TAX ALLOCATION AGREEMENT
Exhibit
10.44
THIS
AGREEMENT is entered into as March 1, 2006, by and between Ener1 Group, Inc.,
a
Florida corporation (“E1G”) and Ener1, Inc. and its subsidiaries (“Ener1”), a
Florida corporation.
WITNESSETH:
WHEREAS,
E1G is the common parent corporation of an affiliated group of corporations
(the
“E1G Affiliated Group”) within the meaning of section 1504(a) of the Internal
Revenue Code of 1986, as amended (the “Code”), and Ener1 is a corporation more
than 80% owned by E1G and therefore a member of the E1G Affiliated Group;
and
WHEREAS,
E1G and Ener1 deem it appropriate to define the method by which the federal
income tax, including for all purposes of this Agreement, the alternative
minimum tax, and certain state and local tax liabilities of the E1G Affiliated
Group shall be allocated between the parties and the manner in which such
allocated liability shall be paid.
NOW,
THEREFORE, in consideration of the premises and of the mutual premises and
covenants hereinafter set forth, the parties hereto agree as
follows:
1. Definitions.
The following
terms as used in this Agreement shall have the meanings set forth
below:
(a)
“Additional
Amount” shall mean the amount determined under Section 3 hereof.
(b)
“Consolidated
Return” shall mean a consolidated federal income tax return filed pursuant to
section 1501 of the Code.
(c)
“Consolidated
Tax Liability” shall mean the consolidated federal income tax liability,
including for all purposes of this Agreement, alternative minimum tax liability,
of the E1G Affiliated Group for any taxable year for which the E1G Affiliated
Group files a Consolidated Return.
(d)
“IRS”
shall mean the Internal Revenue Service.
(e)
“Member”
shall mean each includible member of the E1G Affiliated Group.
(f)
“E1G
Affiliated Group” shall mean the affiliated group of corporations within the
meaning of section 1504(a) of the Code of which E1G is the common
parent.
1
(g)
“Regulations”
shall mean the Treasury regulations as in effect from time to time.
(h)
“Separate
Return Tax Liability” shall mean the federal income tax liability, including for
all purposes of this Agreement, alternative minimum tax liability, of a Member
computed as if it had filed a separate federal income tax return for the
applicable taxable year with the modifications set forth in section
1.1552-1(a)(2)(ii) of the Regulations.
(i)
“Separate
Tax Liability” shall mean the amount owed by a Member under Section 2(a)
hereof.
(j)
“Tax
Sharing Receivable” shall mean the amount owned to a Member pursuant to Section
2(a) hereof.
2. Separate
Tax Liability.
(a)
If
a
Consolidated Return is filed by the E1G Affiliated Group for any taxable year,
the Separate Tax Liability of each Member for such taxable year shall, if a
positive number, be the sum of (i) the amount determined for such Member
pursuant to paragraph (b) hereof, plus or minus, as the case may be, (ii) any
increase or reduction in the Member's tentative Separate Tax Liability required
by paragraph (c) hereof. To the extent an allocation to a Member under clause
(ii) of paragraph (c) hereof reduces a Member's tentative Separate Tax Liability
to an amount less than zero, such negative amount shall be referred to herein
as
a “Tax Sharing Receivable.”
(b)
Each
Member's tentative Separate Tax Liability shall be an amount equal to that
portion of the Consolidated Tax Liability for such taxable year that the
Member's Separate Return Tax Liability for such taxable year bears to the sum
of
the Separate Return Tax Liabilities of all Members for such taxable year;
provided, however, that such amount shall not exceed the Consolidated Tax
Liability for such taxable year.
(c)
Adjustments
for Additional Amount. If an Additional Amount is determined with respect to
a
Member for a Consolidated Return taxable year, then (i) the tentative Separate
Tax Liability of that Member, as determined pursuant to paragraph (b), shall
be
increased by such Additional Amount; and (ii) the Separate Tax Liability of
each
of those Members whose tax attributes are absorbed shall be reduced by a pro
rata portion of the Additional Amount allocated to such Member, which allocation
shall be made in a manner that reasonably reflects the absorption of the tax
attributes. This paragraph (c) and Section 3 hereof are intended to allocate
Additional Amounts of Separate Return Tax Liability in accordance with the
percentage method of Reg. (S)1.1502-33(d)(3) (using 100% for each Member) and
shall be interpreted to comply in all material respects with that
method.
3.
Additional
Amount. An “Additional Amount” exists with respect to a Member if, for any
Consolidated Return taxable year, that Member's Separate Return Tax Liability
exceeds the tentative Separate Tax Liability of that Member determined pursuant
to Section 2(b).
2
4. Payments.
For each taxable year with respect to which E1G files, or it is reasonably
anticipated that E1G will file, a Consolidated Return which includes Ener1,
payment of the Separate Tax Liability or Tax Sharing Receivable with respect
to
such taxable year shall be made as follows:
(a)
On
or
before the 15th day of the fourth month of such taxable year, E1G shall estimate
the Separate Tax Liability or Tax Sharing Receivable of each Member for such
taxable year.
(b)
Ener1
shall pay to E1G or E1G shall pay to Ener1, as the case may be, on or before
each of the due dates for E1G to make payment of estimates of its federal income
taxes for such taxable year one-fourth of the amount estimated pursuant to
paragraph (a) above (the “Estimated Amount”). If, after paying any such
installment of the Estimated Xxxxxx, X0X and Ener1 make a new estimate, the
amount of each remaining installment (if any) shall be the amount which would
have been payable if the new estimate had been made when the first estimate
for
the taxable year was made, increased or decreased as applicable, by the amount
computed by dividing: (i) the difference between (A) the amount of the Estimated
Amount required to be paid before the date on which the new estimate is made,
and (B) the amount of the Estimated Amount which would have been required to
be
paid before such date if the new estimated had been made when the first estimate
was made, by (ii) the number of installments remaining to be paid on or after
the date on which the new estimate is made.
(c)
If,
after
the end of each such taxable year with respect to which E1G filed, or reasonably
anticipates that it will file, a Consolidated Return which includes Ener1,
it is
determined that the actual Separate Tax Liability for such taxable period
exceeds the aggregate amount paid pursuant to the subparagraph (b) above with
respect to such taxable period, then such excess shall be paid on or before
the
later of (i) the 15th day of the third month after the end of such taxable
period, and (ii) the date on which such excess is finally determined, which
shall be not later than sixty (60) days after the Consolidated Return for such
taxable period is filed.
(d)
If,
after
the end of each such taxable year with respect to which E1G filed, or reasonably
anticipates that it will file, a Consolidated Return which includes Ener1,
it is
determined that the amount paid pursuant to subparagraph (b) above with respect
to such taxable period exceeds the actual Separate Tax Liability or Tax Sharing
Receivable for such taxable period, then such excess shall be paid on or before
the later of (i) the 15th day of the third month after the end of such taxable
period and (ii) the date on which such excess is finally determined, which
shall
be not later than sixty (60) after the Consolidated Return for such taxable
period is filed.
3
5.
Carrybacks.
The provisions of this Section 5 shall be interpreted in a manner that does
not
result in the duplication of any computations required by any other provision
of
this Agreement or in the duplication of any tax sharing payment required to
be
made pursuant to any other provision of this Agreement.
(a)
If
the
E1G Affiliated Group has a consolidated unused investment credit, a consolidated
unused foreign tax credit, a consolidated excess charitable contribution, a
consolidated net capital loss or a consolidated net operating loss, as such
terms are defined in the Regulations (a “Consolidated Excess Amount”) for any
taxable year, the portion of such Consolidated Excess Amount which is
attributable to a Member (the “Separate Excess Amount”) shall be computed in
accordance with the Consolidated Return Regulations.
(b)
If
such
Consolidated Excess Amount is carried back to a prior taxable year of the E1G
Affiliated Group during which Ener1 was a Member or was not in existence, then
the amounts due under this Agreement for such prior taxable year shall be
redetermined by taking into account such Consolidated Excess Amount and any
Separate Excess Amount allocable to such taxable year.
(c)
Payment
of any amount due under this Section 5 shall be made on the date that a credit
or refund is allowed with respect to the taxable year to which such payment
related and shall include any interest attributable thereto under section 6611
of the Code.
6.
Subsequent Adjustments. If any adjustments (other than adjustments made pursuant
to Section 5 hereof) are made to the income, gains, losses, deductions or
credits of the E1G Affiliated Group for a taxable year during which Ener1 is
a
Member, whether by reason of the filing of an amended return or a claim for
refund which respect to such taxable year or an audit with respect to such
taxable year by the IRS, the amounts due under this Agreement for such taxable
year shall be redetermined by taking into account such adjustments. If, as
a
result of such redetermination, any amounts due under this Agreement shall
differ from the amounts previously paid, then payment of such difference shall
be made (a) in the case of an adjustment resulting in a credit or refund, on
the
date on which such credit or refund is allowed with respect to such adjustment,
or (b) in the case of an adjustment resulting in the assertion of a deficiency,
on the date on which such deficiency is paid. Any amounts due under this Section
6 shall include any interest attributable thereto under section 6601 or 6611
of
the Code, as the case may be, and any penalties or additional amounts which
may
be imposed.
7.
Foreign
Tax and State and Local Tax
4
(a)
Ener1
agrees, on the request of E1G, to join with E1G, or any direct or indirect
subsidiary of E1G, (i) in any combined or consolidated foreign tax return
(“Foreign Combined Return”) for any taxable year for which E1G or any such
direct or indirect subsidiary of E1G files a Foreign Combined Return that may
include Ener1, and (ii) in any combined or consolidated state or local income
or
franchise tax return (“State/Local Combined Return”) for any taxable year for
which E1G or any such direct or indirect subsidiary of E1G files a State/Local
Combined Return that may include Ener1.
(b)
If,
at
any time from and after the date of this Agreement, Ener1 is included in any
Foreign Combined Return or State/Local Combined Return that includes E1G or
any
direct or indirect subsidiary of E1G, this Agreement shall be applied in a
like
manner to all matters relating to such foreign taxes or state or local income
or
franchise taxes.
8.
Determinations.
All determinations required hereunder shall be made by the independent public
accountants regularly employed by the E1G Affiliated Group at the time that
such
determination is required to be made or by such other independent tax advisor
as
may be selected by E1G, in the exercise of its absolute discretion. Such
determinations shall be binding and conclusive upon the parties for purposes
hereof.
9.
Procedural
Matters. E1G shall prepare and file the Consolidated Return and other returns,
documents or statements required to be filed with the IRS with respect to the
determination of federal income tax liability of the E1G Affiliated Group.
In
its sole discretion, E1G shall have the right with respect to any Consolidated
Returns which it has filed or will file, (i) to determine the manner in which
such returns, documents or statement shall be prepared and filed, including,
without limitation, the manner in which any item of income, gain, loss,
deduction or credit shall be reported, the elections that will be made by any
Member, (ii) to contest, compromise or settle any adjustment or deficiency
proposed, asserted or assessed as a result of any audit or such returns by
the
IRS, (iii) to file, prosecute, compromise or settle any claim for refund and
(iv) to determine whether any refunds, to which the E1G Affiliate Group may
be
entitled, shall be paid by way of refund or credited against the tax liability
of the E1G Affiliated Group. Ener1 hereby irrevocably appoints E1G as its agent
and attorney-in-fact to take such actions (including the execution of documents)
as E1G may deem appropriate to effect the foregoing.
10.
Earnings
and Profits Determinations. For purposes of determining the manner in which
taxes are shared in calculating each Member's earnings and profits, E1G shall
be
entitled to use any of the methods permitted by section 1.1502-33(d) of the
Regulations that E1G, in the exercise of its absolute discretion, deems
necessary or appropriate.
11.
Miscellaneous
Provisions.
(a)
This
Agreement contains the entire understanding of the parties hereto with respect
to the subject matter contained herein. No alteration, amendment or modification
of any of the terms of this Agreement shall be valid unless made by an
instrument signed in writing by an authorized officer of each party
hereto.
5
(b)
This
Agreement has been made in and shall be construed and enforced in accordance
with the laws of the State of Florida from time to time obtaining.
(c)
This
Agreement shall be binding upon and inure to the benefit of each party hereto
and their respective successors and assigns.
(d)
This
Agreement may be executed simultaneously in two or more counterparts, each
of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(e)
All
notices and other communications hereunder shall be deemed to have been duly
given if delivered by hand or mailed certified or registered mail, postage
prepaid:
If
to
Ener1 Group:
Ener1
Group, Inc.
000
Xxxx
Xxxxxxx Xxxxx Xx., Xxxxx 000
Xx.
Xxxxxxxxxx, XX 00000
Attn:
Xxxxxxx Xxxxxxxxxxxx, CEO
Email:
xxxxxxxxxxxxx@xxxx0xxxxx.xxx
Fax:
000.000.0000
If
to
Ener1, Inc.:
Ener1,
Inc.
000
Xxxx
Xxxxxxx Xxxxx Xx., Xxxxx 000
Xx.
Xxxxxxxxxx, XX 00000
Attn:
Xxxxxx Xxxxxxx, CFO
Email:
Xxxxxxxx@xxxx0.xxx
Fax:
000
000-0000
(f) The
headings of the paragraph of this Agreement are inserted for convenience only
and shall not constitute a part hereof.
6
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their authorized representative, all on the date and year first
above written.
| ENER1 GROUP, INC. | |||
| By: | |||
|
Name:
Title:
|
|
||
|
|
| ENER1, INC. | |||
| By: | |||
|
Name:
Title:
|
|
||
7
