Exhibit 10.4
AMENDED AND RESTATED
TAX ALLOCATION AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT is made as of December
4, 1996 between Thermo Electron Corporation, a Delaware
corporation ("Thermo Electron"), and Thermo Ecotek Corporation, a
Delaware corporation ("Ecotek").
Preliminary Statement
Thermo Electron is the parent of an affiliated group of
corporations (including Ecotek) within the meaning of Section
1504(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
Thermo Electron owns over 80% of the issued and outstanding
shares of voting common stock of Ecotek, the only class of stock
that Ecotek is authorized to issue. Ecotek is required to
file consolidated federal income tax returns with Thermo
Electron.
Thermo Electron, as the common parent of an affiliated group
of corporations, and Ecotek recognize that any one of them that
sustains a net operating loss or otherwise generates beneficial
tax attributes for a taxable period may be deprived of such
benefits when offset in that or other periods against income or
tax liabilities of the others.
Agreements
IT IS MUTUALLY agreed by the parties hereto as follows:
1. Definitions and Construction.
1.1 The Term "Thermo Electron Group" means the group
of corporations of which Thermo Electron is common parent and
with which Thermo Electron files a consolidated federal income
tax return, excluding Ecotek and subsidiaries of Ecotek that may
exist now or in the future. For purposes of this Agreement, the
Thermo Electron Group shall be treated as a single corporate
entity. The Thermo Electron Group and Ecotek and its
subsidiaries, respectively, are sometimes herein referred to
collectively as the "Two Companies" or the "Companies." The term
"Deficit Company" means either one of the Companies that has an
ordinary loss, capital loss, special deduction or tax credit
arising in a consolidated return year, or in a prior separate
return year, that is utilized to a greater extent in the then
current consolidated federal income tax return than would have
PAGE
been the case if the Company had filed a separate federal income
tax return for the year. This Agreement anticipates that Thermo
Electron will set aside and retain certain sums calculated as
provided herein. All reference to Thermo Electron paying sums to
itself pursuant to this Agreement shall be satisfied by Thermo
Electron setting aside sums in respect of the obligations
established under this Agreement.
1.2 The paragraph titles used herein are for
convenience of reference only and will not be considered in the
interpretation or construction of any of the provisions hereof.
Words may be construed in the singular or the plural as the
context requires.
2. Tax Returns.
2.1 Federal Tax Returns. Thermo Electron as the
common parent will prepare and file or cause to be prepared and
filed federal and state income tax returns on a consolidated
basis, for the Thermo Electron Group and Ecotek and its
subsidiaries for all fiscal periods as to which a consolidated
return is appropriate in accordance with the terms of this
Agreement.
2.2 State Tax Returns. Thermo Electron as the common
parent will prepare and file or cause to be filed state income
tax returns on a combined, consolidated, unitary, or other method
that Thermo Electron believes will result in a lower overall tax
liability to the Two Companies. Ecotek will reimburse Thermo
Electron for its portion of the tax. Such reimbursement will be
the tax Ecotek would have paid on a separate return basis, but
only if it was required to file a return in that state.
3. Time of Payment of Federal Obligations to Thermo
Electron. The obligations of the Companies for Federal income
tax payments will be determined and paid as follows:
(a) Not later than the 15th day after the end of the
fourth, sixth, ninth and twelfth months of each consolidated
taxable year of Thermo Electron, Thermo Electron will make a
reasonable determination (consistent with the provisions of
Section 6655 of the Code) of the separate federal income tax
liability that each Company would be required to pay as estimated
payments on a separate return basis (without regard to
alternative minimum tax) for that period. Each Company shall pay
to Thermo Electron the amount of such liability within ten days.
(b) After the end of Thermo Electron's fourth
accounting quarter and before the 15th day of the third month
thereafter, each Company will promptly pay to Thermo Electron the
entire amounts estimated to be due and payable under such
Company's federal income tax return as if filed on a separate
return basis, less all amounts previously paid with respect to
that year pursuant to subparagraph (a) of this Paragraph 3.
PAGE
(c) If upon the filing of the consolidated income tax
return, a revised calculation is made in the manner set forth in
subparagraph (b) of this Paragraph 3, and it is determined that
either Company has paid to Thermo Electron with respect to the
consolidated taxable year an amount greater than that required by
Paragraph 3(b), then that excess will be promptly paid by Thermo
Electron to that Company.
4. Tax Obligations of Thermo Electron. Thermo Electron
will pay the consolidated tax liabilities of the Companies
arising from filing a consolidated federal tax return.
5. Payment of Funds by Thermo Electron. If in any year
Ecotek incurs a loss or generates tax credits or similar tax
benefits (a "tax benefit item"), Thermo Electron shall pay to
Ecotek a sum equal to the amount of benefit realized by Thermo
Electron that is attributable to the Ecotek tax benefit item;
payments due to Ecotek from Thermo Electron under this section
shall be made upon the earlier of (1) the year in which Ecotek
would have obtained a tax benefit from the tax benefit item if
Ecotek had in all years filed a separate federal income tax
return or (2) the year in which any applicable carry-forward
period with respect to the tax benefit item expires; provided
that payments under this section shall be made first by being
taken into account in determining amounts payable to Ecotek under
Section 3, and any remaining amount due to Ecotek shall be paid
by Thermo Electron to Ecotek at the times set forth for payments
by Ecotek under Section 3.
6. Changes in Prior Year's Tax Liabilities. In the event
that the consolidated tax liability or the separate tax liability
referred to in Paragraphs 3 and 5 hereof for any year for which a
consolidated tax return for the two Companies was filed is or
would be increased or decreased by reason of filing an amended
return or returns (including carry-back claims), or by reason of
the examination of the returns by the Internal Revenue Service,
the amounts due Thermo Electron for payment of taxes under
Paragraph 3 hereof, and the amount to be paid to Thermo Electron
for allocation to Ecotek under Paragraph 5 hereof for each year
will be recomputed by Thermo Electron to reflect the adjustments
to taxable income and tax credits for the taxable year and
interest or penalties, if any. In accordance with those
recomputations, additional sums will be paid by the Companies to
Thermo Electron or paid by Thermo Electron to the Companies
regardless of whether a member has become a Departing Member (as
defined in Paragraph 8 hereof) subsequent to the taxable year of
recomputation.
7. New Members. The Companies agree that if, subsequent
to the execution of this Agreement, Thermo Electron becomes the
Parent, as that term is used in Section 1504 of the Code, of one
or more subsidiary corporations, ion addition to Ecotek, then
each newly-acquired subsidiary corporation may become a separate
PAGE
party to this Agreement by consenting in writing to be bound by
its provisions, effective immediately upon its delivery to Thermo
Electron, but the income, deductions and tax credits of the
newly-acquired subsidiary corporations will first be included in
the consolidated federal income tax return as required by the
Code.
8. Departing Members.
8.1 The term "Departing Members," as used herein, will
mean a Company that is no longer permitted under the Code to be
included in the consolidated federal income tax return.
8.2 In applying this Agreement to a Departing Member
for the final taxable year in which its income, deductions, and
tax credits are required to be included in the consolidated
federal income tax return: (i) the amount required to be paid by
a Departing Member under the provisions of Paragraph 3 hereof and
(ii) the amount that the Departing Member is entitled to receive
under the provisions of Paragraph 5 hereof, will be determined by
taking into account the income, deductions and tax credits of the
Departing Member only for the fractional part of such year as the
Departing Member was a member of the consolidated group and
included in the consolidated federal income tax return.
8.3 After the filing of the consolidated federal
income tax return for the last taxable year that the Departing
Member was included therein, the Departing Member will be
informed of the amount of consolidated carry-overs as of the end
of the taxable year or period which are attributable to the
Departing Member, as provided by Treasury Regulations Section
1.1502-79 or otherwise, including the agreement of the parties.
9. Determination of Sums Due from and Payable to Members.
Thermo Electron will determine the sums due from and payable to
the Companies under the provisions of this Agreement (including
the determination for purposes of Paragraph 6 hereof). The
Companies agree to provide Thermo Electron with such information
as may reasonably be necessary to make these determinations.
Issues arising in the course of the determinations that are not
expressly provided for in this agreement will be resolved in an
equitable manner.
10. Tax Controversies. If a consolidated federal income
tax return for any taxable year during which this Agreement is in
effect is examined by the Internal Revenue Service, the
examination, as well as any other matters relating to that tax
return, including any tax litigation, will be handled solely by
Thermo Electron. Ecotek will cooperate with Thermo Electron and
to this end will execute protests, petitions, and any other
documents as Thermo Electron determines to be necessary or
appropriate. The cost and expense of Thermo Electron's handling
of a tax controversy, including legal and accounting fees, will
be allocated to and paid by the Company to whom the tax
PAGE
controversy relates. If the tax controversy relates to both
Companies, the cost and expense will be allocated between the
Companies in the proportion that each Company's potential
additional tax liability bears to the total potential additional
tax liability of both Companies (determined in accordance with
Paragraph 6 hereto and assuming that the tax controversy is
resolved in favor of the Internal Revenue Service) for the
taxable year on issue. If the tax controversy encompasses more
than one taxable year, Thermo Electron will first allocate the
cost and expense to each taxable year in the proportion that the
potential additional tax liability for each taxable year bears to
the total potential additional tax liability for the taxable
years in issue.
11. Effective Date. This Agreement shall be effective
beginning as of the date of this Agreement, and will continue on
a year-to-year basis thereafter with respect to Ecotek for so
long as Ecotek is permitted to file a consolidated federal income
tax return with Thermo Electron.
12. State Taxes. The two Companies will jointly file any
state tax return on a combined, consolidated, unitary, or other
method that Thermo Electron determines results in a lower overall
tax liability to the Two Companies. In the event that said state
tax returns shall be filed, the provisions of Sections 1-11
hereof shall apply, mutatis mutandis (the necessary changes being
made) to the allocation, preparation, filing and payment related
to such state taxes and tax returns provided, however, that any
benefit realized by the filing of the combined, consolidated or
unitary return will remain with Thermo Electron.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers as of
the date first above written.
THERMO ELECTRON CORPORATION
By:
________________________________
Title:
_______________________________
THERMO ECOTEK CORPORATION
By:
_________________________________
Title:
--------------------------------
