EXHIBIT 10.6
TAX SHARING AGREEMENT
Agreement by and among Delaware North Companies, Incorporated ("Parent"),
Sportsystems Corporation ("Sportsystems"), and Wheeling Island Gaming, Inc. for
itself and its subsidiaries ("Wheeling"), effective for Parent and Sportsystems
as of the first day of the consolidated return year beginning January 1, 2001,
and effective for Wheeling as of December 20, 2001, the date that it became a
wholly-owned subsidiary of Sportsystems; and thereby a member of the Parent's
Affiliated Group.
WHEREAS, the parties hereto are members of an Affiliated Group as defined
by Section 1504(a) of the Internal Revenue Code of 1986, as amended (Code), and
WHEREAS, the Affiliated Group has since 1965 filed a consolidated federal
income tax return in accordance with Code Section 1501, and is required to file
a consolidated federal income tax return for years subsequent to that year; and
WHEREAS, the parties desire to establish a method for:
1. Allocating the annual consolidated federal income tax liability
(determined in accordance with Regulations Section 1.1502-2) among
them.
2. Reimbursing Parent for payment on behalf of the Affiliated Group of
such tax liability.
3. Compensating a member for its tax attributes which are used by
carrying them back to a prior year of the Affiliated Group.
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THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto agree as follows:
1. Parent shall file a consolidated federal income tax return for each
year while this Agreement is in effect for which the Affiliated
Group is required or permitted to file such return. The parties
hereto shall execute any consents, elections, or other documents
required or appropriate for the filing of the return.
2. The amounts to be paid pursuant to Paragraph 6 of this agreement
shall be determined as follows:
STEP 1. The consolidated federal income tax liability for each
taxable year shall be allocated by charging to each member an amount
equal to that member's tax liability, determined as if it had filed
a separate consolidated return for that year and for all years while
a member, and by crediting to each member the benefit of its tax
attributes to which it would be entitled, determined as if it had
filed a separate consolidated return for that year and for all years
while a member.
STEP 2. Where the tax attributes of a member are not absorbed by it
on this separate consolidated return basis until a later year, a
portion of the consolidated federal tax liability for such later
year shall be reallocated. This reallocation shall take into account
all consolidated return years of the Affiliated Group during which
it is a member. This reallocation is determined by comparing the tax
which was allocated to the member during all such years with the tax
liability determined
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had the member filed separate consolidated returns during all such
years.
STEP 3. The amount of any reallocation determined under Step 2
which would cause the total tax liability allocated to the member
to exceed the total tax liability determined had it filed separate
consolidated returns during all such years shall be reallocated to
Parent.
3. In determining the separate consolidated return tax liability of a
member, the following rules apply:
A. Dividends received by one member from another member will be
assumed to qualify for the 100 percent dividend-received
deduction of Code Section 243, or they shall be eliminated
from such calculation in accordance with Regulations Section
1.1502-13.
B. Gain or loss on inter-company transactions, whether deferred
or not, will be treated by each party in the manner required
by Regulations Section 1.1502-13.
C. Elections regarding tax credits and tax computations, which
might have been different from the consolidated return
treatment if separate consolidated returns had actually been
filed, will be made on an annual basis by Parent. Parent shall
determine for the Affiliated Group and for each member whether
an election shall be made to forego a net operating loss
carryback arising in a consolidated return year.
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D. Parent and all other members of the Affiliated Group shall be
treated as a single entity. Where a member has subsidiaries of
its own, it and its subsidiaries shall form a sub-group, and
this sub-group shall be treated as a single entity.
E. The benefit of any tax attribute shall not be credited to a
member unless that tax attribute has actually reduced the
consolidated federal income tax liability of the Affiliated
Group.
4. It is acknowledged that allocation of the consolidated federal
income tax liability for the Affiliated Group under Code Section
1552(a)(2) and Regulation Section 1.1502-33(d)(3), the method
required to be used by it in determining earnings and profits for
income tax purposes and in determining the tax basis of a member for
income tax purposes, may be different from the allocation resulting
from this Agreement.
5. The provisions of this agreement shall be administered by Parent,
who is solely responsible for the resolution of any inconsistencies
in a manner that will reasonably reflect the facts and circumstances
of the members involved.
6. A. As soon as practical after the end of each consolidated federal
income tax return year, each member shall pay to Parent the amount
of federal income tax allocated to it pursuant to Paragraph 2. Each
member shall advance to Parent the amounts necessary to reimburse
Parent for the member's portion of any estimated federal income
taxes required to be paid by Parent
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during the year, which amounts shall be computed using the steps in
Paragraph 2 and reasonable annual projections made by Parent. These
advances shall reduce the amount payable after the end of the year,
and any remaining balance shall be settled as appropriate.
B. Parent shall, at its discretion, advance to each member the
benefit of the member's tax attributes which are reflected in
estimated federal income tax payments paid by Parent during
the year, which amounts shall be computed using the steps in
Paragraph 2 and reasonable annual projections made by Parent.
These advances shall reduce the amount payable after the end
of the year, and any remaining balance shall be settled as
appropriate.
C. If a member is credited with the benefit of a tax attribute
pursuant to Paragraph 2 in a later year, Parent shall pay to
the member the amount of such benefit as soon as practical
after the end of that year.
7. If the consolidated federal income tax liability is subsequently
adjusted for any year, whether by means of an amended return, claim
for refund, or Internal Revenue Service examination, the amounts
charged or credited for that year pursuant to this Agreement shall
be recomputed to give effect to such adjustments, and prompt
settlement shall be made between the parties. Any other tax year
which is affected by such adjustments (e.g., due to carryovers or
carrybacks) shall be similarly recomputed and promptly settled.
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Interest paid or received, as a result of such adjustments shall be
allocated to the parties whose separate return tax liability is
adjusted.
8. This Agreement shall apply to the taxable year 2001 and to all
subsequent taxable years unless suspended or terminated in writing
by the parties. Notwithstanding such suspension or termination, this
Agreement shall continue in effect with respect to any payments,
refunds, or adjustments due between the parties for any taxable
years prior to such suspension or termination.
9. This Agreement shall not be assignable by one party without the
prior written consent of the other party.
10. All documents, including, but not limited to, tax returns,
supporting schedules, work papers, and correspondence, relating to
the consolidated federal income tax returns filed for a taxable year
during which this Agreement is in effect shall be available to a
party during regular business hours for a period of years equal to
applicable federal record retention requirements.
11. Any party which leaves the Affiliated Group shall be bound by this
Agreement for all taxable years for which it is included in the
consolidated federal income tax return.
12. The parties hereto specifically recognize that from time to time
other companies may become members of the Affiliated Group by virtue
of becoming a subsidiary of any party to this agreement. The parties
agree that such members become parties to this Agreement unless a
specific exclusion is created.
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13. Any alteration, modification, addition, deletion, or other change in
the consolidated federal income tax return provisions of the Code or
the Regulations thereunder shall automatically be applicable to this
Agreement mutatis mutandis.
14. Failure of one or more parties hereto to meet the definition of
member of the Affiliated Group shall not operate to terminate this
Agreement with respect to the other parties as long as two or more
parties hereto continue as members.
15. If Wheeling is reorganized as a non-taxable entity (e.g., an LLC
treated as a partnership, etc.), Parent, Sportsystems, and any other
entity with an ownership interest in Wheeling, will be entitled to
be paid by Wheeling an amount equal to the federal income tax
liability which would have been allocated to Wheeling had it
remained as a member of the affiliated group, calculated pursuant to
paragraph 2 above. Further, Parent, Sportsystems, and any other
entity with an ownership interest in Wheeling, will be entitled to
be paid by Wheeling an amount equal to the state income tax
liability which would have been paid by Wheeling had Wheeling filed
separate or combined state income tax returns as a Subchapter C
corporation for the relevant taxing jurisdiction. The amounts
payable by Wheeling shall be allocated to each owner proportionate
to their ownership interest.
16. This Agreement shall bind and inure to the respective successors and
assigns of the parties; but no assignment shall relieve any
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party's obligations hereunder without the written consent of Parent.
17. This Agreement shall be governed by the laws of the State of New
York.
IN WITNESS WHEREOF, the parties hereto have caused their names to be
subscribed and executed by their respective authorized officers on the
dates indicated.
DELAWARE NORTH COMPANIES, INCORPORATED
By: Date:
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Xxxxx X. Xxxxxxx
Vice President-Controller
SPORTSYSTEMS CORPORATION
By: Date:
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Xxxxxx Xxxxxxxxxx
President
WHEELING ISLAND GAMING, INC., for itself and as agent for the Subsidiaries
listed below:
By: Date:
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Xxxxxxx X. Xxxxxx
Vice President-Finance
WHEELING ISLAND GAMING, INC. SUBSIDIARIES
1. Wheeling Land Development Corp.
2. WDRA Food Service, Inc.
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