Exhibit 10.5
TAX SHARING AGREEMENT
AMONG
INTEGRATED HEALTH SERVICES, INC. ("IHS"),
and
ROTECH HEALTHCARE INC. ("Company"),
and
ROTECH MEDICAL CORPORATION ("Reorganized RoTech")
DATED AS OF MARCH 26, 2002
TABLE OF CONTENTS
Page
1. Definitions.............................................................1
2. Representations and Warranties of Parties...............................5
2.1 Organization and Good Standing....................................5
2.2 No Conflict.......................................................6
2.3 Taxes.............................................................6
2.4 Continuation of Reorganized RoTech................................6
3. Additional Agreements...................................................6
3.1 Maintenance of Operations.........................................6
3.2 Tax Filings.......................................................6
3.3 Tax Sharing Agreements............................................7
4. Tax Matters.............................................................7
4.1 Tax Indemnification...............................................7
4.2 Filing of Tax Returns.............................................9
4.3 Cooperation......................................................10
4.4 Section 338(h)(10) Election......................................11
4.5 Designation of Agent.............................................12
5. General Provisions.....................................................12
5.1 Expenses.........................................................12
5.2 Notices..........................................................12
5.3 Further Assurances...............................................13
5.4 Waiver...........................................................14
5.5 Entire Agreement and Modification................................14
5.6 Schedules........................................................14
5.7 Assignments, Successors and Third Party Rights...................14
5.8 Dispute Resolution...............................................14
5.9 Severability.....................................................15
5.10 Section Headings, Construction...................................15
5.11 Governing Law....................................................15
5.12 Counterparts.....................................................15
Schedule A - Assets Excluded From Transferred Assets
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TAX SHARING AGREEMENT
This Tax Sharing Agreement ("Agreement") is made as of March , 2002, by
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and among Integrated Health Services, Inc., a Delaware corporation ("IHS"),
Rotech Healthcare Inc., a Delaware corporation (the "Company") and Rotech
Medical Corporation, a Florida corporation ("Reorganized RoTech").
WHEREAS, IHS and Reorganized RoTech and various of their respective
subsidiaries have been debtors and debtors in possession in connection with
proceedings under Chapter 11 of the Bankruptcy Code (defined below);
WHEREAS, pursuant to such proceedings, as they relate to Reorganized
RoTech, Reorganized RoTech has proposed, and has submitted to the bankruptcy
court and to creditors for approval, and the bankruptcy court has confirmed, a
Joint Plan of Reorganization of Reorganized RoTech and its subsidiaries (the
"Plan") which Plan calls for the reorganization of Reorganized RoTech and its
subsidiaries and the consummation of the Contemplated Transactions (defined
below) at such location and at such time as provided in the Plan (such
consummation being called the "Closing" and such date being called the "Closing
Date");
WHEREAS, the parties hereto desire to set forth and agree to their
respective rights and obligations with respect to Taxes (defined below) arising
from and in connection with the implementation of the Plan in the event that the
Restructuring Transaction (as such term is defined in the Plan) are consummated;
NOW THEREFORE, in exchange for their mutual promises herein and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"Accountants" -- means any "big five" accounting firm that is not, at the
time in question, then retained by IHS or by the Company for audit or other
material business purposes.
"Acquired Companies" -- the Company and its Subsidiaries as of the Closing
Date, collectively, and each individually, an "Acquired Company."
"Affiliate" -- means, as to any specified Person, (i) any shareholder,
equity owner, officer or director of such Person and their family members or
(ii) any other Person which, directly or indirectly, controls, is controlled by,
employed by or is under common control with, any of the foregoing. For the
purposes of this definition, "control" means the possession of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise.
"Agreement" -- as defined in the first paragraph of this Agreement.
"Closing" -- as defined in the second "Whereas" paragraph of this
Agreement.
"Closing Date" -- as defined in the second "Whereas" paragraph of this
Agreement.
"Code" -- the Internal Revenue Code of 1986, as amended, or any successor
law, and Treasury regulations issued thereunder.
"Common Stock" -- common stock, par value $.0001 per share, of the Company.
"Company" -- as defined in the first paragraph of this Agreement.
"Consent" -- any approval, consent, ratification, waiver or other
authorization (including by any Governmental Body).
"Contemplated Transactions" -- the following transactions contemplated by
the Plan and this Agreement:
(a) the transfer of the Transferred Assets by Reorganized RoTech to
the Company;
(b) the performance by Reorganized RoTech, IHS and each Acquired
Company of their respective covenants and obligations under this Agreement;
(c) The Company's acquisition and ownership of the Transferred Assets;
(d) the issuance of the Shares to Reorganized RoTech; and
(e) the distribution of the shares of stock of Reorganized RoTech and
the Shares to the New Shareholders.
"Contract" -- any agreement, contract, obligation, promise or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"Final Determination" -- a "determination" as defined in Section 1313(a)
of the Code.
"Governmental Body" -- any:
(a) nation, state, county, city, town, village, district or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government;
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(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"IHS" -- as defined in the first paragraph of this Agreement.
"IHS Taxes" -- (i) all Taxes attributable to IHS and members of the
consolidated group of corporations, other than the Rotech Debtors, of which IHS
is the common parent, other than Section 338(h)(10) Taxes; and (ii) Section
338(h)(10) Taxes to the extent that they are comprised of up to $2 million of
federal alternative minimum tax.
"Indemnified Party" -- as defined in Section 4.1(f)(i).
"Indemnifying Party" -- as defined in Section 4.1(f)(i).
"IRS" -- the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Legal Requirement" -- any applicable federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, regulation or statute.
"Material Adverse Effect" -- means, with respect to any Person, any event,
matter, condition or circumstance, any change or effect that would reasonably be
expected to have a material adverse effect upon the business, condition
(financial or otherwise), assets, liability, business, operations, performance,
properties or operating results of such Person and its Subsidiaries, taken as a
whole.
"New Shareholders" -- means holders of claims against IHS and/or RoTech
that are satisfied and/or discharged pursuant to the Plan.
"Order" -- any award, decision, injunction, judgment, order, ruling or
verdict entered, issued, made, or rendered by any court, administrative agency,
or other Governmental Body or by any arbitrator.
"Organizational Documents" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
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"Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Plan" -- as defined in the second "Whereas" paragraph of this Agreement.
"Proceeding" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"Reorganized RoTech" -- as defined in the first paragraph of this
Agreement.
"Rotech Taxes" -- (i) all Taxes attributable to the Acquired Companies,
including Section 338(h)(10) Taxes, other than those Section 338(h)(10) Taxes
expressly included in clause (ii) of the definition of IHS Taxes.
"Schedules" -- means the Schedules that are attached to this Agreement.
"Section 338(h)(10) Election" -- as defined in Section 4.4(a).
"Section 338(h)(10) Taxes" -- all Taxes incurred by any of IHS, Reorganized
RoTech, the Company or any of their Affiliates for the taxable period that
includes the Effective Date as a result of the Section 338(h)(10) Election.
"Shares" -- all issued and outstanding shares of Common Stock as of the
date hereof.
"Stock Certificate" -- as defined in Section 2.4(a)(i).
"Subsidiary" -- with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to elect
a majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of the Company.
"Tax" -- any tax (including, without limitation, any income, capital gains,
value-added, sales, uses, gross receipts, transfer, franchise, withholding,
employment, payroll, excise, property, gift, or estate tax), levy, assessment,
tariff, duty (including any customs duty), deficiency, or other fee, and any
related charge or amount (including any fine, penalty, interest, or addition to
tax), imposed, assessed, or collected by or under the authority of any
Governmental Body or payable pursuant to any tax-sharing agreement or any other
Contract relating to the sharing or payment of any such tax, levy, assessment,
tariff, duty, deficiency or fee.
"Tax Contest" -- as defined in Section 4.1(e)(i).
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"Tax Return" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Taxing
Authority or other Governmental Body in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any Legal
Requirement relating to any Tax.
"Taxing Authority" -- any Governmental Body, domestic or foreign, having
jurisdiction over the assessment, determination, collection or other composition
of any Tax.
"Threatened" -- a claim, Proceeding, dispute, action, or other matter will
be deemed to have been "Threatened" if any demand or statement has been made (in
writing) or any notice has been given (in writing), or if any other event has
occurred or any other circumstances exist, that would lead a prudent Person to
conclude that such a claim, Proceeding, dispute, action, or other matter is
likely to be asserted, commenced, taken, or otherwise pursued in the future.
"Transaction Documents" -- means this Agreement and any agreements,
documents, certificate or instrument being delivered in connection with the
implementation of the Contemplated Transactions or of the Restructuring
Transactions.
"Transfer Taxes" -- any sale, use, transfer, excise or similar tax imposed
on any transfer of stock that is consummated as part of the Contemplated
Transactions.
"Transferred Assets" -- means all of the assets of Reorganized RoTech
(which may include the stock of Subsidiaries of Reorganized RoTech), but
excluding the assets identified on Schedule A attached hereto.
All capitalized terms not defined herein shall have the meanings ascribed
to them in the Plan.
2. Representations and Warranties of Parties.
Each of IHS, Reorganized RoTech and the Company (each, a "Party")
acknowledges and accepts that each of the other parties is entering into this
Agreement in reliance upon each of the representations and warranties set forth
in this Agreement and the Schedules hereto. Each Party represents and warrants
to the other parties as follows:
2.1 Organization and Good Standing. Each Party is in good standing under
the laws of its jurisdiction of incorporation or organization, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to execute, deliver and perform all its obligations under and as
contemplated by this Agreement. Each Party is duly qualified or licensed to do
business as a foreign corporation and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification or license, except where such failure would not have
a Material Adverse Effect. The execution, delivery and performance by each Party
to this Agreement has been duly authorized by
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all necessary action required on its part. Upon the execution and delivery by
each Party of this Agreement, this Agreement will constitute a legal, valid, and
binding obligation of such Party, enforceable against such Party in accordance
with their respective terms. Each Party has the requisite right, power,
authority, and capacity to execute and deliver this Agreement and to perform its
respective obligations under this Agreement
2.2 No Conflict. The execution, delivery and performance by each Party of
this Agreement and the Transaction Documents and the consummation of the
Contemplated Transactions hereby and thereby do not and will not (a)(i)
contravene any provisions of any of such Party's Organizational Documents or any
resolutions of the board of directors (or comparable governing body, if any), or
(ii) result in any violation by such Party of any law, rule or regulation
applicable to it, or any license or permit issued by any Governmental Body to
it, or give any Governmental Body or other Person, the right to challenge IHS's
right to consummate any of the Contemplated Transactions, where any such
violation or challenge would result in a Material Adverse Effect, (b) result in
any violation by such Party of any judgment, injunction or decree of any court
or Governmental Body applicable to such Party where such violation would result
in a Material Adverse Effect, or (c) except as set forth in Schedule 2.2,
require any material consent or approval of, notice to, or filing, registration
or qualification with, any court or administrative Governmental Body or, except
where such would not have a Material Adverse Effect, any other Person, to be
made or obtained by such Party.
2.3 Taxes. Such Party has taken no actions that would be inconsistent with,
or would preclude, the Section 338(h)(10) Election.
2.4 Continuation of Reorganized RoTech. Reorganized RoTech has no plan or
intention to liquidate or otherwise to merge out of existence.
3. Additional Agreements.
3.1 Maintenance of Operations. For a period of five years beginning the day
after the Closing Date, Reorganized RoTech shall not (a) adopt or implement a
plan of liquidation, (b) distribute to its shareholders, with respect to its
outstanding Common Stock, all or substantially all of its assets; (c) dispose
of, for cash or cash equivalents, all or substantially all of its assets (other
than in connection with the reinvestment of the proceeds of such disposition in
a new business venture) or (d) otherwise take any action that could be
characterized as a complete liquidation of Reorganized RoTech for federal income
tax purposes.
3.2 Tax Filings. Each of the parties and its Affiliates shall (a) file all
Tax Returns and other relevant filings and documents in a manner consistent with
the treatment of the transfer of the Transferred Assets to the Company as a
fully taxable transaction for federal income tax purposes, and not as a
nonrecognition transaction under any of Section 351, Section 355 or Section 368
of the Code, and (b) maintain such position in connection with any Tax Contest;
in either case, unless precluded from taking such position by a Final
Determination to the contrary.
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3.3 Tax Sharing Agreements. The obligations of each Party, under any and
all agreements, other than this Agreement to pay the liability of any other
Person for Taxes shall be terminated as of the Closing Date.
4. Tax Matters.
4.1 Tax Indemnification.
(a) Except as provided herein, IHS shall have no liability for any
Rotech Taxes, whether disputed or not, or for any Taxes, whether disputed or
not, attributable to Reorganized Rotech and any Subsidiary retained by
Reorganized Rotech as of the Closing Date.
(b) Except as provided herein, the Company shall have no liability for
any IHS Taxes, whether disputed or not, or for any Taxes, whether disputed or
not, attributable to Reorganized RoTech and any Subsidiary retained by
Reorganized RoTech as of the Closing Date.
(c) (i) IHS shall pay, indemnify and hold harmless Reorganized
RoTech, any Subsidiary retained by Reorganized RoTech as of the Closing
Date, and the Acquired Companies, from and against all liabilities, for IHS
Taxes and any costs or expenses of enforcing this Agreement against IHS.
(ii) The Company shall pay, indemnify and hold harmless
Reorganized RoTech and any Subsidiary retained by Reorganized RoTech as of
the Closing Date and IHS from and against (A) all liabilities for Rotech
Taxes, (B) all Taxes incurred in connection with the implementation of the
Plan, other than Section 338(h)(10) Taxes that are included in IHS Taxes,
and (C) any costs or expenses of enforcing this Agreement against the
Company.
(d) IHS shall be entitled to any refund or credit of any IHS Taxes
including interest thereon (for purposes of this Section 4.1(d), at the
overpayment rate paid or payable by the Taxing Authority with respect to such
refund or credit), and shall be paid any such refund, including interest
thereon, promptly upon receipt thereof by Reorganized RoTech, the Company or any
Acquired Companies (other than a refund related to a carryback of a tax benefit
of such company from a period, or portion thereof, after the Closing Date). In
furtherance thereof, IHS shall have the right to determine that a claim for
refund for such Taxes shall be made on behalf of Reorganized RoTech or any of
the Acquired Companies, but only so long as IHS or its successors is not in
breach of, or incapable of performing its obligations under, this Agreement.
Notwithstanding the preceding sentence, none of Reorganized RoTech, the Company
or any Acquired Company shall be required to file any claim for refund that it
reasonably believes is not true, correct and complete in all material respects.
Notwithstanding anything provided in this Section 4.1(d), each of Reorganized
RoTech and the Company reserves the right to pay any proposed refund or credit
(including interest thereon) to IHS in cash in lieu of the filing of any amended
tax return or claim for refund. If IHS elects to make a claim for refund,
Reorganized RoTech, the Company and the Acquired Companies shall cooperate fully
in connection therewith. IHS shall be responsible to reimburse Reorganized
RoTech and the Acquired Companies for reasonable out-of-pocket expenses
(excluding any allocated
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overhead costs and any allocated costs of existing employees) incurred in
providing such cooperation.
(e) The Company shall be entitled to any refund of any Rotech Taxes,
including interest thereon. If any such refund is paid to IHS or to Reorganized
Rotech, IHS or Reorganized Rotech, as the case may be, shall promptly pay such
refund (including any interest thereon) to the Company. The Company shall have
the sole right to determine whether any claim for refund for such Taxes shall be
made. If the Company elects to make such a claim for refund, IHS or Reorganized
Rotech, as the case may be, shall cooperate fully in connection therewith. The
Company shall be responsible to reimburse IHS or Reorganized Rotech, as the case
may be, for any reasonable out-of-pocket expenses incurred in providing such
cooperation.
(f) (i) Any party entitled to indemnification under this Section 4.1
(the "Indemnified Party"), shall include in its notice of any claim for
indemnification pursuant to this Section 4.1 a detailed calculation of the
amount of the requested indemnity payment. If the party obligated herein to
indemnify the Indemnified Party (the "Indemnifying Party") disagrees with
the calculation of the indemnity payment, the Indemnified Party and
Indemnifying Party, shall attempt to resolve such disagreement for a period
of 15 days after disagreement by the Indemnifying Party. If the parties
fail to reach an agreement at the end of such period, such disagreement
shall be submitted to the Accountants, whose determination shall be final
and binding on all parties. The cost of the Accountants shall be borne by
the Indemnified Party and Indemnifying Party in a ratio that equals the
proportions in which each such party prevails as to its calculation of the
amount in dispute.
(ii) Within 10 days after the indemnity calculation has been
resolved or determined, as provided in Section 4.1(f)(i), the Indemnifying
Party shall pay to the Indemnified Party, such amounts as have been
determined to be due hereunder.
(g) (i) The Indemnified Party shall inform the Indemnifying Party of,
and the Indemnifying Party shall be entitled to control and conduct only
those aspects of, audits, examinations or proceedings (a "Tax Contest")
relating to the Indemnified Party that are related to (i) the liability for
any Taxes for which the Indemnifying Party would be required to indemnify
the Indemnified Party, pursuant to this Section 4.1, or (ii) a claim for
refund for any Taxes that the Indemnifying Party is entitled to pursuant to
this Section 4.1; provided, however, that the Indemnified Party is not in
breach of, or incapable of satisfying, its obligations hereunder. Costs of
any Tax Contest are to be borne by the party controlling such Tax Contest.
The Indemnified Party shall deliver to the Indemnifying Party any power of
attorney required to allow the Indemnifying Party and its counsel to
represent in connection with the Tax Contest and shall provide Indemnifying
Party with such assistance as may be reasonably requested by Indemnifying
Party in connection with the Tax Contest. Indemnifying Party shall
reimburse for reasonable out-of-pocket expenses (excluding any allocated
overhead costs and any allocated costs of existing employees) incurred in
providing such assistance. Notwithstanding the preceding, Indemnifying
Party shall conduct such Tax Contest in a reasonable manner with respect to
any liability for Taxes for which Indemnified Party, may be liable.
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(ii) Notwithstanding Section 4.1(g)(i), Indemnifying party shall
consult in good faith with the Indemnified Party with respect to the
conduct of, and before entering into any settlement of, any Tax Contest.
Indemnifying Party shall neither consent nor agree to the settlement of any
Tax Contest, without the written consent of the Indemnified Party, which
settlement (A) is in respect of a tax period that includes the Closing Date
but ends after the Closing Date, or (B) may have a material adverse impact
on the liability for Taxes of the Indemnified Party (for which the
Indemnified Party is not indemnified pursuant to this Section 4.1), or any
affiliated group of corporations of which Reorganized RoTech or the
Company, as the case may be, has been or may become a member.
(iii) Neither IHS nor any Affiliate of IHS (other than the Rotech
Debtors or the Company) shall file any amended Tax Return that may affect
the Tax liability of Reorganized RoTech or the Company or any group of
affiliated corporations of which Reorganized RoTech or the Company is a
member without the consent of such affected party or parties, which consent
shall not unreasonably be withheld or delayed.
(iv) Neither Reorganized RoTech nor the Company nor any Affiliate
of any of them (other than IHS) shall file any amended Tax Return that may
affect the Tax liability of IHS or any liability for Taxes for which IHS
may indemnify Reorganized RoTech or Company pursuant to this Agreement
without the consent of IHS (which consent shall not unreasonably be
withheld or delayed), but only so long as IHS is not in breach of, or
incapable of performing, its obligations hereunder.
4.2 Filing of Tax Returns.
(a) IHS shall prepare and file or cause to be prepared and filed on a
timely basis all Tax Returns with respect to the Rotech Debtors and the Company
for taxable periods ending on or before the Closing Date. Such Tax Returns shall
be prepared in a manner consistent with past practice of IHS, and shall be
subject to reasonable review by the Company. Reorganized RoTech and the Acquired
Companies shall cooperate in resolving any disputes with respect to, and in the
execution and filing of, such Tax Returns, provided, however, that none of
Reorganized RoTech or the Acquired Companies shall be required to execute or
file any Tax Return that it reasonably believes is not true, correct and
complete in all material respects. The Company shall prepare and file or cause
to be prepared and filed all other Tax Returns and reports of the Acquired
Companies. The Company shall reimburse IHS and its Affiliates for any
incremental expenses that any of them incurs (including, without limitation,
costs attributable to overhead and employees) in order to prepare, file, or
cause to be filed Tax Returns and any other materials attributable to the
Section 338(h)(10) Election.
(b) In the event that Reorganized RoTech, or the Company and IHS
cannot resolve any dispute in connection with the preparation, execution or
filing of Tax Returns referred to in the first sentence of Section 5.2(a)
hereof, then such dispute shall promptly be submitted to the Accountants for
resolution, and the Accountants' determination as to the resolution of such
dispute (i) shall be rendered in sufficient time to allow the filing of such Tax
Returns on a timely basis
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(taking into account extensions) and (ii) if clause (i) is satisfied, shall be
binding on Reorganized RoTech, the Company and IHS.
4.3 Cooperation.
(a) Following the date hereof, IHS shall (i) give each Rotech Debtor
and the Company, and their authorized representatives, full access to its books
and records (and permit them to make copies thereof) to the extent relating to
such company, as such company may reasonably request, (ii) permit any such
company to make inspections thereof, and (iii) cause IHS's officers and advisors
(including, without limitation, its auditors, attorneys, financial advisors and
other consultants, agents and advisors) to furnish such companies with such
financial, tax and other operating data and other information with respect to
the business and properties of such company for periods ending before or
including the Closing Date as such company may reasonably request. Following the
Closing, Reorganized RoTech and the Company shall give, or cause its
Subsidiaries to give IHS, and its authorized representatives, access to its
books and records (and permit IHS to make copies thereof) to the extent relating
to periods prior to or including the Closing Date as IHS may reasonably request
for purposes of preparing Tax Returns and conducting Proceedings relating to
Taxes.
(b) Each of the Rotech Debtors, the Company, IHS and their Affiliates
will provide the other parties with such assistance as may reasonably be
requested by any of them in connection with the preparation of any Tax Return,
any Proceedings relating to Taxes, or any other claim arising under this
Agreement, and each will retain and provide the others with any records or
information that may be relevant to any such Tax Return, audit or examination,
proceeding or claim. Such assistance shall include making employees available on
a mutually convenient basis to provide additional information and explanation of
any material provided hereunder and shall include providing copies of any
relevant Tax Returns and supporting work schedules. The party requesting
assistance hereunder shall reimburse the other parties for reasonable expenses
incurred in providing such assistance. Notwithstanding any other provision of
this Section 4.3, each of Reorganized RoTech and the Company hereby agrees that
it will retain, or cause the relevant Subsidiary to retain, until all
appropriate statutes of limitation (including any extensions) expire, copies of
all Tax Returns, supporting work schedules and other records or information
which may be relevant to such Tax Returns, and that it will not destroy or
otherwise dispose of such materials without first providing IHS with a
reasonable opportunity to review and copy such materials.
(c) If, within a reasonable period, IHS, a Rotech Debtor or the
Company, as the case may be, fails to provide any information, that it
reasonably should have available, requested by another party, or otherwise fails
to do any act required of it under this Section or Section 4.1 or 4.2, then such
party shall be obligated, notwithstanding any other provision of this Agreement,
to indemnify such other party and shall so indemnify such other party and hold
such other party harmless from and against any and all costs, claims, or
damages, including, without limitation, all Taxes or deficiencies thereof,
payable as a result of such failure.
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4.4 Section 338(h)(10) Election.
(a) Except to the extent that the Company shall otherwise notify IHS
in writing, IHS, Reorganized RoTech and the Company shall jointly make, or cause
to be made, a timely election under Section 338(h)(10) of the Code, and Treasury
Regulation Section 1.338(h)(10)-1 and any analogous election under relevant
State and local law (collectively, the "Section 338(h)(10) Election") with
respect to the transfer, pursuant to the Plan and this Agreement, of the shares
of stock of each of the Company's direct Subsidiaries (as of immediately after
the Closing) and with respect to the deemed acquisition, pursuant thereto, of
the stock of any Subsidiaries thereof. As soon as practicable after the Closing,
with respect to the federal Election, the Company shall prepare a Form 8023
(with all attachments) in accordance with this Section 4.4 and deliver such Form
to IHS for IHS's review and approval, which approval shall not be unreasonably
withheld or delayed. IHS authorizes the Company to file the completed and signed
election forms with the appropriate federal and State taxing authorities.
Reorganized RoTech, the Company and IHS shall make all reports and filings, for
federal, State and local income tax purposes, in a manner consistent with the
Section 338(h)(10) Election, and none of Reorganized RoTech, IHS or the Company
shall take (or permit any Affiliate to take) any position to the contrary
thereto in any Tax Return, any Proceeding before any Tax Authority or otherwise,
unless such position is, as a result of a Final Determination, decided or agreed
to be incorrect.
(b) In connection with the Section 338(h)(10) Election, the Company
and Reorganized RoTech shall mutually determine, as promptly as reasonably
practicable following the Closing, the Modified Aggregate Deemed Sales Price and
Adjusted Grossed-up Basis (each as defined under the applicable Regulations) and
the allocation of such Modified Aggregate Deemed Sales Price and Adjusted
Grossed-up Basis among the assets of the Company and of the Acquired Companies.
For this purpose, the parties agree that any shares of Common Stock issued to
Reorganized RoTech in exchange for the Transferred Assets shall be valued at the
value ascribed to them by Reorganized RoTech and the New Shareholders
implementing the Plan. Reorganized RoTech, IHS and the Company shall be bound by
such allocation for purposes of determining any Taxes, shall prepare and file
(or cause to be prepared and filed) all Tax Returns to be filed with any Taxing
Authority in a manner consistent with such allocation, and shall not take (or
permit any Affiliate to take) any position inconsistent with such allocation on
federal or State income Tax Return or in any Proceeding before any Taxing
Authority, unless such position is, as a result of a Final Determination,
decided or agreed to be incorrect.
(c) In the event any allocation of the Modified Aggregate Deemed Sales
Price is questioned, audited or disputed by any Taxing Authority, the parties
receiving notice thereof shall promptly notify the other parties, shall consult
with the other parties concerning the strategy for resolving the issue and shall
keep the other parties apprized of the status of such question, audit or dispute
and the resolution thereof.
(d) In the event any Taxing Authority questions, audits or disputes
any of the foregoing positions, the party receiving notice thereof shall
promptly notify the other parties.
11
4.5 Designation of Agent. In the event that IHS contemplates liquidation or
any other transaction resulting in the termination of its existence, IHS shall,
pursuant to Treasury Regulation section 1.1502-77(d), designate Reorganized
RoTech as the agent for the affiliated group of corporations of which IHS was
the common parent and which group included Reorganized Rotech, for all tax
periods during which any of the Rotech Debtors was a member of such group, and
shall take all necessary steps to render such designation effective, including,
without limitation, duly notifying the IRS or its designee pursuant to such
regulations.
5. General Provisions.
5.1 Expenses. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants.
5.2 Notices. All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand (with written confirmation of receipt), (b) sent by
telecopier (with written confirmation of receipt from sender's equipment),
provided that a copy is mailed by certified mail, return receipt requested, or
(c) when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties):
IHS:
Integrated Health Services, Inc.
000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Facsimile No.: 000-000-0000
with a copy to:
Xxxx Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxx, Esq.
Facsimile No.: 000-000-0000
12
Reorganized Rotech:
Rotech Medical Corporation
0000 Xxxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: President
Facsimile No.: 000-000-0000
with a copy to:
----------------------------
----------------------------
----------------------------
----------------------------
Attention:
------------------
Facsimile No.:
--------------
The Company:
Rotech Healthcare Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: General Counsel
Facsimile No.: 000-000-0000
with a copy to:
----------------------------
----------------------------
----------------------------
----------------------------
Attention:
------------------
Facsimile No.:
--------------
5.3 Further Assurances. The parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as any other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
13
5.4 Waiver. The provisions, terms, covenants, representations, warranties
and conditions of this Agreement may be waived only by a written instrument
executed by the party hereto waiving compliance. The failure of any party hereto
at any time or times to require performance of any provision of this Agreement
shall in no manner affect the right of such party at a later date to enforce the
same. No waiver by any party hereto of any condition or the breach of any
provision, term, covenant, representation, or warranty contained in this
Agreement, whether by conduct or otherwise, in any one or more instances shall
be deemed to be or construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant,
representation, or warranty of this Agreement.
5.5 Entire Agreement and Modification. This Agreement supersedes all prior
agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment
5.6 Schedules.
(a) The disclosures in the Schedules must relate only to the
representations and warranties in the Section of the Agreement to which they
expressly relate and not to any other representation or warranty in this
Agreement.
(b) In the event of any inconsistency between the statements in the
body of this Agreement and those in the Schedules (other than an exception
expressly set forth as such in the Schedules with respect to a specifically
identified representation or warranty), the statements in the body of this
Agreement will control.
5.7 Assignments, Successors and Third Party Rights. This Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
successors (including, without limitation, any entity that acquires all or
substantially all of the assets, as of the Closing Date, of IHS) and permitted
assigns and heirs and personal representatives of the parties and, as express
third party beneficiaries, the Subsidiaries of Reorganized RoTech and of the
Company, and the successors of such Subsidiaries. Other than as set forth in the
immediately preceding sentence, nothing expressed or referred to in this
Agreement will be construed to give any Person other than the parties to this
Agreement and the Subsidiaries of Reorganized RoTech and of the Company, and the
successors of such Subsidiaries, any legal or equitable right, remedy, or claim
under or with respect to this Agreement or any provision of this Agreement. This
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement.
5.8 Dispute Resolution. Except as otherwise provided herein, any
controversy or claim arising out of or relating to this Agreement or any
Transaction Document or the breach thereof, which is not settled by agreement
among the parties shall be resolved pursuant to arbitration in New York City in
accordance with the arbitration rules and procedures of American Arbitration
Association, provided, however, that the parties hereto agree that (i) the
arbitrator shall be prohibited from disregarding, adding to or modifying the
terms of this Agreement or any Transaction
14
Document, (ii) the arbitrator shall be without authority to award punitive or
exemplary damages, and (iii) any demand for arbitration made by either party
hereto must be filed and served, if at all, within 180 days of the party's
awareness of any occurrence of the act or omission which constitutes the subject
matter of such demand. Any claim or controversy required to be submitted to
arbitration in accordance with this Section 5.8 and not submitted as provided
herein shall be considered waived and, thereafter, no arbitration panel or
tribunal or court shall have the power to rule or make any award on any such
claim or controversy. The determination of the arbitrators in any arbitration
pursuant to this Section 5.8 shall be conclusive and binding on Reorganized
Rotech, the Company and IHS, and judgment upon the award rendered may be entered
and enforced in any court having jurisdiction thereof. Each party shall pay its
own fees and expenses in connection with any such dispute, unless the
arbitrator(s) determines (which determination may be made without findings of
fact) that either party raised claims or defenses in bad faith, in which case
the arbitrator may require such party to reimburse the other party's reasonable
costs and expenses incurred in connection with such arbitration (including
reasonable attorneys' fees).
5.9 Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
5.10 Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. Unless otherwise indicated, all references to "Section" or
"Sections" refer to the corresponding Section or Sections of this Agreement. All
words used in this Agreement will be construed to be of such gender or number as
the circumstances require. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
5.11 Governing Law. This Agreement shall, in accordance with Section 5-1401
of the General Obligations Law of the State of New York, be governed by the laws
of the State of New York, without regard to any conflicts of laws principles
thereof that would call for the application of the laws of any other
jurisdiction.
5.12 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
15
IN WITNESS WHEREOF, the parties have executed and delivered this Tax
Sharing Agreement as of the date first written above.
ROTECH HEALTHCARE INC.
/s/ Xxxxx X. Xxxxxx
-----------------------------------------------
By: Xxxxx X. Xxxxxx
Title: Chief Financial Officer and Treasurer
ROTECH MEDICAL CORPORATION
/s/ Xxxxx X. Xxxxxx
-----------------------------------------------
By: Xxxxx X. Xxxxxx
Title: Vice President & Chief Financial Officer
INTEGRATED HEALTH SERVICES, INC.
/s/ W. Xxxxxxx Xxxxxxx
-----------------------------------------------
By: W. Xxxxxxx Xxxxxxx
Title: Executive Vice President
