Exhibit 10.46
TAX AGREEMENT
AGREEMENT (this "Agreement"), dated as of September 9, 1996, between RSL
COMMUNICATIONS PLC, a United Kingdom corporation ("RSL"), RSL COMMUNICATIONS,
LTD., a Bermuda corporation, as successor in interest to RSL Communications,
Inc., a British Virgin Islands corporation ("Parent") and XXXXXXX X. XXXXXX
("Xxxxxx").
W I T N E S S E T H:
WHEREAS, RSL and Xxxxxx have simultaneously herewith entered into that
certain Agreement and Plan of Reorganization, dated as of September 9, 1996,
among RSL, Xxxxxx and Parent (the "Exchange Agreement"), pursuant to which
Xxxxxx shall transfer to RSL up to 15,619 shares of International
Telecommunications Group, Ltd. ("ITG") (the "Transferred Shares") in a
transaction intended by the parties to qualify as a reorganization within the
meaning of Internal Revenue Code ("IRC") Section 368(a)(1)(B) (a "Tax-Free
Reorganization"); and
WHEREAS, the U.S. Internal Revenue Service has not, as of the date hereof,
issued final regulations under Section 367(a) of the U.S. Internal Revenue
Service Code, as amended, relevant to the determination of whether the
transaction contemplated by the Exchange Agreement can be consummated as a
Tax-Free Reorganization and, accordingly, the parties have not yet determined
whether such transaction can be consummated as a Tax-Free Reorganization; and
WHEREAS, Xxxxxx shall continue to consult with his professional advisers
to determine whether the transaction contemplated by the Exchange Agreement can
be consummated as a Tax-Free Reorganization; and
WHEREAS, the parties wish to provide in this Agreement, which Agreement
will come into effect only in the event that a tax adviser to Xxxxxx employed by
Galland, Kharasch, Xxxxx & Xxxxxxxxx, P.C., or otherwise, who is acceptable to
RSL (the "Adviser") determines in good faith that the transaction contemplated
by the Exchange Agreement most likely cannot be consummated as a Tax-Free
Reorganization (referred to as a "Tax Determination") that (i) such transaction
will be consummated as a taxable transfer pursuant to the terms of the Exchange
Agreement as modified by this Agreement and (ii) RSL will loan certain monies to
Xxxxxx on the terms and conditions, and under the circumstances, set forth
herein.
NOW, TREREFORE, in consideration of the premises and covenants
contained herein and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Effective Date. This Agreement shall become effective on the
date upon which Xxxxxx gives written notice to the Escrow Agent (defined below),
with a copy to RSL, that the Adviser has reached a Tax Determination. This
Agreement, however, shall, be null and void and of no force and effect ab
initio, on such date as the Transaction is otherwise consummated as a Tax-Free
Reorganization pursuant to the terms of the Exchange Agreement.
Section 2. The Loan. In the event that (i) an initial offering of the
shares of common stock of Parent to the public (an "IPO") has not been
consummated, and (ii) Xxxxxx incurs tax liability arising out of the transfer of
the Transferred Shares pursuant to the Exchange Agreement either (a) by
reporting such liability on returns he files or (b) by virtue of an IRS
assessment being issued or (c) by virtue of RSL, or any affiliate of RSL,
reporting the transaction contemplated by the Exchange Agreement as a taxable
transaction, or (d) as may be determined by Xxxxxx'x Adviser (the "Tax
Liability"), promptly upon receipt of a written request therefor specifying the
date on which such Tax Liability is payable (including any applicable
extensions) (the "Tax Payment Date"), RSL or Parent (as they may determine
between them) will loan to Xxxxxx three business days prior to the Tax Payment
Date, pursuant to a promissory note in the form attached hereto as Exhibit A
(the "Note"), monies equal to the amount of the Tax Liability; provided,
however, that such monies shall not exceed U.S. $1,700,000; and provided,
further, that such $1,700,000 or other loan amount shall be further reduced by
any after tax (such tax liability to be evidenced by the relevant year's Form
1040 to be furnished by Xxxxxx to Parent prior to the time of making the Loan)
cash proceeds previously received by Xxxxxx as the result of an RSL Sale (as
defined in the Note) (the "Loan"); and provided further, that the loan amount
may exceed $1,700,000 if the Tax Liability results from a Disposition
Transaction (as defined in the Exchange Agreement) pursuant to paragraph 5.5 of
the Exchange Agreement.
Section 3. Escrow Agreement. This Agreement, including the Note, shall
upon execution be deposited with Rosenman & Colin LLP (the "Escrow Agent")
pursuant to the terms of the Escrow Agreement attached hereto as Exhibit B.
Section 4. Modification of Exchange Agreement. Upon the effectiveness of
this Agreement, the Exchange Agreement shall be modified ab initio as follows:
(a) Sections 5.4, 5.5, 5.6 and 5.7 of the Exchange Agreement shall be
deleted; and
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(b) Notwithstanding the triggering events set forth in Section 2.1 of the
Exchange Agreement, a new closing of the transactions contemplated by the
Exchange Agreement will occur at such time as Xxxxxx shall determine.
Section 5. Notices. All notices and other communications given under this
Agreement shall be in writing and shall be deemed to have been duly given (i) on
the date delivered, if delivered personally or by reputable overnight courier
with delivery confirmed or (ii) five days after its deposit in the United States
mail, if sent by registered or certified mail, return receipt requested, postage
prepaid and addressed to the parties as follows:
If to RSL, to:
RSL Communications PLC
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx
with a copy to:
Rosenman & Colin LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
If to Xxxxxx, to:
Xxxxxxx X. Xxxxxx
XXX Xxxxx, Xxxx Xxxxx, Xxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
with a copy to:
Xxxxxxxx, Xxxxx & Xxxxxxxx, P.L.C.
0000 Xxxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxx, Esq.
with a copy to:
Galland, Kharasch, Xxxxx & Xxxxxxxxx, P.C.
Canal Square
1054 Thirty First Street, N.W.
Washington, D.C. 20007-4492
Attention: Xxxxxx X. Xxxxxxx, Esq.
or to such other address as any party shall have specified by notice in writing
to the others in compliance with this Section 5 except that any notice
specifying a change in address shall only
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be deemed given when actually received. Any notice to the Escrow Agent shall be
copied to all other parties hereto.
Section 6. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without reference to its principles of conflicts of laws.
Section 7. Binding Nature; Assignability. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Notwithstanding the first sentence of this
Section 7, this Agreement may not be assigned by either party without the prior
written consent of the other party.
Section 8. Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
Section 9. Enforceability. It is the desire and intent of the parties that
the provisions of this Agreement be enforced to the fullest extent permissible
under the law and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any provision of this Agreement would be
held to be invalid, prohibited or unenforceable in any jurisdiction for any
reason, such provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not to be invalid, prohibited or unenforceable in such jurisdiction, it
shall, as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 10. No Waiver. No delay by the parties in exercising any power or
right hereunder shall operate as a waiver of any power or right, nor shall any
single or partial exercise of any power or right preclude other or further
exercise thereof, or the exercise of any other power or right hereunder or
otherwise. No
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waiver or modification of the terms hereof shall be valid unless set forth in
writing by the parties hereto.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as
of the date first written above.
RSL COMMUNICATIONS PLC
By: /s/ Xxxxxx Xxxxxx
-----------------------------
Name:
Title:
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------
Xxxxxxx X. Xxxxxx
RSL COMMUNICATIONS, LTD.
By: /s/ Xxxxxx Xxxxxx
-----------------------------
Name:
Title:
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EXHIBIT A
SPECIAL PROMISSORY NOTE
$________________ ____________, ___
FOR VALUED RECEIVED, XXXXXXX X. XXXXXX (the "Maker"), hereby promises to
pay to the order of RSL COMMUNICATIONS PLC, a United Kingdom corporation (the
"Holder"), the principal amount of___________________________________($______)
in lawful money of the United States of America, plus any accrued but unpaid
interest through the date of maturity hereof.
1. Payments. The principal amount on this promissory note (the "Note")
shall be due and payable on the earliest date (the "Maturity Date") on which any
of the following circumstances occur:
a. The outstanding principal amount of this Note (and any accrued
but unpaid interest thereon) shall be due and payable on the first October 31
following the date on which an initial offering of the shares of common stock of
RSL Communications, Ltd. (the "RSL Shares") to the public (an "IPO") is
consummated.
b. Regardless of whether an IPO has occurred, in the event that
Xxxxxx from time to time shall sell any RSL Shares for cash consideration (an
"RSL Sale"), such portion of the outstanding principal amount of this Note (and
any accrued but unpaid interest thereon) which is equal to the after tax (such
tax liability to be evidenced by Xxxxxx'x Form 1040 for the relevant year, which
Form 1040 shall promptly be furnished by Xxxxxx to the Holder or RSL
Communications, Ltd.) cash proceeds of any RSL Sale shall immediately become due
and payable on the date of receipt of such proceeds from such RSL Sale, and all
such cash after tax proceeds of any such RSL Sale shall be applied to the
payment of all or such portion of the amount due and payable hereunder; and
c. July 20, 2010.
2. Interest. Interest shall accrue on the outstanding principal amount of
this Note at the higher of 6% per annum or the lowest applicable Federal rate on
the date of this Note, from the date hereof to (and including) the Maturity
Date. Such interest shall be payable on the Maturity Date.
3. Prepayment. This Note may be prepaid, in whole or in part, at any time
or from time to time, without premium or penalty, but with accrued but unpaid
interest through the date of prepayment. All amounts paid by the Maker shall
first be applied to principal due hereunder and then to accrued interest.
4. Payment not on a Business day. If any payment of principal of or
interest on this Note shall become due on a Saturday, Sunday or a public holiday
under the laws of the State of New York or the United States of America, such
payment shall be made on the next succeeding business day and such extension of
time shall in such case be included in computing interest in connection with
such payment.
5. Late Payment Charge. In the event that the Maker fails to make any
payment of principal and/or interest under this Note within 5 days after it
becomes due and payable hereunder, then the Maker shall promptly pay the Holder,
in addition to other amounts owing hereunder, a late payment charge of 5% of
such unpaid and overdue principal and/or interest which was due and payable
hereunder and has not been paid in such 5-day period.
6. Events of Default. For purposes hereof, the occurrence of any of
following events shall constitute an "Event of Default":
(a) Failure to make any payment of principal or interest under this
Note within 5 days after the date when it becomes due and payable; or
(b) If the Maker makes an assignment for the benefit of its
creditors, is adjudicated bankrupt or insolvent, petitions or applies to any
tribunal for the appointment of a trustee or receiver for it or any substantial
part of its assets, commences any proceedings relating to it under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debts,
dissolution or liquidation law, or similar laws, of any jurisdiction, whether
now or hereafter in effect, consents to, approves of or acquiesces in or to any
such petition or application being filed, or any such proceedings commenced
against it, by any other person, or fails to remove any order entered appointing
any trustee or receiver or approving the petition or application in any such
proceedings or decreeing its dissolution or liquidation, within 60 days after
such order is entered.
Subject to the provisions hereof, if an Event of Default set forth
in clause (a) above shall occur and be continuing, the Holder may, without
notice or demand to the Maker, declare the unpaid principal of this Note,
together with accrued and unpaid interest thereon, to become due and payable. If
an Event of Default set forth in clause (b) above shall occur, the
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unpaid principal of this Note, together with accrued and unpaid interest
thereon, shall immediately become due and payable without notice, demand or
other act on the part of the Holder. The Maker shall notify the Holder of the
occurrence of any Event of Default promptly after the Maker obtains knowledge
thereof.
7. Successors and Assigns. This Note shall inure to the benefit of and be
enforceable by the Holder and its successors and assigns and shall be binding
and enforceable against the Maker and its successors and assigns. In the event
that the Maker assigns its obligations hereunder, the Maker shall immediately
notify the Holder of such assignment and shall remain liable for the fulfillment
of its obligations hereunder.
8. Severability. It is the desire and intent of the parties that the
provisions of this Note be enforced to the fullest extent permissible under the
law and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, if any provision of this Note would be held to be invalid,
prohibited or unenforceable in any jurisdiction for any reason, such provision,
as to such jurisdiction, shall be ineffective, without invalidating the
remaining provisions of this Note or affecting the validity or enforceability of
such provision in any other jurisdiction. Notwithstanding the foregoing, if such
provision could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of this Note or
affecting the validity or enforceability of such provision in any other
jurisdiction.
9. Waivers. The Maker and all endorsers, sureties and guarantors of this
Note hereby jointly and severally waive presentment, demand for payment, notice
of dishonor, notice of protest, and protest in connection with the delivery,
acceptance, performance, default, endorsement or guaranty of this Note.
No delay by the Holder in exercising any power or right hereunder
shall operate as a waiver of any power or right, nor shall any single or partial
exercise of any power or right preclude other or further exercise thereof, or
the exercise of any other power or right hereunder or otherwise. No waiver or
modification of the terms hereof shall be valid unless set forth in writing by
the Holder.
10. Modification. No modification, alteration or change of any of the
provisions hereof shall be effective unless in writing and signed by the Maker
and the Holder and only to the extent set forth therein.
11. Place of Payment. Payments of principal, interest and any other
amounts payable hereunder are to be made to the Holder
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at 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX 00000, or such other place as the
Holder shall designate to the Maker in writing.
12. Expenses. The Maker shall pay all reasonable costs and expenses,
including reasonable attorneys' fees, incurred by the Holder in collecting or
enforcing this Note.
13. Governing Law; Jurisdiction; Waiver of Jury Trial. This Note shall be
governed by and construed in accordance with the laws of the State of New York,
without giving effect to principles of conflicts of law. Any action or
proceedings to enforce or arising out of this Note may be commenced in any court
of the State of New York or in the United States District Court for the Southern
District of New York. The Maker agrees that venue will be proper in such courts
in any such matters, and agrees that New York is the most convenient forum for
litigation in any suit, action or legal proceeding. The Maker agrees that a
final judgment in any such action or proceeding may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
The Maker hereby waives all right to trial by jury in any action, suit or
proceeding brought to enforce or defend any rights or remedies under this
Agreement.
14. Confessed Judgment. Upon the occurrence of an Event of Default
hereunder, the Maker hereby authorizes any attorney designated by the Holder or
any clerk of any court of record to appear for the Maker in any court of record
and confess judgment against the Maker, without prior hearing, in favor of the
Holder for, and in an amount equal to, the full amount then due and payable by
the Maker hereunder, all other amounts then due and payable by the Maker to the
Holder under the provisions of this Note, costs of suit and attorneys' fees of
15% of the amount of such obligations. In connection therewith, the Maker hereby
releases, to the extent permitted by applicable laws, all errors and all rights
of exemption, appeal, stay of execution, inquisition, and other rights to which
the Maker may otherwise be entitled under the applicable laws now in force and
which may hereafter be enacted, including, without limitation, those of the
United States of America. The authority and power to appear for and enter
judgment against the Maker shall not be exhausted by one or more exercises
thereof or by any imperfect exercise thereof and shall not be extinguished by
any judgment entered pursuant thereto. Such authority may be exercised on one
or more occasions or from time to time in the same or different jurisdictions as
often as the Holder shall deem necessary and desirable, for all of which this
Note shall be sufficient warrant.
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IN WITNESS WHEREOF, the Maker has executed this Note as of the date first
above written.
By:___________________________
XXXXXXX X. XXXXXX
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