SUB-GROUP TAX SHARING AGREEMENT
Tax Sharing Agreement ("Agreement") dated this 12th
day of March, 1998, by and among PM Holdings Corporation
("Holdings") and each of the Holdings subsidiaries listed on
Schedule I hereto (each subsidiary being a "Subsidiary").
RECITALS
1. For purposes of applying the provisions of this
Agreement, Holdings and the Subsidiaries shall be treated as the
only members ("Members") of an affiliated group (the "Affiliated
Group"), as defined in Section 1504(a) of the Internal Revenue
Code of 1986 (the "Code"), for the taxable year ending December
31, 1998, of which Holdings is the parent. All references in this
Agreement to provisions of the Code or the Treasury Regulations
promulgated thereunder shall include any corresponding successor
provisions.
2. It is the intent and desire of the parties hereto
that a method be established for allocating the federal and state
consolidated tax liability of the Affiliated Group, as determined
under the Parent Tax Sharing Agreement between Xxxx Industries,
Inc. and Holdings, among its Members, for reimbursing Holdings
for payment of such tax liability, and to provide for the
allocation and payment of any refund arising from a carry-back of
losses or tax credits from subsequent taxable years.
AGREEMENT
Now, therefore, in consideration of the mutual
covenants and promises contained herein, the parties hereto agree
as follows:
1. Allocation of Tax Liability. Holdings and
Subsidiaries agree that the consolidated tax liability for each
year beginning with the taxable year ending December 31, 1998,
determined in accordance with Treasury Regulations Section
1.1502-2, shall be
apportioned among them in accordance with the provisions of
Treasury Regulations Sections 1.1552-1(a)(2) and 1.1502-33(d)(2).
Accordingly, the tax liability shall be allocated to the several
Members on the basis of the percentage of the total tax that the
tax of such Member if computed on a separate return would bear to
the total amount of taxes for all Members so computed pursuant to
Section 1552(a)(2) of the Code and Treasury Regulations Section
1.1552- 1(a)(2). If a Member (the "Tax Attribute Member") is
unable to absorb a tax attribute on a separate return basis in
one year but is able to absorb that attribute on a separate
return basis in a subsequent year a portion of the consolidated
tax liability which otherwise would have been allocated to the
Tax Attribute Member in the subsequent year under Treasury
Regulation Section 1.1552-1(a)(2) will instead be reallocated
among the other Members of the Affiliated Group,
using the principles of Treasury Regulations Section
1.1502-33(d)(2). This allocation including the effect of any
reallocation shall be each Member's "Allocated Tax Liability" for
such year. For purposes of this Agreement, the consolidated tax
liability shall include any liability for alternative minimum
tax.
3. Payment of Tax. Each Subsidiary shall pay to
Holdings no later than 10 days before the date on which the
Affiliated Group's consolidated income tax return is required to
be filed (taking account of any extensions thereof) its separate
return tax liability determined under Treasury Regulations
Sections 1.1552-1(a)(2)(ii) and 1.1502-33(d)(2) plus its ratable
share of any interest or penalties shown due on the return
(determined by multiplying such interest or penalties by a
fraction, the numerator of which equals such Member's Allocated
Tax Liability (before interest or penalties) and the denominator
of which equals the Affiliated Group's tax liability (before
interest or penalties)).
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4. Carryforward/Carryback of Losses and Credits. If
part or all of an unused loss or tax credit is allocated to a
Member pursuant to Treasury Regulations Sections 1.1502-21T or
1.1502-79, and it is carried back or forward to a year in which
such Member filed a separate return or a consolidated return with
another affiliated group, any refund or reduction in tax
liability arising from the carryback or carryover shall be
retained by such Member. Notwithstanding the foregoing, Holdings
shall determine whether an election shall be made (i) not to
carry back any portion of any such loss arising in a consolidated
return year (including any portion allocated to a Member under
Treasury Regulations Section 1.1502-21T) in accordance with Code
Section 172(b)(3), and (ii) to reattribute to itself any portion
of any loss attributable to the disposition of the stock of a
Subsidiary, to the extent permitted by Treasury Regulations
Section 1.1502-20(g). Each Subsidiary agrees to join with
Holdings in filing any necessary elections under Treasury
Regulations Section 1.1502-20(g).
5. Estimated Tax Payments. If the Affiliated Group is
required to make estimated federal income tax payments (including
(i) payment due at the time any extension of time is sought for
the filing of the Affiliated Group's federal income tax return
and (ii) any estimated tax payments pursuant to any other tax
sharing agreement), each Subsidiary shall, if requested by
Holdings, pay to Holdings, no later than 10 days before the date
each estimated tax payment is to be made by Holdings, that
percentage of the estimated tax payment that equals the
percentage which the estimated Allocated Tax Liability of such
Subsidiary for such year bears to the aggregate of the Affiliated
Group's estimated tax liability for the taxable year. Such
estimates shall be determined by Holdings. Any estimated tax
payments made by a Subsidiary under this paragraph 5 with respect
to any taxable year shall be applied to reduce the amount, if
any, owed by the Subsidiary under paragraph 3 hereof with respect
to such year. Any excess of
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such estimated payments by a Subsidiary over the amount described
in paragraph 3 for such year shall be repaid by Holdings to the
Subsidiary no later than 30 days after the date of filing of the
consolidated return for such taxable year or, to the extent such
excess represents all or a part of a tax refund to be received by
the Affiliated Group, no later than 10 days after the receipt of
the refund.
6. Adjustments to Tax Liability. If the consolidated
tax liability is adjusted for any taxable period, whether
pursuant to an amended return, a claim for refund, a tax audit by
the Internal Revenue Service or some other reason, the liability
of each Member shall be recomputed to give effect to such
adjustments, and in the case of a refund, Holdings shall make
payment to each Member for its share of the refund, determined in
the same manner as in paragraph 2 above, within 10 days after the
refund is received by Holdings, including its ratable share of
any interest, and in the case of an increase in tax liability,
each Member shall pay to Holdings its allocable share of such
increased tax liability (including interest and penalties) within
10 days after receiving notice of such liability from Holdings.
The parties recognize that a recomputation of the consolidated
tax liability for any taxable year under this paragraph 6 is not
necessarily the final liability for such year, and such liability
may be recomputed more than once.
7. New Members of Affiliated Group. If during a
consolidated return period Holdings or any Subsidiary acquires or
organizes another corporation that is required to be included in
the Affiliated Group's consolidated return, then such corporation
shall join in and be bound by this Agreement.
8. Termination of Agreement. This Agreement shall
apply to all taxable periods as to which a consolidated return is
filed by Holdings and any Subsidiary unless Holdings and the
Subsidiaries agree in writing to terminate the Agreement, except
that this
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Agreement shall be terminated with respect to any Subsidiary that
ceases to be included in the Affiliated Group but continues to be
a corporation subject to federal income tax ("Former Member").
Notwithstanding any such termination, this Agreement shall
continue in effect with respect to all taxable periods prior to
termination, including any payments or refunds relating to such
periods.
9. Post-Consolidated Return Period. Notwithstanding
the termination of this Agreement with respect to one or more
Subsidiaries, Holdings and any Former Member shall furnish each
other with all information and assistance as shall reasonably be
requested (including, without limitation, returns, supporting
schedules, work papers, correspondence and other documents)
relating to the tax liability of the Affiliated Group or such
Former Member for any taxable year in which the Former Member was
included in the Affiliated Group. Moreover, Holdings and the
Former Member shall furnish each other with information and
assistance required, and shall take all steps necessary, to apply
for and obtain the benefit of any carryback of a net operating or
capital loss or any investment, foreign tax or other credit of
the Former Member to a taxable year in which the Former Member
was included in the Affiliated Group and a consolidated federal
income tax return was filed with respect to the income of the
Affiliated Group.
10. Audits and Refund Claims. Holdings and a Former
Member shall also consult and furnish each other with information
concerning the status of any tax audit or tax refund claim
relating to a taxable year in which the Former Member was
included in the Affiliated Group and a consolidated federal
income tax return was filed with respect to the income of the
Affiliated Group. Holdings shall have the right to make the final
determination as to the response of the Affiliated Group to any
audit and shall have the sole right to control, at its
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own expense, any contest of any change proposed and any proposed
disallowance of a refund claim by the Internal Revenue Service
through the Appeals Office of the Internal Revenue Service and
the courts in connection with any taxable year for which this
Agreement is in effect.
11. Settlement of Disputes. A dispute or difference
between Holdings and a Former Member with respect to the
operation or interpretation of this Agreement shall be decided by
three arbitrators. Holdings and the Former Member shall each
select one arbitrator and the arbitrators selected by the parties
shall select a third arbitrator. The decision of such arbitrators
shall be final. The fees of such arbitrators shall be borne
equally by Holdings and the Former Member.
12. Elections. Holdings shall have the sole authority
to make any or all elections available under the Code, Treasury
Regulations and any applicable state or local income tax code,
law or statute.
13. State and Local Income Taxes. The principles
underlying the rights and obligations hereunder of the Members in
respect of federal income taxes shall be applied in respect of
any state or local tax (however denominated) based on or measured
by all or any part of the net income or loss of the Affiliated
Group or several of its Members (a "Combined Tax"). All of the
procedural and timing requirements of this Agreement applicable
to federal income taxes shall be equally applicable to any
Combined Tax, with appropriate adjustments thereto to reflect the
differences, if any, in corresponding provisions of the
applicable income tax code, law or statute governing any such
Combined Tax and any administrative provisions relating thereto.
14. Entire Agreement. This Agreement contains the
entire understanding of the parties hereto with respect to the
subject matter contained herein. No alteration, amendment
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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.
15. Binding Agreement. This Agreement shall be binding
upon and inure to the benefit of each party hereto and its
respective successors and assigns.
16. Governing Law. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of
Delaware.
17. Counterparts. 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.
IN WITNESS WHEREOF, the parties hereto have caused
their names to be subscribed and executed by their respective
authorized officers on the date first appearing above.
PM HOLDINGS CORPORATION
By: /s/ Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: President & C.E.O.
PI ACQUISITION CORPORATION
By: /s/ Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: President
PI HOLDING COMPANY
By: /s/ Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: President
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PURINA XXXXX, INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: President & C.E.O.
AMERICAN DAIRY MANAGEMENT
COMPANY, INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: President
CAROLINA AGRI-PRODUCTS INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: President
COASTAL AG DEVELOPMENT, INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: President
XXXX GRAIN COMPANY, INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: President
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PURINA LIVESTOCK MANAGEMENT
SERVICES, INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: Vice-President
PMI NUTRITION, INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: President
PMI HOLDING CO.
By: /s/ Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: President
PMI NUTRITION INTERNATIONAL, INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: President
PM NUTRITION COMPANY, INC.
By: /s/ Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: Vice-President
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Schedule I
Subsidiaries of PM Holdings Corporation
---------------------------------------
PI Acquisition Corporation
PI Holding Company
Purina Xxxxx, Inc.
American Dairy Management Company, Inc.
Carolina Agri-Products Inc.
Coastal Ag Development, Inc.
Xxxx Grain Company, Inc.
Purina Livestock Management Services, Inc.
PMI Nutrition, Inc.
PMI Holding Co.
PMI Nutrition International, Inc.
PM Nutrition Company, Inc.
