EXHIBIT 2.8
TAX SHARING AGREEMENT
This Tax Sharing Agreement (the "Agreement") is made by and between
Catalytica, Inc. ("Catalytica") and each of the other entities listed on
Schedule A annexed hereto, as amended from time to time.
WHEREAS, Catalytica is the parent of an affiliated group of corporations,
as defined in section 1504(a) of the internal Revenue Code of 1986, as amended
(the "Code");
WHEREAS, Catalytica, on behalf of its affiliated group, is required to file
consolidated federal income tax returns in accordance with section 1501 of the
Code and may be required to file consolidated federal income tax returns for
subsequent taxable years; and
WHEREAS, the parties wish to provide for the allocation between them of
consolidated federal income tax liability, state and local income tax liability,
and certain related matters.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants and agreements contained herein, the parties agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the terms set forth below shall be defined
as follows:
(a) "Group" shall mean Parent (as hereinafter defined) and all other
corporations (whether now existing or hereafter formed or acquired) that are
required to join with Parent in filing a consolidated federal income tax return.
(b) "Group Tax Liability" shall mean the consolidated federal income tax
liability of the Group reported on the Group's consolidated federal income tax
return filed for the taxable year.
(c) "Member" shall mean any corporation that is required to join with
Parent in filing a consolidated federal income tax return, as listed on Schedule
A, as amended from time to time.
(d) "Parent" shall mean (i) Catalytica, (ii) any successor common parent
corporation described in Treas. Reg. (S)1.1502-75(d)(2)(i) or (ii), or (iii) any
corporation as to which Parent (or a successor corporation described in clause
(ii) hereof) is the "predecessor" within the meaning of Treas. Reg. (S)1.1502-
l(f)(1), if such corporation
acquires Catalytica (or a successor corporation described in clause (ii) hereof)
in a "reverse acquisition" within the meaning of Treas. Reg. (S)1.1502-75(d)(3).
(e) "Separate Return Tax Liability" shall mean with respect to any Member
for any taxable year the hypothetical federal income tax liability of such
Member determined on a pro forma basis as if such Member had filed its own
separate federal income tax return for such year and calculated by (i) taking
into account only losses, credits, carryovers of losses and credits from prior
or subsequent years, and other tax attributes of the Member (determined without
reference to the effect of the application of the consolidated return
regulations on the Member's attributes), all of which attributes are subject to
the limitations of the Code that would have been applicable had the Member filed
a separate federal income tax return for all taxable years relating to the
computation, (ii) imposing a tax on the taxable income of the Member at a rate
equal to the rate specified by the Code for the taxable year under each
applicable tax provision (including without limitation the taxes imposed under
Sections 11, 55 and 1201(a) of the Code), without surtax exemptions, and (iii)
employing the methods and principles of accounting, elections and conventions
that are used by the Group. The Separate Return Tax Liability of a Member shall
include any interest or penalties that would have been shown as due had such
Member filed a separate federal income tax return for the taxable year in
accordance with this subparagraph (e).
2. FILING OF RETURNS.
(a) Parent shall, on a timely basis, file or cause to be filed,
consolidated federal income tax returns and estimated tax returns for each
taxable year during the term of this Agreement and shall pay in full any tax
shown as due thereon. Each Member shall execute and file such consents,
elections, and other documentation as may be required or appropriate for the
proper filing of such returns. Each Member shall also maintain such books and
records and provide such information as Parent may request in connection with
the matters contemplated by this Agreement.
(b) Parent shall have the right, in its sole discretion, to (i) make any
elections which are employed in the filing of such returns, including any
elections denominated as such in the Code and choice of methods of accounting
and depreciation; (ii) determine the manner in which such returns shall be
prepared and filed, including without limitation, the manner in which any item
of income, gain, loss, deduction or credit shall be reported; (iii) contest,
compromise or settle any adjustment or deficiency proposed, asserted or assessed
as a result of any audit of any such returns; (iv) file, prosecute, compromise
or settle any claim for refund; and (v) determine whether any refunds to which
the Group may be entitled shall be paid by way of refund or credit against the
federal income tax liability of the Group.
(c) The Group will jointly file state, local and foreign tax returns on a
combined, consolidated, unitary, or other method that Parent determines in its
sole
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discretion results in a lower overall tax liability for the Group. In the event
any such state or local tax returns are filed, all of the provisions of this
Agreement shall apply to the extent determined by Parent to the allocation,
preparation, filing and payment related to such state and local taxes and
returns and shall be applied as is appropriate in the context of the applicable
state and local tax laws as determined in the sole discretion of Parent,
provided, further, that any benefit realized by the filing of such state and
local returns shall remain with Parent.
3. PAYMENTS.
For each taxable year of the Group with respect to which a consolidated
federal income tax return is filed, Each Member shall make payments to Parent in
the following manner:
(a) Each Member shall pay to Parent the amount of such Member's Separate
Return Tax Liability not later than five (5) days before the date on which the
Group's consolidated federal income tax return is required to be filed (taking
account of any extensions thereof).
(b) Each Member shall pay to Parent, not later than five (5) days before
the date such Member would be required to make a payment of estimated federal
income taxes were such Member to file a separate federal income tax return for
the taxable year (including any payment due at the time any extension of time
for the filing of such hypothetical return is obtained), an amount as
determined by Parent in a manner consistent with paragraph 1(e), equal to the
portion of such Member's Separate Return Tax Liability that would be due were
that Member to file a separate federal income tax return for the taxable year.
The Quarterly Estimated Tax Payment shall be determined at the Parent's sole
discretion. Any payments made by a Member to Parent under this subparagraph (b)
with respect to a taxable year shall be applied to reduce the amount, if any,
owing by that Member under subparagraph (a) of this paragraph 3 with respect to
such year. Any excess of such payments over the amount determined under
subparagraph (a) of this paragraph 3 for such year shall be repaid by Parent to
that Member not later than forty-five (45) days after the date on which the
Group's federal income tax return is filed or, to the extent that such excess
represents all or a part of a tax refund claimed by the Group, not later than
forty-five (45) days after the receipt of such refund.
4. CHANGES IN TAX LIABILITY.
(a) If with respect to any taxable year (i) the Group files an amended
consolidated federal income tax return reporting a consolidated federal income
tax liability different from the Group Tax Liability, (ii) the Group Tax
Liability or a Member's tax liability is adjusted and such adjustment is part of
a final "determination" as that term is defined in section 1313(a) of the Code,
or (iii) the Group is assessed and pays federal income taxes in excess of the
Group Tax Liability by reason of any of the
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events specified in section 6213(b) or (d) of the Code, then the amounts of the
payments required under paragraph 3 shall be recomputed, subject to the
limitations of subparagraph (c) of this paragraph 4, to give effect to such
amended return, adjustment or assessment, as the case may be. That Member shall
then pay to Parent, or Parent shall then pay to that Member, as the case may be,
any difference between the amounts determined by such recomputation and the
amounts previously paid. Such payments shall be made no later than (i) in the
case of an additional payment of tax by the Group due as a result of such
amended return, adjustment or assessment, the later of(a) five (5) days before
the date on which such additional payment of tax is due or (b) five (5) days
after the date on which Parent notifies of the amount of payment due from that
Member pursuant to this subparagraph (a); or (ii) where the Group receives a
refund arising from such amended return or adjustment, forty-five (45) days
after the receipt of such refund.
(b) If with respect to any taxable year in which the Group files an amended
consolidated federal income tax return reporting a consolidated federal income
tax liability identical to the Group Tax Liability, then the amounts of the
payments required under paragraph 3, subject to the limitations of subparagraph
(c) of this paragraph 4, shall be recomputed to give effect to such amended
return. Not later than forty-five (45) days after the filing of such amended
return, the affected Member shall pay to Parent, or Parent shall pay to that
Member, as the case may be, any difference between the amounts determined by
such recomputation and the amounts previously paid.
(c) If with respect to any taxable year a Member realizes a loss or credit
that would be permitted under the Code (taking into account any election under
section 172(b)(3) of the Code) to be carried to one or more taxable years that
precede such taxable year if such Member had filed a separate federal income tax
return for all such taxable years, then the amounts of the payments required
under paragraph 3 for such taxable years shall be recomputed to give effect to
such carryback; provided, however, that, notwithstanding subparagraphs (a) and
(b) of this paragraph 4, no such recomputation shall be made with respect to any
loss or credit carried back to a taxable year beginning before the date hereof
or, if later, a taxable year in which such Member was not a Member; provided,
further, that no loss or credit that could be carried back to a taxable year
beginning before the date hereof in which such Member was a Member shall be
considered in determining such Member's Separate Return Tax Liability for any
other year. Such Member shall pay to Parent, or Parent shall pay to such Member,
as the ease may be, any difference between the amounts determined by such
recomputation and the amounts previously paid not later than forty-five (45)
clays after the date on which the Group's federal income tax return for the
taxable year is filed, or to the extent that such difference represents all or
part of a tax refund claimed by the Group, not later than five (5) clays after
the receipt of such refund.
(d) The parties recognize that a recomputation under subparagraphs (a), (b)
or (c) of this paragraph 4 of the amounts of the payments required under
paragraph 3 for any
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taxable year will not necessarily be the final determination of the amounts of
such payments for such year, and the amounts of such payments may be recomputed
more than once.
(e) In the event that a change in the tax liability of the Group arising
from an amended return, adjustment or assessment described in subparagraph (a)
of this paragraph 4 results or will result in the receipt or payment of
interest, or the payment or recovery of penalties in excess of the aggregate
interest or penalties included in determining the aggregate Separate Return Tax
Liability of a Member, such interest or penalties shall be allocated to such
Member as follows: The total amount of such excess interest or penalty shall be
multiplied by a fraction, the denominator of which is the amount of the change
in the Group Tax Liability on which the interest or penalty is computed, and the
numerator of which is the amount of the change in such Member's allocated tax
liability, in both cases with respect to the most recent prior computation of
the Group Tax Liability and such Member's Separate Return Tax Liability. Such
Member shall pay to Parent, or Parent shall pay to such Member, as the case may
be, the excess interest or penalties allocated to such Member pursuant to this
subparagraph 4(e) at the same time the amounts payable pursuant to subparagraph
(a) of this paragraph 4 become payable.
(f) Except as provided in paragraph 6, payments made pursuant to
subparagraphs (a), (b), (c), (d), or (e) of this paragraph 4 shall not
themselves bear interest.
5. INDEMNIFICATION.
(a) Each Member agrees to indemnify and hold harmless Parent with respect
to any liability for federal income taxes, including any interest thereon, any
additions to such taxes and assessable penalties imposed with respect thereto
(collectively "Taxes") to the extent that Parent's liability for such Taxes is
attributable to the failure of such Member to make the payments required of it
pursuant to paragraphs 3 and 4 of this Agreement or to the failure of such
subsidiary to comply with subparagraph (a) of paragraph 2 of this Agreement.
(b) Parent agrees to indemnify and hold each Member harmless with respect
to any liability for federal income taxes, including any interest thereon, any
additions to such taxes and assessable penalties imposed with respect thereto
(collectively, "Taxes"), where such liability arises solely by reason of such
Member being severally liable for any taxes of the Group pursuant to Treas. Reg.
(S) 1.1502-6; provided, however, that such Member shall not be entitled to
indemnification by Parent pursuant to this paragraph 5 unless such Member has
made all payments required of it pursuant to paragraph 3 and 4 of this Agreement
and fully complied with subparagraph (a) of paragraph 2 of this Agreement.
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(c) Payment pursuant to the indemnity provided in this paragraph 5 shall be
made within ten (10) days of notice that a payment requiring indemnification
under this paragraph 5 has been made by the Parent.
6. DEFAULT INTEREST.
Where payment required by this Agreement to be made from one party to
another is not made within the time provided, the amount not timely paid shall
bear interest at the rate established pursuant to section 6621 (a)(2) of the
Code.
7. TERMINATION OF AFFILIATION.
(a) In the event that a Member ceases to be included in the Group but
continues to be a corporation subject to federal income tax, this Agreement,
except as provided in paragraphs 5 and 7 of this Agreement, shall terminate.
(b) Parent and each former Member shall consult and furnish each other with
information concerning the status of any tax audit or tax refund claim relating
to a taxable year in which such Member was a Member and a consolidated federal
income tax return was filed. Parent shall have the right to make the final
determination as to the response of the Group to any audit and shall have the
sole right to control, at its own expense, any contest of any change proposed
and any proposed disallowance of a refund claim by the Internal Revenue Service
through the Appeals Office of the Internal Revenue Service and the courts in
connection with any taxable year for which this Agreement is in effect.
(c) Each Member shall reimburse Parent to the extent that such Member
received a payment under this Agreement on account of (or payments made by it
under this Agreement were reduced by) any loss or credit that remains an
attribute of such Member (i.e., the loss or credit was not absorbed by the Group
----
in calculating the Group Tax Liability).
(d) Payments which would have been required under paragraphs 3 and 4 of
this Agreement to or by a Member, were such Member still a Member, with respect
to those taxable years as to which such Member was a Member, shall be so made in
accordance with principles analogous to those set forth in such paragraphs and
at the times set forth therein; provided, however, that no such payments shall
be made on account of any loss or credit realized by a Member in a year in which
such Member was not a Member that may be carried back to a taxable year in which
a Member was a Member.
8. RESOLUTION OF DISPUTES.
Any dispute or ambiguity concerning the amount of any payment provided for
under this Agreement shall be resolved by Parent in a manner consistent with the
principles and procedures set forth in this Agreement. The judgment of Parent
shall be conclusive and binding upon each of the parties to this Agreement.
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9. EFFECTIVE DATE.
This Agreement shall be effective on the date first above written and shall
remain in effect for each taxable year thereafter in which any Member is
included in a consolidated federal income tax return filed by Parent.
10. INFORMATION AND EXPENSES.
Parent is authorized to retain accountants and attorneys for the purpose of
preparing the Group's tax returns provided for herein, and each Member agrees to
pay all the costs incurred by such Member in furnishing records, documents or
information in the form requested by Parent in connection with the preparation
of any such returns. Each Member shall promptly provide Parent with such
records, documents and information as Parent shall request in connection with
the preparation of such returns. Parent shall be authorized to retain
accountants and attorneys for the purpose of preparing any of the refund claims
provided for herein, and of representation in connection with any Member
disputes with the IRS. In cases where the action taken is Member specific or
where any Member has agreed that the action taken is appropriate, such Member"
agrees to pay the costs reasonably allocated to it by Parent of employing such
attorneys and accountants (including associated court costs), and to bear the
costs incurred by it in furnishing records, documents and testimony in
connection with any such matter.
11. MISCELLANEOUS PROVISIONS.
(a) This Agreement contains the entire understanding of the parties hereto
with respect to the subject matter contained herein and supersedes all prior
written, oral or implied understandings, representations and agreements among
the parties with respect thereto. No alteration, amendment, or modification of
any of the terms of this Agreement shall be valid unless made by an instrument
signed in writing by an authorized officer of each party.
(b) This Agreement shall be binding upon and inure to the benefit of each
party hereto, its respective successors and assigns.
(c) This Agreement is not intended to benefit any person other than the
parties hereto, each of their respective successors and assigns. No person not
(i) a party or (ii) a party's successor or assign shall be a third party
beneficiary hereof.
(d) This Agreement shall be governed by, interpreted and enforced in
accordance with the laws of the State of California (regardless of the laws that
might be applicable under principles of conflicts of laws).
(e) This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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(f) The descriptive headings of the paragraphs of this Agreement are
inserted for convenience only and shall not constitute a part hereof.
(g) Any notice or other communication required or permitted under this
Agreement shall be in writing and shall be personally delivered or sent by
certified or registered United States mail, postage prepaid, to the parties at
the following addresses (or at such other address as a party may specify by
notice to the others):
If to Parent:
Catalytica, Inc.
000 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxx
If to a Member:
See the address set forth on Schedule A
Attn: Xxxxxxxx Xxxxxxx
Any such notice or communication shall be effective and be deemed to have been
given as of the dates delivered or mailed, as the case may be; provided that any
notice or communication changing any of the addresses set forth above shall be
effective and deemed to have been given only upon its receipt.
(h) Where the context so requires, the word "person" shall include a
corporation, firm, partnership or other form of association or entity.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date set forth below, with the effective date as to each
Member the date such Member joined the Group.
CATALYTICA, INC.
By: /s/ Xxxxxxx X. Xxxx
__________________________________________
Date: 3/4/99
_________________________________________
CATALYTICA BAYVIEW, INC.
By: /s/ Xxxxxxxx X. Xxxxxxx
__________________________________________
Date: 3/4/99
_________________________________________
CATALYTICA COMBUSTION SYSTEMS, INC.
By: /s/ Xxxxxxxx X. Xxxxxxx
__________________________________________
Date: 3/4/99
_________________________________________
CATALYTICA ADVANCED TECHNOLOGIES, INC.
By: /s/ Xxxxxxxx X. Xxxxxxx
__________________________________________
Date: 3/4/99
_________________________________________
Schedule A
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LIST AND ADDRESSES OF MEMBER CORPORATIONS
Catalytica Bayview, Inc.
000 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxx, XX 00000
Catalytica Combustion Systems
000 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxx, XX 00000
Catalytica Advanced Technologies, Inc.
000 Xxxxxxxx Xxxxx
Xxxxxxxx Xxxx, XX 00000
