EXHIBIT 10.1.10
---------------
TAX SHARING AGREEMENT
AGREEMENT dated as of November 26, 1997 by and among Xxxxxxx Holdings
Inc. ("SHI"), Xxxxxxx Fasteners Inc. ("SFI") and the SFI Subgroup (as defined
below), and effective as of the closing date of the Acquisition referred to
below (the "Effective Date").
WITNESSETH
WHEREAS, Xxxxxxx Acquisition Inc. ("SAI"), a wholly owned subsidiary
of SHI formed for the purpose of effecting SHI's acquisition of SFI, entered
into a Stock Purchase Agreement dated as of October 10, 1997 ("Stock Purchase
Agreement") with KSCO Acquisition Corporation ("KSCO"), which owns all of the
capital stock of SFI, and KSCO's stockholders; and
WHEREAS, pursuant to the Stock Purchase Agreement, SAI purchased all
of the capital stock of KSCO (the "Purchase"); and
WHEREAS, (i) immediately following the Purchase, SAI merged with and
into KSCO, with KSCO surviving the merger, and (ii) immediately following such
merger, KSCO merged with and into SFI, with SFI surviving the merger (such
mergers, together with the Purchase, the "Acquisition"); and
WHEREAS, prior to the Effective Date, the SFI Subgroup were members of
an affiliated group as defined in Section 1504(a) of the Internal Revenue code
of 1986, as amended (the "Code") and joined in filing a federal consolidated
income tax return; and
WHEREAS, SHI and its subsidiaries will elect to be members of an
affiliated group as defined in Section 1504(a) of the Code and will elect to
file a federal consolidated income tax return for its taxable year 1997 and
subsequent years; and
WHEREAS, each member of the SFI Subgroup will become a member of the
SHI Group (as defined below) as of the end of the Effective Date; and
WHEREAS, it is the intent and desire of the parties hereto that a
method be established for reimbursing SHI for
-2-
payment of the federal, state and local tax liabilities of the SFI Subgroup,
NOW THEREFORE, in view of the aforementioned considerations, the
parties hereto agree as follows:
1. Definitions
-----------
1.1 The words and concepts used in this Agreement shall be given the
same definitions and meanings ascribed to them by the Code and the regulations
promulgated thereunder, from time to time in effect (the "Regulations").
1.2 For purposes of this Agreement, the terms set forth below shall have
the following meanings:
1.3 "SFI Subgroup" -- SFI and each of its subsidiaries.
------------
1.4 "SHI Group" -- The affiliated group of corporations of which SHI
---------
is the "common parent" within the meaning of Section 1504 of the Code.
1.5 "SHI Group Tax Liability" -- The consolidated federal income tax
-----------------------
liability of the SHI Group of any taxable year for which the SHI Group files a
consolidated federal income tax return.
1.6 "Member Tax Liability" -- With respect to any taxable year of SFI
--------------------
and each of its subsidiaries the federal income tax liability that SFI or each
such subsidiary would have incurred if it had filed a separate federal income
tax return and not had been included in the SHI Group for each such taxable year
and all prior taxable years. For purposes of calculating the Member Tax
Liability (a) section 1.1552-1(a)(2)(ii)(a) - (h) shall apply, and (b) any such
amounts shall be computed using the highest marginal rate in effect for each
such taxable year under section 11 of the Code rather than graduated rates.
2. Agreement To File Consolidated And Combined Returns
---------------------------------------------------
2.1 A federal consolidated income tax return will be filed by SHI for
the taxable year ended December 31, 1997 and shall be filed for each subsequent
taxable period in respect of which this Agreement is in effect and for which the
SHI Group is required or permitted to file a consolidated tax return.
-3-
2.2 Each member of the SFI Subgroup also agrees to join with SHI or any
member of the SHI Group in any consolidated or combined state or local tax
return in which such member is properly includible.
2.3 Each member of the SFI Subgroup agrees to furnish SHI any and all
information requested by SHI in order to carry out the provisions of this
Agreement; to cooperate with SHI in filing any return or consent contemplated by
this Agreement; to take such action as SHI may request, including, but not
limited to, the filing of requests for the extension of time within which to
file tax returns; to cooperate in connection with any refund claim; and to
execute and file such consents, elections, and other documents that may be
required or appropriate for the proper filing of such returns.
2.4 Each member of the SFI Subgroup shall cooperate fully with SHI in
any audit or other proceeding relating to any federal, state or local tax return
and SFI and each SFI subsidiary shall pay an appropriate share of the expenses
of any such audit or other proceeding. SHI shall have sole control over and
discretion as to the undertaking, conduct, settlement or other disposition of
any tax controversy arising out of any federal, state or local tax return of the
SHI Group.
3. Allocation of Income Tax Liability
----------------------------------
3.1 In the event a consolidated federal income tax return (a
"Consolidated Return") is filed by SHI with respect to any taxable year of the
SHI Group in which SFI or any subsidiary is included in the SHI Group, and such
return evidences a liability for federal income taxes for such taxable year, the
total tax liability as shown on such return shall be paid in full by SHI.
3.2 SHI shall notify SFI and each SFI subsidiary no later than 7 days
prior to the date it expects to file any Consolidated Return of the amount of
SFI's and each such subsidiary's Member Tax Liability with respect to the
taxable year covered by such Consolidated Return. SFI and each such subsidiary
shall pay such amount (less any amounts previously paid by SFI or such
subsidiary with respect to such taxable year pursuant to paragraph 3.3 below) to
SHI on the date SHI files such Consolidated Return.
3.3 In the event that SHI is required to make estimated federal income
tax payments with respect to any table year for which SHI expects to file a
Consolidated Return, SFI
-4-
and each SFI subsidiary shall pay to SHI, on the date each estimated payment is
required to be made by SHI, an amount equal to SFI's or such subsidiary's Member
Tax Liability for the estimated tax period. Any estimated tax payments made by
SFI or a subsidiary to SHI under this paragraph 3.3 for any taxable year shall
reduce the amount, if any, owed by SFI or such subsidiary to SHI under Paragraph
3.2 for such taxable year. If the total amount of payments made by SFI or a SFI
subsidiary pursuant to this paragraph 3.3 with respect to any taxable year of
the SHI Group exceeds SFI's or each such subsidiary's Member Tax Liability with
respect to such taxable year, SHI shall refund such excess to SFI or each such
subsidiary on the date it receives a refund of federal income taxes paid with
respect to such taxable year.
3.4 Loss Carrybacks. SFI and each of its subsidiaries shall be deemed to
---------------
have made the election pursuant to section 172(b)(3) of the Code to forego the
carryback of netoperating losses. Such losses shall instead be carried forward.
3.5 Subsequent Adjustments. If the SHI Group Tax Liability for any
----------------------
taxable year is adjusted by an audit by the Internal Revenue Service, a court
determination, or otherwise, SFI's and each SFI subsidiary's Member Tax
Liability shall be recomputed for such taxable years to take into account such
adjustment and, as applicable, (a) SHI shall (x) reimburse SFI and each
subsidiary the amount of taxes SFI or such subsidiary paid previously in excess
of its readjusted Member Tax Liability, or (y) offset SFI's or such subsidiary's
future Member Tax Liability for such readjusted Member Tax Liability, or (b) SFI
and each of its subsidiaries shall pay SHI the appropriate portion of the
additional amount of taxes SHI paid in excess of SFI' or each such subsidiary's
recomputed Member Tax Liability. Any such reimbursement or additional payment
shall be paid within seven (7) days of the date of a final determination with
respect to such adjustment or as soon as such adjustment can practicably be
calculated, if later, together with interest for the period and at the rate
provided for underpayment in Section 6621 of the Code.
3.6 State and Local Tax Liability. Consolidated, combined or unitary
-----------------------------
state and local income and franchise tax liability will be allocated, paid and
reimbursed under this Agreement in a manner as similar as possible to the
allocation, payment and reimbursement of the SHI Group Tax Liability.
-5-
4. Miscellaneous
-------------
4.1 This Agreement shall be effective as of the Effective Date and shall
apply to any payments or refunds due with respect to any predecessor, whether by
statutory merger, acquisition of assets or otherwise, of any of the parties
hereto, to the same extent as if the predecessor had been an original party to
the Agreement.
4.2 This agreement shall continue in full force and effect unless and
until SHI and SFI agree to terminate the Agreement. Notwithstanding such
termination, this Agreement shall continue in effect with respect to any
payments or refunds due for all periods prior to termination.
4.3 This Agreement shall be binding upon and inure to the benefit of any
successor, whether by statutory merger, acquisition of assets or otherwise, to
any of the parties hereto, to the same extent as if the successor had been an
original part to the Agreement.
-6-
IN WITNESS WHEREOF, the parties hereto have caused this agreement to
be executed by their duly authorized representatives on November 26, 1997.
XXXXXXX HOLDINGS INC.
By: _______________________________
Name: Xxxxxx X. Xxxxx
Title: Executive Vice-President
XXXXXXX FASTENERS INC.
By: _______________________________
Name: Xxxxxx X. Xxxxx
Title: Executive Vice-President
PCI GROUP, INC.
By: _______________________________
Name: Xxxxxx X. Xxxxx
Title: Vice-President
SCOMEX, INC.
By: _______________________________
Name: Xxxxxx X. Xxxxx
Title: Vice-President
XXXXXXX FASTENERS, S.A. de C.V.
By: _______________________________
Name: Xxxxxx X. Xxxxx
Title: Vice-President
-7-
158856 CANADA INC.
By: _______________________________
Name: Xxxxxx X. Xxxxx
Title: Vice-President
UNIFAST-XXXXXXX X.X.
By: _______________________________
Name: Xxxxxx X. Xxxxx
Title: Vice-President
XXXXX X.X.
By: _______________________________
Name: Xxxxxx X. Xxxxx
Title: Vice-President
XXXXXXX PUERTO RICO, INC.
By: _______________________________
Name: Xxxxxx X. Xxxxx
Title: Vice-President
XXX FASTENER COMPANY, L.L.C.
By: _______________________________
Name: Xxxxxx X. Xxxxx
Title: Vice-President
