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EXHIBIT 10.12
TAX SHARING AGREEMENT
Tax Sharing Agreement (the "Agreement"), dated as of January 28, 1999,
by and among New World Pasta, LLC, a Delaware limited liability company
("Parent"), and New World Pasta Company, a Delaware corporation ("Sub").
WHEREAS, Parent and Sub (collectively and including any other
includible corporations, the "Members") are includible corporations in an
affiliated group of corporations of which Parent is the common parent (the
"Group"), all within the meaning of Section 1504(a) of the Internal Revenue Code
of 1986, as amended (the "Code"); and
WHEREAS, Parent, and Sub wish to allocate and settle between Parent and
Sub in an equitable manner the consolidated federal income tax liabilities of
the Group.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, Parent, and Sub agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall be defined as follows:
(a) "Estimated Tax Payments" shall mean for a Taxable Period
(as defined in Section 1(e)) the aggregate payments for such Taxable Period
provided in Section 2 hereof.
(b) "Final Determination" shall mean a closing agreement with
the Internal Revenue Service (the "IRS"), a claim for refund that has been
allowed, a deficiency notice with respect to which the period for filing a
petition with the United States Tax Court has expired, or a decision of any
court of competent jurisdiction that is not subject to appeal or for which the
time for appeal has expired.
(c) "Separate Tax Liability" for a Taxable Period shall mean
the amount, if any, of the federal income tax liability (including, without
limitation, liability for any penalty, fine, additions to tax, interest, minimum
tax and other items of any nature applicable to Sub in connection with the
determination of Sub's federal income tax liability) that Sub and its
subsidiaries would have incurred if Sub had filed (i) a consolidated federal
income tax return as parent together with its subsidiaries that would qualify as
includible corporations with Sub under Section 1504 of the Code or (ii) separate
federal income tax return in the event no such subsidiaries exist, as the case
may be, for the Taxable Period and
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all prior Taxable Periods, and computed the applicable tax liability in a manner
consistent with (i)general tax accounting principles, (ii) the Code and the
Treasury Regulations promulgated thereunder (the "Treasury Regulations") and
(iii) Sub's and its subsidiaries', if any, practice in computing federal income
tax liability.
(d) "Taxable Period" shall mean any taxable year or portion
thereof ending on or after the date hereof with respect to which a consolidated
federal income tax return including Sub is or is expected to be filed on behalf
of the Group.
2. Estimated Tax Payments.
(a) For each calendar quarter in the Taxable Period that
includes the date of this Agreement, Sub shall pay to Parent on behalf of Sub
and its subsidiaries an amount equal to the amount of any estimated federal
income taxes that Sub would have been required to pay with respect to such
quarter if Sub was filing a consolidated federal income tax return with Sub as
the parent or separate federal income tax return, as the case may be, for the
Taxable Period including such quarter. Such amount shall be payable by Sub to
Parent at least five (5) days prior to the date on which such estimated federal
income tax payment would have been due. Such hypothetical estimated federal
income tax liability shall be determined by Sub in a manner consistent with
Section 1(c) hereof.
(b) Thirty days before the end of the fourth quarter of each
Taxable Period that ends after the date hereof, Sub shall provide Parent with an
estimate of the Separate Tax Liability for the following Taxable Period and the
amount of estimated federal income taxes that Sub would have been required to
pay with respect to each quarter in the following Taxable Period if the Sub was
filing a consolidated federal income tax return with Sub as the parent or
separate federal income tax return, as the case may be, for such Taxable Period,
which estimates shall be prepared in a manner consistent with Section 1(c)
hereof and shall be approved by Parent. Parent shall notify Sub of its
disagreement with such estimates within 15 days of Parent's receipt of such
estimates. Upon such notification, Parent and Sub will negotiate in good faith
to resolve the dispute, but if no agreement is reached, Sub's estimates shall be
final, provided that such estimates were prepared in a manner consistent with
Section 1(c) hereof. For each of the first three calendar quarters in every
Taxable Period that begins after the date hereof, Sub shall pay to Parent an
amount equal to the estimated federal income taxes that Sub would have been
required to pay with respect to such quarter if Sub was filing a consolidated
federal income tax return with Sub as the parent or separate federal income tax
return, as the case may be, for the Taxable Period that includes such quarter.
Such amount shall be payable by Sub to Parent at least 5 days prior to the date
on which such estimated federal income tax payment would have been due. If,
during the course of a Taxable Period, there is a material change in Sub's
estimates of the Separate Tax Liability of Sub for such Taxable Period and the
estimated tax payments resulting therefrom, Sub shall notify Parent of such
changes, and the provisions of this Section
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2(b) shall apply as if such new estimates were submitted to Parent during the
fourth quarter of the prior Taxable Period, except that Sub shall not be
required to adjust any payments already made to Sub with respect to such current
Taxable Period to reflect such new estimates. Notwithstanding anything contrary
in this Section 2(b), the amount that Sub and its subsidiaries shall pay to
Parent each calendar quarter pursuant to this Section 2(b) shall not exceed the
amount of estimated federal income taxes that Sub would have been obligated to
pay to the IRS with respect to such quarter if Sub was filing a consolidated
federal income tax return with Sub as the parent or separate federal income tax
return, as the case may be, for the Taxable Period that includes such quarter
and all prior Taxable Periods (and such hypothetical estimated federal income
tax liability shall be determined by Sub in a manner consistent with Section
1(c) hereof).
(c) In the event Parent and Sub are ineligible to be
includible corporations in an affiliated group that files a consolidated federal
income tax return that includes Sub for any Taxable Period, any payments by Sub
to Parent made pursuant to this Section 2 for such Taxable Period shall be
accrued as a liability of Parent to Sub.
3. Payments and Accruals.
(a) For every Taxable Period, (i) Sub shall pay to Parent an
amount equal to the excess, if any, of the actual Separate Tax Liability for
such Taxable Period over the Estimated Tax Payments that it has paid to Parent
for such Taxable Period or (ii) Parent shall accrue as a liability to Sub an
amount equal to the excess, if any, of Sub's Estimated Tax Payments that have
been paid to Parent for such Taxable Period over the actual Separate Tax
Liability for such Taxable Period.
(b) As soon as practicable following the close of Sub's
taxable year, Sub shall compute the actual Separate Tax Liability, which
computation shall be reviewed by Parent's independent public accountants.
(c) If Parent receives from the IRS as a result of a Final
Determination a refund or credit attributable to the Sub in respect of the
Separate Tax Liability, appropriate adjustments will be made to subsequent
payments of Sub required hereunder to Parent.
4. Time and Manner of Payment and Accrual. Except as otherwise provided
in Section 3(c), payments and accruals pursuant to Section 3(a) hereof shall be
made no sooner than ten (10) days prior to and no later than five (5) days prior
to the due date of the Group's consolidated federal income tax return for the
Taxable Period in question, without giving effect to any extensions. If the due
date for such return is extended, such payments and accruals shall be
recalculated by Sub no sooner than ten (10) days prior to and no later than five
(5) days prior to the filing date for such return, and any difference between
such
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recalculated payments and accruals and such payments and accruals (prior to such
recalculation) shall be paid to or accrued for the party entitled thereto at the
time of such recalculation.
All payments Sub is required to make hereunder shall be paid
in immediately available funds as instructed by Parent in writing.
5. Adjustments.
(a) Adjustment of Tax Liability. In the event of any
redetermination of the consolidated federal income tax liability of the Group
for any Taxable Period as a result of audit by the IRS, amended return, claim
for refund or otherwise, the Separate Tax Liability shall be re-computed by Sub
and Parent's independent public accountants for such Taxable Period to take into
account such redetermination, and the payments and accruals pursuant to Section
3 hereof shall be appropriately adjusted. Any reconciliation between Parent and
Sub required by such adjustment shall be paid by Sub, or accrued as a liability
of Parent, as the case may be, no sooner than ten (10) days prior to and no
later than five (5) days following the earlier of (i) the date of a Final
Determination with respect to such redetermination or (ii) the earliest date
such adjustment can reasonably be calculated.
(b) Deconsolidation.
(i) In the event that it is determined that Sub has ceased to
be a Member of the Group with respect to any Taxable Period, the amount
of any payments ("Deconsolidated Payments") made by Parent or Sub with
respect to such or subsequent Tax able Periods under Sections 2 and 3
hereof (taking into account any adjustments pursuant to paragraph (a)
of this Section 5) shall be repaid by Sub, or accrued as a liability of
Parent, as the case may be, with interest at the rate determined under
Section 6621(a)(2) of the Code no sooner than ten (10) days prior to
and no later than five (5) days following the earlier of (i) the date
of a Final Determination with respect to such determination or (ii) the
earliest date such adjustment can reasonably be calculated. In the
event Parent accrues a liability to Sub under this Section 5(b)(i) (or
Section 2(c) hereof), Parent shall promptly (i) repay to Sub any
Deconsolidated Payments that Parent has not forwarded to the IRS; and
(ii)(a) file a request with the IRS for a refund of all Deconsolidated
Payments that Parent has forwarded to the IRS and pay to Sub all
amounts received from the IRS pursuant to such refund request or (b)
apply for and receive permission from the IRS to have all
Deconsolidated Payments that Parent has forwarded to the IRS credited
as payments made by Sub to the IRS (in accordance with Treasury
regulation section 1.1502-75(f)(2)). For purposes of this Section
5(b)(i), interest shall be computed in the same manner as the IRS
would have computed interest with respect to a hypothetical
overpayment equivalent to the amount to be repaid or accrued from the
date of such hypothetical overpayment until the date repaid or accrued.
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(ii) Notwithstanding anything in this Agreement to the
contrary, the provisions of the final sentence of Section 3(a) shall
continue to apply following Sub's ceasing to be a Member of the Group
for any reason.
6. Parent as Agent; Filing of Returns; Payment of Taxes.
(a) For each Taxable Period of the Group, Parent shall file,
and cause all Members to join in the filing of, consolidated federal income tax
returns. Sub hereby consents to the filing of such returns, the making of such
elections and applications and the execution of any other documents as Parent
reasonably believes may be required or appropriate for the filing of such
returns.
(b) Sub hereby appoints Parent as its agent, as long as Sub is
a member of the Group, (i) for the purpose of filing all consolidated federal
income tax returns for the Group and making any election or application or
taking any action in connection therewith on behalf of Sub and (ii) in
connection with any audit, examination or other proceeding relating to any taxes
of the Group (a "Proceeding"), to take any action in respect of any Proceeding,
to control any Proceeding, and to initiate any claim for refund, file any
amended return or take any other action Parent deems appropriate. Sub, at its
own cost and expense, shall prepare all such tax returns and conduct all
Proceedings in each case subject to the control of Parent.
(c) Parent shall make all required payments of the federal
consolidated tax liability (including estimated tax payments), if any, of the
Group to the IRS provided that Sub shall have made all payments required of it
hereunder.
7. Cooperation. In the event that the preparation of federal income tax
returns, amended returns, claims for refund, an IRS examination or litigation
relating to the foregoing may require the use of records and information that is
within the exclusive possession and control of Parent or any Member or former
Member, Parent and each Member or former Member shall provide such records,
information and assistance (which may include making employees of any of the
foregoing entities available to provide additional information and explanatory
material thereunder) as are requested by Parent or Sub, as the case may be,
during regular business hours, in connection with any of the developments
described in the preceding sentence. The decision to settle any issue with the
taxing authority shall be Parent's decision but Parent shall in good faith take
into account the intent of this Agreement to treat Sub as it would have been
treated on a consolidated federal income tax return with Sub as the parent or
separate federal income return, as the case may be, and shall endeavor to make a
settlement that is consistent with that intent. Any of the information obtained
pursuant to this Section 7 or any provision hereof providing for the sharing of
information shall be kept confidential by the parties hereto.
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8. State, Local and Foreign Taxes. In the event the Parent elects, or
is required to elect, to file combined, unitary or consolidated state, local or
foreign income tax returns with Sub or any of Sub's subsidiaries, the provisions
hereof shall be applicable to the amount and time of payment by Sub to the
Parent or the accrual of a liability by Parent to Sub.
9. Operating Principles. Parent and Sub agree to (i) act, subject to
principles of sound tax planning, to minimize payments required hereunder, (ii)
utilize cash received from any tax authority in respect of prior payments
hereunder to satisfy any unpaid accruals hereunder and (iii) pay timely amounts
paid hereunder in respect of Separate Tax Liability (including for this purpose
the equivalent amounts corresponding to state, local or foreign taxes computed
in accordance with Section 8 hereof) to the appropriate taxing authority and
return to the payor the excess, if any, of (a) such amount over (b) the amount
actually paid in respect thereof to such taxing authority.
10. Binding Effect; Successors. This Agreement shall be binding upon
each Member of the Group, whether or not such Member was a Member upon the
execution of this Agreement. Parent shall cause each present Member of the Group
formally to assent to the terms hereof and shall cause each future Member of the
Group to so assent promptly after becoming a Member of the Group. This Agreement
shall inure to the benefit of and be binding upon any successors or assigns of
the parties hereto.
11. Governing Law. This Agreement shall be governed by the laws of the
State of New York without regard to principles of conflicts of law which would
apply a law of a jurisdiction other than the law of the State of New York to
this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused their names
to be subscribed and executed by their respective officers effective as of the
date first written above.
NEW WORLD PASTA, LLC
By: /s/ Xxxxx X. Xxxx
Name: Xxxxx X. Xxxx
Title: President
NEW WORLD PASTA COMPANY
By: /s/ C. Xxxxxx Xxxxxxx
Name: C. Xxxxxx Xxxxxxx
Title: Chairman and Chief Executive Officer
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