PARENT TAX SHARING AGREEMENT
Tax Sharing Agreement ("Agreement") dated this 12th
day of March, 1998, by and among Xxxx Industries, Inc. ("Xxxx")
and PM Holdings Corporation ("Holdings").
RECITALS
1. Xxxx, Holdings, and the Holdings subsidiaries
listed on Schedule I hereto (each a "Subsidiary") are members of
an affiliated group (the "Affiliated Group"), as defined in
Section 1504(a) of the Internal Revenue Code of 1986 (the
"Code"), for the taxable year ending December 31, 1998. For
purposes of applying the provisions of this Agreement, Holdings
shall cause to be prepared hypothetical estimated and final
United States federal income tax returns showing the estimated
and final United States federal income tax liability of Holdings
and its Subsidiaries (the "Holdings Sub-Group") calculated as if
Holdings Sub-Group filed a separate consolidated return. All
references in this Agreement to provisions of the Code or the
Treasury Regulations promulgated thereunder shall include any
corresponding successor provisions.
2. It is the intent and desire of the parties hereto
that a method be established for allocating the federal and state
consolidated tax liability of the Affiliated Group among Xxxx on
the one hand and Holdings Sub-Group on the other, for reimbursing
Xxxx for payment of such tax liability, and to provide for the
allocation and payment of any refund arising from a carry-back of
losses or tax credits from subsequent taxable years.
AGREEMENT
Now, therefore, in consideration of the mutual
covenants and promises contained herein, the parties hereto agree
as follows:
1. Filing of Returns. A U.S. consolidated income tax
return and estimated tax returns shall be filed by Xxxx for the
taxable year ending December 31, 1998, and shall be
filed for each subsequent taxable period in respect of which the
Affiliated Group is required or permitted to file a consolidated
tax return. Holdings shall and shall cause the other members of
Holdings Sub-Group to execute and file such consents, elections,
and other documents as Xxxx determines are required or
appropriate for the proper filing of such returns and shall
furnish to Xxxx any and all information reasonably requested by
Xxxx in order to carry out the provisions of this Agreement.
2. Allocation of Tax Liability. Xxxx and Holdings
agree that the consolidated tax liability for each year beginning
with the taxable year ending December 31, 1998, determined in
accordance with Treasury Regulations Section 1.1502-2, shall be
apportioned among Xxxx and Holdings Sub-Group (each a "Member")
in accordance with the provisions of Treasury Regulations
Sections 1.1552-1(a)(2) and 1.1502-33(d)(2). Accordingly, the tax
liability shall be allocated to each of the two Members on the
basis of the percentage of the total tax that the tax of such
Member if computed on a separate return would bear to the total
amount of taxes for both Members so computed pursuant to Section
1552(a)(2) of the Code and Treasury Regulations Section
1.1552-1(a)(2). If a Member (the "Tax Attribute Member") is
unable to absorb a tax attribute on a separate return basis in
one year but is able to absorb that attribute on a separate
return basis in a subsequent year a portion of the consolidated
tax liability which otherwise would have been allocated to the
Tax Attribute Member in the subsequent year under Treasury
Regulation Section 1.1552-1(a)(2) will instead be reallocated to
the other Member of the Affiliated Group using the principles of
Treasury Regulations Section 1.1502- 33(d)(2). This allocation
including the effect of any reallocation shall be each Member's
"Allocated Tax Liability" for such year. For purposes of this
Agreement, the consolidated tax liability shall include any
liability for alternative minimum tax.
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3. Payment of Tax. Holdings shall pay to Xxxx no later
than 10 days before the date on which the Affiliated Group's
consolidated income tax return is required to be filed (taking
account of any extensions thereof) the separate return tax
liability of Holdings Sub-Group determined under Treasury
Regulations Sections 1.1552-1(a)(2)(ii) and 1.1502-33(d)(2) plus
its ratable share of any interest or penalties shown due on the
return (determined by multiplying such interest or penalties by a
fraction, the numerator of which equals Holdings Sub-Group's
Allocated Tax Liability (before interest or penalties) and the
denominator of which equals the Affiliated Group's tax liability
(before interest or penalties)).
4. Carryforward/Carryback of Losses and Credits. If
part or all of an unused loss or tax credit is allocated to a
Member pursuant to Treasury Regulations Sections 1.1502-21T or
1.1502-79, and it is carried back or forward to a year in which
such Member filed a separate return or a consolidated return with
another affiliated group, any refund or reduction in tax
liability arising from the carryback or carryover shall be
retained by such Member. Notwithstanding the foregoing, Xxxx
shall determine whether an election shall be made (i) not to
carry back any portion of any such loss arising in a consolidated
return year (including any portion allocated to a Member under
Treasury Regulations Section 1.1502-21T) in accordance with Code
Section 172(b)(3), and (ii) to reattribute to itself any portion
of any loss attributable to the disposition of the stock of
Holdings or any Subsidiary, to the extent permitted by Treasury
Regulations Section 1.1502-20(g). Holdings agrees to join with
Xxxx in filing any necessary elections under Treasury Regulations
Section 1.1502-20(g).
5. Estimated Tax Payments. If the Affiliated Group is
required to make estimated federal income tax payments (including
payment due at the time any extension of time is sought for the
filing of the Affiliated Group's federal income tax return),
Holdings shall, if
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requested by Xxxx, pay to Xxxx, no later than 10 days before the
date each estimated tax payment is to be made by Xxxx, that
percentage of the estimated tax payment that equals the
percentage which the estimated Allocated Tax Liability of
Holdings Sub-Group for such year bears to the aggregate estimated
tax liability of the Affiliated Group for the taxable year. Such
estimates shall be determined by Xxxx. Any estimated tax payments
made by Holdings under this paragraph 5 with respect to any
taxable year shall be applied to reduce the amount, if any, owed
by Holdings under paragraph 3 hereof with respect to such year.
Any excess of such estimated payments made by Holdings over the
amount described in paragraph 3 for such year shall be repaid by
Xxxx to Holdings no later than 30 days after the date of filing
of the consolidated return for such taxable year or, to the
extent such excess represents all or a part of a tax refund to be
received by the Affiliated Group, no later than 10 days after the
receipt of the refund.
6. Adjustments to Tax Liability. If the consolidated
tax liability is adjusted for any taxable period, whether
pursuant to an amended return, a claim for refund, a tax audit by
the Internal Revenue Service or some other reason, the liability
of each Member shall be recomputed to give effect to such
adjustments, and in the case of a refund, Xxxx shall make payment
to Holdings for Holdings Sub-Group's share of the refund,
determined in the same manner as in paragraph 2 above, within 10
days after the refund is received by Xxxx, including Holdings'
share of any interest or penalty rebate received, and in the case
of an increase in tax liability, Holdings shall pay to Xxxx
Holdings Sub-Group's allocable share of such increased tax
liability (including interest and penalties) within 10 days after
receiving notice of such liability from Xxxx. The parties
recognize that a recomputation of the consolidated tax liability
for any
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taxable year under this paragraph 6 is not necessarily the final
liability for such year, and such liability may be recomputed
more than once.
7. New Members of Affiliated Group. If during a
consolidated return period Xxxx or Holdings Sub-Group acquires or
organizes another corporation that is required to be included in
the Affiliated Group's consolidated return, then such corporation
shall join in and be bound by this Agreement.
8. Termination of Agreement. This Agreement shall
apply to all taxable periods as to which a consolidated return is
filed by Xxxx and Holdings Sub-Group unless Xxxx and Holdings
agree in writing to terminate the Agreement, except that this
Agreement shall be terminated with respect to any Subsidiary that
ceases to be included in the Affiliated Group but continues to be
a corporation subject to federal income tax ("Former Member").
Notwithstanding any such termination, this Agreement shall
continue in effect with respect to all taxable periods prior to
termination, including any payments or refunds relating to such
periods.
9. Post-Consolidated Return Period. Notwithstanding
the termination of this Agreement with respect to one or more
Subsidiaries, Xxxx and any Former Member shall furnish each other
with all information and assistance as shall reasonably be
requested (including, without limitation, returns, supporting
schedules, work papers, correspondence and other documents)
relating to the tax liability of the Affiliated Group or such
Former Member for any taxable year in which the Former Member was
included in the Affiliated Group. Moreover, Xxxx and the Former
Member shall furnish each other with information and assistance
required, and shall take all steps necessary, to apply for and
obtain the benefit of any carryback of a net operating or capital
loss or any investment, foreign tax or other credit of the Former
Member to a taxable year in which the Former Member was included
in the Affiliated Group and a
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consolidated federal income tax return was filed with respect to
the income of the Affiliated Group.
10. Audits and Refund Claims. Xxxx and a Former Member
shall also consult and furnish each other with information
concerning the status of any tax audit or tax refund claim
relating to a taxable year in which the Former Member was
included in the Affiliated Group and a consolidated federal
income tax return was filed. Xxxx shall have the right to make
the final determination as to the response of the Affiliated
Group to any audit and shall have the sole right to control, at
its own expense, any contest of any change proposed and any
proposed disallowance of a refund claim by the Internal Revenue
Service through the Appeals Office of the Internal Revenue
Service and the courts in connection with any taxable year for
which this Agreement is in effect.
11. Settlement of Disputes. A dispute or difference
between Xxxx and a Former Member with respect to the operation or
interpretation of this Agreement shall be decided by three
arbitrators. Xxxx and the Former Member shall each select one
arbitrator and the arbitrators selected by the parties shall
select a third arbitrator. The decision of such arbitrators shall
be final. The fees of such arbitrators shall be borne equally by
Xxxx and the Former Member.
12. Elections. Xxxx shall have the sole authority to
make any or all elections available under the Code, Treasury
Regulations and any applicable state or local income tax code,
law or statute.
13. State and Local Income Taxes. The principles
underlying the rights and obligations hereunder of the Members in
respect of federal income taxes shall be applied in respect of
any state or local tax (however denominated) based on or measured
by all or any part
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of the net income or loss of the Affiliated Group or several of
its Members (a "Combined Tax"). All of the procedural and timing
requirements of this Agreement applicable to federal income taxes
shall be equally applicable to any Combined Tax, with appropriate
adjustments thereto to reflect the differences, if any, in
corresponding provisions of the applicable income tax code, law
or statute governing any such Combined Tax and any administrative
provisions relating thereto.
14. Entire Agreement. This Agreement contains the
entire understanding of the parties hereto with respect to the
subject matter contained herein. No alteration, amendment or
modification of any of the terms of this Agreement shall be valid
unless made by an instrument signed in writing by an authorized
officer of each party.
15. Binding Agreement. This Agreement shall be binding
upon and inure to the benefit of each party hereto and its
respective successors and assigns.
16. Governing Law. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of
Delaware.
17. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute
one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused
their names to be subscribed and executed by their respective
authorized officers on the date first appearing above.
XXXX INDUSTRIES, INC.
By: /s/ X.X. Xxxxxx
----------------
Name: X.X. Xxxxxx
Title: Vice-President
PM HOLDINGS CORPORATION
By: /s/ Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx X. Xxxxxx
Title: President & C.E.O.
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Schedule I
Subsidiaries of PM Holdings Corporation
---------------------------------------
PI Acquisition Corporation
PI Holding Company
Purina Xxxxx, Inc.
American Dairy Management Company, Inc.
Carolina Agri-Products Inc.
Coastal Ag Development, Inc.
Xxxx Grain Company, Inc.
Purina Livestock Management Services, Inc.
PMI Nutrition, Inc.
PMI Holding Co.
PMI Nutrition International, Inc.
PM Nutrition Company, Inc.
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