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EXHIBIT 10.3
TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT is entered as of December 29, 1990 by and
between TEXTRON INC., a Delaware corporation ("Textron") and TEXTRON FINANCIAL
CORPORATION, a Delaware corporation ("TFC"), on behalf of the TFC Group (as
hereinafter defined).
WHEREAS TFC, a wholly owned subsidiary of Textron, and the TFC Group
are members of an affiliated group of corporations of which Textron is the
common parent and are included in the Return, as hereinafter defined;
WHEREAS Textron and TFC have previously entered into a Tax Sharing
Agreement dated as of January 1, 1986; and
WHEREAS Textron and the TFC Group desire to revise the Tax Sharing
Agreement dated as of January 1, 1986 as a result of the development of TFC's
business and changes in the federal tax law.
In consideration of the foregoing premises and mutual covenants
hereinafter set forth, Textron and the TFC Group agree as follows:
(1) Definitions.
(a) For purposes of this Agreement, the terms set forth below
shall be defined as follows:
(i) Code -- The Internal Revenue Code of 1986 as amended
from time to time.
(ii) Textron Group -- Textron and all corporations
(whether now existing or hereafter formed or
acquired) that have consented or are required to join
with Textron (or any successor common parent
corporation) in filing the Return, as defined below.
(iii) TFC Group -- TFC and all corporations (whether now
existing or hereafter formed or acquired) that could
consent or would be required to join with TFC (or any
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successor common parent corporation) in filing a
consolidated U.S. corporation income tax return, if
TFC was not then a member of the Textron Group.
(iv) Textron Allocation Group -- All members of the
Textron Group other than members of the TFC Group.
(v) The Return -- The consolidated U.S. corporation
income tax return filed by Textron pursuant to
Section 1501 of the Code.
(vi) Consolidated U.S. Tax Liability -- All taxes shown
on the Return, or as revised by administrative or
judicial determination or redetermination. For
purposes of this definition "taxes" means the
corporate income tax imposed by Section 11 of the
Code, the alternative minimum tax imposed by Section
55 of the Code and the environmental tax imposed by
Section 59A of the Code, any successor provision to
any of these sections and any other similar U.S.
federal taxes which may be imposed by the Code in
future years, as reduced by the credits allowed by
Sections 27 through 29, Section 34 and Sections 38
through 42 and increased by any tax from recomputing
prior year's Investment Tax Credit ("ITC") and any
other similar credit or recomputation amounts allowed
or imposed by the Code.
(vii) Taxes Payable -- The Consolidated U.S. Tax Liability
together with all penalties assessed thereon.
(viii) Intercompany Account -- The account on the books of
each of Textron and TFC which shall reflect all
debits and credits arising out of transactions
between the Textron Allocation Group and the TFC
Group.
(b) Other terms used in this Agreement shall have the meanings
ascribed to them in the Code, and the regulations and
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rulings issued thereunder, as from time to time in effect. Except as
otherwise provided herein, this Agreement shall be interpreted in
accordance with the Code and the regulations and rulings issued
thereunder then in effect.
(2) Effective Date and Other Agreements.
(a) This Agreement is applicable for all taxable years beginning after
December 29, 1990.
(b) This Agreement shall constitute the entire agreement between Textron
and the TFC Group concerning the subject matter hereof and shall
supersede any prior agreements and understandings between Textron and
the TFC Group concerning the subject matter hereof for taxable years
beginning after the date of this Agreement, and specifically
supersedes Article 7 of the Restated Operating Agreement by and among
TFC, Textron and Textron Canada Limited ("TCL") dated as of May 3,
1981 (the "R.S.O.") and, except for the October 1, 1986 Supplemental
Memorandum, the Tax Sharing Agreement between TFC and Textron dated as
of January 1, 1986.
(c) This Agreement shall not supersede or amend (i) any Articles of the
R.S.O. other than Article 7; (ii) the agreements between Textron FSC
Inc., a U.S. Virgin Islands corporations, and TFC, Textron Capital
Corporation and Textron Pacific Inc. each dated as of January 4, 1988;
(iii) the Supplemental Memorandum dated as of January 1, 1986 between
Avco Corporation and Textron Capital Corporation, which shall remain
in full force and effect and is made a part hereof by reference; or
(iv) any other agreement and understanding concerning tax sharing or
tax matters for taxable years beginning before the date of this
Agreement, between Textron and the TFC Group.
(d) This Agreement shall not supersede any other agreements and
understandings concerning other subject matters, including, but not
limited to, the tax related matters covered by the
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Receivables Purchase Agreement by and among TFC, Textron, Xxxx
Helicopter Textron Inc., H.R. Textron Inc. and TCL dated as of January
1, 1986 and the Support Agreement between TFC and Textron entered into
as of October 15, 1985.
(3) Matters Concerning the Return.
(a) Agreement to file Returns. Until this Agreement is terminated as
provided in Section 6 hereof, each member of the TFC Group has consented
and agrees to join with Textron in filing the Return for each taxable
year.
(b) Filing the Return. Textron shall file the Return for each taxable year
in accordance with Treas. Reg. promulgated, from time to time, under
Section 1502 of the Code.
(c) Payment of Taxes Payable. Textron shall pay the Taxes Payable for each
taxable year in accordance with Treas. Reg. promulgated, from time to
time, under Section 1502 of the Code.
(d) Decisions and Actions Incidental to Filing the Return. The TFC Group
irrevocably appoints Textron to be its sole agent, duly authorized to
act in its own name in all matters relating to the Taxes Payable
(including any refunds thereof) for each taxable year and agrees that
Textron shall make any and all decisions and take any and all actions
incidental to filing the Return for each taxable year, including, but
not limited to, preparing the Return, making elections under the Code
and settling or litigating disputes with the Internal Revenue Service.
This authorization does not extend to the consents, elections and
changes referenced in the parenthetical contained in the first sentence
of Treas. Reg. 1.1502-77(a). TFC agrees to (i) furnish Textron with any
and all information requested by Textron in order to carry out the
provisions of this Agreement, (ii) cooperate with Textron in filing any
Return, statement, election, or
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consent provided for in the Code, regulations and rulings issued
thereunder as from time to time in effect, (iii) take such action as
Textron may request, including, but not limited to, the filing of
requests for the extension of time within which to file Returns, and
(iv) cooperate in connection with any refund claim, audit,
administrative, judicial or other proceeding.
(4) Earnings and Profits and Tax Sharing.
(a) Earnings and Profits
For the purpose of determining earnings and profits of each member of
the Textron Group, Textron has elected for and on behalf of the Textron
Group to allocate the Consolidated U.S. Tax Liability pursuant to the
methods prescribed in Treas.Reg. Section 1.1552-1(a)(2) ("basic
method") and Treas.Reg. Section 1.1502-33(d)(2)(ii) ("complementary
method"). Nothing in this Agreement shall be construed to affect the
allocation of tax required pursuant to these elections for the purpose
of determining the earnings and profits of the members of the Textron
Group.
(b) Tax Sharing
For the purpose of allocating the Taxes Payable under this agreement, a
"separate return tax liability" shall be determined for the TFC Group
and the Textron Allocation Group, by applying the following principles:
(i) "separate return taxable income" adjusted as provided in Treas.
Reg. 1.1552-1(a)(2)(ii) shall be multiplied by the maximum tax
rates applicable in determining Tax Payable;
(ii) the tax benefit of losses using the rates in Section 4(b)(i),
Foreign Tax Credits ("FTC"), General Business Credits ("GBC") and
any other tax credits utilized (pursuant to either the regular tax
or the alternative minimum tax ("AMT") system, as applicable) in
computing
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Taxes Payable shall be a reduction (or increase in the case of any ITC
recomputation) or create a refund amount to the extent such individual
items are allocable to the TFC Group or the Textron Allocation Group
based upon each group's contribution to such item;
(iii) AMT and Environmental Tax (ET) shall be allocated to the TFC Group and
the Textron Allocation Group in the ratio of each group's AMT or ET
determined as if each group filed a separate U.S. corporation income
tax return to the total AMT and ET shown on the Return; provided,
however, that if the sum of such separate AMT and ET are less than the
AMT and ET included in Taxes Payable then the difference between AMT or
ET included in Taxes Payable and the sum of each group's separate AMT
or ET shall be allocated to each group in the ratio of each group's Tax
Preferences and other adjustments used in computing the AMT and ET
included in Taxes Payable; and, provided further, that neither Group
shall be allocated an AMT or ET greater than the AMT or ET included in
Taxes Payable;
(iv) any penalty included in Taxes Payable shall be allocated to the TFC
Group to the extent it would have been liable for such penalty had it
filed a U.S. corporation income tax return reflecting "separate return
tax liability" determined hereunder.
(c) Reimbursement of Taxes Payable
TFC shall reimburse Textron for the net amount of the Taxes Payable for
any taxable year, allocated to the TFC Group under paragraphs 4(b)(i)
through (iv) hereof before the end of the calendar month in which Textron
makes any payments of Taxes Payable under paragraph 3 (c) hereof;
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(d) Reimbursement For Reduction of Tax Payable
Textron shall reimburse TFC for any net reduction in Taxes Payable for any
taxable year credited to TFC under paragraph 4(b)(i) through (iv) hereof
before the end of the calendar month in which Textron makes any payments,
or would have made payments, of Taxes Payable, under paragraph 3(c) hereof,
if TFC were not a member of the Textron Group;
(e) Changes in Taxes Payable
The allocations and reimbursements described in paragraph 4(b) through (d)
above shall be recomputed for any taxable year in which there is a (A) a
carryback or carryforward of net operating losses, capital losses, ITC, FTC
or other tax credits to such taxable year; (B) a revision, adjustment or
redetermination of any administrative or judicial determination; (C) a
filing of an amended return; or (D) a filing of a claim for refund. The
changes attributable to the TFC Group in the Taxes Payable so recomputed
shall be reimbursed by Textron or TFC, as the case may be, within thirty
days of the date the deficiency is paid or the refund is received by
Textron;
(f) Exception Concerning Alternative Minimum Tax
The allocation and reimbursements described in paragraph 4(b)(i) through
(e) above shall be computed without allowing the TFC Group the benefit of
any minimum tax credit allowable under Section 53(b) of the Code
attributable to AMT incurred by the Textron Group before the effective date
of this Agreement and not borne by the TFC Group;
(g) State Income Taxes
In the event one or more members of the TFC Group are included in a
combined, joint, consolidated, unitary or similar state income or franchise
tax return with any other member of the Textron Group, the member of the
Textron
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Group and the appropriate member of the TFC Group shall file such
returns, pay the taxes, make reimbursements and make decisions and
take actions incidental to the filing of any such returns on a
state-by-state basis in a manner consistent with the approach provided
by paragraphs 3(a) through (d) and 4(a) through (e) hereof; and
(h) Computation and Recording of Tax Reimbursements
Computations of the tax reimbursements of Textron or the TFC Group as
hereinabove described shall be made quarterly by the Textron Tax
Department at its corporate offices. Such computations shall be made
from the information used, and in accordance with, the usual
procedures followed by the Textron Tax Department in determining the
quarterly estimated Taxes Payable and quarterly estimated state income
and franchise tax liabilities. When the Return and the state income or
franchise tax returns (if applicable) for each year have been filed by
Textron, the Textron Tax Department shall recompute the actual tax
reimbursements based on the Taxes Payable and the state income and
franchise taxes payable. The quarterly reimbursements, the
reimbursement based on the Return and the state income or franchise
tax returns as filed and any reimbursements due to redeterminations
shall be paid by Textron or TFC, as the case may be, before the end of
the calendar month in which the quarterly tax payments are due, such
returns are filed, the deficiency is paid or the refund is received.
5) Deferred Manufacturing Profit.
Textron shall loan TFC interest free an amount not to exceed the deferred
income tax liability of the Textron Allocation Group attributable to the
manufacturing profit deferred on products manufactured by the Textron
Allocation Group and financed by the TFC Group. The loans shall be evidenced by
entries in the Intercompany Account.
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6) Books.
The Textron Allocation Group and the TFC Group shall make clear and suitable
entries and notations on their books and records, which shall reflect all
transactions arising under this Agreement. Employees of Textron and the TFC
Group and independent certified public accountants from time to time designated
by Textron or TFC shall have the right to examine the other party's books,
records, and files relating to transactions arising under this Agreement.
7) Termination.
(a) This Agreement shall continue in effect unless and until TFC ceases to be
a member of the Textron Group, at which time it will terminate.
(b) If any corporation which has been a member of the TFC Group ceases to be
a member of the TFC Group, this Agreement shall not apply to any income,
loss, deductions or credits of that corporation generated after it ceases
to be a member of the TFC Group.
(c) The termination of this Agreement as provided in (a) or (b) above shall
not affect the rights or obligations of either party arising out of any
income, loss, deductions or credits generated prior to the effective date
of such termination, including, but not limited to, rights or obligations
recorded in the Intercompany Account or as a loan between the parties.
8) Waiver.
Except as specifically provided elsewhere in this Agreement, Textron and TFC
hereby waive (a) any failure or delay on the part of the other in asserting or
enforcing any right which 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.
\fds/460.fds
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9) Miscellaneous.
(a) This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors
and assigns.
(b) 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 Rhode Island.
(c) This Agreement may not be amended or supplemented except by an
instrument in writing signed by the parties.
(d) All headings herein are for convenience of reference only and
shall be disregarded in the interpretation hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on this 16th day of September, 1991.
TEXTRON FINANCIAL CORPORATION
By: /s/ X. X. Xxxxxxxx
___________________________________
Title: Senior Vice President and
Chief Financial Officer
TEXTRON INC.
By: /s/ X. X. Xxxxxx
___________________________________
Title: Vice President, Taxes
