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EXHIBIT 10.4
TAX REPORTING AGREEMENT
THIS TAX REPORTING AGREEMENT (the "Agreement"), dated as
of October 31, 1995, is made by and among CROWN CRAFTS, INC., a
Georgia corporation ("Crown Crafts"), THE RED CALLIOPE AND
ASSOCIATES, INC., a California corporation ("Red Calliope"), and
XXXX XXXXXXX, an individual resident of California (the
"Designated Party").
W I T N E S E T H :
WHEREAS, Crown Crafts, Red Calliope and the Designated
Party are parties to that certain Merger Agreement, dated as of
October 8, 1995, as amended by Amendment No. 1 thereto dated as
of October 31, 1995 (the "Merger Agreement"), pursuant to which a
wholly owned subsidiary of Crown Crafts, concurrently herewith,
is merging with and into Red Calliope (the "Merger");
WHEREAS, Crown Crafts is the common parent of an
affiliated group of corporations within the meaning of Section
1504 of the Internal Revenue Code of 1986, as amended (the
"Code") filing consolidated returns;
WHEREAS, Red Calliope timely filed an election (the
"Election") on Form 2553 to be treated as an S corporation within
the meaning of Section 1361(a) of the Code effective for its
taxable year beginning on July 1, 1982 and has consistently filed
tax returns as an S corporation on Form 1120S since July 1, 1982;
WHEREAS, the shareholders of Red Calliope (the
"Shareholders") have filed their tax returns in a manner
consistent with Red Calliope's treatment as an S Corporation
since July 1, 1982;
WHEREAS, certain consents to the Election, which may have
been required at the time of the Election, were not obtained at
such time;
WHEREAS, to resolve any doubt as to the validity of the
Election, Red Calliope has submitted to the Internal Revenue
Service a request for an extension of time to file consents to
the Election pursuant to Treasury Regulations Section
1.1362-6(b)(3)(iii), which extension has been granted;
WHEREAS, Red Calliope ceased to be a "small business
corporation" within the meaning of Section 1361(b) of the Code on
July 28, 1995; and
WHEREAS, pursuant to the terms of the Merger Agreement
and as a condition precedent to the obligations of the parties
under the Merger Agreement, the parties hereto have reached
certain agreements concerning the filing of Red Calliope's tax
returns for federal, state and local tax purposes as set forth in
detail herein;
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NOW, THEREFORE, in consideration of the premises and of
the mutual covenants and agreements set forth herein, the parties
hereto agree as follows:
1. Definitions.
1.1 Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to such terms in
the Merger Agreement.
1.2 "Designated Party" means Xxxx Xxxxxxx.
1.3 "Red Calliope Income Taxes" means the
federal, state and local income tax of, together with any
interest, penalties and additions to tax imposed on, Red Calliope
with respect to its taxable income by any governmental authority
responsible for the imposition of such tax.
1.4 "Red Calliope Income Tax Return" means
any Tax Return of Red Calliope with respect to Red Calliope
Income Taxes.
1.5 "Red Calliope Tax Return" means any Tax
Return of Red Calliope with respect to Red Calliope Taxes.
1.6 "S Corporation Return" means any Tax
Return of Red Calliope with respect to the taxable income of Red
Calliope for taxable periods beginning on or after July 1, 1982
and ending on or before July 27, 1995.
1.7 "Shareholder Income Taxes" means the
federal, state and local income tax of, together with any
interest, penalties and additions to tax imposed on, any
Shareholder with respect to his or her taxable income by any
governmental authority responsible for the imposition of such
tax.
1.8 "Shareholder Income Tax Return" means
any Tax Return of a Shareholder with respect to Shareholder
Income Taxes.
1.9 "Tax" (including with correlative
meaning, the terms "Taxes" and "Taxable") means any income, gross
receipts, ad valorem, premium, excise, value-added, sales, use,
transfer, franchise, license, severance, stamp, occupation,
service, lease, withholding, employment, payroll, property or
windfall profits tax, alternative or add-on minimum tax, or other
tax, fee or assessment, together with any interest and any
penalty, addition to tax or additional amount imposed by any
governmental authority responsible for the imposition of any such
tax.
1.10 "Tax Return" means any return, report,
statement, information statement and the like required to be
filed with any authority with respect to Taxes.
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2. Filing of Pre-Closing Red Calliope Tax Returns.
2.1 The Designated Party shall be
responsible for the preparation and filing of all Red Calliope
Tax Returns for all taxable periods ending on or before the
Closing Date, including Red Calliope Tax Returns for such periods
that are due after the Closing Date and any amended Red Calliope
Tax Return. Red Calliope shall be responsible for the payment of
all Taxes shown to be due thereon. For purposes of this Section
2.1, any taxable period for Red Calliope Taxes that includes but
does not end on the Closing Date shall be treated as ending on
the Closing Date and the items of income, gain, loss, deduction
and credit shall be determined based on the closing of Red
Calliope's books and records as maintained for Tax purposes at
the end of business on the Closing Date. The Designated Party
shall submit such Tax Returns to Crown Crafts for its review and
comment thirty (30) days before filing and shall make such
revisions to such Tax Returns as are reasonably requested by
Crown Crafts.
2.2 The Designated Party shall cause to be
prepared and filed Red Calliope Income Tax Returns for taxable
periods ending on June 30, 1995 and July 27, 1995 ("S Corporation
Returns") in a manner consistent with its election to be treated
as an S corporation for federal, state and local income tax
purposes.
2.3 All fees and expenses incurred by the
Designated Party in connection with the preparation and filing of
Red Calliope Tax Returns (other than amended Red Calliope Tax
Returns, fees and expenses with respect to which are covered by
Section 4.5 hereof) for taxable periods ending on or before the
Closing Date shall be paid by Red Calliope.
2.4 Neither Crown Crafts, nor Red Calliope
shall amend any Red Calliope Tax Returns for taxable period
ending on or before the Closing Date without the prior written
consent of the Designated Party.
2.5 It is acknowledged and agreed that an
election under Section 338 of the Code shall not be made with
respect to the acquisition by Crown Crafts of Red Calliope
pursuant to the Merger Agreement. Notwithstanding anything to
the contrary in this Agreement or the Merger Agreement, Crown
Crafts shall pay and hold the Shareholders harmless from and
against all Red Calliope Taxes not incurred in the ordinary
course of business attributable to acts or omissions of Crown
Crafts occurring after the Effective Time but on the Closing
Date.
3. FILING OF POST-CLOSING RED CALLIOPE TAX RETURNS.
Crown Crafts shall, at its sole cost and expense, be responsible
for the preparation and filing of all Red Calliope Tax Returns
for taxable periods beginning after the Closing Date, and shall
pay or cause to be paid all Taxes shown to be due thereon.
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4. Control of Tax Proceedings.
4.1 It is acknowledged and agreed that the
Designated Party shall, pursuant to Section 6244 of the Code,
serve as the "tax matters person" for Red Calliope for taxable
years ending on or prior to July 27, 1995.
4.2 Except as specifically provided in this
Agreement, it is acknowledged and agreed that the Designated
Party shall have the sole authority to deal with any matters
relating to Taxes of Red Calliope attributable to taxable periods
ending on or before the Closing Date (as determined under Section
2.1), including but not limited to the filing of amended Red
Calliope Tax Returns.
4.3 Whenever any taxing authority asserts a
claim, makes an assessment or otherwise disputes the amount of
Red Calliope Taxes (including any claim involving any Subchapter
"S" item (as defined in Section 6245 of the Code and the Treasury
Regulations thereunder) (an "S Claim") brought against Red
Calliope) attributable to taxable periods ending on or before the
Closing Date (a "Pre-Closing Dispute"), Crown Crafts shall
promptly inform the Designated Party, who shall thereafter
promptly inform the other Shareholders. The Designated Party
shall have the sole right and authority to control any resulting
proceedings and, except as provided in Section 4.4, to determine
whether and when to settle any Pre-Closing Dispute. The
Designated Party shall keep each Shareholder informed of any such
proceedings or settlements.
4.4 Notwithstanding anything to the contrary
in this Agreement, the Designated Party shall not file any
amended Red Calliope Tax Return or settle any Pre-Closing Dispute
without the prior written consent (not to be unreasonably
withheld or delayed) of (i) Crown Crafts if such action would
increase Red Calliope Taxes for taxable periods ending after the
Closing Date, or (ii) any Shareholder who would be subject to
additional Shareholder Income Taxes in excess of $10,000 as a
result of such action.
4.5 All fees and expenses incurred by the
Designated Party in connection with the filing of any amended Red
Calliope Tax Return or control or conduct of any Pre-Closing
Dispute under Section 4.3 (the "Covered Matters") shall be paid
by Red Calliope and Red Calliope shall indemnify and hold
harmless the Designated Party from and against any and all
claims, damages, liabilities, expenses (including reasonable
attorneys fees), costs and assessments (including actual and
punitive damages) incurred by or imposed upon the Designated
Party in connection with his action or inaction with respect to
the Covered Matters so long as the Designated Party substantially
complies in good faith with his obligations with respect to the
Covered Matters and does not act fraudulently; provided, however,
that Red Calliope shall have no obligation to pay in excess of
$100,000 pursuant to this Section 4.5. All such fees and
expenses incurred by the
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Designated Party which are not paid or reimbursed by Red Calliope
pursuant to the preceding sentence shall be paid pursuant to that
certain Agreement Re Post-Merger Administration dated as of
October 9, 1995.
5. COOPERATION. The Designated Party and Crown
Crafts shall cooperate with each other in a timely manner in the
preparation and filing of any Tax Returns, payment of any Taxes
in accordance with this Agreement and the Merger Agreement, and
the conduct of any audit or other proceeding. Each party shall
execute and deliver such powers of attorney and make available
such other documents as are necessary to carry out the intent of
this Agreement and the Merger Agreement.
6. RETENTION OF RECORDS. Crown Crafts shall, until
the expiration of the applicable statute of limitations or
extensions thereof, (i) retain records, documents, accounting
data and other information (including computer data) necessary
for the preparation and filing of all Tax Returns or the audit of
such returns, and (ii) give to the Designated Party reasonable
access to such records, documents, accounting data and other
information (including computer data) and to its personnel
(insuring their cooperation) and premises, for the purpose of the
preparation and filing or audit of such returns.
7. SPECIFIC PERFORMANCE. The parties hereto each
acknowledge that the rights of each party hereunder are special,
unique and of extraordinary character, and that, in the event
that any party violates or fails or refuses to perform any
covenant or agreement made by it herein, the non-breaching party
may be without an adequate remedy at law. The parties each
agree, therefore, that in the event that any party violates or
fails or refuses to perform any covenant or agreement made by
such party herein, the non-breaching party or parties may,
subject to the terms of this Agreement and in addition to any
remedies at law for damages or other relief, institute and
prosecute an action in any court of competent jurisdiction to
enforce specific performance of such covenant or agreement or
seek any other equitable relief.
8. REPRESENTATIONS AND WARRANTIES OF THE DESIGNATED
PARTY. The Designated Party hereby represents and warrants to
each other party hereto that:
(a) this Agreement has been duly authorized,
executed and delivered by the Designated Party and constitutes
the valid and binding agreement of the Designated Party
enforceable against the Designated Party in accordance with its
terms, subject to applicable bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors, rights
generally, general equitable principles and the discretion of
courts in granting equitable remedies; and
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(b) the execution, delivery and performance
of this Agreement and the consummation of the transactions
contemplated hereby will not, with the passing of time or the
giving of notice or both, violate or conflict with, constitute a
breach of or default under, result in the loss of any material
benefit under, or permit the acceleration of or entitle any party
to accelerate any obligation under or pursuant to any material
mortgage, lien, lease, agreement, instrument, order, arbitration
award, judgment or decree to which the Designated Party is a
party or by which he or any of his assets are bound.
9. REPRESENTATIONS AND WARRANTIES OF CROWN CRAFTS.
Crown Crafts hereby represents and warrants to each other party
hereto that:
(a) this Agreement has been duly authorized,
executed and delivered by Crown Crafts, and constitutes the valid
and binding agreement of Crown Crafts, enforceable against Crown
Crafts in accordance with its terms, subject to applicable
bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors, rights generally, general equitable
principles and the discretion of courts in granting equitable
remedies; and
(b) the execution, delivery and performance
of this Agreement and the consummation of the transactions
contemplated hereby will not, with the passing of time or the
giving of notice or both, violate or conflict with, constitute a
breach of or default under, result in the loss of any material
benefit under, or permit the acceleration of or entitle any party
to accelerate any obligation under or pursuant to any material
mortgage, lien, lease, agreement, instrument, order, arbitration
award, judgment or decree to which Crown Crafts is a party or by
which it or any of its assets are bound.
10. REPRESENTATIONS AND WARRANTIES OF RED CALLIOPE.
Red Calliope hereby represents and warrants to each other party
hereto that:
(a) this Agreement has been duly authorized,
executed and delivered by Red Calliope, and constitutes the valid
and binding agreement of Red Calliope, enforceable against Red
Calliope in accordance with its terms, subject to applicable
bankruptcy, insolvency and other similar laws affecting the
enforcement of creditors, rights generally, general equitable
principles and the discretion of courts in granting equitable
remedies; and
(b) the execution, delivery and performance
of this Agreement and the consummation of the transactions
contemplated hereby will not, with the passing of time or the
giving of notice or both, violate or conflict with, constitute a
breach of or default under, result in the loss of any material
benefit under, or permit the acceleration of or entitle any party
to accelerate any obligation under or pursuant to any material
mortgage, lien, lease, agreement, instrument, order,
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arbitration award, judgment or decree to which Red Calliope is a
party or by which it or any of its assets are bound.
11. NOTICES. The provisions of Section 10.10 of the
Merger Agreement shall apply to this Agreement.
12. MISCELLANEOUS. Nothing in this Agreement is
intended to or shall confer upon anyone other than the parties
hereto any legal or equitable right, remedy or claim. This
Agreement shall be governed by, and its provisions construed in
accordance with, the laws of the State of California (without
reference to California's choice of law rules) applicable to
contracts made and to be wholly performed within such state and
may be modified only in writing signed by each of the parties
hereto. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, and
all such counterparts shall constitute one and the same
instrument. Paragraph headings contained in this Agreement are
solely for convenience of reference and shall not affect the
meaning or interpretation of any term or provision hereof.
12. SEVERABILITY. If any provision of this Agreement
or the application of any such provision to any person or
circumstance shall be held invalid, illegal or unenforceable in
any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any
other provision hereof.
13. COUNTERPARTS. This Agreement may be executed in
two or more counterparts, each of which is an original and all of
which together shall be deemed to be one and the same instrument.
This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by all of
the parties. It shall not be necessary in making proof of this
Agreement or any counterpart hereof to produce or account for any
of the other counterparts.
IN WITNESS WHEREOF, the Designated Party has duly
executed and delivered this Agreement, and Crown Crafts and Red
Calliope hereto have caused this Agreement to be executed and
delivered on its behalf by an officer thereunto duly authorized,
all as of the date first above written.
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XXXX XXXXXXX
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CROWN CRAFTS, INC.
By:
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E. Xxxxxxx Xxxxxxxx
Vice President
THE RED CALLIOPE AND ASSOCIATES,
INC.
By:
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Xxxx Xxxxxxx
President
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