Exhibit 10.18
EXECUTION COPY
THIS AMENDED AND RESTATED TAX SHARING AND INDEMNIFICATION AGREEMENT
("Amended Tax Sharing Agreement") is effective as of May 11, 2004 and hereby
amends and restates that certain Tax Sharing and Indemnification Agreement ("Tax
Sharing Agreement") executed on May 11, 2004, by and among Pierre Holding Corp.,
a Delaware Corporation ("Buyer"), PF Management, Inc. ("PFMI"), Pierre Foods,
Inc. ("Company"), and the direct and indirect subsidiaries of PFMI and the
Company, signatories hereto (along with Company, the "Subsidiaries"), Xxxxx X.
Xxxxxxxxxx, Xx., Xxxxx X. Xxxxx, Xxxxx X. Xxxxxxxxx, Xxxxx X. Xxxxx, Trustee
under that certain Voting Trust Agreement dated February 1, 2004 for the
shareholder participants thereof (each a "Shareholder" and collectively the
"Shareholders") and Xxxxx X. Xxxxx, Agent ("Shareholders Agent") under that
certain Shareholders Agent Agreement dated May 11, 2004 for the shareholder
participants thereof set forth on Schedule A.
RECITALS
WHEREAS, Buyer, Shareholders and Shareholders Agent have entered into the Stock
Purchase Agreement (as defined herein);
WHEREAS, in connection with the transaction contemplated by the Stock Purchase
Agreement, Buyer, Shareholders and Shareholders Agent have entered into the Tax
Sharing Agreement in order to govern tax sharing and indemnification and certain
related tax matters; and
WHEREAS, Buyer, Shareholders and Shareholders Agent wish to amend and restate
the Tax Sharing Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein, Buyer and Shareholders agree as follows:
1. DEFINITIONS. Except as otherwise defined herein, all terms used herein
shall have the same meaning as in the Stock Purchase Agreement among
Shareholders, Shareholders Agent and Buyer dated May 11, 2004 (the "Stock
Purchase Agreement"). For purposes hereof:
(a) "Code" shall mean the United States Internal Revenue Code of 1986, as
amended.
(b) "Tax" or "Taxes" shall mean all forms of taxation imposed by any Taxing
Authority, including Income Tax, corporation, trade, franchise, property, stamp,
occupation, premium, windfall profits, sales, use, excise, employment,
unemployment, severance, license, payroll, social security, disability,
estimated, value-added, ad valorem, transfer, recapture, alternative or add-on
minimum, withholding and other taxes of any kind, including any interest,
penalties and additions thereto.
(c) "Tax Return" or "Return" shall mean any report, return, document,
declaration or other information or filing required to be supplied to any Taxing
Authority with respect to Taxes, including any amendment made with respect
thereto.
(d) "Seller Year" shall mean any taxable period of any of PFMI, the Company
or any Subsidiary ending on or before the Closing Date.
(e) "Buyer Year" shall mean any taxable period of any of PFMI, the Company
or any Subsidiary beginning after the Closing Date.
(f) "Straddle Period" shall mean any taxable period of any of PFMI, the
Company or any Subsidiary that includes (but does not end on) the Closing
Date.
(g) "Federal Tax" means any Tax imposed under Subtitle A of the Code with
respect to which any of PFMI, the Company or any Subsidiary has filed or will
file a Tax Return.
(h) "Income Tax" or "Income Taxes" shall mean (i) all income, corporation,
trade, franchise, gains or similar Taxes imposed on or measured by income,
profits, gains or similar items (ii) all other Taxes reported on a Tax Return
that includes such Taxes and (iii) any interest, penalties and additions
associated with the amounts described in clauses (i) and (ii) hereof.
(i) "Taxing Authority" shall mean the government of any country or any
political subdivision thereof, whether state or local, any agency, commission or
authority thereof or any quasi-governmental body exercising tax regulatory
authority.
(j) "Acquired Group" means, as applicable, all or any one or more of PFMI,
the Company and the Subsidiaries.
(k) "Deal Related Expenses" means the following expenses related to the
Closing to the extent determined to be deductible: (i) write-offs of capitalized
loan costs and capitalized Indenture restructuring fees, (ii) payment of 1% call
premium on Indenture and loan prepayment penalty costs, (iii) Executive Bonus
Payments, (iv) Non-Compete Payments, (v) Xxxxx Fee, (vi) Xxxxxxxx Fee, and (vii)
Shareholder Transaction Expenses.
(l) "Tax Escrow Amount" shall have the meaning specified in Section 3(d)
hereof.
(m) "Tax Escrow Account" shall have the meaning specified in Section 3(d)
hereof.
(n) "Tax Escrow Agreement" shall have the meaning specified in Section 3(d)
hereof.
(o) "Tax Escrow Agent" shall mean Bank of America Private Bank.
2. REPRESENTATIONS AND WARRANTIES. Each of the Shareholders, jointly and
severally, represent and warrant to the Buyer that, except as set forth on
Schedule 2 attached hereto:
(a) The Acquired Group has timely and properly filed or caused to be filed
(taking into account any applicable extension periods) all Income Tax Returns
and all other material Tax Returns required to be filed by them by applicable
Law prior to the Closing Date and such Tax Returns are true, complete, and
correct in all material respects.
(b) All Taxes due and payable by the Acquired Group, whether or not shown or
required to be shown on such Tax Returns, have been timely paid in full.
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(c) There are no Liens for Taxes with respect to any of the assets or
properties of the Acquired Group (except Liens for Taxes not yet due and payable
provided, however, that adequate accruals, consistent with GAAP, are maintained
for all such Liens).
(d) The Acquired Group is in compliance in all material respects with all
applicable Laws with respect to the procedures concerning the filing of Tax
Returns of the Acquired Group.
(e) No Tax Return of the Acquired Group is under audit by any Taxing
Authority, and, to the Knowledge of Shareholders, no written notice of such an
audit or notice of any assessment has been received by the Acquired Group from
any Taxing Authority.
(f) There is no action, suit, proceeding, or claim now pending against the
Acquired Group with respect to any Tax, or with respect to the Tax of another
Person for which the Acquired Group could be severally liable under Treasury
Regulation Section 1.1502-6 or any comparable state, local or foreign tax
provisions.
(g) The Acquired Group has complied with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes and is not liable
for any Taxes for failure to comply with such laws, rules and regulations.
(h) Excepting that certain Tax Agreement dated September 10, 1999 with CRG
Holdings Corp. (the "CRG Tax Agreement"), the Acquired Group is not a party to
or otherwise bound by any agreement or understanding providing for the
allocation or sharing of, or indemnification with respect to, Taxes nor has any
obligation or liability under any such agreement or understanding to which it
was once a party or otherwise bound.
(i) The Acquired Group is not a party to any agreement, contract,
arrangement or plan that has resulted or could result, separately or in the
aggregate, in the payment of any "excess parachute payment" within the meaning
of Code Section 280G (or any corresponding provision of state, local or foreign
law).
(j) The Acquired Group will not be required to include any item of income
in, or exclude any item of deduction from, taxable income for any taxable period
or portion thereof ending after the Closing Date as a result of any (A) change
in the method of accounting for a taxable period ending on or prior to the
Closing Date or (B) prepaid amount received on or prior to the Closing Date.
(k) No member of the Acquired Group has distributed stock of another Person,
or has had its stock distributed by another Person, in a transaction that was
purported or intended to be governed in whole or in part by Code Section 355 or
Code Section 361.
(l) No member of the Acquired Group (A) has been a member of an affiliated
group filing a consolidated federal Income Tax Return (other than a group the
common parent of which was PFMI or the Company) or (B) has liability for the
Taxes of any Person (other than a member of the Acquired Group) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor or by contract.
3. TAX MATTERS.
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(a) FILING.
(i) STRADDLE PERIOD. For any Straddle Period, Buyer and the Acquired Group
shall timely prepare and file with or deliver to the appropriate Tax Authorities
or other persons all Tax Returns required to be filed or delivered and shall
timely pay all Taxes due with respect to such Tax Returns; provided that
Shareholders shall reimburse Buyer and the Acquired Group (in accordance with
the procedures set forth in Section 4(a)) for any amount owed by Shareholders,
less, in the case of Taxes other than Income Taxes, any amount reserved in the
Final Working Capital, pursuant to Section 4(a) with respect to such Straddle
Period. To the extent permitted by Law, any such Tax Returns shall be prepared
in a manner consistent with past practice of the relevant PFMI, the Company or
Subsidiary and without a change of any election or any accounting method and
shall be submitted by Buyer to Shareholders Agent (together with schedules,
statements and, to the extent requested by Shareholders Agent, supporting
documentation) at least 30 days prior to the due date (including extensions) of
such Tax Returns. Shareholders Agent shall have the right to review all work
papers and procedures used to prepare any such Tax Return. If Shareholders
Agent, within 5 business days after delivery of such Tax Return, notifies Buyer
in writing that Shareholders Agent objects to any items in such Tax Return, the
disputed items shall be resolved (within a reasonable time, taking into account
the deadline for filing such Tax Return) by the Neutral Accounting Firm (as
determined and in accordance with the procedure in the Stock Purchase
Agreement). Upon resolution of all such items, the relevant Tax Return shall be
adjusted to reflect such resolution and shall be binding upon the parties
without further adjustment. The costs, fees and expenses of such accounting firm
shall be borne equally by Buyer (and the Acquired Group) and the Shareholders.
(ii) SELLER YEAR RETURNS.
(A) As to all Tax Returns of the Acquired Group due on or before the Closing
Date, Shareholders Agent shall cause such Returns to be properly prepared and
timely filed and all taxes due to be paid. To the extent permitted by Law, any
such Tax Returns shall be prepared in a manner consistent with past practice of
the relevant PFMI, the Company or Subsidiary and without a change of any
election or any accounting method. At least 30 days prior to the due date
(including extensions) of such Tax Returns, Shareholders Agent shall deliver
such Income Tax Returns to Buyer for its approval not to be unreasonably
withheld.
(B) As to Income Tax Returns of the Acquired Group for a Seller Year due
after the Closing Date, Shareholders Agent shall timely prepare and deliver to
the Buyer and the Acquired Group such Income Tax Returns for filing with or the
appropriate Taxing Authorities. To the extent permitted by law, any such Income
Tax Returns shall be prepared in a manner consistent with past practice of the
relevant PFMI, the Company or Subsidiary, and without a change of any election
or any accounting method. At least 30 days prior to the due date (including
extensions) of such Income Tax Returns, Shareholders Agent shall deliver such
Income Tax Returns to Buyer and the Acquired Group for their approval not to be
unreasonably withheld. The Shareholders shall timely pay all Taxes due with
respect to such Income Tax Returns. The parties agree to cause the PFMI, the
Company and Subsidiaries to file all Income Tax Returns for periods that include
the Closing Date on the basis that the relevant taxable period ended as of the
close of business on the Closing Date, unless the Taxing Authority will not
accept an Income Tax Return filed on that basis. The Federal Tax Return filed
with respect to the Company or any
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Subsidiary for a Seller Year that includes the Closing Date shall reflect a tax
period ending as of the close of the Closing Date.
(C) As to Tax Returns (other than Income Tax Returns) of the Acquired Group
due after the Closing Date for a Seller Year, Buyer shall cause PFMI, the
Company and its Subsidiaries to prepare, in a manner consistent with past
practice of the relevant PFMI, the Company or Subsidiary, and without a change
of any election or any accounting method, and timely file such Tax Returns;
provided, however, that (1) Buyer shall deliver any such Tax Return to
Shareholders Agent at least 20 business days before it is due, except for any
such Tax Return due within 30 business days after the Closing Date, which shall
be delivered to Shareholders Agent as soon as commercially practicable prior to
the date such Tax Return is due, (2) Shareholders Agent shall have the right (i)
to review such Tax Return, and, (ii) if Shareholders Agent should object to any
item in such Tax Return, to notify Buyer of such objection in writing within 5
business days after delivery of such Tax Return (or in such shorter time as is
commercially practicable, if such Tax Return is due within 30 business days
after the Closing Date), and submit such disputed item for resolution (within a
reasonable time, taking into account the deadline for filing such Tax Return) by
the Neutral Accounting Firm (as determined and in accordance with the procedure
in the Stock Purchase Agreement, it being agreed that Buyer (and the Acquired
Group) and the Shareholders shall bear equally the costs, fees, and expenses of
such resolution by the Neutral Accounting Firm, (3) such Tax Return shall be
filed (as so approved or modified) on a timely basis by PFMI, the Company or its
Subsidiaries, as applicable, and (4) Shareholders shall reimburse Buyer or the
Acquired Group, as applicable, for any amount owed by Shareholders with respect
to such Return which was not reserved or accrued in the Final Working Capital.
(b) COOPERATION. Shareholders, Shareholders Agent, PFMI, the Company, the
Subsidiaries and Buyer shall reasonably cooperate, and shall cause their
respective Affiliates, officers, employees, agents, auditors and representatives
to cooperate, in preparing and filing all returns, reports and forms relating to
Taxes, including maintaining and making available to each other all records
necessary in connection with Taxes and in resolving all disputes and audits with
respect to all taxable periods relating to Taxes. Buyer and the Acquired Group
recognize that Shareholders Agent will need access, from time to time, after the
Closing Date, to certain accounting and Tax records and information held by
PFMI, the Company and the Subsidiaries to the extent such records and
information pertain to events occurring on or prior to the Closing Date;
therefore, Buyer and the Acquired Group agree, (i) to use their best efforts to
properly retain and maintain such records for a period of 5 years from the
Closing Date, provided that if Buyer elects to dispose of some or all of such
records, Buyer shall give Shareholders Agent 60 days notice prior to any such
disposition, within which time Shareholders Agent may request in writing that
Buyer surrender such records to Shareholders Agent, and (ii) to allow
Shareholders Agent and its agents and representatives, at times and dates
mutually acceptable to the parties, to inspect, review and make copies of such
records as Shareholders Agent reasonably deems necessary or appropriate from
time to time, such activities to be conducted during normal business hours.
(c) REFUNDS. Except for refunds or credits resulting from a carryback of an
item from a Buyer Year (which shall be for the account of Buyer and the Acquired
Group), any refunds or credits of Taxes of PFMI, the Company and the
Subsidiaries
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for any Seller Year shall be for the account of the Shareholders. Any refunds or
credits of Taxes of PFMI, the Company and the Subsidiaries for any Buyer Year
shall be for the account of Buyer and the Acquired Group. If the Shareholders
pay on, before or after the Closing Date, or cause the Company or its
Subsidiaries to accrue on or before the Closing Date in the Final Working
Capital, Taxes for any Straddle Period in excess of the amount ultimately
determined to be due for the portion of such Straddle Period ending on the
Closing Date and Buyer or the Acquired Group obtain the benefit by refund credit
or otherwise of such excess payment, Buyer shall promptly refund such excess to
Shareholders Agent. If Shareholders Agent so requests and at Shareholders
Agent's expense, the Acquired Group will file for and obtain any refunds or
credits to which Shareholders are entitled under this Section 2(c). Buyer and
the Acquired Group shall reasonably permit Shareholders Agent to control the
prosecution of any such refund claim and, where deemed appropriate by
Shareholders Agent, shall cause PFMI, the Company or any Subsidiary to authorize
by appropriate powers of attorney such Persons reasonably satisfactory to Buyer
and the Acquired Group as Shareholders Agent shall designate to represent the
Buyer and the Acquired Group with respect to such refund claim, provided that
Buyer and the Acquired Group may participate in any such proceeding at its own
expense. Notwithstanding the foregoing, Shareholders Agent may not settle or
otherwise resolve any refund claim that could affect the Tax liability of Buyer
or the Acquired Group for periods ending after the Closing Date without their
consent (such consent not to be unreasonably withheld). Buyer and Acquired Group
shall pay to Shareholders Agent for the benefit of the Shareholders any such
refund due Shareholders within 10 days after the refund is received, provided,
however, that any refund paid to Shareholders shall be net of any Taxes payable
thereon by Buyer or the Acquired Group, and provided further that no refund
shall be paid to the extent such amount was recorded as an asset in Closing
Working Capital. Shareholders and Buyer shall treat any payments that
Shareholders shall receive pursuant to this Section 3(c) as an adjustment to the
purchase price for Tax purposes.
(d) NOL BENEFIT. Buyer agrees to the extent any said net operating loss
carry forward ("NOL") from a Seller Year attributable to Deal Related Expenses
creates a Tax benefit for the Buyer or the Acquired Group in the portion of a
Straddle Period beginning after the Closing Date or in a Buyer Year, Buyer and
the Acquired Group shall pay Shareholders Agent for the benefit of the
Shareholders an amount equal to the Tax benefit within 20 days of filing of the
Tax Return reflecting such Tax benefit. The amount of any Tax benefit with
respect to a carry forward NOL attributable to Deal Related Expenses shall be
equal to the excess, if any, of (A) the tax liability of the Acquired Group for
periods after the Closing Date, calculated without taking into account such
NOLs, OVER (B) the actual tax liability of the Acquired Group for periods after
the Closing Date, calculated by taking into account such NOLs. To the extent a
Tax benefit paid to Shareholders Agent with respect to an NOL carry forward
attributable to Deal Related Expenses is later denied or reduced by a Taxing
Authority, Shareholders shall jointly and severally indemnify the Buyer and the
Acquired Group for any resulting Tax deficiency (within the meaning of the
Code). Buyer agrees to adopt the 338 safe harbor approach permitted under
Treasury Notice 2003-65 in determining Acquired Group realized built-in gain or
realized built-in loss under Code section 382(h) for purposes of determining the
amount of NOL useable in the Straddle Period or a Buyer Year. Upon the written
request and at the sole expense of Shareholders Agent, Buyer and Acquired Group
shall cause the accountants preparing the Federal Tax Return of Acquired Group
to furnish Shareholders Agent with a calculation of the amount of Tax benefit
arising from either a carry forward NOL attributable to Deal Related Expenses or
deferred Executive Bonus Payments (determined in accordance with this Section
3(d)) in the portion of a Straddle Period after the Closing Date or in a Buyer
Year, it being
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agreed that Shareholders Agent will not use such calculation for any purpose
other than verification of the amount of Tax benefits covered by this Section
3(d), and Shareholders Agent shall keep any such information strictly
confidential.
To the extent any of the Executive Bonus Payments that constitute Deal Related
Expenses are deferred and paid after the Closing Date, Buyer and the Acquired
Group shall pay to Shareholders Agent for the benefit of the Shareholders any
Tax benefit attributable to such deferred payments (taking into account only the
initial balance that was deferred and not any subsequent earnings credited
thereon) in periods after the Closing Date; provided, however, that any
obligation to make such Tax benefit payments shall cease with respect to any
period (or partial period) beginning on or after the first day on which Madison
Dearborn Capital Partners IV, L.P.'s ("MDCP") equity interest in Buyer
constitutes less than 10% of total equity interests in Buyer (measured by
value), unless the general partner of MDCP determines, in its sole discretion,
that continuing such obligation after such date will not reduce the
consideration payable to MDCP in connection with any sale or disposition of its
equity interests in Buyer. The amount of any Tax benefit with respect to such
deferred payments shall be determined after determining any Tax benefit
attributable to NOLs in the preceding paragraph and shall be equal (provided
that there shall be no double counting of benefits) to the excess, if any, of
(A) the tax liability of the Acquired Group for periods after the Closing Date,
calculated without taking into account such deferred payments, OVER (B) the
actual tax liability of the Acquired Group for periods after the Closing Date,
calculated by taking into account such deferred payments. To the extent a Tax
benefit paid to Shareholders Agent with respect to such deferred payments is
later denied or reduced by a Taxing Authority, Shareholders shall jointly and
severally indemnify the Buyer and the Acquired Group for any resulting Tax
deficiency (within the meaning of the Code).
Notwithstanding anything to the contrary in the foregoing:
(i) the first $4 million of Tax benefits with respect to NOLs attributable
to Deal Related Expenses that would otherwise be payable to Shareholders Agent
by operation of this Section (the "Tax Escrow Amount") shall be deposited by
Buyer and the Acquired Group with the Tax Escrow Agent to be held in an escrow
account (the "Tax Escrow Account") and released by the Tax Escrow Agent in
accordance with the terms and conditions of this Amended Tax Sharing Agreement
and of the escrow agreement (the "Tax Escrow Agreement") substantially in the
same form as the escrow agreement attached to the Stock Purchase Agreement as
Exhibit B (subject to such administrative changes as may be required to be made
by the Tax Escrow Agent);
(ii) to the extent any indemnification payment to which Buyer and the
Acquired Group are entitled pursuant to Section 4 or this Section 3(d) hereof is
not paid by the Shareholders pursuant to the terms of this Amended Tax Sharing
Agreement, Buyer and the Acquired Group shall be entitled to a distribution from
the Tax Escrow Account in an amount equal to such unpaid indemnification
payment; and
(iii) the Tax Escrow Account shall be maintained by the Tax Escrow Agent until
the later of (A) Xxxxx 00, 0000, (X) the date on which the statute of
limitations with respect to the federal income Tax Return of Acquired Group for
the taxable period ending on the Closing Date expires,
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and (C) the final resolution of any outstanding Tax Claim(s); and thereafter the
remaining balance of the Tax Escrow Account shall become the property of
Shareholders Agent for the benefit of the Shareholders, consistent with the
terms of the Tax Escrow Agreement.
(e) CARRYBACK. Buyer and the Acquired Group may carry back any item into any
consolidated, combined or unitary Tax Returns for Seller Years.
(f) AMENDED TAX RETURNS. After the Closing Date, Buyer and the Acquired
Group shall not file any amended Tax Return for a Seller Year or Straddle Period
without the prior written consent of Shareholders Agent, which consent shall not
be unreasonably withheld or delayed. Any required amended Returns resulting from
Seller Year examination adjustments, as finally determined, shall be prepared by
Shareholders Agent and furnished to the Buyer and the Acquired Group applicable,
for approval (which approval shall not be unreasonably withheld), and, if
necessary, signature and filing at least 30 days prior to the due date for
filing such Returns. Without Buyer's and the Acquired Group's consent (such
consent not to be unreasonably withheld), Shareholders Agent shall not otherwise
file any amended Tax Returns for Seller Years that could reasonably be expected
to affect the Tax liability of Buyer or the Acquired Group for periods ending
after the Closing Date. Nothing in this Amended Tax Sharing Agreement shall
require Shareholders Agent to amend any Return other than as set forth above.
4. INDEMNIFICATION.
(a) GENERAL PROVISIONS. Except to the extent such Taxes other than Income
Taxes, are reserved for on the Final Working Capital Sheet, Shareholders,
jointly and severally, agree to indemnify and hold Buyer and the Acquired Group
and their Affiliates, (and their respective officers, directors, employees and
agents) (each in its capacity as an indemnitee, an "Indemnitee") harmless from
and against (i) all liability for Taxes of the Acquired Group for any Seller
Year and any portion of any Straddle Period ending on the Closing Date, (ii) all
liability for Taxes of the Acquired Group payable as a result of any breach of
this Amended Tax Sharing Agreement (including, but not limited to, any breach of
the representations or warranties contained herein) by the Shareholders or
Shareholders Agent, and (iii) any liability for Taxes or other items under the
CRG Tax Agreement. Notwithstanding the foregoing, Shareholders Agent shall not
indemnify and hold harmless any Indemnitee from or against any liability for
Taxes attributable solely to a breach by Buyer or the Acquired Group of its
obligations under this Amended Tax Sharing Agreement.
Buyer and the Acquired Group (in capacity as an indemnifying party, an
"Indemnifying Party") agree to, indemnify and hold the Shareholders and their
Affiliates (and their respective officers, directors, employees and agents)
(each in its capacity as an indemnitee, an "Indemnitee") harmless from and
against (i) all liability for Taxes of the Acquired Group for any Buyer Year and
the portion of any Straddle Period beginning after the Closing Date, and (ii)
all liability for Taxes attributable to a breach by Buyer or the Acquired Group
of its obligations under this Amended Tax Sharing Agreement.
In the case of any Straddle Period: (i) real, personal and intangible property
Taxes ("Property Taxes") of the Acquired Group for property held during the
portion of the Straddle Period ending on the Closing Date shall be equal to the
amount of such Property Taxes for the entire Straddle
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Period multiplied by a fraction, the numerator of which is the number of days in
the Straddle Period prior to and including the Closing Date and the denominator
of which is the number of days in the Straddle Period; and (ii) the Taxes of the
Acquired Group (other than Property Taxes) for the portion of the Straddle
Period ending on the Closing Date shall be computed as if such taxable period
ended as of the close of business on the Closing Date.
Shareholders' indemnity obligation in respect of Taxes for a Straddle Period
shall initially be effected by their payment to Buyer or the Acquired Group of
the excess of (x) such Taxes for the portion of the Straddle Period ending on
the Closing Date over (y) the amount of such Taxes paid by Shareholders, or by
Shareholders Agent on their behalf, at any time after the Closing Date and, in
the case of Taxes other than Income Taxes, the balance of such Tax liabilities
reserved for, if any, in the Final Working Capital, plus the amount of such
Taxes paid, by estimate or otherwise, by the Acquired Group on or prior to the
Closing Date. Shareholders shall initially pay such excess to Buyer or the
Acquired Group within 20 days after the Tax Return, with respect to the final
liability for such Taxes is required to be filed. If the amount of such Taxes
paid by Shareholders or on their behalf (other than the Company or the
Subsidiaries), and, in the case of Taxes other than Income Taxes, the balance of
such Tax liabilities reserved for in the Final Working Capital, plus the amount
of such Taxes paid by the Company or the Subsidiaries on or prior to the Closing
Date exceeds the amount payable by Shareholders pursuant to clause (x) of the
second preceding sentence, Buyer or the Acquired Group shall pay such excess to
Shareholders Agent within 20 days after the Tax Return with respect to the
liability for such Taxes is required to be filed. The payments to be made
pursuant to this paragraph by Shareholders or Buyer or the Acquired Group with
respect to a Straddle Period shall be appropriately adjusted to reflect any
final determination with respect to Straddle Period Taxes.
Shareholders' indemnity obligation in respect of any other Taxes shall be paid
within 20 days after the date on which the indemnified party pays such the
Taxes.
To the extent that Shareholders Agent does not assume the defense of any Tax
Claim as set forth below, Shareholders shall also, jointly and severally,
indemnify Buyer and the Acquired Group and hold them harmless from any legal and
accounting costs of defending against such Tax Claim.
(b) TERMINATION OF INDEMNIFICATION. The obligations to indemnify and hold
harmless a party hereto pursuant to Section 4(a) shall terminate 60 days after
the date on which the applicable statutes of limitations with respect to the Tax
liabilities in question expire (giving effect to any waiver, mitigation or
extension thereof).
(c) PROCEDURES RELATING TO INDEMNIFICATION. Any claims for indemnification
made hereunder shall be accompanied by a schedule or schedules setting forth the
Indemnitee's calculation of such claim. If a claim shall be made by any Taxing
Authority, which, if successful, might result in an indemnity payment to Buyer
or the Acquired Group pursuant to Section 4(a), Buyer or the Acquired Group
shall notify Shareholders Agent promptly in writing of any notice of deficiency,
proposed adjustment, adjustment, assessment, audit, examination, suit, dispute
or other claim (a "Tax Claim") and shall give Shareholders Agent such other
information with respect thereto as Shareholders Agent may reasonably request.
The failure of Buyer to provide prompt notice to
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Shareholders Agent of a Tax Claim shall reduce Indemnification hereunder only in
the case and to the extent such failure to provide prompt notice causes actual
prejudice to the defense of such Tax Claim.
Shareholders Agent may, at its own expense, participate in and assume the
defense of any such claim, suit, action, litigation or proceeding (including any
Tax audit). If Shareholders Agent assumes such defense, Shareholders Agent shall
control all proceedings taken in connection with such Tax Claim (including
selection of counsel) and, without limiting the foregoing and notwithstanding
anything else contained herein, may in its sole discretion pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with any
Taxing Authority with respect thereto, and may, in its sole discretion, either
pay the Tax claimed and xxx for a refund where applicable law permits such
refund suits or contest the Tax Claim in any permissible manner. Notwithstanding
the foregoing, Shareholders Agent shall not settle or compromise any such claim,
suit, action, litigation or proceeding without Buyer's and the Acquired Group's
prior written consent, as applicable, (which consent shall not be unreasonably
withheld). Shareholders Agent and Buyer and the Acquired Group shall jointly
control all proceedings taken in connection with any Tax Claim relating solely
to Taxes of the Acquired Group for a Straddle Period.
Buyer, the Acquired Group and their Affiliates shall cooperate reasonably with
Shareholders Agent in contesting any Tax Claim, which cooperation shall include,
without limitation, the retention and (upon Shareholders Agent's request) the
provision to Shareholders Agent of records and information which are reasonably
relevant to such Tax Claim, execution of powers of attorney in favor of
Shareholders Agent and making employees available on a mutually convenient basis
to provide additional information or explanation of any material provided
hereunder or to testify at proceedings relating to such Tax Claim.
In no case shall Buyer or the Acquired Group settle or otherwise compromise any
Tax Claim relating to a Seller Year or a Seller portion of a Straddle Period of
the Acquired Group without Shareholders Agent's prior written consent (which
consent shall not be unreasonably withheld).
Notwithstanding anything to the contrary contained herein, the party controlling
the proceedings in connection with the Tax Claim shall keep the other party
informed of all material developments and events relating to such Tax Claim and
the other party, at its own cost and expense and with its own counsel, shall
have the right to participate in (but not control) the applicable audit or
examination and defense of such Tax Claim.
(d) TAX TREATMENT OF INDEMNIFICATION. For all Tax purposes, Buyer, the
Acquired Group and Shareholders agree to treat any indemnity payment under this
Amended Tax Sharing Agreement as an adjustment to the Purchase Price.
5. MISCELLANEOUS.
(a) FURTHER ASSURANCE. Each party agrees that it will execute and deliver,
or cause to be executed and delivered, on or after the date of this Amended Tax
Sharing Agreement, all such other instruments and will take all reasonable
actions as may be necessary to consummate the transactions contemplated hereby,
and to effectuate the provisions and purposes hereof.
10
(b) ASSIGNMENT. Except as expressly provided herein, the rights and
obligations of a party hereunder may not be assigned, transferred or encumbered
without the prior written consent of the other parties. Notwithstanding the
foregoing, Buyer may at any time, in its sole discretion, assign, in whole or in
part, (a) its rights and obligations pursuant to this Amended Tax Sharing
Agreement to one or more of its Affiliates; (b) its rights under this Amended
Tax Sharing Agreement for collateral security purposes to any lender providing
financing to Buyer, the Company or any of their Affiliates and any such lender
may exercise all of the rights and remedies of the Buyer hereunder; and (c) its
rights under this Amended Tax Sharing Agreement, in whole or in part, to any
subsequent purchaser of PFMI, the Company or any of its respective subsidiaries
or any material portion of its respective assets (whether such sale is
structured as a sale of stock, sale of assets, merger, recapitalization or
otherwise); provided, however, that Buyer shall nevertheless remain liable for
all obligations imposed upon it under, or to which it is subject pursuant to,
the provisions of this Amended Tax Sharing Agreement.
(c) PARTIES IN INTEREST. This Amended Tax Sharing Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the respective successors
and assigns of the parties hereto. Nothing contained herein shall be deemed to
confer upon any other person any right or remedy under or by reason of this
Amended Tax Sharing Agreement .
(d) OBLIGATIONS. Shareholders Agent acts in the relationship of and is the
designated agent for the Shareholders with exclusive authority to make all
decisions and determinations and to take all actions (including giving consents
and waivers to this Amended Tax Sharing Agreement) required or permitted
hereunder on behalf of the Shareholders, and any such action, decision or
determination so made or taken shall be deemed the action, decision or
determination of the Shareholders, and any notice, document, certificate or
information required to be given to any Shareholder shall be deemed so given if
given to Shareholders Agent. The Shareholders unconditionally guarantee the full
performance of all obligations, duties and liabilities of Shareholders Agent
hereunder. The Buyer and any other Person may conclusively and absolutely rely,
without inquiry, upon any action of Shareholders Agent on behalf of the
Shareholders in all matters in which it has been granted authority pursuant to
this Amended Tax Sharing Agreement. All actions, decisions and instructions of
Shareholders Agent taken, made or given pursuant to the authority granted to
Shareholders Agent pursuant to this Amended Tax Sharing Agreement shall be
final, conclusive and binding upon all Shareholders.
The obligations of the Buyer and the Acquired Group shall be joint and several,
and the obligations hereunder of the Shareholders shall be joint and several.
For purposes herein the plural shall include the singular, the singular shall
include the plural, as the context may require.
(e) LAW GOVERNING AGREEMENT; FORUM. This Amended Tax Sharing Agreement may
not be modified or terminated orally, and shall be construed and interpreted
according to the laws governing the provisions of Stock Purchase Agreement and
shall be subject to any exclusive or non-exclusive forum provisions therein.
(f) AMENDMENT AND MODIFICATION. Buyer and Shareholders Agent may amend,
modify and supplement this Amended Tax Sharing Agreement in such manner as may
be agreed upon in writing between Buyer and Shareholders Agent.
11
(g) NOTICE. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; or
(b) sent to the parties at their respective addresses indicated herein by
registered or certified U.S. mail, return receipt requested and postage prepaid,
or by private overnight mail courier service providing for a receipted delivery.
The respective addresses to be used for all such notices, demands or requests
are as follows:
If to Buyer or Acquired Group, to:
Pierre Holding Corp.
c/o Madison Dearborn Partners
Three First Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Telephone: (000) 000-0000
(with copies to)
Madison Dearborn Partners
Three First Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx
Telephone: (000) 000-0000
Xxxxxx X. Xxxx, P.C.
Xxxxxxxx & Xxxxx LLP
000 X. Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
If to Shareholders or Shareholders Agent, to:
Xxxxx X. Xxxxx
Xxxx Xxxxxx Xxx 0000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Telephone: 000-000-0000
(with a copy to)
T. Xxxxxxx Xxxxxx
0000 Xxxxxx Xxxxxx, Xxxxx 000-X
Xxxxx Xxxxx, Xxxxx Xxxxxxxx 00000
Telephone: 000-000-0000
If personally delivered, such communication shall be deemed delivered upon
actual receipt; if sent by overnight courier pursuant to this paragraph, such
communication shall be deemed
12
delivered upon receipt; and if sent by U.S. mail pursuant to this paragraph,
such communication shall be deemed delivered as of the date of delivery
indicated on the receipt issued by the relevant postal service, or, if the
addressee fails or refuses to accept delivery, as of the date of such failure or
refusal. Any party to this Amended Tax Sharing Agreement may change its address
for the purposes of this Amended Tax Sharing Agreement by giving notice thereof
in accordance with this Section.
(h) ENTIRE AGREEMENT. This Amended Tax Sharing Agreement sets forth the
entire agreement between the parties hereto with respect to the Tax matters
contemplated herein.
(i) EFFECTIVENESS. This Amended Tax Sharing Agreement shall not be
effective, and no party shall have any rights or obligations hereunder, unless
and until the Closing under the Stock Purchase Agreement occurs, other than the
provisions of Section 2 (REPRESENTATIONS AND WARRANTIES), which will be
enforceable upon the execution and delivery of this Amended Tax Sharing
Agreement which such execution and delivery will occur simultaneously with the
execution and delivery of the Stock Purchase Agreement.
(j) COUNTERPARTS. This Amended Tax Sharing Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(k) HEADINGS. The headings in this Amended Tax Sharing Agreement are
inserted for convenience only and shall not constitute a part hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amended Tax Sharing
Agreement to be duly executed by their respective authorized officers effective
as of the day and year first above written.
[Signature Pages Attached]
13
PIERRE HOLDING CORP.
By: /s/ Xxxxx X. Xxxxxx
------------------------------
Name: Xxxxx X. Xxxxxx
----------------------------
Title: President
---------------------------
PF MANAGEMENT, INC.
By: /s/ Xxxxx X. Xxxxx
-------------------------------
Xxxxx X. Xxxxx, President
PIERRE FOODS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Xxxxxx X. Xxxxxxx, Chief
Financial Officer
/s/ Xxxxx X. Xxxxxxxxxx, Xx.
-----------------------------------
Xxxxx X. Xxxxxxxxxx, Xx.
/s/ Xxxxx X. Xxxxx
-----------------------------------
Xxxxx X. Xxxxx
/s/ Xxxxx X. Xxxxxxxxx
-----------------------
Xxxxx X. Xxxxxxxxx
/s/ Xxxxx X. Xxxxx
------------------
Xxxxx X. Xxxxx, Trustee under
Voting Trust Agreement dated
February 1, 2004.
/s/ Xxxxx X. Xxxxx
-----------------------------------
Xxxxx X. Xxxxx, Agent under
Shareholders Agent Agreement
dated June 30, 2004
FRESH FOODS PROPERTIES, LLC
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------
Xxxxxx X. Xxxxxxx, Chief Financial
Officer of Pierre Foods, Inc.,
its sole member
COMPASS OUTFITTERS, LLC
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
Xxxxxx X. Xxxxxxx, Manager
