prior or subsequent year which had been absorbed by the
Consolidated Group or by the Loss Member in computing the Consolidated Tax
Liability or an SR Tax.
(c) In no event shall a Tax Savings payment be made to a Loss Member
unless the net operating loss and/or tax credit to which such payment relates
resulted in a reduction in the Consolidated Tax Liability.
(d) In calculating the amount of Tax Savings resulting from a
carryback or carryover of net operating losses, adjustment shall be made to the
SR Tax for such prior or subsequent year as required under Section 172(b)(2) and
172(d) of the Code. For purposes of this calculation, the election under Section
172(b)(3)(C) of the Code shall be made on a separate return basis; provided,
however, the decision to make any such election under Section 172(d)(3)(C) shall
be in the sole discretion of IE.
(e) The liability of an Affiliate to IE for the amount of such
Affiliate's CR Tax shall be represented on the books of such Affiliate and IE,
as an account payable and account receivable, respectively. The liability of a
Tax Savings Member to pay the amount of its Tax Savings to IE shall be
represented on the books of such Tax Savings Member as an account payable, and
the right of a Loss Member to receive payments of Tax Savings from IE shall be
represented on the books of such Loss Member as an account receivable. Payment
of such accounts shall be made in accordance with the provisions of paragraph 5
of this Agreement.
5. Payments by and to Members. With respect to each taxable year (or
relevant portion thereof), each Affiliate shall pay to IE the amount of such
Affiliate's CR Tax. With respect to the discharge of intercompany accounts
relating to payments of Tax Savings, a Tax Savings Member shall pay the amount
of its Tax Savings to IE. With respect to payment of Tax Savings to Loss
Members, IE shall pay to each Loss Member such Loss
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Member's allocable share of the total Tax Savings. All payments to be made
pursuant to this paragraph 5 shall be made within 30 days of the date of filing
of the Consolidated Return to which such payments relate.
6. Estimated Consolidated Tax Liability Payments. IE shall have the
right to assess each Affiliate for its share of estimated federal income tax
payments to be made with respect to the projected Consolidated Tax Liability for
each taxable year. Each Affiliate shall make such payment to IE within fifteen
days after such assessment. Each Affiliate that makes payments under this
section will receive credit for its payments of estimated federal income tax in
the computation of the payments under Section 5 of this Agreement.
7. Carrybacks and Carryovers of Losses and Credits. If part of or all
of an unused consolidated net operating loss or tax credit is allocated to a
Member pursuant to Treas. Reg. (section)1.1502-79, and it is carried back or
forward to a year in which such Member filed a separate income tax return or was
included in a consolidated federal income tax return with another affiliated
group, any refund or reduction in federal income tax liability arising from the
carryback or carryover shall be retained by such Member (or, if appropriate,
paid to such Member if a refund is received by another Member).
8. Adjustments to Consolidated Tax Liability.
(a) If Consolidated Tax Liability is adjusted for any taxable
period, whether by means of an amended return, claim for refund, or examination
by the IRS, the computations made under Sections 3 and 4 of this Agreement shall
be recomputed taking into account such adjustments, and appropriate conforming
payments made. In the case of a refund, if any, IE shall make payment to the
appropriate Member within fifteen days after the refund is received by IE. In
the case of an increase in the Consolidated Tax Liability, each Member obligated
to make payment under the recomputed allocation shall pay such amount to IE upon
the receipt of notice of such liability from IE.
(b) If any interest is to be paid or received as a result of a
consolidated federal income tax deficiency or refund, such interest shall be
allocated to the Members in the ratio that each Member's allocated share of the
change in Consolidated Tax Liability bears to the total change in Consolidated
Tax Liability. Any penalty not specifically allocated to a Member by the IRS
shall be allocated upon such basis as interest is allocable as described above;
provided, however, that if XLConnect disagrees with any reporting position taken
by IE as agent for XLConnect on a Consolidated Return for any taxable year in
which XLConnect has shareholders other than Members, and XLConnect obtains an
opinion of counsel or a national accounting firm that such reporting position
would result in the imposition of one or more penalties by the IRS, IE agrees to
indemnify and reimburse XLConnect for any penalties paid by or allocated to it
which are attributable to such reporting position.
9. Term of this Agreement. This Agreement shall apply to the taxable
year ending February 3, 1996, and all subsequent years, unless the Members agree
in writing
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to terminate the Agreement. Notwithstanding such termination, this Agreement
shall continue in effect with respect to any payment or refunds due for all
taxable periods prior to termination. Nothing herein shall be construed to
prevent IE from terminating its election to file a Consolidated Return.
10. Assignability. This Agreement may not be assigned by a party
without the prior written consent of the other parties to this Agreement.
11. Effect of Changes to the Code. Any alteration, modification,
addition, deletion, or other change in the federal income tax laws or
regulations relating to consolidated federal income tax returns shall
automatically be applicable to this Agreement, provided, however, that if all of
the parties to this Agreement agree, this Agreement shall be amended or
terminated in the event of any such alteration, modification, addition, deletion
or other change.
12. Other Taxes. To the extent two or more Members are permitted or
required to file consolidated, combined or unitary tax returns with respect to
Other Taxes, the provisions of this Agreement relating to federal income tax
matters shall apply to such Other Taxes as if they were federal income taxes. If
such a consolidated, combined or unitary tax return with respect to any other
Taxes is not filed, each Member shall be responsible for the reporting and
payment of any Other Taxes applicable to such Member.
13. Record Retention. Records relating to the calculation and reporting
of the Consolidated Tax Liability, including returns, supporting schedules,
workpapers, correspondence, software and data bases, shall be retained by the
Members in accord with IE's record retention policy, but for at least as long as
they may be material to the determination of such liability or refunds. IE shall
make reasonably available to Members all such materials.
14. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the respective successors and assigns of the parties hereto; but
no assignment shall relieve any party's obligations hereunder without the
written consent of the other parties. If a Member leaves the Consolidated Group,
they shall continue to be bound by this Agreement with respect to any matter
which involves a taxable year (or portion thereof) during which such Member was
included in a Consolidated Return.
15. New Members. The Members recognize that from time to time other
corporations may become Members of the Consolidated Group and agree that such
new Members may become parties to this Agreement by signing a joinder
substantially in the form of that attached as Exhibit A.
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S
16. Governing Law. This Agreement shall be governed by the laws of the
state of Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have caused their names to be
subscribed and executed by their respective authorized officers on the dates
indicated, effective as of the date first written above.
NTELLIGENT ELECTRONICS, INC.
Date: 10/21/96 By: /s/ Xxxxxxxx X. Xxxx
------------------------ -------------------------------------
MISSING LINK COMMUNICATIONS, INC.
Date: 10/21/96 By: /s/ Xxxxxxxxx Xxxxx
------------------------ -------------------------------------
XLCONNECT SERVICES, INC.
Date: 10/21/96 By: /s/ Xxxxxxxxx Xxxxx
------------------------ -------------------------------------
INTELLINET, LTD.
Date: 10/21/96 By: /s/ Xxxxxxxx X. Xxxx
------------------------ -------------------------------------
INTELLIGENT ADVANCED SYSTEMS, INC.
Date: 10/21/96 By: /s/ Xxxxxxxx X. Xxxx
------------------------ -------------------------------------
INTELLIGENT DISTRIBUTION SERVICES, INC.
Date: 10/21/96 By: /s/ Xxxxxxxx X. Xxxx
------------------------ -------------------------------------
INTELLIGENT EXPRESS, INC.
Date: 10/21/96 By: /s/ Xxxxxxxx X. Xxxx
------------------------ -------------------------------------
[EXECUTIONS CONTINUED]
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INTELLIGENT SP, INC.
Date: 10/21/96 By: /s/ Xxxxxxxx X. Xxxx
------------------------ -------------------------------------
INTELLIGENT SYSTEMS GROUP, INC.
Date: 10/21/96 By: /s/ Xxxxxxxxx Xxxxx
------------------------ -------------------------------------
RND, INC.
Date: 10/21/96 By: /s/ Xxxxxxxx X. Xxxx
------------------------ -------------------------------------
THE FUTURE NOW, INC.
Date: 10/21/96 By: /s/ Xxxxxxxx X. Xxxx
------------------------ -------------------------------------
XLCONNECT SOLUTIONS, INC.
Date: 10/21/96 By: /s/ Xxxxxxxxx Xxxxx
------------------------ -------------------------------------
INTELEVEST HOLDINGS, INC.
Date: 10/21/96 By: /s/ Xxxx Xxxxxxx
------------------------ -------------------------------------
THE FUTURE NOW, INC. OF
ARKANSAS
Date: 10/21/96 By: /s/ Xxxxxxxx X. Xxxx
------------------------ -------------------------------------
Date:_________________________ INTELLICOM SOLUTIONS, INC.
By: /s/ Xxxxxxxxx Xxxxx
-------------------------------------
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Exhibit A
to
Tax Allocation Agreement
This instrument forms part of the Tax Allocation Agreement dated
January 29, 1996 among Intelligent Electronics, Inc. and its subsidiaries (the
"Agreement"). The Agreement provides that a corporation which becomes a Member
of the Consolidated Group (as such capitalized words are used in the Agreement)
may become a party to the Agreement by signing this joinder. The below
identified authorized officer of The Future Now acknowledges having received a
copy of the Agreement and having read the Agreement, hereby agrees that The
Future Now as of August 17, 1985 shall be a party to the Agreement for the
taxable year ending February 3, 1996 and all subsequent years and shall be a
Member as defined in the Agreement.
11/6/96 The Future Now
-------------
Date
By: /s/ Xxxxxxxx Xxxx
------------------------
Title: Secretary
-------------------
Exhibit A
to
Tax Allocation Agreement
This instrument forms part of the Tax Allocation Agreement dated
January 29, 1996 among Intelligent Electronics, Inc. and its subsidiaries (the
"Agreement"). The Agreement provides that a corporation which becomes a Member
of the Consolidated Group (as such capitalized words are used in the Agreement)
may become a party to the Agreement by signing this joinder. The below
identified authorized officer of XLConnect Systems, Inc. acknowledges having
received a copy of the Agreement and having read the Agreement, hereby agrees
that XLConnect Systems, Inc. as of April 25, 1996 shall be a party to the
Agreement for the taxable year ending February 1, 1997 and all subsequent years
and shall be a Member as defined in the Agreement.
11/6/96 XLConnect Systems, Inc.
-------------
Date
By: /s/ Xxxxxxxxx Xxxxx
------------------------
Title: Secretary
-------------------
Exhibit A
to
Tax Allocation Agreement
This instrument forms part of the Tax Allocation Agreement dated
January 29, 1996 among Intelligent Electronics, Inc. and its subsidiaries (the
"Agreement"). The Agreement provides that a corporation which becomes a Member
of the Consolidated Group (as such capitalized words are used in the Agreement)
may become a party to the Agreement by signing this joinder. The below
identified authorized officer of XLConnect Solutions, Inc. acknowledges having
received a copy of the Agreement and having read the Agreement, hereby agrees
that XLConnect Solutions, Inc. as of January 5, 1996 shall be a party to the
Agreement for the taxable year ending February 3, 1996 and all subsequent years
and shall be a Member as defined in the Agreement.
11/6/96 XLConnect Systems, Inc.
-------------
Date
By: /s/ Xxxxxxxxx Xxxxx
------------------------
Title: Secretary
-------------------
Exhibit A
to
Tax Allocation Agreement
This instrument forms part of the Tax Allocation Agreement dated
January 29, 1996 among Intelligent Electronics, Inc. and its subsidiaries (the
"Agreement"). The Agreement provides that a corporation which becomes a Member
of the Consolidated Group (as such capitalized words are used in the Agreement)
may become a party to the Agreement by signing this joinder. The below
identified authorized officer of The Future Now, Inc. of Arkansas acknowledges
having received a copy of the Agreement and having read the Agreement, hereby
agrees that The Future Now, Inc. of Arkansas as of August 17, 1995 shall be a
party to the Agreement for the taxable year ending February 3, 1996 and all
subsequent years and shall be a Member as defined in the Agreement.
11/6/96 The Future Now, Inc. of Arkansas
-------------
Date
By: /s/ Xxxxxxxx Xxxx
------------------------
Title: Secretary
-------------------
Exhibit A
to
Tax Allocation Agreement
This instrument forms part of the Tax Allocation Agreement dated
January 29, 1996 among Intelligent Electronics, Inc. and its subsidiaries (the
"Agreement"). The Agreement provides that a corporation which becomes a Member
of the Consolidated Group (as such capitalized words are used in the Agreement)
may become a party to the Agreement by signing this joinder. The below
identified authorized officer of The Future Now, Inc. of Delaware acknowledges
having received a copy of the Agreement and having read the Agreement, hereby
agrees that The Future Now, Inc. of Delaware as of August 17, 1995 shall be a
party to the Agreement for the taxable year ending February 3, 1996 and all
subsequent years and shall be a Member as defined in the Agreement.
11/6/96 The Future Now, Inc. of Delaware
-------------
Date
By: /s/ Xxxxxxxx Xxxx
------------------------
Title: Secretary
-------------------
Exhibit A
to
Tax Allocation Agreement
This instrument forms part of the Tax Allocation Agreement dated
January 29, 1996 among Intelligent Electronics, Inc. and its subsidiaries (the
"Agreement"). The Agreement provides that a corporation which becomes a Member
of the Consolidated Group (as such capitalized words are used in the Agreement)
may become a party to the Agreement by signing this joinder. The below
identified authorized officer of The Future Now, Inc. of Massachusetts
acknowledges having received a copy of the Agreement and having read the
Agreement, hereby agrees that The Future Now, Inc. of Massachusetts as of August
17, 1995 shall be a party to the Agreement for the taxable year ending February
3, 1996 and all subsequent years and shall be a Member as defined in the
Agreement.
11/6/96 The Future Now, Inc. of Massachusetts
-------------
Date
By: /s/ Xxxxxxxx Xxxx
------------------------
Title: Secretary
-------------------
Exhibit A
to
Tax Allocation Agreement
This instrument forms part of the Tax Allocation Agreement dated
January 29, 1996 among Intelligent Electronics, Inc. and its subsidiaries (the
"Agreement"). The Agreement provides that a corporation which becomes a Member
of the Consolidated Group (as such capitalized words are used in the Agreement)
may become a party to the Agreement by signing this joinder. The below
identified authorized officer of The Future Now, Inc. of Texas acknowledges
having received a copy of the Agreement and having read the Agreement, hereby
agrees that The Future Now, Inc. of Texas as of August 17, 1995 shall be a party
to the Agreement for the taxable year ending February 3, 1996 and all subsequent
years and shall be a Member as defined in the Agreement.
11/6/96 The Future Now, Inc. of Texas
-------------
Date
By: /s/ Xxxxxxxx Xxxx
------------------------
Title: Secretary
-------------------
Exhibit A
to
Tax Allocation Agreement
This instrument forms part of the Tax Allocation Agreement dated
January 29, 1996 among Intelligent Electronics, Inc. and its subsidiaries (the
"Agreement"). The Agreement provides that a corporation which becomes a Member
of the Consolidated Group (as such capitalized words are used in the Agreement)
may become a party to the Agreement by signing this joinder. The below
identified authorized officer of Monterey-Waldec, Inc. acknowledges having
received a copy of the Agreement and having read the Agreement, hereby agrees
that Monterey-Waldec, Inc. as of August 17, 1995 shall be a party to the
Agreement for the taxable year ending February 3, 1996 and all subsequent years
and shall be a Member as defined in the Agreement.
11/6/96 Monterey-Waldec, Inc.
-------------
Date
By: /s/ Xxxxxxxxx Xxxxx
------------------------
Title: VP, Secretary & Treasurer
---------------------------------
Exhibit A
to
Tax Allocation Agreement
This instrument forms part of the Tax Allocation Agreement dated
January 29, 1996 among Intelligent Electronics, Inc. and its subsidiaries (the
"Agreement"). The Agreement provides that a corporation which becomes a Member
of the Consolidated Group (as such capitalized words are used in the Agreement)
may become a party to the Agreement by signing this joinder. The below
identified authorized officer of Premium Computer Corporate Center acknowledges
having received a copy of the Agreement and having read the Agreement, hereby
agrees that Premium Computer Corporate Center as of August 17, 1995 shall be a
party to the Agreement for the taxable year ending February 3, 1996 and all
subsequent years and shall be a Member as defined in the Agreement.
11/6/96 Premium Computer Corporate Center
-------------
Date
By: /s/ Xxxxxxxxx Xxxxx
------------------------
Title: VP, Secretary & Treasurer
---------------------------------
Exhibit A
to
Tax Allocation Agreement
This instrument forms part of the Tax Allocation Agreement dated
January 29, 1996 among Intelligent Electronics, Inc. and its subsidiaries (the
"Agreement"). The Agreement provides that a corporation which becomes a Member
of the Consolidated Group (as such capitalized words are used in the Agreement)
may become a party to the Agreement by signing this joinder. The below
identified authorized officer of Entre Computer Centers of Virginia, Inc.
acknowledges having received a copy of the Agreement and having read the
Agreement, hereby agrees that Entre Computer Centers of Virginia, Inc. as of
August 17, 1995 shall be a party to the Agreement for the taxable year ending
February 3, 1996 and all subsequent years and shall be a Member as defined in
the Agreement.
11/6/96 Entre Computer Centers of Virginia, Inc.
-------------
Date
By: /s/ Xxxxxxxxx Xxxxx
------------------------
Title: VP, Secretary & Treasurer
---------------------------------
