Exhibit 10.4
TAX SHARING AGREEMENT
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This Agreement is entered into as of the 1st day of
December, 1999 between ACX Technologies, Inc. ("ACX"), a Colorado
corporation, and CoorsTek, Inc. ("CTI"), a Delaware corporation.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, ACX and CTI have entered into a Distribution
Agreement dated October [], 1999 (the "Distribution Agreement"),
providing for the distribution by ACX to its shareholders of all
of the common stock of CTI (the "Distribution");
WHEREAS, ACX and CTI desire to set forth their agreement on
the rights and obligations of ACX, CTI and their respective
Affiliates with respect to various Tax matters and the handling
and allocation of Federal, state, local and foreign Taxes
incurred in Taxable periods beginning prior to the Effective
Date;
NOW, THEREFORE, in consideration of the mutual covenants
and agreements hereinafter set forth, the parties agree as
follows:
1. Definitions
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(a) As used in this Agreement:
"ACX Consolidated Group" shall mean, with respect to
any Taxable period, the corporations which are members of the
affiliated group of corporations of which ACX or its successor is
the common parent (within the meaning of Section 1504 of the
Code).
"ACX Group" shall mean the corporations which are
members of the ACX Consolidated Group during any Taxable period,
excluding the corporations which are the members of the CTI
Group.
"CTI Group" shall mean the corporations which are
members of the affiliated group of corporations of which CTI is
the common parent (within the meaning of Section 1504 of the
Code) immediately after the Distribution Date and any
predecessors or successors thereto (and to the extent applicable,
a corporation, sold prior to the Distribution, that was a
subsidiary of a member of the CTI Group).
"Affiliate" (and the correlative meaning,
"Affiliation") of any person shall mean any individual,
corporation, partnership or other entity directly or indirectly
controlling, controlled by or under common control with such
person. Notwithstanding the foregoing, (i) a member of the CTI
Group and a member of the ACX Group shall not be Affiliates, and
(ii) neither ▇▇▇▇▇▇ ▇▇▇▇▇ Company nor any of its subsidiaries
shall be an Affiliate of any member of the ACX Group or any
member of the CTI Group.
"After-Tax Amount" shall mean an amount that, on an
"After-tax basis", is equal to the obligation amount hereunder.
"After-tax basis" shall reflect the hypothetical Tax consequences
resulting from (i) receipt or accrual of the required payment by
the recipient hereunder and (ii) any deduction for the payment
or accrual of the item giving rise to the obligation. References
to "after-Tax basis" and "hypothetical Tax consequences" refer to
calculations of Tax at the maximum statutory rate (or rates, in
the case of an item that affects more than one Tax) to the extent
applicable for the relevant year.
"Code" shall mean the Internal Revenue Code of 1986,
as amended, or any successor thereto.
"Consolidated State Tax" shall mean any income,
franchise or similar Tax (based on income) payable to any state
or local government as to which CTI or any of its Affiliates is
or may be liable for such Tax on a consolidated, combined or
unitary basis with ACX or any of its Affiliates. This term shall
specifically exclude any combined state Tax Returns filed with
CTI or any member of the CTI Group as the common parent. Such
combined state Tax Returns shall be treated similar to separate
company state Returns with responsibility being exclusive to the
filing entity.
"Distribution Date" shall mean the date on which ACX
distributes to its shareholders all of the common stock of CTI.
"Effective Date" shall mean ________.
"Federal Tax" shall mean any United States Federal
income, environmental, alternative or add-on minimum Tax.
"Final Determination" shall mean (i) with respect to
Federal Taxes, (A) a "determination" as defined in Section
1313(a) of the Code, or (B) the date of acceptance by or on
behalf of the Internal Revenue Service of Form 870-AD (or any
successor form thereto), as a final resolution of Tax liability
for any Taxable period, except that a Form 870-AD (or successor
form thereto) that reserves the right of the taxpayer to file a
claim for refund and/or the right of the Internal Revenue Service
to assert a further deficiency shall not constitute a Final
Determination with respect to the item or items so reserved; (ii)
with respect to Taxes other than Federal Taxes, any final
determination of liability in respect of a Tax provided for under
applicable law; (iii) any final disposition by reason of the
expiration of the applicable statute of limitations; and (iv) the
payment of Tax by ACX, CTI, or any Affiliate of ACX or CTI,
whichever is responsible for payment of such Tax under applicable
law, with respect to any item disallowed or adjusted by a Taxing
Authority, provided that the provisions of Section 8 hereof have
been complied with, or, if such section is inapplicable, that the
party responsible under the terms of this Agreement for such Tax
is notified by the party paying such Tax that it has determined
that no action should be taken to recoup such disallowed item,
and the other party agrees with such determination.
"Other Taxes," are defined in Section 4.
"Post-Effective Period" shall mean any Taxable period
beginning after the Effective Date.
"Pre-Effective Period" shall mean any Taxable period
ending on or before the Effective Date.
"Pre-Effective Tax Liability" shall mean (i) the
Federal Tax liability of ACX and each corporation included in the
ACX Consolidated Group for any period as to which a consolidated
Federal Tax Return is filed by ACX for such group for all Pre-
Effective Periods, and (ii) the Consolidated State Tax liability
for such group for all Pre-Effective Periods and for the portions
(up to the Effective Date) of any Taxable periods including but
not ending on the Effective Date, regardless of whether any such
liability has been previously assessed in whole or in part or is
assessed in whole or in part after the date hereof, or whether
such liability is or was imposed on the ACX Consolidated Group or
on any corporation included within any such Group separately.
"Prime" shall mean the rate of interest announced
from time to time as "prime" by the Bank of America, N.A.
"Referee" is defined in Section 16.
"Return" shall mean any Tax Return, statement, report
or form (including estimated Tax Returns and reports and
information Returns and reports) required to be filed with any
Taxing Authority.
"Tax" (and the correlative meaning, "Taxes," "Taxing"
and "Taxable") shall mean (A) any net income, alternative or add-
on minimum, gross income, gross receipts, sales, use, ad valorem,
franchise, profits, license, withholding, payroll, employment,
excise, transfer, recording, severance, stamp, occupation,
premium, property, environmental, custom duty, or other tax,
governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest and any penalty, addition
to tax or additional amount imposed by a Taxing Authority; (B)
any liability of ACX, CTI or any Affiliate of ACX or CTI (or, in
each case, any successor in interest thereto by merger or
otherwise), as the case may be, for the payment of any amounts of
the type described in clause (A) for any Taxable period resulting
from the application of Treasury Regulation Section 1.1502-6 or,
in the case of any Consolidated State Tax, any similar provision
applicable under state law; and (C) any liability of ACX, CTI or
any Affiliate of ACX or CTI (or, in each case, any successor in
interest thereto by merger or otherwise) for the payment of any
amounts described in clause (A) as a result of any express or
implied obligation to indemnify any other party.
"Tax Asset" shall mean any net operating loss, net
capital loss, investment Tax credit, foreign Tax credit,
charitable deduction or any other credit or Tax attribute,
including additions to basis of property, which could reduce
Federal Taxes or Consolidated State Taxes, as the case may be,
including, without limitation, deductions or credits related to
alternative minimum Taxes.
"Taxing Authority" shall mean any governmental
authority responsible for the imposition of any Tax.
(b) Any term used in this Agreement which is not
defined in this Agreement shall, to the extent the context
requires, have the meaning assigned to it in the Code or the
applicable Treasury regulations thereunder.
2. Federal Taxes and Consolidated State Taxes--
Administrative and Compliance Matters.
(a) Sole Tax Sharing Agreement. The parties
acknowledge that there has not been a Final Determination of the
Pre-Effective Tax Liability, that the members of the CTI Group
are includible in the ACX Consolidated Group, and may be found to
be includible in certain State Consolidated Groups through the
Effective Date, that pursuant hereto any and all existing Tax
sharing agreements or arrangements, written or unwritten, between
the ACX Group and the CTI Group shall be terminated as of the
Effective Date, and that after the Effective Date this Agreement
shall constitute the sole Tax sharing agreement between the ACX
Group and the CTI Group. Any tax sharing agreements between
▇▇▇▇▇▇ ▇▇▇▇▇ Company and ACX will still be legally binding and
applicable to both ACX Group and CTI Group.
(b) Intent. Treasury regulations designate ACX as
the sole agent of all members of the ACX Consolidated Group with
respect to virtually all Federal Tax matters. Certain states have
corresponding provisions. Notwithstanding Section 2(d) hereof,
if the Internal Revenue Service District Director (or a
corresponding state official) deals directly with any member of
the CTI Group in respect of its Tax liability for a Pre-Effective
Period (as is the District Director's right), such member of the
CTI Group shall have full authority to act, provided, however,
that such actions do not cause a material detriment to the ACX
Group. It is the intent of ACX and CTI, as common parents of
their respective groups for Post-Effective Periods, that, since
each group is ultimately responsible for Federal Tax and
Consolidated State Tax liabilities allocable thereto hereunder,
each group, through its common parent, shall have the authority
to negotiate, resolve and settle its own Tax matters to the
extent such actions do not cause a material detriment to the
other group or are otherwise inconsistent with the specific
provisions of this Agreement.
(c) Designation of Agent. CTI and each member of
the CTI Group hereby irrevocably designate ACX as its agent,
coordinator, and administrator for the purpose of taking any and
all actions (including the execution of waivers of applicable
statutes of limitation) necessary or incidental to the filing of
any Federal or Consolidated State Tax Return, any amended Federal
or Consolidated State Tax Return or any claim for refund (even
where an item or Tax Asset giving rise to an amended Return or
refund claim arises in a Post-Effective Period), credit or offset
of Tax or any other proceedings relating to any Pre-Effective
Period. ACX, as agent, shall be responsible to see that all such
administrative matters relating thereto shall be handled promptly
and appropriately. ACX shall be CTI's agent with respect to
making payments to, or collecting Refunds from, any Taxing
Authority with respect to Pre-Effective Tax Liabilities. CTI will
then reimburse ACX, or ACX will reimburse CTI, as the case may
be, for the CTI share of the total pursuant to such agency. ACX
shall inform and consult with CTI prior to taking any action on
behalf of, or which will have any material impact on, any member
of the CTI Group, including, without limitation, strategies
relating to waivers of any statute of limitations.
(d) 1999 Returns. ACX will prepare and file the
consolidated Federal Tax Return and each Consolidated State Tax
Return for the taxable years ending on the Effective Date. ACX
will provide CTI with "packets" at a time and in a form similar
to prior years for CTI and each of its Affiliates for which data
is necessary for the Federal and Consolidated State Returns, and
CTI will complete and return such packets with respect to each
member of the CTI Group or relevant CTI Affiliate, pursuant to a
schedule mutually agreed upon by ACX and CTI, but in no event
later than June 1, 2000. CTI will have sole responsibility for
the technical propriety and accuracy of the packets relating to
members of the CTI Group and CTI Affiliates.
(e) Tax Assets. Tax Assets from any Pre-Effective
Period shall be computed and agreed upon by ACX and CTI after
the completion of the last ACX Consolidated Group Return
which includes CTI or any member of the CTI Group.
3. Federal Taxes and Consolidated State Taxes--
Allocation of Taxes.
(a) 1999 Federal and Consolidated State Income
Taxes. In its capacity as agent, ACX shall pay all Federal Taxes
and Consolidated State Taxes due in connection with the filing of
its 1999 Returns or with any request for extension of time within
which to file any such Return. Within 20 days of filing of any
such Returns, ACX shall send a statement to CTI showing the
amount of the unpaid or overpaid portion of the CTI Group's
allocated share of the total Federal Tax liability or
Consolidated State Tax liability as shown on such Returns as
filed.
(b) Carrybacks. ACX agrees to pay CTI the actual
benefits received by ACX from the use in any Pre-Effective Period
of any Tax Asset of CTI, a member of the CTI Group or a CTI
Affiliate arising in a Post-Effective Period. Such benefit shall
be considered equal to the excess of the actual amount of Federal
Taxes or Consolidated State Taxes that would have been payable by
the ACX Consolidated Group in the absence of such carryback over
the amount of Federal Taxes or Consolidated State Taxes actually
payable by the ACX Consolidated Group as a result of such
carryback or subsequent increase to such carryback. Payment of
the amount of such benefit shall be made within 30 days of (i)
receipt of the refund or (ii) the end of the Taxable year during
which ACX or the relevant ACX Affiliate receives the credit or
other offset attributable thereto.
(c) Subsequent Adjustments to Carrybacks. If, subse-
quent to the payment by ACX to CTI of any amount referred to in
Section 3(b) above, there shall be
(i) a Final Determination under applicable
law of a deficiency of Federal Taxes or Consolidated State
Taxes of the ACX Consolidated Group or the relevant State
Consolidated Group on the grounds that the Tax Asset giving rise
to such payment was in fact not available in whole or in part,
(ii) a Final Determination resulting from an
audit of any member of the CTI Group or any CTI Affiliate which
results in a reduction of any Tax Asset so carried back, or
(iii) the filing of a subsequent Return
reflecting a recapture by the ACX Consolidated Group or the
relevant State Consolidated Group of any Tax Asset so carried
back, then within 20 days of such event, ACX shall send a
statement to CTI setting forth an amount reflecting the amount
which would not have been payable to CTI pursuant to this Section
3 had the amount of the benefit been determined in light of such
event. In addition, CTI shall hold ACX and each of its Affiliates
harmless by paying an amount for any penalty or interest paid by
ACX or any such Affiliate as a result of any such decrease.
(d) Amended Returns with Amounts Due by CTI. If ACX
files an amended Return on behalf of the ACX Consolidated Group
or a State Consolidated Group for any Pre-Effective Period and
such Return results in an increase in the Pre-Effective Tax
Liability attributable to any member of the CTI Group or any CTI
Affiliate for such period, CTI shall pay to ACX the amount of
such increase, plus any applicable interest and penalties.
(e) Amended Returns with Refunds Due to CTI.
(i) CTI may request that ACX file an
amended Return or assert a claim for refund. ACX shall assert a
claim for refund or file an amended Return within 60 days of such
request, provided, however, that ACX shall have no obligation to
file such an amended Return or assert such a claim for a refund
if ACX reasonably determines in good faith after consulting with
CTI that the benefit of filing such Return or asserting such
claim to the members of the CTI Group or CTI Affiliates is
outweighed by the detriment to it or the members (or former
members) of the ACX Group. If CTI believes that ACX's
determination is unreasonable, the dispute shall be subject to
the procedures set forth in Section 16.
(ii) If ACX files an amended Return on
behalf of the ACX Consolidated Group for any Pre-Effective Period
that results in a decrease in the Pre-Effective Tax Liability
attributable to any member of the CTI Group or any CTI Affiliate
for such period, or if ACX asserts a claim for a refund of
Federal Taxes or Consolidated State Taxes which would be
attributable to any member of the CTI Group or any CTI Affiliate
in any audit or other proceeding, then ACX shall pay to CTI the
amount of any refund received resulting from such decrease or
claim for refund, plus any interest received by ACX attributable
thereto.
(f) Calculation and Payments of Amounts Due.
(i) Responsible Party. Calculations required
to be made pursuant to this Section 3 and the relevant portion of
Section 6(c) shall be made by ACX. Upon receipt of such
calculations, CTI shall have 10 days to review the computations
and to notify ACX of any disagreements. During CTI's review and
in the event that CTI has notified ACX of a disagreement, for an
additional 10 days both CTI and ACX shall make reasonable efforts
to resolve any questions or disputes. In the event the parties
cannot agree, their disputes will be resolved pursuant to Section
16.
(ii) Method of Calculation. Except as
otherwise provided, CTI's share of any Federal Tax, or
Consolidated State Tax shall be calculated pursuant to the method
described in Exhibit A hereto.
(iii) Payments Due. Except as otherwise
provided, all payments required by this Section 3 and the
relevant portions of Section 6(c) will be due 30 days after the
fixing of liability or the resolution of a dispute (as provided
for in 3(f)(i)).
(iv) Interest. Any amount not paid when due
under Section 3(f)(iii) shall bear interest at Prime plus 3%,
except that any amount not paid because of any good faith dispute
under Section 16 shall bear interest at Prime.
(v) After-Tax Amounts. ACX and CTI shall
discharge their obligations under this Section 3 and the relevant
portions of Section 6(c), other than payments required under
Section 3(b), by paying After-Tax Amounts.
(vi) Duplicative Payments Not Required.
Notwithstanding the foregoing, no payment shall be required under
any provision of this Agreement to the extent it is duplicative
of any payment required by any other provision of this Agreement.
(g) In the event that the Treasury Department
promulgates regulations under the Code that provide a method for
the allocation of a consolidated group's "minimum tax credit"
(within the meaning of Section 53 of the Code) among a group's
members, and, as a result of such regulations' mandatory
application, the ACX Consolidated Group is required to allocate
the maximum tax credit carried forward to any Post-Effective
Period from any federal income Tax Return for any Pre-Effective
Period, so that the amount originally allocated to members of the
CTI Group (the "Original CTI Allocation") is different from the
amount that is allocated under such regulations (the "Adjusted
CTI Allocation"), then, ACX shall pay CTI an amount equal to the
excess of the Original CTI Allocation over the Adjusted CTI
Allocation, or, if applicable, CTI shall pay ACX an amount equal
to the excess of the Adjusted CTI Allocation over the Original
CTI Allocation. Within 20 days of the effective date of such
regulations, ACX shall send a statement to CTI showing the amount
of the Adjusted CTI Allocation.
4. Other Taxes.
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(a) Liability for all Taxes other than Federal
Taxes and Consolidated State Taxes ("Other Taxes"), attributable
to any member of the CTI Group, and the responsibility for filing
of all Returns relating to such other Taxes, shall be the sole
responsibility of the CTI Group. Liability for all Other Taxes,
attributable to any member of the ACX Group and the
responsibility for filing all Returns relating to such Other
Taxes, shall be the sole responsibility of the ACX Group. Each
party agrees to indemnify and hold the other harmless in
accordance with the undertakings contained in this Section 4(a).
(b) The CTI Group shall be entitled to all refunds
and credits of Other Taxes attributable to any member of the CTI
Group, and the ACX Group shall be entitled to all refunds and
credits of Other Taxes attributable to any member of the ACX
Group.
5. Certain Representations and Covenants.
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(a) (I) CTI Representations. CTI represents and
agrees that, as of the date hereof, and covenants that on the
Distribution Date:
(i) There is no plan or intention (A)
to liquidate CTI or to merge or consolidate CTI with any other
person subsequent to the Distribution or (B) to sell or otherwise
dispose of any asset of CTI subsequent to the Distribution,
except in the ordinary course of business.
(ii) CTI will not take any action
inconsistent with the information and representations furnished
to the IRS in connection with the request for a private letter
ruling with respect to the spin-off, regardless of whether such
information and representations were included in the ruling or
pronouncement issued by the IRS.
(iii) CTI will not enter into any
negotiation, agreements or arrangements with respect to
transactions or events (including stock issuances, pursuant to
the exercise of options or otherwise, option grants, the adoption
of, or authorization of shares under, a stock option plan,
capital contributions, or acquisitions, but not including the
spin-off) which may cause the spin-off to (a) be treated as part
of a plan pursuant to which one or more persons acquire directly
or indirectly CTI stock representing a "50-percent or greater
interest" within the meaning of Section 355(d)(4) or the Code, or
(b) violate the "continuity of interest requirement" set forth in
Treasury Regulation 1.355- 2(c).
(II) CTI and ACX Representations. CTI and
ACX each represents that, as of the date hereof, and covenants
that on the Distribution Date:
(i) To the best of ACX's and CTI's
knowledge (as applicable), payments made in connection with all
continuing non-transitional transactions between any member of
the CTI Group and any member of the ACX Group occurring after the
Distribution will be for fair market value based on terms and
conditions arrived at by the parties bargaining at arm's length
and payments made in connection with certain transitional
services also will be provided for fair market value.
(ii) Neither CTI nor ACX (as
applicable) is aware of any plan or intention by the shareholders
of ACX to sell, exchange, transfer by gift, or otherwise dispose
of any of their stock in, or securities of, ACX or CTI subsequent
to the Distribution, except for any dispositions of ACX stock or
CTI stock through the 401(k) plans of ACX and CTI, respectively.
(b) CTI Covenants. CTI covenants to ACX and agrees
that during the two-year period following the Distribution Date:
(i) It will not liquidate, merge or
consolidate with any other person, or sell, exchange, distribute
or otherwise dispose of its assets other than in the ordinary
course of business, redeem or otherwise reacquire any of its
capital stock, other than through stock purchases meeting the
requirements of Section 4.05(1)(b) of Rev. Proc. 96-30.
(ii) CTI Group will continue the active
conduct of the historic business conducted by CTI Group
throughout the five year period prior to the spin-off.
(iii) CTI will not, nor will it permit any
member of the CTI Group to, take any action inconsistent with the
information and representations furnished to the IRS in
connection with the request for a private letter ruling with
respect to the spin-off, regardless of whether such information
and representations were included in the ruling or pronouncement
issued by the IRS.
(iv) During the applicable period provided
in Section 355(e)(2)(B) of the Code with respect to the spin-off,
CTI will not enter into any transaction or make any change in its
equity structure (including stock issuances, pursuant to the
exercise of options or otherwise, option grants, the adoption of,
or authorization of shares under, a stock option plan, capital
contributions, or acquisitions, but not including the spin-off)
which may cause the spin-off to (a) be treated as part of a plan
pursuant to which one or more persons acquire directly or
indirectly CTI stock representing a "50-percent or greater
interest" within the meaning of Section 355(d)(4) of the Code, or
(b) violate the "continuity of interest requirement" set forth in
Treasury Regulation 1.355-2(c).
(v) CTI will covenant that in the one-year
period after the spin-off, it will make the borrowings and
acquisitions described in the materials submitted to the IRS with
respect to the business purpose of the spin-off.
(c) Exceptions. Notwithstanding the foregoing, CTI
may take actions inconsistent with the covenants contained in
Section 5(b) above if:
(i) CTI obtains a ruling from the Internal
Revenue Service to the effect that such actions will not cause
either ACX or its shareholders to recognize Taxable income by
virtue of the Distribution; or
(ii) CTI obtains an opinion, acceptable to
ACX, from recognized counsel acceptable to ACX to the same effect
as in Section 5(c)(i).
6. Indemnities.
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(a) CTI Indemnity. CTI and each member of the CTI
Group will jointly and severally indemnify ACX and each member of
the ACX Group against and hold them harmless from
(i) any Pre-Effective Tax Liability
assessed after the Distribution Date pursuant to a Final
Determination, which is attributable to any item of income, loss,
credit, deduction or other Tax attribute of any member of the CTI
Group, or a CTI Affiliate,
(ii) any liability (including any and all
Taxes) relating to the Distribution, in the event the
Distribution is Taxable due to a breach by CTI or any member of
the CTI Group of any agreement, representation or covenant made
by CTI herein; provided, however, that if the Distribution is
Taxable as a result, in part, of ACX's action, then CTI shall be
liable only for the proportionate amount of the liability
attributed to CTI's action, and
(iii) all liability for fees, costs and
expenses (including reasonable attorneys' fees) arising out of or
incident to any proceedings before any Taxing Authority, or any
judicial authority, with respect to any amount indemnifiable
under this Section 6(a).
(b) ACX Indemnity. ACX and each member of the ACX
Group will jointly and severally indemnify CTI and each member of
the CTI Group against and hold them harmless from
(i) any Pre-Effective Tax Liability, or Tax
liability resulting from the Distribution, other than any such
liabilities described in Sections 6(a)(i) and (ii) hereof,
(ii) any liability resulting from a breach
by ACX or any member of the ACX Group after the Distribution Date
of any covenant made by ACX herein, and
(iii) all liability for fees, costs and
expenses (including reasonable attorneys' fees) arising out of or
incident to any proceedings before any Taxing Authority, or any
judicial authority, with respect to any amount indemnifiable
under this Section 6(b).
(c) Discharge of Indemnity. CTI and each member of
the CTI Group, and ACX and each member of the ACX Group, shall
discharge their obligations under Sections 6(a)(ii), 6(a)(iii),
6(b)(i), 6(b)(ii) and 6(b)(iii) hereof, respectively, by paying
an After-Tax Amount within 30 days of demand therefore. Within
20 days of a Final Determination of an obligation of CTI and each
member of the CTI Group under Section 6(a)(i) ACX shall send a
statement to CTI showing the amount due thereunder. Calculation
and payment mechanics relating to items described in Section
6(a)(i) are set forth in Section 3(f). Notwithstanding the
foregoing, if either CTI or ACX disputes in good faith the fact
or the amount of its obligation under Section 6(a) or Section
6(b) (including, without limitation, any After-Tax Amount), then
no payment of the amount in dispute shall be required until any
such good faith dispute is resolved in accordance with Section 16
hereof; provided, however, that any amount not paid within 30
days of demand therefore shall bear interest as provided in
Section 3(f)(iv). Notwithstanding anything to the contrary
herein, any Final Determination relating to the applicability,
determination or calculation of the gross-up required to achieve
an After-Tax Amount under this Agreement shall be subject to
indemnity as if an indemnifiable Tax relating to a Pre-Effective
Period.
(d) Method of Calculation. Except as otherwise
provided, the amount of CTI's liability under Section 6(a)(i) and
ACX's liability under Section 6(b)(i), including the calculation
of any party's share of any Federal Tax or Consolidated State
Tax, shall be calculated pursuant to the method described in
Exhibit A hereto.
(e) Joint and Several Liability. The joint and
several liabilities of the members of the CTI Group under Section
6(a) shall become several liabilities (and not joint) with
respect to any member upon a disposition, causing a break in
Affiliation from the CTI Group, of such member to a third party
for fair value. The several liability responsibility of such
member shall equal the portion of the total liability multiplied
by a fraction, the numerator of which is the fair market value of
the member and the denominator of which is the fair market value
of the CTI Group immediately prior to the disposition.
7. Communication and Cooperation.
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(a) Consult and Cooperate. CTI and ACX shall consult
and cooperate (and shall cause each of their Affiliates to
cooperate) fully at such time and to the extent reasonably
requested by the other party in connection with all matters
subject to this Agreement. Such cooperation shall include,
without limitation,
(i) the retention and provision on
reasonable request of any and all information including all
books, records, documentation or other information, any necessary
explanations of information, and access to personnel, until the
expiration of the applicable statute of limitation (giving effect
to any extension, waiver, or mitigation thereof),
(ii) the execution of any document that may
be necessary or helpful in connection of any required Return or
in connection with any audit, proceeding, suit or action, and
(iii) the use of the parties' best efforts to
obtain any documentation from a governmental authority or a third
party that may be necessary or helpful in connection with the
foregoing.
(b) Provide Information. ACX and CTI shall keep each
other fully informed with respect to any development relating to
all matters subject to this Agreement.
(c) Tax Attribute Matters. ACX and CTI shall advise
and consult with each other with respect to any proposed Tax
adjustment relating to the ACX Consolidated Group or any State
Consolidated Group which are the subject of an Internal Revenue
Service or State Taxing Authority audit or investigation, or are
the subject of any proceeding or litigation, and which may affect
any Tax attribute of ACX, CTI or any Affiliate of ACX or CTI
(including, but not limited to, basis in an asset or the amount
of earnings and profits).
8. Audits and Contests.
-------------------
(a) Notice. ACX shall promptly notify CTI in writing
of any inquiries from the Internal Revenue Service or any other
Taxing Authority which relate or may relate to matters described
in Section 3(c) or 6(a). CTI shall promptly notify ACX in writing
of any inquiries from the Internal Revenue Service or other
Taxing Authority which relate or may relate to matters described
in Section 3(c) or 6(b). Each party shall forward to the other
party relevant portions of any reports or other communications
which relate to such matters.
(b) Settlement of Issues. No settlement of any
audit, examination, action, suit or other judicial or
administrative proceeding relating to matters described in
Section 6(a) for any Pre-Effective Period (or with respect to
matters relating to Section 6(a)(ii) for any Taxable period)
shall be accepted or entered into by or on behalf of the ACX
Consolidated Group or State Consolidated Group unless CTI has
consented thereto in writing (which consent shall not be
unreasonably withheld); provided, however, that in the event that
CTI does not consent and ACX believes that the withholding of
consent was unreasonable, the parties shall resolve their
disagreement under the procedures provided in Section 16. In the
process of resolving such a disagreement, the Referee (or other
applicable arbiter) shall consider the magnitude and size of the
item in question, the impact of the resolution on other CTI
Taxable periods and the likelihood of CTI's position ultimately
prevailing.
(c) Venue. In the event that a notice of deficiency
(or similar notice) is received from the Internal Revenue Service
or other Taxing Authority by the ACX Consolidated Group or State
Consolidated Group for a Pre-Effective Period (or, with respect
to a notice of deficiency relating to an item described in
Section 6(a)(ii), for any Taxable period) and such notice relates
in whole or in part to a matter described in Section 6(a), then
(i) ACX, upon receiving a written request from
CTI, which shall be given no later than a date reasonably
required to permit timely filing of a petition in the United
States Tax Court, (or, if applicable, similar State venue) for
redetermination of the deficiency, shall timely file such
petition; provided, however, that, notwithstanding such request,
after consultation with CTI, ACX shall have the option, if the
notice also relates to matters described in Section 6(b), to pay
the amount of the deficiency, to file a claim for the refund
thereof, and, if the claim is denied, to bring an action in a
court of competent jurisdiction seeking the refund of such Tax.
If a Final Determination does not provide for a refund of any
amount covered by Section 6(a) and contested under this Section,
CTI shall pay ACX such amount plus interest from the time ACX's
payment of the deficiency at a rate equal to Prime; or
(ii) If (A) CTI does not request ACX to file a
petition in the United States Tax Court (or, if applicable,
similar State venue) for redetermination of the deficiency
pursuant to Section 8(c)(i), (B) ACX does not, on its own
initiative, timely file such a petition, and (C) CTI requests
that ACX file a claim for refund, then ACX shall pay the
deficiency, file a claim for refund thereof, and, if the claim is
denied, bring an action in a court of competent jurisdiction
seeking such refund; provided that, in such case, CTI shall pay
to ACX, on or before the date on which the deficiency is paid by
ACX, the amount as if the notice of deficiency were a Final
Determination (that CTI would otherwise be responsible for with
respect to matters described in Section 6(a)) and any such
payment shall be credited against the payment required with
appropriate adjustment to be made promptly upon a Final
Determination with respect to such proceedings for refund.
Notwithstanding anything to the contrary herein, if as a result
of a Final Determination the amount due by CTI (the "Final
Liability") is less than the amount previously paid by CTI
pursuant hereto (the "Prepaid Amount"), ACX shall pay to CTI
within 30 days after such Final Determination an amount based
upon an amount equal to the excess or the Prepaid Amount over the
Final Liability, together with interest attributable to such
excess (reduced by the excess of any tax imposed on the receipt
of such interest over the amount of any Tax savings realized by
ACX upon any payment made to CTI pursuant to this sentence).
Notwithstanding the foregoing, no payment shall be required under
this provision to the extent it is duplicative of any payment
required by any other provision of this Agreement.
(d) Judicial Appeals. In the event that a judgment
of the United States Tax Court or other court of competent
jurisdiction results in an adverse determination with respect to
a matter described in Section 6(a) then:
(i) In the case an appeal of the adverse
determination involves no material issues other than matters
described in Section 6(a), CTI shall have the right to cause ACX
to appeal from such adverse determination if CTI delivers to ACX
an opinion from an independent tax counsel selected by CTI and
reasonably acceptable to ACX that such appeal has a reasonable
chance of success.
(ii) In the case of an appeal of any other
adverse determination which involves material issues other than
those described in Section 6(a), CTI shall have the right to
cause ACX to appeal from such adverse determination if CTI
delivers to ACX an opinion from an independent tax counsel
selected by CTI and reasonably acceptable to ACX that it is more
likely than not that such appeal will succeed.
(iii) In the case of an adverse determination
which involves matters described in Section 6(b) and within such
determination material matters described in Section 6(a) were
favorably disposed, CTI shall have the right to prevent ACX from
appealing from such adverse determination, unless ACX delivers to
CTI an opinion from an independent tax counsel selected by ACX
and reasonably acceptable to CTI that it is more likely than not
that such appeal will succeed.
(e) Participation and Closing.
(i) CTI and its representatives, at CTI's
expense, shall be entitled to participate in all conferences,
meetings, or proceedings with any Taxing Authority, the subject
matter of which is or includes matters described in Section
6(a); provided, however, that if (A) less than $200,000 of the
amount of the total of annual proposed adjustment is
attributable to matters described in Section 6(a) and the
proposed adjustments do not cause significant prejudice to the
CTI Group in other Taxable periods, and (B) ACX, in good faith
and in its sole discretion, determines that the commencement or
continuance of any such discussions or submissions by CTI would
extend the audit or review of the Tax Return of the ACX
Consolidated Group or State Consolidated Group for such Taxable
year beyond the period such audit or review would require but
for the commencement or continuance of such discussions or
submissions, then, upon receipt of notice by CTI from ACX to
such effect, CTI shall have no further right to commence or
continue such discussions or submissions with respect to the
audit or review for such Taxable year, and ACX shall have the
right to compromise such issues and cause such audit or review
to be closed.
(ii) If ACX suspends CTI's rights to
commence or continue discussions or submissions with respect to a
Taxable year under Section 8(e)(i) and compromises the proposed
adjustments thereunder, ACX will not be entitled to indemnity
under Section 6(a) for any such items if it is more likely than
not that any such item would have prevailed in a court of
competent jurisdiction. If ACX believes it is entitled to an
indemnity for such an item under Section 6(a) and CTI disagrees
(on the grounds that CTI believes that the item is more likely
than not to prevail) the parties shall resolve the disagreement
provided in Section 16.
(iii) CTI and its representatives, at CTI's
expense, shall be entitled to participate in all appearances
before any court, the subject matter of which includes matter
described in Section 6(a).
(iv) The participation referred to in
Sections 8(e)(i) and (iii) shall include the right to control the
submission and content of documentation, protests, memoranda of
fact and law and briefs, the conduct of oral arguments or
presentations, the selection of witnesses and the negotiation of
stipulations of fact, all as may be deemed appropriate by CTI,
but solely with respect to a matter described in Section 6(a).
(f) Taxability of the Distribution.
Notwithstanding anything to the contrary herein, to the extent
any issue is based on a theory which would, if true, result in
CTI being liable under Section 6(a)(ii) of this Agreement for any
Tax that might result from an adverse determination of such
issue, then ACX shall provide CTI with such notice and
information as would be required under Section 8(a) hereof, and
CTI shall have the right to be involved, at its own expense, in
the development and execution of strategy for the response to,
preparation of and defense of any contest relating to such issue.
In the case of any such issue which is based solely on such a
theory, ACX shall not settle such issue in a manner which would
be impermissible under Section 8(b).
9. Payments.
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All payments to be made hereunder shall be made in
immediately available funds. Payments shall be deemed made when
received.
10. Notices.
-------
Any notice, demand, claim, or other communication under
this Agreement shall be in writing and shall e deemed to have
been given upon the delivery or mailing hereof, as the case may
be, if delivered personally or sent by certified mail, Return
receipt requested, postage prepaid, to the parties at the
following addresses (or at such other address as a party may
specify by notice to the other):
If to ACX, to:
ACX Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Tax Director, ACX Technologies, Inc.
If to CTI, to:
CoorsTek, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Tax Manager, CoorsTek, Inc.
11. Costs and Expenses.
------------------
Except as expressly set forth in this Agreement, each
party shall bear its own costs and expenses incurred pursuant to
this Agreement.
12. Effectiveness; Termination and Survival.
---------------------------------------
This Agreement shall become effective upon the
consummation of the Distribution, provided, however, that this
Agreement will only become effective if consummation of the
Distribution occurs prior to the close of business on March 1,
2000. Notwithstanding anything in this Agreement to the contrary,
this Agreement shall remain in effect and its provisions shall
survive for the full period of all applicable statutes of
limitation (giving effect to any extension, waiver or mitigation
thereof).
13. Section Headings.
----------------
The headings contained in this Agreement are inserted for
convenience only and shall not constitute a part hereof or in any
way affect the meaning or interpretation of this Agreement.
14. Entire Agreement; Amendments and Waivers
----------------------------------------
(a) Entire Agreement. This Agreement contains the
entire understanding of the parties hereto with respect to the
subject matter contained herein. No alteration, amendment,
modification, or waiver of any of the terms of this Agreement
shall be valid unless made by an instrument signed by an
authorized officer of ACX and CTI, or in the case of a waiver, by
the party against whom the waiver is to be effective.
(b) Waiver. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate
as a waiver hereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the
exercise of any right, power or privilege.
15. Governing Law and Interpretation.
--------------------------------
This Agreement has been made in and shall be construed and
enforced in accordance with the laws of the State of Colorado.
16. Dispute Resolution.
------------------
(a) CEO's. If the parties hereto are unable to
resolve any disagreement or dispute, either party may refer the
matter to the Chief Executive Officers (CEOs) of the parties by
giving the other party written notice ("Notice"). Within 20 days
after delivery of Notice, the CEOs of both parties shall meet at
a mutually acceptable time and place to exchange relevant
information and attempt to resolve the dispute within 45 days
after delivery of Notice. All negotiations pursuant to this
Section 16(a) shall be confidential and shall be treated as
compromise and settlement negotiations for purposes of the
Federal Rules of Evidence and State Rules of Evidence.
(b) Referees. Except for disagreements relating to
Section (ii), any disagreement not resolved by mutual agreement
of the parties or under Section 16(a) shall be resolved by an
independent referee that is mutually acceptable to the parties
hereto (a "Referee"). In the event the parties cannot agree on a
Referee, each party shall select an independent nationally
recognized law firm or accounting firm expert in tax matters and
such firms shall jointly choose the Referee. A Referee so chosen
shall resolve any such disagreement within 30 days of appointment
pursuant to such procedures as it may deem advisable. Any such
resolution shall be binding on the parties hereto without further
recourse.
(c) Costs. The costs of any Referee shall be
apportioned between ACX and CTI as determined by such Referee in
such manner as the Referee deems reasonable taking into account
the circumstances of the dispute, the conduct of the parties and
the result of the dispute.
17. Counterparts.
------------
This 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.
18. Assignments; Third Party Beneficiaries.
--------------------------------------
This Agreement shall be binding upon and shall inure only
to the benefit of the parties hereto and their respective
successors and assigns. This Agreement is not intended to benefit
any person other than the parties hereto and such successors and
assigns, and no such other person shall be a third party
beneficiary hereof.
EXHIBIT A
Allocated on a stand alone basis, consistent with prior years
with the exception of any 1999 pension plan contributions which
will be allocated to ACX.
The undersigned hereby irrevocably appoints ACX Technologies,
Inc. as its agent and true and lawful attorney in fact in the
name of the undersigned to execute on behalf of the undersigned
and bind it to a Tax Sharing Agreement (the "TSA") that ACX and
its Affiliates will enter into with CoorsTek, Inc. and its
Affiliates in order to enable ACX to effect the contemplated
Distribution of the shares of CTI to the shareholders of ACX. The
TSA sets forth the rights and obligations of the parties
(including the undersigned) with respect to certain Tax matters
and sets forth indemnification obligations of all parties (on a
joint and several basis).
ACX Technologies, Inc.
By /s/ ▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇
------------------------------------
Title: General Counsel and Secretary
-----------------------------
The undersigned hereby irrevocably appoints CoorsTek, Inc. as its
agent and true and lawful attorney in fact in the name of the
undersigned to execute on behalf of the undersigned and bind it
to a Tax Sharing Agreement (the "TSA") that CTI and its
Affiliates will enter into with ACX Technologies, Inc. and its
Affiliates in order to enable ACX to effect the contemplated
Distribution of the shares of CTI to the shareholders of ACX. The
TSA sets forth the rights and obligations of the parties
(including the undersigned) with respect to certain Tax matters
and sets forth indemnification obligations of all parties (on a
joint and several basis).
CoorsTek, Inc.
By /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Title: General Counsel and Secretary
-----------------------------
