Tax Sharing Agreement - Carlson Holdings Inc. and Carlson Restaurants Worldwide Inc.
TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT ("Agreement") is entered into as of August
19, 1999 by and between Carlson Holdings, Inc., a Minnesota corporation ("CHI")
and Carlson Restaurants Worldwide Inc., a Delaware corporation (Restaurants).
This Agreement supercedes all prior Tax Sharing Agreements entered into
between CHI and Restaurants.
RECITALS
WHEREAS, CHI is the common parent corporation of an affiliated group of
corporations within the meaning of Section 1504(a) of the Internal Revenue Code
of 1986, as amended (the "Code") and of combined groups as defined under similar
laws of other jurisdictions (the "CHI Group"), and Restaurants and Restaurants'
Affiliates are members of such groups; and
WHEREAS, the groups of which CHI is the common parent and in which
Restaurants and Restaurants' Affiliates are members, file and intend to file
Consolidated Returns and Combined Returns to the extent required or permitted
under federal, state, and local laws; and
WHEREAS, CHI and Restaurants desire to agree upon a method for
determining the financial consequences to each party and their subsidiaries
resulting from the filing of a consolidated federal income tax return and the
filing of returns relating to combined state taxes.
AGREEMENTS
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, CHI and Restaurants for
themselves, their successors, and assigns, hereby agree as follows:
ARTICLE I
DEFINITIONS
Definitions. For purposes of this Agreement, the terms set forth below
shall have the following meanings.
1.1. "AUDIT" includes any audit, assessment of Taxes, other examination by
any Tax Authority, proceeding, or appeal of such proceeding relating
to Taxes, whether administrative or judicial.
1.2. "COMBINED GROUP" means a group of corporations or other entities that
file a Combined Return.
1.3. "COMBINED RETURN" means any Tax Return with respect to Non-Federal
Taxes filed on a consolidated, combined (including nexus combination,
worldwide combination, domestic combination, line of business
combination or any other form of combination) or unitary basis
wherein one or more members of the Restaurants Group join in the
filing of a Tax Return with CHI or a CHI subsidiary that is not also
a member of the Restaurants Group.
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1.4. "CONSOLIDATED GROUP" means the affiliated group of corporations
within the meaning of Section 1504(a) of the Code of which CHI is
the common parent and which includes the Restaurants Group.
1.5. "CONSOLIDATED RETURN" means any Tax Return with respect to Federal
Income Taxes filed by CHI and its subsidiaries pursuant to Section
1501 of the Code.
1.6. "DECOMBINATION" means any event pursuant to which CHI or the
Restaurants Group cease to be includible in a Combined Group.
1.7. "DECOMBINATION DATE" means the close of business on the day on which
a Decombination occurs. Unless otherwise required by the relevant
Tax Authority or a court of competent jurisdiction, CHI and
Restaurants, for itself and the Restaurants Group, agree to file
all Tax Returns, and to take all other actions, relating to
Non-Federal Combined Taxes in a manner consistent with the
position that Restaurants and its affiliates are included in the
Combined Group for all days through and including a Decombination
Date.
1.8. "DECONSOLIDATION" means any event pursuant to which CHI or the
Restaurants Group cease to be includible in the Consolidated Group.
1.9. "DECONSOLIDATION DATE" means the close of business on the day on
which a Deconsolidation occurs. Unless otherwise required by the
relevant Tax Authority or a court of competent jurisdiction, CHI
and Restaurants, for itself and the Restaurants Group, agree to
file all Tax Returns, and to take all other actions, relating to
Federal Income Taxes in a manner consistent with the position that
Restaurants and the Restaurants Group are includible in the
Consolidated Group for all days through and including a
Deconsolidation Date.
1.10. "ESTIMATED TAX INSTALLMENT DATE" means the installment due dates
prescribed in Section 6655(c) of the Code (presently April 15,
June 15, September 15 and December 15).
1.11. "CHI GROUP" means CHI and its affiliates other than the Restaurants
Group.
1.12. "FEDERAL INCOME TAXES" means any tax imposed under Subtitle A of
the Code (including the taxes imposed by Sections 11, 55, 59A and
1201(a) of the Code), including any interest, addition to tax, or
penalties applicable thereto, and any other income-based United
States federal taxes which are hereinafter imposed upon
corporations.
1.13. "FINAL DETERMINATION" means (a) the final resolution of any tax
(or other matter) for a taxable period, including any related
interest or penalties, that, under applicable law, is not subject
to further appeal, review
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or modification through proceedings or otherwise, including (1)
the expiration of a statute of limitations (giving effect to any
extension, waiver or mitigation thereof) or a period for the
filing of claims for refunds amended returns, appeals from adverse
determinations, or recovering any refund (including by offset),
(2) a decision, judgment, decree, or other order by a court of
competent jurisdiction, which has become final and unappealable,
(3) a closing agreement or an accepted offer in compromise under
Section 7121 or 7122 of the Code, or comparable agreements under
laws of other jurisdictions, (4) execution of an Internal Revenue
Service Form 870 or 870AD, or by a comparable form under the laws
of other jurisdictions (excluding, however, any such form that
reserves (whether by its terms or by operation of law) the right
of the Tax Authority to assert a further deficiency), or (5) any
allowance of a refund or credit, but only after the expiration of
all periods during which such refund or credit may be recovered
(including by way of offset) or (b) the payment of tax by any
member of the Consolidated Group or Combined Group with respect to
any item disallowed or adjusted by a Tax Authority provided CHI
determines no action should be taken to recoup such payment but
only after consultation with Restaurants regarding any issues
pertaining to the Restaurants Group.
1.14. "RESTAURANTS' AFFILIATE" means any corporation or other entity
directly or indirectly owned or controlled by Restaurants, as of
the date of execution of this Agreement, which is includible in
the Restaurants Group.
1.15. "RESTAURANTS GROUP" means the affiliated group of corporations as
defined in Section 1504(a) of the Code, or similar group of
entities as defined under similar laws of other jurisdictions,
including Restaurants and Restaurants' affiliates, of which
Restaurants is deemed to be the common parent, and any corporation
or other entity which may have been, may be, or may become a
member of such group from time to time.
1.16. "RESTAURANTS GROUP COMBINED TAX LIABILITY" means, with respect to
any taxable year, the Restaurants Group's liability for
Non-Federal Combined Taxes as determined under Section 2.3 of this
Agreement.
1.17. "RESTAURANTS GROUP FEDERAL INCOME TAX LIABILITY" means with
respect to any taxable year, the Restaurants Group's liability for
Federal Income Taxes as determined under Section 2.2 of this
Agreement.
1.18 "NON-FEDERAL COMBINED TAXES" means any Non-Federal Income Taxes with
respect to which a Combined Return is filed.
1.19. "NON-FEDERAL SEPARATE TAXES" means any Non-Federal Income Taxes that
are not Non-Federal Combined Taxes.
1.20. "NON-FEDERAL INCOME TAXES" includes all federal taxes not imposed
under Subtitle A of the Code and all state, local, and foreign
taxes, charges, fees, levies, imposts, duties, or other
assessments of a similar
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nature, including, without limitation, income, alternative or
add-on minimum, gross receipts, excise, employment, sales, use,
transfer, license, payroll, franchise, severance, stamp,
occupation, windfall profits, withholdings, unemployment,
disability, ad valorem, highway use, commercial rent, capital
stock, paid up capital, recording, registration, property, real
property gains, value added, business license, custom duties, or
other tax or governmental fee of any kind whatsoever, imposed or
required to be withheld by any domestic Tax Authority (excluding
any federal governmental agency of the United States), including
any interest, additions to tax, or penalties applicable thereto.
1.21. "POST-DECONSOLIDATION PERIOD" means a taxable period beginning after
the Deconsolidation Date.
1.22. "PRE-DECONSOLIDATION PERIOD" means a taxable period ending on or
prior to the Deconsolidation Date.
1.23. "PRO FORMA RESTAURANTS GROUP COMBINED RETURN" means a Pro Forma
Restaurants Group Combined Return prepared pursuant to Section 2.3
of this Agreement.
1.24. "PRO FORMA RESTAURANTS GROUP CONSOLIDATED RETURN" means a Pro
Forma Restaurants Group Consolidated Return prepared pursuant to
Section 2.2 of this Agreement.
1.25. "REDETERMINATION AMOUNT" means, with respect to any taxable year, the
amount determined under Section 3.7 of the Agreement.
1.26. "SPECIAL TAX ATTRIBUTES" means any net operating loss, net capital
loss, investment tax credit, foreign tax credit, targeted jobs tax
credit, work opportunity tax credit, credit for increasing
research activities, charitable deduction or any other deduction,
credit or tax attribute which could reduce taxes (including
without limitation deductions and credits related to alternative
minimum taxes).
1.27. "STRADDLE PERIOD" means a taxable period beginning on or prior to and
ending after the Deconsolidation or Decombination Date.
1.28. "TAX AUTHORITY" means the Internal Revenue Service and any state,
local, or other governmental authority responsible for the
administration of any Taxes.
1.29. "TAXES" means Federal Income Taxes and Non-Federal Income Taxes.
1.30. "TAX RETURN" means any return, declaration, statement, report,
schedule, certificate, form, information return or any other
document (and any related or supporting information) including an
amended tax return required to be supplied to, or filed with, a
Tax Authority with respect to Taxes.
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SECTION 2. TAX SHARING
2.1. RESTAURANTS' LIABILITY FOR FEDERAL INCOME TAXES AND NON-FEDERAL
COMBINED TAXES. With respect to each taxable year in which
Restaurants is a member of the CHI Consolidated Group or a CHI
Combined Group, Restaurants shall pay to CHI (or CHI shall pay to
Restaurants) in accordance with the procedures set forth in
Section 3, an amount equal to the sum of the Restaurants Group
Federal Income Tax Liability (or refund) and the Restaurants Group
Combined Tax Liability (or refund) for such taxable year.
2.2. RESTAURANTS GROUP FEDERAL INCOME TAX LIABILITY FOR CONSOLIDATED
RETURN YEARS.
(a) IN GENERAL. With respect to any taxable year for which CHI and
Restaurants file a Consolidated Return, the Restaurants Group
Federal Income Tax Liability shall be the sum, for such
taxable year, of (1) the Restaurants Group's liability for
Federal Income Taxes as determined on the Pro Forma
Restaurants Group Consolidated Return, and (2) any interest,
penalties and other additions applicable to such taxes.
(b) PRO FORMA FEDERAL RETURN. With respect to each taxable year,
Restaurants shall prepare or cause to be prepared a pro forma
consolidated federal income tax return for the Restaurants
Group ("Pro Forma Restaurants Group Consolidated Return") as
if (except as provided in Section 2.2(c)) the Restaurants
Group was not, nor ever was a part of the Consolidated Group,
but rather was a separate affiliated group of corporations,
consisting of Restaurants and Restaurants' Affiliates of which
Restaurants was the common parent filing a consolidated
federal income tax return pursuant to Section 1501 of the
Code.
(c) OPERATING RULES. The Pro Forma Restaurants Group Consolidated
Return shall be prepared:
(1) reflecting the elections, methods of accounting, and
positions with respect to specific items to be made
or used in the Consolidated Return;
(2) giving effect to any deduction or credit for any
Restaurants Special Tax Attribute as determined on
the Pro Forma Restaurants Group Consolidated Return.
In addition, Restaurants shall receive the benefit of
any deduction or credit for any Restaurants Special
Tax Attributes for which a tax benefit is actually
received in a Consolidated Return, but for this
purpose, if the Restaurants Group and the CHI Group
contribute like Special Tax Attributes to a
Consolidated Return (not necessarily in the same
taxable year) which are partially or fully limited
under the Code, then Restaurants
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shall only receive benefit for such like Special
Tax Attributes based on a ratio of their Special
Tax Attributes to the total Special Tax Attributes
of the Consolidated Group. If a Special Tax
Attribute is limited by the above, the Restaurants
Group shall be entitled to utilize such Special
Tax Attribute to the extent allowed when carried
forward or carried back to a Pro Forma Restaurants
Group Consolidated Return;
(3) applying the top marginal income tax rate used in the
Consolidated Return without regard to the graduated
tax brackets in Code Sec. 11(b) (the top marginal
rate is currently 35 percent);
(4) reflecting transactions with members of the
Consolidated Group that are not also members of the
Restaurants Group as if such transactions were not
with members of the same Consolidated Group;
(5) reflecting deductions for Non-Federal Combined Taxes
estimated as provided for in Section 2.3 of this
Agreement;
(6) reflecting no allocation of other special items
allowed under the Code such as the amounts under
Sections 1561(a)(2), 1561(a)(3), and 179(d)(2),
unless CHI specifically approves an allocation to
Restaurants.
2.3. RESTAURANTS GROUP COMBINED TAX LIABILITY
(a) IN GENERAL. With respect to any taxable year in which
Restaurants participates in the filing of a Combined Return
with CHI, the Restaurants Group Combined Tax Liability shall
be the sum, for such taxable years, of (1) the Restaurants
Group's liability for Non-Federal Income Taxes as determined
on the Pro Forma Restaurants Group Combined Returns, and (2)
any interest, penalties and other additions applicable to
Restaurants Group's liability.
(b) PRO FORMA COMBINED RETURNS. Each taxable year, Restaurants
shall prepare or cause to be prepared pro forma combined tax
returns or other schedule for the Restaurants Group ("Pro
Forma Restaurants Group Combined Returns") determined as if
the Restaurants Group was not and never was part of the
Combined Group, but rather was a separate group of which
Restaurants was the common parent filing combined tax returns.
(c) OPERATING RULES. The Pro Forma Restaurants Group Combined
Returns shall be prepared by reference to:
(1) the Restaurants Group's taxable income or loss from
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(or other similar line representing taxable
income before net operating loss deduction and
special deductions) of the Pro Forma Restaurants
Group Consolidated Return, adjusted to take into
account (i) those members of the Restaurants Group
which are included in the Combined Return, (ii)
Restaurants Group Special Tax Attributes; and (iii)
material adjustments necessary to reflect the laws of
the applicable jurisdiction;
(2) apportionment factors determined by taking into
account only those members of the Restaurants Group
which are included in the Combined Return;
(3) the applicable tax rate(s) imposed by each
jurisdiction; and
(4) the fact that if a Restaurants Group Special Tax
Attribute cannot be fully utilized in the Pro Forma
Restaurants Group Combined Return, the Restaurants
Group will only be able to realize a benefit from
such Special Tax Attribute to the extent it is
allowed to utilize such Special Tax Attribute when
carried forward or carried back to a Pro Forma
Restaurants Group Combined Return in future or prior
years.
2.4. ALLOCATION OF OTHER SPECIAL ITEMS REQUIRED UNDER THE
CODE
In the event of a Deconsolidation after which period CHI and
Restaurants remain members of a controlled group as defined in
Section 1563 of the Code, all allocations of special items such as
those required under Sections 179 and 1561 shall be allocated to
CHI unless a specific allocation to Restaurants is approved by CHI.
SECTION 3. PAYMENT OF TAXES AND SHARING AMOUNTS
3.1. FEDERAL INCOME TAXES. CHI shall timely file the Consolidated
Return and pay timely to the Internal Revenue Service all Federal
Income Taxes, if any, of the Consolidated Group (including the
Restaurants Group) due and payable for all Pre-Deconsolidation
Periods.
3.2. NON-FEDERAL COMBINED TAXES. CHI shall timely file all Combined
Returns and pay timely to the appropriate Tax Authorities all
Non-Federal Combined Taxes, if any, of the Combined Group
(including the Restaurants Group) due and payable for all
Pre-Decombination Periods and Straddle Periods.
3.3. NON-FEDERAL SEPARATE TAXES. Restaurants shall pay timely to the
appropriate Tax Authorities all Non-Federal Separate Taxes, if
any, of the Restaurants Group due and payable for all
Pre-Deconsolidation Periods and Straddle Periods.
3.4. OTHER FEDERAL TAXES. The parties shall each pay timely to the
appropriate governmental authorities all of their respective other
federal taxes (excluding Federal Income Taxes for
Pre-Deconsolidation Periods,
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which are governed by Section 3.1. of this Agreement), if any, due
and payable for all Pre-Deconsolidation Periods, Straddle Periods,
and Post-Deconsolidation Periods.
3.5. TAX SHARING INSTALLMENT PAYMENTS
(a) FEDERAL INCOME TAXES. At each Estimated Tax Installment Date
with respect to any Pre-Deconsolidation Period or Straddle
Period, Restaurants shall determine under Section 6655 of the
Code the estimated amount of the related installment of the
Restaurants Group Federal Income Tax Liability and shall then
pay to CHI the amount thus determined. In addition, the
provisions of this Section 3.5(a) shall apply to any Federal
Income Tax payment made with the filing of the extension of
the Consolidated Return.
(b) NON-FEDERAL COMBINED TAXES. At each Estimated Tax Installment
Date with respect to any Pre-Decombination Period or Straddle
Period, Restaurants shall determine the estimated amount of
the related installment of the Restaurants Group Non-Federal
Combined Income Tax Liability and shall then pay to CHI the
amount thus determined. In addition, the provisions of this
Section 3.5(b) shall apply to any Non-Federal Combined Income
Tax payment made with the filing of the extension of the
Non-Federal Combined Returns.
3.6. TAX SHARING TRUE UP PAYMENTS
(a) FEDERAL INCOME TAXES. An amount equal to the difference, if
any, between the Restaurants Group Federal Income Tax
Liability for such taxable year as shown on the Pro Forma
Restaurants Group Consolidated Return and the aggregate amount
paid by Restaurants with respect to such taxable year under
Section 3.5(a) of this Agreement shall be paid to CHI (or paid
to Restaurants as the case may be) on or before the due date
of the CHI Consolidated Returns.
(b) NON-FEDERAL COMBINED TAXES. An amount equal to the difference,
if any, between the Restaurants Group Non-Federal Combined
Income Tax Liability for such taxable year as shown on the Pro
Forma Restaurants Group Combined Returns and the aggregate
amount paid by the Restaurants with respect to such taxable
year under Section 3.5(b) of this Agreement shall be paid to
CHI (or paid to Restaurants as the case may be) on or before
the due date of the CHI Non-Federal Combined Returns.
3.7. REDETERMINATION AMOUNTS
(a) IN GENERAL. In the event of any redetermination of any item of
income, gain, loss, deduction or credit of any member of the
Consolidated Group or Combined Group as a result of a Final
Determination or any settlement or compromise with any Tax
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Authority (including any amended tax return or claim for
refund filed by CHI), Restaurants shall pay CHI or CHI shall
pay Restaurants as the case may be, the Redetermination
Amount.
(b) CONSULTATION. CHI shall consult with Restaurants prior to
settlement or payment regarding the proposed redetermination
of any item mentioned in (a) above consistent with prior
practices.
(c) COMPUTATION. The Redetermination Amount shall be the
difference, if any, between all amounts previously determined
under Section 2 of this Agreement and all amounts that would
have been determined under Section 2 of this Agreement taking
such redetermination into account (including any additions to
tax or penalties applicable to Restaurants Group's liability),
together with interest for each day calculated (1) with
respect to redeterminations affecting Federal Income Taxes, at
the rate determined, in the case of payment by Restaurants
(relating to underpayments of tax by Restaurants), under
Section 6621(a)(2) of the Code and, in the case of payment by
CHI (relating to overpayments of tax by Restaurants), under
Section 6621(a)(1) of the Code, and (2) with respect to
redeterminations affecting Non-Federal Combined Taxes, under
similar laws, if any, of other jurisdictions.
(d) PAYMENT. CHI shall deliver to Restaurants a schedule
reflecting the computation of any Redetermination Amount with
respect to any taxable year. Not later than thirty (30) days
after the date such schedule is delivered, Restaurants shall
review such schedule and shall pay CHI, or CHI shall pay
Restaurants, such Redetermination Amount.
3.8. INTEREST. Payments under this Section 3 that are not made within
the prescribed period shall thereafter bear interest at the
Federal short-term rate established pursuant to Section 6621(b) of
the Code.
SECTION 4. PROCEDURAL MATTERS
4.1. AGENT, PREPARATION AND FILING OF RETURNS. Until Deconsolidation or
Decombination, CHI shall be the sole and exclusive agent of
Restaurants and any member of the Restaurants Group in any and all
matters relating to (a) Federal Income Taxes of the Consolidated
Group and (b) any Non-Federal Combined Taxes for all
Pre-Deconsolidation Periods, Pre-Decombination Periods and
Straddle Periods. CHI shall have the sole and exclusive
responsibility for the preparation and filing of any (a)
Consolidated Return or (b) Combined Return for all
Pre-Deconsolidation Periods, Pre-Decombination Periods and
Straddle Periods. In its sole discretion, but following
consultation with Restaurants consistent with prior practices, CHI
shall have the exclusive right with respect to any such
Consolidated Return or Combined Return (a) to
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determine (1) the manner in which such Tax 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, (2) whether any extensions may be requested, (3) the
elections that will be made by any member of the Consolidated
Group or Combined Group, and (4) whether any amended tax returns
should be filed; (b) to control, contest, and represent the
interests of the Consolidated Group and Combined Group in any
Audit and to resolve, settle, or agree to any adjustment or
deficiency proposed, asserted or assessed as a result of any
Audit; (c) to file, prosecute, compromise or settle any claim for
refund; and (d) to determine whether any refunds to which the
Consolidated Group or Combined Group may be entitled, shall be
paid by way of refund or credited against the tax liability of the
Consolidated Group and Combined Group, provided that the refunds
can be credited to periods that include Restaurants in the
Consolidated Group and the Combined Group. Restaurants, for itself
and its subsidiaries, hereby irrevocably appoints CHI as its agent
and attorney-in-fact to take such action (including the execution
of documents) as CHI may deem appropriate to effect the above.
4.2. FURNISHING INFORMATION. Each member of the Restaurants Group shall
(a) furnish to CHI in a timely manner such information and
documents as CHI may reasonably request for purposes of (1)
preparing any original or amended Consolidated Return or Combined
Return, (2) contesting or defending any Audit, and (3) making any
determination or computation necessary or appropriate under this
Agreement; (b) cooperate in any Audit of any Consolidated Return
or Combined Return; (c) retain and provide on demand books,
records, documentation or other information relating to any tax
return until the later of (1) the expiration of the applicable
statute of limitations (giving effect to any extension, waiver, or
mitigation thereof) and (2) in the event any claim is made under
this Agreement for which such information is relevant, until a
Final Determination with respect to such claim is made; and (d)
take such action as CHI may deem appropriate in connection
therewith. CHI shall provide the Restaurants Group with any
assistance reasonably required in providing any information
requested pursuant to this Section 4.2. CHI shall also provide
Restaurants Group with any assistance or information reasonably
required by Restaurants related to periods after the
Deconsolidation Date or the Decombination Date that is necessary
to compute Federal Income Taxes, Non-Federal Combined Taxes, or
Non-Federal Separate Taxes of the Restaurants Group. .
4.3. EXPENSES. Restaurants shall reimburse CHI for its prorata portion
of third party legal and accounting expenses incurred by CHI in
the course of the planning and preparation of any tax returns, the
conduct of any Audit regarding the tax liability of the
Consolidated Group or Combined Group, and for any other expense
incurred by CHI in the course of any litigation relating thereto,
to the extent such costs are attributable to the Restaurants Group
and provided CHI has conferred with Restaurants as to the portion
of such costs relating to the Restaurants Group. Notwithstanding
the foregoing, CHI shall have the sole discretion, after
consultation with
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Restaurants consistent with prior practices, to control, contest,
represent, file, prosecute, challenge or settle any Audit related
to the Consolidated Return or Combined Returns of CHI.
SECTION 5. DECONSOLIDATION / DECOMBINATION
5.1. CONTINUING COVENANTS. Restaurants, for itself and the Restaurants
Affiliates, covenants that on or after a Deconsolidation or
Decombination it will not, nor will it cause or permit any member
of the Restaurants Group to, make or change any tax election,
change any accounting method, amend any tax return or take any tax
position on any tax return, take any action, omit to take any
action or enter into any transaction that results in any increased
tax liability or reduction of any Special Tax Attributes of the
Restaurant Pre-Deconsolidation Period, Pre-Decombination Period or
Straddle Period without consultation with CHI.
5.2. REATTRIBUTION OF SPECIAL TAX ATTRIBUTES. In the event of
Deconsolidation or Decombination, CHI may, at its option, elect to
reattribute to itself certain Special Tax Attributes of the
Restaurants Group pursuant to Treasury Regulations Section
1.1502-20(g) or similar provisions of other jurisdictions. If CHI
makes such an election after consultation with Restaurants,
Restaurants shall comply with any applicable requirements,
including those of Treasury Regulations Section 1.1502-20(g)(5).
CHI also agrees to reimburse Restaurants for any additional tax
liabilities that result from such elections.
5.3. CARRYBACKS. CHI agrees to pay Restaurants the actual tax benefits
received by the CHI Group from the use in any Pre-Deconsolidation
Period or Pre-Decombination Period of a carryback of any Special
Tax Attributes of the Restaurants Group from a
Post-Deconsolidation Period or Post-Decombination Period. Such
benefit shall be considered equal to the benefit Restaurants would
have received had such Special Tax Attributes arisen in a
Pre-Deconsolidation Period or Pre-Decombination Period. Payment of
the amount of such benefit shall be made within ninety (90) days
of the filing of the applicable tax return for the taxable year in
which the Special Tax Attributes are utilized.
If subsequent to the payment by CHI to Restaurants of any such
amount, there shall be (a) a Final Determination which results in
a disallowance or a reduction of the Special Tax Attributes so
carried back or (b) a reduction in the amount of the benefit
realized by the CHI Group as a result of any other Special Tax
Attributes that arise in a Post-Deconsolidation Period or
Post-Decombination Period, Restaurants shall receive support for
such disallowance or reduction in writing, and shall repay to CHI
within ninety (90) days of such event, an amount which would not
have been payable to Restaurants pursuant to their Section 5.3 had
the amount of the benefit been determined in light of these
events. Restaurants shall hold CHI harmless for any penalty,
addition to tax, or interest payable by any member of the CHI
Group as a result of any such event unless Restaurants objects to
the decision made by CHI regarding the carryback of the Special
Tax Attributes or to the Final Determination agreed to by CHI
regarding
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the assessment of any penalty, addition to tax, or interest. Any
such amount shall be provided to Restaurants in writing and shall
be paid by Restaurants to CHI within ninety (90) days after notice
to Restaurants of the payment by CHI or any member of the
Consolidated Group or Combined Group of any such penalty, addition
to tax, or interest. Nothing in this Section 5.3 shall require CHI
to file a claim for refund of Federal Income Taxes or Combined
Taxes.
SECTION 6. DISPUTES
6.1. ACCOUNTING FIRM. If the parties are unable to agree on the amount
which is allocable or due to one party from the other under this
Agreement (including any payments due under Section 3.5, 3.6 or
3.7), or on whether an action or failure to act has the effect of
minimizing taxes, then either party may invoke this procedure by
giving notice to the other. Upon receipt of such notice, the
parties shall select and notify a single public accounting firm to
resolve the dispute. If the parties cannot agree on a single firm
within ten (10) days, they shall each select a nationally
recognized public accounting firm, which may include the public
accounting firm which regularly opines on either party's financial
statements ("Auditor"). Those two firms shall jointly select and
notify, within ten (10) days, a third independent nationally
recognized public accounting firm, which shall not be the Auditor
of either CHI or Restaurants, to resolve the dispute.
6.2. RESOLUTION OF DISPUTE. The chosen public accounting firm (the
"Arbitrator") shall be provided with written arguments by each
party and all supporting documents which each party deems
necessary within thirty (30) days of selection of the Arbitrator.
Each party shall provide the other party with copies of all
written arguments, documents, and correspondence submitted to the
Arbitrator. Either party may discuss the issues with the
Arbitrator provided the other party is given the opportunity to be
present. Within sixty (60) days of any oral arguments or the last
written arguments, whichever is later, the Arbitrator shall notify
the parties of its decision. If in the opinion of the Arbitrator,
an expedited decision is necessary to protect either party's
rights, the Arbitrator shall accelerate the dates for submissions,
arguments and decision so as to protect the rights of the parties.
6.3. BINDING RESOLUTION. The determination made by the Arbitrator under
Section 6.2 hereof shall be conclusive and binding upon the
parties and shall not be subject to appeal, except in the case of
manifest mathematical error.
6.4. COSTS OF DISPUTE RESOLUTION. The parties shall share equally in all
fees and costs of the Arbitrator.
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SECTION 7. MISCELLANEOUS
7.1. TERM
(a) FEDERAL INCOME TAXES. The portions of this agreement relating
to Federal Income Taxes shall expire upon the Deconsolidation
Date; provided, however, that all rights and obligations
arising hereunder with respect to a Pre-Deconsolidation Period
or Straddle Period shall survive until they are fully
effectuated or performed and, provided, further, that
notwithstanding anything in this Agreement to the contrary,
all rights and obligations arising hereunder with respect to a
Post-Deconsolidation Period shall remain in effect and its
provisions shall survive for the full period of all applicable
statutes of limitation (giving effect to any extension, waiver
or mitigation thereof).
(b) NON-FEDERAL COMBINED TAXES. Not withstanding that a
Deconsolidation Date occurs for Federal Income Tax, if such
date does not represent a Decombination Date for Non-Federal
Combined taxes, the portions of this Agreement relating to
Non-Federal matters shall remain in effect.
7.2. ALLOCATIONS. All computations with respect to the
Pre-Deconsolidation Period ending on the Deconsolidation Date, the
immediately following taxable period of Restaurants and the
Restaurants Group, and any Straddle Period shall be made pursuant
to the principles of Treasury Regulations Section 1.1502-76(b),
taking into account such elections thereunder as CHI, in its sole
discretion but after consultation with Restaurants, shall make.
7.3. CHANGES IN LAW. Any reference to a provision of the Code or a
similar law of another jurisdiction shall include a reference to
any successor provision to such provision.
7.4. CONFIDENTIALITY. Each party shall hold and cause its advisors and
consultants to hold in strict confidence, unless compelled to
disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law, all information
(other than any such information relating solely to the business
or affairs of such party) concerning the other parties hereto
furnished it by such other party or its representatives pursuant
to this Agreement (except to the extent that such information can
be shown to have been (a) previously known by the party to which
it was furnished, (b) in the public domain through no fault of
such party, or (c) later lawfully acquired from other sources not
under a duty of confidentiality by the party to which it is
furnished), and each party shall not release or disclose such
information to any other person except its auditors, attorneys,
financial advisors, bankers and other consultants who shall be
advised of and agree to be bound by the provisions of this Section
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7.4. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the
other party if it exercises the same care as it takes to preserve
confidentiality for its own similar information.
7.5. SUCCESSORS. This Agreement shall be binding on and inure to the
benefit of any successor, by merger, acquisition of assets or
otherwise, to any of the parties hereto (including any successor
of CHI and Restaurants succeeding to the tax attributes of such
party under Section 381 of the Code), to the same extent as if
such successor had been an original party.
7.6. AUTHORIZATION, ETC. Each of the parties hereto hereby represents
and warrants that it has the power and authority to execute,
deliver and perform this Agreement, that this Agreement has been
duly authorized by all necessary corporate action on the part of
such party, that this Agreement constitutes a legal, valid and
binding obligation of each such party and that the execution,
delivery and performance of this Agreement by such party does not
contravene or conflict with any provision of law or of its charter
or bylaws or any agreement, instrument or order binding on such
party.
7.7. ENTIRE AGREEMENT. This Agreement contains the entire agreement
among the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements.
7.8. SECTION CAPTIONS. Section captions used in this Agreement are for
convenience and reference only and shall not affect the
construction of this Agreement.
7.9. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota without giving
effect to laws and principles relating to conflicts of law.
7.10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same Agreement.
7.11. WAIVERS AND AMENDMENTS. This Agreement shall not be waived, amended
or otherwise modified except in writing, duly executed by all of the
parties hereto.
7.12. SEVERABILITY. In case any one or more of the provisions in this
Agreement should be invalid, illegal or unenforceable, the
enforceability of the remaining provisions hereof will not in any
way be affected or impaired thereby.
7.13. NO THIRD PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties to this Agreement and the other members of
the Consolidated Group and should not be deemed to confer upon
third parties any remedy, claim, liability, reimbursement, cause
of action or other rights in excess of those existing without this
Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by a duly authorized officer as of the date first above
written.
CARLSON HOLDINGS, INC.
BY: /s/ Martyn R. Redgrave
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NAME: Martyn R. Redgrave
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TITLE: Executive Vice President and CFO
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CARLSON RESTAURANTS WORLDWIDE INC.
BY: /s/ Wallace B. Doolin
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NAME: Wallace B. Doolin
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TITLE: President and CEO
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