EXHIBIT 10.4
TAX SHARING AGREEMENT
This Tax Sharing Agreement (this "Agreement"), dated as of October 27,
1998, is made by and among Pinnacle Automation, Inc. (together with its
successors and assigns, "Pinnacle"), a Delaware corporation, Xxxxx Systems, Inc.
("Xxxxx"), a Delaware corporation and wholly owned subsidiary of Pinnacle, and
XxXxxx Software International, Inc. ("XxXxxx"), a Delaware corporation and
wholly owned subsidiary of Xxxxx, and their respective successors in interest.
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in Article I.
RECITALS
WHEREAS, Pinnacle is the common parent of an affiliated group of domestic
corporations that include Xxxxx and XxXxxx;
WHEREAS, Xxxxx and its wholly-owned subsidiaries other than the XxXxxx
Companies provide automated materials handling systems for manufacturing plants,
distribution centers and warehouses and related services (the "Xxxxx Business");
WHEREAS, XxXxxx and its subsidiaries develop, market, implement and support
software solutions for warehouse and transportation management (the "XxXxxx
Business");
WHEREAS, Pinnacle, Xxxxx and XxXxxx have entered into a Distribution
Agreement, dated as of even date herewith, pursuant to which Xxxxx will
distribute all of the issued and outstanding shares of capital stock of XxXxxx
to Pinnacle, and Pinnacle will subsequently distribute such shares of capital
stock of XxXxxx to its stockholders, as more fully described in such
Distribution Agreement (the "Spin-Off");
WHEREAS, Pinnacle, Xxxxx and XxXxxx intend that for federal income tax
purposes the Spin-Off qualify as a tax-free distribution under Section 355 of
the Code;
WHEREAS, following the Spin-Off, XxXxxx will become the common parent of an
affiliated group of corporations;
WHEREAS, the parties desire to set forth their agreement relating to their
respective obligations, responsibilities, rights and entitlements with respect
to (1) Taxes paid or payable by either of them, (2) Tax Returns to be filed by
either of them, and (3) certain representations and covenants relating to
actions of the parties following the Disaffiliation Date.
NOW, THEREFORE, in consideration of the foregoing and the agreements set
forth below, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
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I. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (the meanings to be equally applicable to the singular and the plural
forms of the terms defined).
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
"Disaffiliation Date" means the date upon which XxXxxx ceases to be a
member of the Pinnacle Affiliated Group as determined in accordance with
Treasury Regulations Section 1.1502-76(b).
"Final Determination" means the final resolution of liability for any Tax
for a taxable period, including any related interest or penalties, (i) by IRS
Form 870-AD (or any successor form thereto), on the date of acceptance by or on
behalf of the Commissioner of the IRS, or by a comparable agreement form under
the laws of any state, local or foreign government or the rules or regulations
of any state, local or foreign taxing authority, except that a Form 870-AD or
comparable form that reserves the right of the taxpayer to file a claim for
refund or the right of the taxing authority to assert a further deficiency shall
not constitute a Final Determination with respect to the item or items so
reserved, (ii) by a decision, judgment, decree, or other order by a court of
competent jurisdiction that has become final and unappealable, (iii) by a
closing agreement or accepted offer in compromise under section 7121 or 7122 of
the Code, or a comparable agreement under the laws of any state, local or
foreign government or the rules or regulations of any state, local or foreign
taxing authority, (iv) by any allowance of a refund or credit in respect of an
overpayment of Tax, including any related interest or penalties, but only after
the expiration of all periods during which such refund may be recovered
(including by way of offset) by the jurisdiction imposing the Tax (including a
refund or credit allowed as a result of the filing of an amended return), or (v)
by any other final disposition, including by reason of the expiration of the
applicable statute of limitations. In addition to the foregoing, any event
(e.g., the filing of an IRS Form 870 or a partial settlement) that is agreed by
the parties in writing to be a Final Determination shall also be treated as a
Final Determination.
"Income Taxes" means Taxes based on or measured by net income, including,
but not limited to, franchise or similar Taxes for which a consolidated, unitary
or combined Tax Return is required or permitted.
"IRS" means the Internal Revenue Service.
"XxXxxx Affiliated Group" means the affiliated group of corporations
(within the meaning of Section 1504(a) of the Code) of which XxXxxx will be the
common parent immediately after the Spin-Off.
"XxXxxx Class A Common" means the newly created class of XxXxxx Class A
common stock.
"XxXxxx Class B Common" means the newly created class of XxXxxx Class B
common stock.
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"XxXxxx Class C Common" means the newly created class of XxXxxx Class C
common stock.
"XxXxxx Companies" means, for any taxable period, XxXxxx and the
subsidiaries of XxXxxx that are includable in the XxXxxx Affiliated Group.
"Pinnacle Affiliated Group" means the affiliated group of corporations
(within the meaning of Section 1504(a) of the Code) of which Pinnacle is the
common parent.
"Pinnacle Companies" means, for any taxable period, Pinnacle and the
Pinnacle subsidiaries that are includable in the Pinnacle Affiliated Group,
excluding all XxXxxx Companies.
"Tax" or "Taxes" means all forms of taxation, whenever created or imposed,
and whether of the United States or elsewhere, and whether imposed by a local,
municipal, governmental, tribal (including Indian or native American), state,
federation or other body, and without limiting the generality of the foregoing
shall include income, sales, use, ad valorem, gross receipts, value added,
franchise, transfer, recording, withholding, payroll, employment, excise,
occupation, premium or property taxes, together with any related interest,
penalties and additions to tax, or additional amounts imposed by any taxing
authority (domestic or foreign).
"Tax Benefit" means any item of loss, deduction, tax credit or any similar
item that generally has the effect of reducing the relevant Tax liability.
"Tax Detriment" means any item of income, gain, recapture of credits or any
similar item that generally has the effect of increasing the relevant Tax
liability.
"Tax Item" means any Tax Benefit or Tax Detriment.
"Tax Return" means any return, filing, questionnaire, report, form or other
document, including amended returns or claims for refund filed or required to be
filed for any period with any taxing authority (whether domestic or foreign) in
connection with any Taxes (whether or not a payment is required to be made with
respect to the filing), including any forms required to obtain an exemption from
any Tax.
II. FILING OF RETURNS AND PAYMENT OF TAXES
2.01 FEDERAL INCOME TAXES.
For all Tax periods, Pinnacle shall accurately prepare and timely file all
consolidated federal Income Tax Returns that are required to be filed for the
Pinnacle Affiliated Group and shall pay all Taxes shown as due thereon.
2.02 STATE, LOCAL AND FOREIGN INCOME TAXES.
(a) For all Tax periods ending on or before the Disaffiliation Date,
Pinnacle shall accurately prepare and timely file all combined, consolidated or
unitary state, local or foreign Income Tax Returns that include a Pinnacle
Company and shall pay all Taxes shown as due thereon.
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(b) For all Tax periods that include but do not end on the
Disaffiliation Date ("Straddle Periods"), Pinnacle shall accurately prepare and
timely file all combined, consolidated or unitary state, local or foreign Income
Tax Returns that include a Pinnacle Company. The liability to pay the Taxes
shown as due thereon shall be (i) allocated to Pinnacle to the extent such Tax
liability is attributable to any of the Pinnacle Companies, and (ii) allocated
to XxXxxx to the extent such Tax liability is attributable to any of the XxXxxx
Companies. Pinnacle shall pay such Taxes shown as due thereon, and XxXxxx shall
reimburse Pinnacle for its share of such Taxes upon receipt of demand for
reimbursement accompanied by reasonable explanation of the calculation of the
share of such Tax liability attributable to XxXxxx.
(c) All other Income Tax Returns required to be filed by any Pinnacle
Company or any XxXxxx Company (including any combined, consolidated or unitary
state, local or foreign Income Tax Returns that are filed solely for the XxXxxx
Companies), as the case may be, for any period shall be filed by, and the Taxes
shown as due thereon shall be paid by, the applicable XxXxxx Company or Pinnacle
Company with respect to which such Income Tax Return is required to be filed.
2.03 TAXES OTHER THAN INCOME TAXES.
XxXxxx shall accurately prepare and timely file all Tax Returns with
respect to Taxes other than Income Taxes required to be filed by any of the
XxXxxx Companies for all Tax periods and shall pay all Taxes shown as due
thereon. Pinnacle shall accurately prepare and timely file all Tax Returns with
respect to Taxes other than Income Taxes required to be filed by any other
Pinnacle Company and shall pay all Taxes shown as due thereon.
2.04 PRIOR PRACTICE.
All Tax Returns shall be prepared in accordance with applicable law and
consistently with prior practice.
III. SUBSEQUENT ADJUSTMENTS OF INCOME TAX LIABILITY
3.01 PINNACLE LIABILITY AND REFUNDS.
Except as set forth in Article V, Pinnacle shall pay and shall indemnify
and hold harmless the XxXxxx Companies from and against (i) any Tax liability
resulting from any Final Determination that adjusts any Tax Item of any member
or former member of the Pinnacle Affiliated Group for any Tax period that ends
on or before the Disaffiliation Date, including any Tax allocated to the portion
of any Straddle Period that ends on the Disaffiliation Date, (ii) any Tax
liability attributable to any Pinnacle Company and (iii) any expenses incurred
by any XxXxxx Company in connection therewith, including reasonable accounting
and attorneys' fees. Pinnacle shall be entitled to the benefit of all refunds
of Taxes resulting from any Final Determination that adjusts any Tax Item of any
member or former member of the Pinnacle Affiliated Group for any Tax period that
ends on or before the Disaffiliation Date.
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3.02 ALLOCATION OF LIABILITY FOR STRADDLE PERIODS.
In the case of any Straddle Period, the Tax allocable to the portion of
such Straddle Period ending on and including the Disaffiliation Date shall (i)
in the case of any Taxes other than gross receipts, sales or use taxes and Taxes
based upon or related to income, be deemed to be the amount of such Tax for the
entire Tax period multiplied by a fraction, the numerator of which is the number
of calendar days in the portion of such Straddle period ending on and including
the Disaffiliation Date and the denominator of which is the number of days in
the entire Straddle Period, and (ii) in the case of any Tax based upon or
related to income and gross receipts, sales or use taxes, be deemed equal to the
amount that would be payable if the relevant Tax period ended on and included
the Disaffiliation Date. The portion of any credits relating to a Straddle
Period shall be determined as though the relevant period ended on and included
the Disaffiliation Date.
IV. REPRESENTATIONS, WARRANTIES AND COVENANTS
4.01 REPRESENTATIONS, WARRANTIES AND COVENANTS OF PINNACLE.
Pinnacle represents that it has no plan or intention to:
(a) Amend its charter in any manner or adopt a plan of recapitalization
or similar plan that would change or modify, directly or indirectly, the rights
of the holders of the common stock or preferred stock of Pinnacle;
(b) Issue any class of stock to any person or group of persons such
that for purposes of Section 355(e) of the Code (x) the aggregate combined
voting power of the holders of such stock equals or exceeds 50% of the total
voting power of the outstanding capital stock of Pinnacle or (y) the aggregate
fair market value of such stock equals or exceeds 50% of the fair market value
of the capital stock of Pinnacle;
(c) Enter into a transaction, or to the extent it has the right to
prohibit, permit a transaction to occur, as a result of which any person, other
than Pinnacle, would acquire shares of Pinnacle capital stock from any holder of
shares of Pinnacle capital stock;
(d) Acquire, or permit any subsidiary of Pinnacle to acquire, any
outstanding shares of Pinnacle capital stock that has an aggregate fair market
value of more than $5 million;
(e) Cause or permit Xxxxx to adopt a plan of liquidation or
dissolution, or to discontinue any material portion of the Xxxxx Business;
(f) Liquidate, sell or dispose of any shares of capital stock of Xxxxx;
or
(g) Adopt a plan of liquidation or dissolution.
4.02 REPRESENTATIONS, WARRANTIES AND COVENANTS OF XXXXX.
Xxxxx represents that it has no plan or intention to:
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(a) Acquire, or permit any subsidiary to acquire, any outstanding
shares of Pinnacle or Xxxxx capital stock; or
(b) Adopt a plan of liquidation or dissolution, or discontinue any
material portion of the Xxxxx Business.
4.03 REPRESENTATIONS, WARRANTIES AND COVENANTS OF XXXXXX.
XxXxxx represents that it has no plan or intention to:
(a) Amend its charter in any manner or adopt a plan of recapitalization
or similar plan that would change or modify, directly or indirectly, the rights
of the holders of the outstanding common stock of XxXxxx, the XxXxxx Class A
Common, the XxXxxx Class B Common or the XxXxxx Class C Common;
(b) Issue any class of stock to any person or group of persons such
that for purposes of Section 355(e) of the Code (x) the aggregate combined
voting power of such stock and the XxXxxx Class A Common equals or exceeds 50%
of the total voting power of the outstanding capital stock of XxXxxx or (y) the
aggregate fair market value of such stock and the XxXxxx Class A Common equals
or exceeds 50% of the fair market value of the capital stock of XxXxxx;
(c) Enter into a transaction, or to the extent it has the right to
prohibit, permit a transaction to occur, as a result of which any person, other
than XxXxxx, would acquire shares of XxXxxx capital stock from any holder of
shares of XxXxxx capital stock;
(d) Acquire, or permit any subsidiary of XxXxxx to acquire, any
outstanding shares of XxXxxx capital stock that has a fair market value of more
than $5 million;
(e) Liquidate, dispose of or otherwise discontinue any material portion
of the XxXxxx Business; or
(f) Adopt a plan of liquidation or dissolution.
V. TAXES ATTRIBUTABLE TO SPIN-OFF
5.01 PINNACLE LIABILITY.
Each of Pinnacle, Xxxxx and XxXxxx hereby agrees that it will take any
action required or reasonable to qualify the Spin-Off, and will not take or
cause to be taken any action that would disqualify the Spin-Off, as a tax free
distribution under Section 355 of the Code. Notwithstanding any provision of
this Agreement to the contrary, and except as specifically provided in Section
5.02, Pinnacle shall pay and shall indemnify and hold harmless the XxXxxx
Companies from and against any Taxes resulting from the Spin-Off.
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5.02 XXXXXX LIABILITY.
Notwithstanding Section 5.01 hereof, XxXxxx shall be liable for, and shall
indemnify Pinnacle against, the Taxes described in Section 5.01, to the extent
the incurrence of the Tax in question resulted from (i) any actions taken after
the Disaffiliation Date by XxXxxx or any of its stockholders that would be
contrary to the requirements of Section 355 of the Code or (ii) any failure by
XxXxxx or any of its stockholders to take any actions after the Disaffiliation
Date that would be contrary to the requirements of Section 355 of the Code.
VI. ADMINISTRATIVE PROVISIONS
6.01 CONTESTS.
A party entitled to be indemnified under this Agreement (the
"Indemnified Party") shall provide the indemnifying party (the "Indemnifying
Party") with written notice of any claim or of the commencement of any
proceeding against the Indemnified Party that may result in any
indemnification hereunder, and shall provide the Indemnifying Party with
notice of and an opportunity to attend any meeting with taxing authorities
regarding the claim or proceeding. The Indemnified Party shall not (unless
otherwise required by a proper notice of assessment of levy) pay, settle,
compromise or concede any portion of the claim or issue relating thereto
without the written consent of the Indemnifying Party and shall, at the
Indemnifying Party's sole cost (including any reasonable out-of-pocket costs
incurred by the Indemnified Party), take such action as the Indemnifying
Party may reasonably request (including the filing of a petition, amended
return or claim for refund) in contesting the claim. The Indemnifying Party
shall, if so requested, provide an opinion of independent Tax counsel or
independent accounting firm that there exists a reasonable basis for the
contest. The Indemnified Party shall assign to the Indemnifying Party any
claim for refund or any portion of the claim that shall have been paid. If
in the course of a contest, a compromise is offered with respect to
offsetting or partially offsetting issues, the parties agree to negotiate in
good faith to share the benefits and burdens of the compromise.
6.02 COOPERATION.
Pinnacle and XxXxxx agree to furnish or cause to be furnished to each
other, at no cost and upon request, as promptly as practicable, such information
and assistance (including access to books and records) as is reasonably
necessary for preparation of any return, claim for refund or audit and the
prosecution or defense of any claim, suit or proceeding relating to Taxes.
Neither the Pinnacle Companies nor the XxXxxx Companies shall, without the
consent of the other party (which shall not be unreasonably withheld) settle or
compromise any Tax claim or dispute with a Taxing authority if the effect of
such settlement or compromise would be a material increase in the Tax Liability
of the other group.
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VII. MISCELLANEOUS
7.01 ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement among the parties with
respect to the subject matter hereof and supersedes all prior written and oral
and all contemporaneous oral agreements and understandings with respect to the
subject matter hereof.
7.02 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware regardless of the laws that might otherwise govern
under principles of conflicts of laws applicable thereto.
7.03 DESCRIPTIVE HEADINGS.
The descriptive headings herein are inserted for convenience of reference
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
7.04 NOTICES.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given when delivered in person, by telecopy or
by registered or certified mail (postage prepaid, return receipt requested) to
the respective parties as follows:
if to Pinnacle or Xxxxx:
c/o Pinnacle Automation, Inc.
0000 Xxxxx Xxxxxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xx. Xxxxxxx X. X'Xxxxx
President and Chief Executive Officer
if to XxXxxx:
XxXxxx Software International, Inc.
00000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xx. Xxxxx X. Xxxxxxx
President and Chief Executive Officer
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Any notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by telecopy shall be deemed
effective on the first business day at the place of which such notice or
communication is
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received following the day on which such notice or communication was sent.
Any notice or communication sent by registered or certified mail shall be
deemed effective on the fifth business day at the place from which such
notice or communication was mailed following the day in which such notice or
communication was mailed.
7.05 COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original, but all of which shall constitute one and the same
agreement.
7.06 PERSONAL LIABILITY.
This Agreement shall not create or be deemed to create or permit any
personal liability or obligation on the part of any direct or indirect
stockholder of any party hereto or any officer, director, employee, agent,
representative or investor of any party hereto.
7.07 BINDING EFFECT; ASSIGNMENT.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective legal representatives and successors. This
Agreement may not be assigned by any party hereto.
7.08 AMENDMENT.
This Agreement may not be amended except by an instrument in writing signed
on behalf of all the parties.
7.09 LEGAL FEES; COSTS.
If any party hereto institutes any action or proceeding, whether before a
court or arbitrator, to enforce any provision of this Agreement, the prevailing
party therein shall be entitled to receive from the non-prevailing party
reasonable attorneys' fees and costs and any other costs incurred in such action
or proceeding, whether or not such action or proceeding is prosecuted to
judgment.
7.10 RESOLUTION OF DISPUTES.
Any disputes between the parties concerning the calculation of amounts or
similar accounting matters shall be resolved by a nationally recognized public
accounting firm selected by the parties, whose fees and expenses shall be shared
equally by Pinnacle and XxXxxx.
7.11 TERM.
This agreement shall commence on the date of execution indicated on page
one hereof and shall continue in effect until the expiration of the applicable
statute of limitations.
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7.12 SEVERABILITY.
If any term, provision or restriction of this Agreement is held by a court
of competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and restrictions shall remain in full force and effect and
shall not be affected, impaired or invalidated. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions and restrictions without including any invalid, void
or unenforceable provisions.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized on the day and
year first above written.
PINNACLE AUTOMATION, INC.
By: /s/Xxxxxxx X. X'Xxxxx
------------------------------------
Xxxxxxx X. X'Xxxxx
President and Chief Executive Officer
XXXXX SYSTEMS, INC.
By: /s/Xxxxxxx X. X'Xxxxx
-------------------------------------
Xxxxxxx X. X'Xxxxx
President and Chief Executive Officer
XXXXXX SOFTWARE INTERNATIONAL, INC.
By: /s/Xxxxx X. Xxxxxxxx
--------------------------------------
Xxxxx X. Xxxxxxxx
Vice President - Finance and Treasurer
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