TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT is entered into as of
___________, 1996 by and between XXXX XXXXXXX INC., a Delaware corporation
("PARENT") and LARSCOM INCORPORATED, a Delaware corporation ("LARSCOM").
WHEREAS, the Parent owns not less than 80 percent of the equity and
voting interests of Larscom;
WHEREAS, Parent and Larscom are members of an affiliated group of
corporations (within the meaning of Section 1504(a) of the Code) of which Parent
is the common parent;
WHEREAS, Parent and Larscom desire, to the extent permitted by the
Code and the regulations promulgated thereunder, to be included in the filing of
consolidated Federal income tax returns on behalf of the Parent Group;
WHEREAS, Parent and Larscom acknowledges that such consolidated return
may be included in the consolidated Federal income tax return on behalf of Lexa
International Corporation, the parent of the Parent Group (the "Lexa Return");
and
WHEREAS, Parent and Larscom desire to participate, to the extent
permitted by applicable state or local law, in
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combined, consolidated or unitary state and local income tax returns if so
requested by Parent.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. DEFINITIONS
1.1. For purposes of this Agreement, the terms set forth below shall be
defined as follows:
1.1.1 "CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time (including any successor statute).
1.1.2 "CONSOLIDATED U.S. TAX LIABILITY" shall mean all taxes shown on
the Federal Return as filed (including any amended return), or as revised by
administrative or judicial determination or redetermination. For purposes of
this definition, "taxes" shall mean all corporate income taxes imposed by the
Code on the Parent Group (including minimum or alternative minimum taxes), as
reduced by all offsets and credits allowed by the Code.
1.1.3 "FEDERAL RETURN" shall mean the part of the Lexa Return that is
the consolidated corporation income tax
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return filed on behalf of the Parent Group pursuant to Section 1501 of the Code.
1.1.4 "PARENT GROUP" shall mean Parent and all corporations (whether
now existing or hereafter formed or acquired) that have consented or are
required to join with Parent (or any successor common parent corporation) in
filing the Federal Return or any state or local combined, consolidated or
unitary tax return.
1.1.5 "SUBSIDIARY" shall mean each corporation other than Parent that
is at any time includible in the Parent Group for such period of time as it is
includible in the Parent Group. Larscom is a Subsidiary.
1.1.6 "TAXES PAYABLE" shall, with respect to a Subsidiary, mean (i)
the federal income tax liability of such Subsidiary and (ii) the state or local
income or franchise tax liability of any Subsidiary payable in connection with
any combined, consolidated or unitary tax return, in both cases as determined
under paragraph 4 of this Agreement.
1.2. Other terms used in this Agreement shall have the meanings ascribed to
them in the Code, and the regulations and rulings issued thereunder, as from
time to time in effect. Except as otherwise provided herein, this Agreement
shall be
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interpreted in accordance with the Code and the regulations and rulings issued
thereunder then in effect.
2. EFFECTIVE DATE AND OTHER AGREEMENTS
2.1. EFFECTIVE DATE. Except as otherwise provided in this Agreement, this
Agreement is applicable for all taxable periods ending after the date hereof.
2.2. PRIOR AGREEMENTS. This Agreement shall supersede all prior agreements
and understandings, if any, concerning tax sharing between Parent and Larscom.
3. MATTERS CONCERNING THE FEDERAL RETURN
3.1. AGREEMENT TO FILE THE FEDERAL RETURN. Unless this Agreement is
terminated as provided in paragraph 8 hereof, Larscom agrees to join with Parent
in filing the Federal Return for each taxable year for which it is eligible to
do so under the Code.
3.2. FILING THE FEDERAL RETURN. Parent shall file, or cause to be filed,
the Federal Return, and any amended returns, for each taxable year in accordance
with the Code and regulations promulgated thereunder.
3.3. PAYMENT OF TAXES. For each taxable period, Parent shall timely pay or
discharge, or cause to be timely paid or
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discharged, the Consolidated U.S. Tax Liability for such taxable period and any
estimated taxes due with respect to such taxable period.
3.4. DECISIONS AND ACTIONS INCIDENTAL TO FILING THE FEDERAL RETURN.
Larscom irrevocably appoints Parent to be its sole and exclusive agent and
attorney-in-fact to the maximum extent permitted under the Code, duly authorized
to act on its behalf in all matters relating to the Federal Return (including
any refunds thereunder) for each taxable year, and agrees that Parent shall in
its sole discretion make any and all decisions and take any and all actions
(including the execution of documents) incidental to preparing and filing the
Federal Return for each taxable year, including, but not limited to, the right
(a) to determine (i) the manner in which the Federal Return shall be prepared
and filed, including, without limitation, the manner in which any item of
income, gain, loss, deduction or credit shall be reported and whether any
amended returns shall be filed, (ii) whether any filing extensions may be
requested and (iii) the elections that will be made by any member of the Parent
Group; (b) to contest, compromise or settle any adjustment or deficiency
proposed, asserted or assessed as a result of any audit of the Federal Return;
(c) to file, prosecute, compromise or settle any claim for refund; and (d) to
determine whether any refunds to which the Parent Group
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may be entitled shall be paid by way of refund or credited against the tax
liability for the Parent Group.
Larscom further agrees to (a) furnish to Parent in a timely manner any
and all information and documents requested by Parent in order to carry out the
provisions of this Agreement (including for purposes of preparing the Federal
Return); (b) cooperate with Parent in executing and filing any return,
statement, election, or consent provided for in the Code, and the regulations
and rulings issued thereunder; (c) take such action as Parent may request,
including, but not limited to, the filing of requests for extension of time
within which to file tax returns; and (d) cooperate in connection with any
refund claim, audit, administrative, judicial or other proceeding.
Notwithstanding the foregoing, Federal Returns and State Returns filed
on behalf of Larscom shall be subject to Larscom's prior review and acceptance.
3.5. CERTAIN EXPENSES. Larscom shall reimburse Parent for its pro rata
share of all legal and accounting expenses incurred by Parent in the course of
the conduct of any audit or contest regarding the Consolidated U.S. Tax
Liability, and for all expenses incurred by Parent in the course of any
litigation relating thereto. With respect to each such expense, the pro
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rata share of Larscom shall be determined by Parent in its sole discretion based
on Larscom's share of the tax liability giving rise to such expense.
With respect to any audit or contest regarding any other tax liability
of Larscom and any litigation relating thereto, Larscom shall reimburse Parent
for all legal, accounting and other expenses incurred by Parent.
4. TAX CALCULATION
4.1. TAX SHARING. Taxes Payable for Larscom under this Agreement shall be
determined as if Larscom had filed a separate return on a stand-alone basis for
each taxable year (or part thereof) during which Larscom was a member of the
Parent Group, and assuming that any excess net operating losses, capital losses,
investment tax credits, general business credits, foreign tax credits and other
income offsets or tax credits available for such taxable year can be carried
forward or carried back.
4.2. SUBSIDIARY TAXES PAYABLE. Larscom shall pay to Parent the amount of
the estimated Taxes Payable for any taxable year as determined in accordance
with paragraph 4.1 hereof by March 31 of the following year. If the amount of
the estimated Taxes Payable is negative due to Larscom's losses or
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other tax benefits, the Parent shall pay to Subsidiary such amount, pursuant to
paragraph 4.6 hereof; provided, that such losses or other tax benefits can be
used by Larscom on a stand-alone basis. If the amount of any estimated Taxes
Payable which are paid by Larscom to Parent for any taxable year are greater or
less than the Taxes Payable of Larscom for such taxable year as recomputed under
paragraph 4.5, Parent shall credit such excess (without interest) to, or deduct
such deficiency (without interest) from, as the case may be, Larscom's Taxes
Payable for the next taxable year.
4.3. CHANGES IN TAXES PAYABLE. The amount of Taxes Payable described in
this Section 4 shall be recomputed whenever necessary to reflect adjustments
from, among other things, (a) a revision, adjustment or redetermination arising
from any administrative or judicial determination; (b) the filing of an amended
return; (c) the filing of a claim for refund; or (d) the carryback of any unused
net operating loss, capital loss, investment tax credit, general business
credit, foreign tax credit or other income offset or tax credit that becomes
available for such taxable year. The changes to Taxes Payable (including any
interest and penalties attributable thereto) so recomputed shall be credited
(without interest) to, or deducted (without interest) from, as the case may be,
Larscom's Taxes Payable for the next taxable year.
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4.4. STATE INCOME TAXES. In the event Larscom is included in a combined,
consolidated or unitary state or local income or franchise tax return (a "State
Return") with Parent or any other subsidiary in the Parent Group (the "Filing
Corporation"), (a) Parent or the Filing Corporation shall file, or cause to be
filed, such returns or reports, pay, or cause to be paid, the taxes, and make
decisions and take actions incidental to the filing of any such returns on a
jurisdiction-by-jurisdiction basis in a manner consistent with the approach
provided with respect to the Federal Return by this Agreement, and (b)
principles analogous to those set forth herein for the payment of Consolidated
U.S. Tax Liability and refunds thereof, and for determination of Larscom's Taxes
Payable, shall be used to determine its respective share of such taxes.
4.5. COMPUTATION OF TAXES. Computations of estimated Taxes Payable as
described in paragraphs 4.2 and 4.4 above shall be made quarterly by Parent.
When the Federal Return and the state returns for each year have been filed by,
or on behalf of, Parent (or, with respect to state returns, other applicable
Filing Corporation), Parent shall recompute the Taxes Payable based on the tax
returns as filed.
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4.6. TAX PAYMENTS
4.6.1 Any payment required to be made under this Agreement by Larscom
to Parent shall be made first by reducing the amount of any account payable of
Parent to Larscom created under subparagraph 4.6.2 hereof.
4.6.2 Any payment required to be made hereunder by Parent to Larscom
shall be made in accordance with paragraph 4.2, 4.3 or 4.4 by entering or
increasing an account payable of Parent to Larscom on the books of account of
Parent.
4.6.3 Any account payable created under this paragraph from Parent to
Larscom shall be due on such date as Larscom ceases to be a member of the Parent
Group.
5. ADJUDICATIONS
In any audit, conference, or other proceeding with the Internal
Revenue Service or the relevant state or local taxing authorities, or in any
judicial proceeding concerning the determination of the Federal income tax
liabilities of the Parent Group (or a Subsidiary) or the state or local tax
liability of any combined, consolidated or unitary group including Parent (or a
Subsidiary), Parent or the applicable Subsidiary shall be represented by persons
selected by Parent. The settlement of any issues relating to such proceeding
shall
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be in the sole discretion of Parent, and Larscom hereby appoints Parent as its
agent for the purpose of proposing and concluding any such settlement.
6. EFFECT OF THIS AGREEMENT
This Agreement shall determine the liability of Parent and Larscom to
each other as to the matters provided for herein, whether or not such
determination is effective for purposes of the Code or state or local revenue
laws (and regardless of the actual method for allocating federal income tax
liabilities for purposes of calculating earnings and profits specified in
Treasury Regulations Sections 1.1552-1(a) and 1.1502-33(d)(2) elected, or deemed
elected, by the Parent Group), financial reporting purposes or other purposes.
7. COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one and the
same instrument.
8. TERMINATION
8.1. This Agreement shall continue in effect unless and until Larscom
ceases to be a member of the Parent Group.
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8.2. If Larscom ceases to be a member of the Parent Group, this Agreement
shall cease to apply to any income, loss, deductions or credits of Larscom after
it ceases to be a member of the Parent Group.
8.3. The termination of this Agreement as hereinabove provided shall not
affect the rights or obligations of either party arising hereunder with respect
to pre-termination taxable years, or any transaction entered into prior to the
effective date of such termination, including, but not limited to, any right or
obligation recorded in an intercompany account, or as a loan between the
parties.
9. WAIVER
Except as specifically provided elsewhere in this Agreement, Parent
and Larscom hereby waive (a) any failure or delay on the part of the other in
asserting or enforcing any right it may have at any time under this Agreement
and (b) any notice of presentment, demand for payment, notice of nonpayment or
default, protest and notice of protest and all other notices to which it might
be entitled by law in connection with any obligation of one party to the other.
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10. NEW GROUP MEMBERS
If, at any time while a member of the Parent Group, Larscom acquires
or creates one or more subsidiary corporations that are, under Section 1504 of
the Code, includible corporations of the Parent Group, such subsidiary
corporations shall be subject to this Agreement, and shall promptly deliver an
appropriate instrument evidencing the amendment of this Agreement to include
any such corporation as a signatory hereto. Larscom hereby designates and
appoints Parent as its agent and attorney-in-fact to amend this Agreement to
that effect.
11. RESOLUTION OF DISPUTES
Any dispute or ambiguity concerning the amount of any payment provided
for under this Agreement shall be resolved, in a manner consistent with the
principles and procedures set forth in this Agreement, by an internationally
recognized accounting firm (a so-called "Big-Six" accounting firm) or law firm
jointly selected by the parties hereto. The judgment of such firm shall be
conclusive and binding upon each of the parties to this Agreement. The firm's
fees and expenses shall be paid by the party whose position does not prevail in
such dispute.
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12. MISCELLANEOUS
12.1. SUCCESSORS. This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their respective successors and assigns.
12.2. GOVERNING LAW. This Agreement and all rights and obligations
hereunder shall be governed by and construed and enforced in accordance with
the laws of the State of New York without regard to principles of conflicts of
laws.
12.3. AMENDMENT. This Agreement may not be amended or supplemented except
by an instrument in writing signed by the parties.
12.4. HEADINGS. All headings herein are for convenience of reference only
and shall be disregarded in the interpretation hereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on this day of , 1996.
XXXX XXXXXXX INC.
By:
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Title:
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LARSCOM INCORPORATED
By:
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Title:
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