Exhibit 10.4
FORM OF TAX SHARING AGREEMENT
TAX SHARING AGREEMENT (the "Agreement"), dated as of ________ ___,
1998, between Energy Research Corporation, a New York corporation ("ERC"), and
Evercel, Inc., a Delaware corporation ("Evercel").
WHEREAS, ERC is the parent corporation of an affiliated group of
corporations, including Evercel, that join in filing consolidated federal Income
Tax Returns and certain consolidated, combined or unitary state Income Tax
Returns;
WHEREAS, pursuant to the Distribution Agreement (as hereinafter
defined), ERC presently intends to distribute all of the common stock, $.01 par
value per share, of Evercel to its common stockholders (the "Distribution"); and
WHEREAS, ERC and Evercel desire on behalf of themselves, their
subsidiaries and their successors to set forth their respective rights and
obligations with respect to Taxes (as hereinafter defined).
NOW THEREFORE, in consideration of their mutual promises, the parties
hereby agree as follows:
1. DEFINITIONS.
When used herein the following terms shall have the following meanings:
"AGREEMENT" -- shall have the meaning set forth in the introductory
paragraph hereof.
"CLOSING DATE" -- the date the Distribution is consummated pursuant to
the terms of the Distribution Agreement.
"CODE" -- The Internal Revenue Code of 1986, as amended, or any
successor thereto, as in effect for the taxable year in question.
"DISTRIBUTION" -- shall have the meaning set forth in the recitals
hereof.
"DISTRIBUTION AGREEMENT" -- The Distribution Agreement dated as of
__________ ___, 1999 between ERC and Evercel.
"ERC" -- shall have the meaning set forth in the introductory paragraph
hereof.
"ERC Group" -- for any taxable year or period, ERC and each corporation
filing a consolidated federal Income Tax Return with ERC as the parent
corporation. For any taxable year or period ending on or before the Closing
Date, such term shall include
Evercel. For any taxable year or period beginning after the Closing Date, such
term shall not include Evercel.
"EVERCEL" -- shall have the meaning set forth in the introductory
paragraph hereof.
"INCOME TAX(ES)" -- with respect to any corporation or group of
corporations, any and all Taxes to the extent based upon or measured by net
income (regardless of whether denominated as an "income tax," a "franchise tax"
or otherwise) imposed by any Taxing Authority, together with any related
interest, penalties or other additions thereto.
"IRS" -- the U.S. Internal Revenue Service.
"OTHER TAXES" -- Taxes other than Income Taxes.
"OVERDUE RATE" -- a rate of interest per annum that fluctuates with the
federal short-term rate established from time to time pursuant to Code Section
6621(b).
"TAX(ES)" -- any net income, gross income, gross receipts, sales, use,
excise, franchise, transfer, payroll, premium, property or windfall profits tax,
alternative or add-on minimum tax, or other tax, fee or assessment, together
with any interest and any penalty, addition to tax or other additional amount
imposed by any Taxing Authority, whether any such tax is imposed directly or
through withholding.
"TAXING AUTHORITY" -- the IRS and any other domestic or foreign
governmental authority responsible for the administration of any Tax.
"TAX RETURN(S)" -- all returns, reports, estimates, information
statements, declarations and other filings relating to, or required to be filed
by any taxpayer in connection with, its liability for, or its payment or receipt
of any refund of, any Tax.
2. PREPARATION AND FILING OF TAX RETURNS; PAYMENT OF TAXES
a. ERC shall prepare and timely file; or cause to be prepared and
timely filed, with the appropriate Taxing Authorities (i) all federal and state
Income and Other Tax Returns of the ERC Group and any member or members thereof
for all taxable years and periods ending on or before the Closing Date; and (ii)
all federal and state Income and Other Tax Returns of ERC for all taxable years
and periods beginning after the Closing Date. ERC shall pay, or cause to be
paid, all Taxes due with respect to Tax Returns described in this subsection
(a). ERC shall be entitled to all Tax refunds received or receivable with
respect to any and all Income and Other Taxes attributable to the ERC Group for
all taxable years and periods.
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b. Evercel shall prepare and timely file, or cause to be prepared
and timely filed, with the appropriate Taxing Authorities, all federal and state
Income and Other Tax Returns of Evercel for taxable years and periods beginning
after the Closing Date. Evercel shall pay, or cause to be paid, all Taxes due
with respect to Tax Returns described in this subsection (b). Evercel shall be
entitled to all Tax refunds received or receivable with respect to any and all
Income and Other Taxes attributable to Evercel for all taxable years and periods
beginning after the Closing Date.
3. PAYMENTS.
a. METHOD. Unless the parties otherwise agree, all payments made by a
party pursuant to this Agreement shall be made by wire transfer to a bank
account designated from time to time by the other party. The paying party shall
also provide a notice of payment to the recipient.
b. INTEREST. If any payment is not timely paid, interest shall
accrue on the unpaid amount at the Overdue Rate. A payment will be deemed to be
timely paid only if actually received by the payee within seven (7) days of the
receipt of notice from the other party that such payment is due.
c. CHARACTERIZATION. Any payment (other than interest thereon)
made hereunder shall be treated by all parties for all purposes as a nontaxable
intercompany settlement of liabilities existing immediately before the
Distribution or, to the extent appropriate, as a non-taxable dividend
distribution or capital contribution.
4. CONTESTS AND AUDITS; INDEMNIFICATION.
a. NOTICE. Upon the receipt by ERC or Evercel, as the case may be,
of notice of any pending or threatened Tax audit or assessment which may affect
the liability for Taxes that are subject to indemnification hereunder, ERC or
Evercel, as the case may be, shall promptly notify the other in writing of the
receipt of such notice.
b. CONTROL AND SETTLEMENT. From and after the Closing Date, ERC
shall have full control over, and the right to represent the interests of, ERC
and all other corporations involved in or affected by any Tax audit or
administrative, judicial or other proceeding relating, in whole or in part, to
Taxes that are subject to indemnification by ERC hereunder. ERC shall have the
right to employ counsel of its choice at its expense, and shall have the
ultimate control of the contest and any settlement or other resolution thereof.
Any liability for Taxes established pursuant to such proceeding shall be
allocated and paid in accordance with Section 2 of this Agreement.
c. AMENDMENT OF TAX RETURNS. ERC shall have sole control over the
preparation and filing of any and all amendments to Tax Returns described in
Section 2(a).
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d. INDEMNIFICATION. ERC shall indemnify and hold harmless Evercel
against any and all Income and Other Taxes of the ERC Group for all taxable
years and periods. Evercel shall indemnify and hold harmless ERC against any and
all Income and Other Taxes specifically attributable to Evercel for all taxable
years and periods beginning after the Closing Date.
5. COOPERATION; DOCUMENT RETENTION; CONFIDENTIALITY.
a. COOPERATION. Upon reasonable request, ERC and Evercel shall
promptly provide (and shall cause their respective affiliates to provide) the
requesting party with such cooperation and assistance, documents, and other
information, without charge, as may be necessary or reasonably helpful in
connection with (i) the preparation and filing of any original or amended Tax
Return, (ii) the conduct of any audit, appeal, protest or other examination or
any judicial or administrative proceeding involving to any extent Taxes or Tax
Returns within the scope of this Agreement, or (iii) the verification by a party
of an amount payable hereunder to, or receivable hereunder from, another party.
Such cooperation and assistance shall include, without limitation: (a) the
provision on demand of books, records, Tax Returns, documentation or other
information relating to any relevant Tax Return; (b) the execution of any
document that may be necessary or reasonably helpful in connection with the
filing of any Tax Return, or in connection with any audit, appeal, protest,
proceeding, suit or action of the type generally referred to in the preceding
sentence, including, without limitation, the execution of powers of attorney and
extensions of applicable statutes of limitations; (c) the prompt and timely
filing of appropriate claims for refund; and (d) the use of reasonable 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. Each
party shall make its employees and facilities available on a mutually convenient
basis to facilitate such cooperation.
b. RETENTION. ERC and Evercel shall retain or cause to be retained
all Tax Returns, and all books, records, schedules, workpapers, and other
documents relating thereto, which Tax Returns and other materials are within the
scope of this Agreement, until the expiration of the later of (i) all applicable
statutes of limitations (including any waivers or extensions thereof), and (ii)
any retention period required by law or pursuant to any record retention
agreement. The parties hereto shall notify each other in writing of any waivers,
extensions or expirations of applicable statutes of limitations, and shall
provide at least thirty (30) days prior written notice of any intended
destruction of the documents referred to in the preceding sentence. A party
giving such a notification shall not dispose of any of the foregoing materials
without first allowing the other party a reasonable opportunity to copy them at
such other party's expense.
c. CONFIDENTIALITY. Except as required by law or with the prior
written consent of the other party, all Tax Returns, documents, schedules, work
papers and similar items and all information contained therein, which Tax
Returns and other materials are within the scope of this Agreement, shall be
kept confidential by the parties
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hereto and their representatives, shall not be disclosed to any other person or
entity and shall be used only for the purposes provided herein.
6. MISCELLANEOUS.
a. EFFECTIVENESS. This Agreement shall be effective from and after
the Closing Date and shall survive until the expiration of all applicable
statutes of limitations with respect to taxable years and periods ending on or
before or including the Closing Date.
b. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and supersedes all prior agreements, understandings, negotiations and
discussions, whether written or oral, between the parties hereto with respect to
the subject matter hereof, so that no such external or separate agreement
relating to the subject matter of this Agreement shall have any effect or be
binding, unless the same is referred to specifically in this Agreement or is
executed by the parties after the date hereof. To the extent that the terms of
this Agreement and similar terms of the Distribution Agreement are in conflict,
this Agreement shall govern. This Agreement cancels and supersedes, as of the
Closing Date, any and all other agreements with respect to Taxes between ERC and
Evercel.
c. SEVERABILITY. In the event that one or more of the terms or
provisions of this Agreement or the application thereof to any person(s) or in
any circumstance(s) shall, for any reason and to any extent be found by a court
of competent jurisdiction to be invalid, illegal or unenforceable, such court
shall have the power, and hereby is directed, to substitute for or limit such
invalid term(s), provision(s) or application(s) and to enforce such substituted
or limited terms or provisions, or the application thereof. Subject to the
foregoing, the invalidity, illegality or enforceability of any one or more of
the terms or provisions of this Agreement, as the same may be amended from time
to time, shall not affect the validity, legality or enforceability of any other
term or provision hereof.
d. AMENDMENTS; WAIVERS. No termination, cancellation,
modification, amendment, deletion, addition or other change in this Agreement,
or any provision hereof, or waiver of any right or remedy herein provided, shall
be effective for any purpose unless such change or waiver is specifically set
forth in a writing signed by the party or parties to be bound thereby. The
waiver of any right or remedy with respect to any occurrence on one occasion
shall not be deemed a waiver of such right or remedy with respect to such
occurrence on any other occasion.
e. GOVERNING LAW. This Agreement and the rights and obligations of
the parties hereunder shall be governed by the laws of the State of New York,
without regard to the principles of choice of law thereof, except with respect
to matters of law concerning the internal corporate affairs of any corporate
entity which is a party to or subject of this Agreement, and as to those matters
the law of the jurisdiction under which the respective entity derives its powers
shall govern.
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f. NOTICES. All notices, requests, demands, statements, bills and
other communications under this Agreement shall be delivered in accordance with
Section ____ of the Distribution Agreement.
g. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. This Agreement shall not be assigned without the express
written consent of each of the parties hereto.
h. NO THIRD-PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties hereto and shall not be deemed to confer upon third
parties any remedy, claim, liability, reimbursement, claim of action or other
right in excess of those existing without this Agreement.
i. TITLES AND HEADINGS. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
j. PREDECESSORS AND SUCCESSORS. To the extent necessary to give
effect to the purposes of this Agreement, any reference to any corporation shall
also include any predecessor or successor thereto, by operation of law or
otherwise.
k. TAX ELECTIONS. Nothing in this Agreement is intended to change
or otherwise affect any previous tax election made by or on behalf of the ERC
Group, and ERC shall have sole discretion to make or change any and all
elections affecting the ERC Group or any member or members thereof for all
taxable years and periods ending on or before the Closing Date.
l. EXPENSES. Except as otherwise set forth in this Agreement, all
costs and expenses in connection with the preparation, execution, delivery and
implementation of this Agreement and with the consummation of the transactions
contemplated by this Agreement shall be charged to the party for whose benefit
the expenses are incurred, with any expenses which cannot be allocated on such
basis to be split equally between the parties.
m. DISPUTE RESOLUTION. Any dispute arising under this Agreement
shall be resolved by binding arbitration in the manner contemplated by Section
___ of the Distribution Agreement, including the attorneys fees provisions
referred to therein.
n. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which together shall be deemed to be an original and all
of which together shall be deemed to constitute one and the same agreement.
o. RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship
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of principal and agent, partnership or joint venture between the parties, it
being understood and agreed that no provision contained herein, and no act of
the parties, shall be deemed to create any relationship between the parties
other than the relationship set forth herein.
p. FURTHER ACTION. Evercel and ERC each shall cooperate in good
faith and take such steps and execute such papers as may be reasonably requested
by the other party to implement the terms and provisions of this Agreement.
q. LEGAL ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Without prejudice to any
rights or remedies otherwise available to any party hereto, each party hereto
acknowledges that damages would be an inadequate remedy for any breach of the
provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
ENERGY RESEARCH CORPORATION
By:
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Name:
Title:
EVERCEL, INC.
By:
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Name:
Title:
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