EXHIBIT 10.(2)
TAX SHARING AGREEMENT
by and between
FLORIDA PROGRESS CORPORATION,
a Florida corporation,
and
ECHELON INTERNATIONAL CORPORATION,
a Florida corporation,
Dated as of December 16, 1996
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS................................................. 2
1.1 General........................................................... 2
1.2 References; Interpretation........................................ 6
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS............................ 6
2.1 Manner of Preparation............................................ 6
2.2 Predistribution Tax Returns...................................... 8
2.3 Post-Distribution Tax Returns.. ................................ 8
ARTICLE III
PAYMENT OF TAXES.......................................... 8
3.1 Predistribution Taxes.. ......................................... 8
3.2 Post-Distribution Taxes.......................................... 9
3.3 Reorganization Taxes. .......................................... 9
3.4 Indemnification.................................................. 9
ARTICLE IV
TAX ATTRIBUTES AND TIMING ADJUSTMENTS ........................... 10
4.1 Carrybacks....................................................... 10
4.2 Deductions or Credits............................................ 11
4.3 Timing Adjustments............................................... 11
ARTICLE V
TAX AUDITS, TRANSACTIONS AND OTHER MATTERS........................... 13
5.1 Tax Audits and Controversies..................................... 13
5.2 Prior Agreements................................................. 13
5.3 Cooperation...................................................... 14
5.4 Retention of Records; Access..................................... 14
5.5 Dispute Resolution............................................... 14
5.6 Confidentiality; Ownership of Information;
Privileged Information.......................................... 14
ARTICLE VI
MISCELLANEOUS.............................................. 15
6.1 Complete Agreement; Construction................................. 15
6.2 Counterparts..................................................... 15
6.3 Survival of Agreements........................................... 15
6.4 Expenses......................................................... 15
6.5 Notices.......................................................... 15
6.6 Waivers.......................................................... 16
6.7 Amendments....................................................... 16
6.8 Assignment....................................................... 16
6.9 Successors and Assigns........................................... 16
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TABLE OF CONTENTS (continued)
Page
6.10 Termination..................................................... 16
6.11 Subsidiaries.................................................... 17
6.12 Third Party Beneficiaries....................................... 17
6.13 Title and Headings.............................................. 17
6.14 Schedules....................................................... 17
6.15 GOVERNING LAW................................................... 17
6.16 Consent to Jurisdiction......................................... 17
6.17 Severability.................................................... 18
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TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT, dated as of December 16, 1996, by
and between FLORIDA PROGRESS CORPORATION, a Florida corporation ("Florida
Progress"), and ECHELON INTERNATIONAL CORPORATION, a Florida corporation and a
wholly owned subsidiary of Florida Progress ("Echelon").
W I T N E S S E T H:
WHEREAS, as of the date hereof, Florida Progress is the common
parent of an affiliated group of domestic corporations within the meaning of
Section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
including the members of the Echelon Group (as defined below), and the members
of the affiliated group have heretofore joined in filing consolidated federal
income tax returns;
WHEREAS, as of the date hereof, Florida Progress is the common
parent of an affiliated group of domestic corporations within the meaning of
Section 220.131(1) of the Florida Income Tax Code, including the members of the
Echelon Group (as defined below), and the members of the affiliated group have
heretofore joined in filing consolidated state income tax returns;
WHEREAS, prior to entering into this Agreement, the Echelon
Group consisted of (i) Progress Credit Corporation ("PCC"), a Florida
corporation and a direct, wholly owned subsidiary of Progress Capital Holdings,
Inc. ("PCH"), (ii) Talquin Development Company ("Talquin"), a Florida
corporation and a direct, wholly owned subsidiary of PCC, (iii) Progress Leasing
Corporation ("Progress Leasing"), a Florida corporation and a direct, wholly
owned subsidiary of PCC, (iv) Echelon, formerly known as PLC Leasing Corporation
("PLC Leasing") and a direct, wholly owned subsidiary of Progress Leasing and
(v) their respective Subsidiaries;
WHEREAS, prior to entering into this Agreement, (i) Talquin,
merged with and into PCC, (ii) PCC, merged with and into Progress Leasing and
(iii) Progress Leasing, merged with and into Echelon, which, as a result of such
mergers, became the successor to Talquin, PCC and Progress Leasing;
WHEREAS, PCH, a wholly owned subsidiary of Florida Progress,
has distributed the shares of Echelon Common Stock (and Echelon Rights) to
Florida Progress and it has been proposed that Florida Progress distribute the
shares of Echelon Common Stock (and Echelon Rights) to Florida Progress
stockholders (the "Distribution") and, as a result of the Distribution, the
Echelon Group will not be included in the consolidated Federal income tax return
of Florida Progress for the portion of the year following the Distribution or in
future years;
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WHEREAS, the Distribution is intended to qualify as a
tax-free spin-off under Section 355 of the Code;
WHEREAS, Florida Progress and Echelon have entered into an
agreement (the "Distribution Agreement") to, among other things, allocate
certain assets and to allocate and assign responsibility for certain liabilities
of the present Florida Progress and its present and former subsidiaries; and
WHEREAS, Florida Progress and Echelon desire to allocate the
tax burdens and benefits of transactions which occurred on or prior to the
Distribution Date and to provide for certain other tax matters, including the
assignment of responsibility for the preparation and filing of tax returns, the
payment of taxes, and the prosecution and defense of any tax controversies;
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the parties hereby agree
as follows:
ARTICLE I
DEFINITIONS
1.1 General. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
(a) "Ancillary Agreements" shall mean all of the written
agreements, instruments, assignments or other arrangements (other than this
Agreement) entered into in connection with the transactions contemplated hereby,
including, without limitation, the Distribution Agreement, the Employee Benefits
Allocation Agreement, the Transition Services Agreement, the PCH Note (as
defined below), and any exhibit, schedule or appendix to any of the foregoing.
(b) "Code" shall mean the Internal Revenue Code of
1986, as amended, and the Treasury regulations promulgated
thereunder, including any successor legislation.
(c) "Consolidated Return" shall mean any consolidated federal
or state income tax return of Florida Progress for the period commencing on
January 1, 1996, and including members of the Echelon Group through the
Distribution Date.
(d) "Distribution" shall mean the distribution on the
Distribution Date to holders of record of shares of Florida Progress Common
Stock as of the Record Date of the Echelon Common Stock owned by Florida
Progress on the basis of one Echelon
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Common Stock for each 15 outstanding shares of Florida Progress Common Stock.
(e) "Distribution Agreement" is defined in the
recitals hereto.
(f) "Distribution Date" shall mean the date on which
the Distribution is effected.
(g) "Echelon" is defined in the recitals hereto.
(h) "Echelon Common Stock" shall mean the common stock, par
value $.01 per share, of Echelon, together with the Echelon Rights.
(i) "Echelon Group" shall mean Echelon and the group of
companies which become part of Echelon as a result of the Reorganizations
(including PCC, Talquin, and Progress Leasing) as well as any Person which may
hereafter be organized or acquired directly or indirectly as an Echelon
Subsidiary.
(j) "Echelon Investments" means any corporation, partnership
or other business entity, in which any member of the Echelon Group has owned or
will own any equity interest or other investment and which relates to the
business and operations conducted by Echelon or any Echelon Subsidiary, other
than a member of the Florida Progress Group.
(k) "Echelon Rights" shall mean the preferred stock purchase
rights of Echelon issued pursuant to the Rights Agreement dated as of November
15, 1996 by and between Echelon and The First National Bank of Boston, as Rights
Agent.
(l) "Echelon Subsidiaries" shall mean all Subsidiaries
of Echelon and all Echelon Investments.
(m) "Effective Time" shall mean 12:01 a.m., St.
Petersburg, Florida time, on the Distribution Date.
(n) "Final Determination" shall mean the final resolution of
liability for any Tax for any taxable period, including any related interest or
penalties, by or as a result of: (i) a final and unappealable decision,
judgment, decree or other order by any court of competent jurisdiction; (ii) a
closing agreement or accepted offer in compromise under Section 7121 or 7122 of
the Code, or comparable agreement under the laws of other jurisdictions which
resolves the entire tax liability for any taxable period; (iii) any allowance of
a refund or credit in respect of an overpayment of tax, but only after the
expiration of all periods during which such refund may be recovered (including
by way of offset) by the jurisdiction imposing the Tax; or (iv) any other final
disposition, including by reason of the expiration of the applicable statute of
limitations.
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(o) "Florida Progress" is defined in the recitals
hereto.
(p) "Florida Progress Common Stock" shall mean the shares of
common stock, without par value, of Florida Progress.
(q) "Florida Progress Group" shall mean Florida Progress and
all of the direct and indirect Subsidiaries of Florida Progress as of the
Distribution Date that have joined in or are eligible to join a Consolidated
Return or any Prior Period Consolidated Return, other than any member of the
Echelon Group.
(r) "Governmental Authority" shall mean any federal, state,
local, foreign or international court, government, department, commission,
board, bureau, agency, official or other regulatory, administrative or
governmental authority.
(s) "Group" shall mean the Florida Progress Group and the
Echelon Group, as the context may require.
(t) "Included Party" is defined in Section 2.1.
(u) "Income Taxes" shall mean any federal, state or local
Taxes determined by reference to income.
(v) "Indemnifying Party" is defined in Section 3.4.
(w) "Indemnitee" is defined in Section 3.4.
(x) "IRS" shall mean the Internal Revenue Service.
(y) "Note Balance" shall mean the outstanding balance
of the PCH Note plus any accrued but unpaid interest.
(z) "Old Florida Progress Consolidated Group" shall mean
Florida Progress and all of the direct and indirect Subsidiaries of Florida
Progress prior to the Distribution Date that joined in or were eligible to join
a Consolidated Return or any Prior Period Consolidated Return.
(aa) "Other Taxes" shall mean any federal, state or local
Taxes determined without regard to income.
(ab) "PCH Note" shall mean the note dated as of December __,
1996 to be issued in connection with the Distribution by Echelon to PCH.
(ac) "person" shall mean any natural person, corporation,
business trust, joint venture, association, company, limited liability company,
partnership or government, or any agency or political subdivision thereof.
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(ad) "Policy Statement" shall mean the policy statement that
clarifies the existing tax allocation practices of the Old Florida Progress
Consolidated Group.
(ae) "Preparing Party" shall have the meaning as
defined in Section 2.1.
(af) "Prior Period Consolidated Return" shall mean any
consolidated income tax return (federal or state) of Florida Progress filed, or
to be filed, for years prior to the Consolidated Return year.
(ag) "Record Date" shall mean December 5, 1996.
(ah) "Reorganizations" shall mean the series of transactions
that occurred prior to the Distribution pursuant to which Echelon became a
first-tier subsidiary of PCH and the assets of PCC, Talquin and Progress Leasing
became a part of Echelon.
(ai) "Subsidiary" shall mean any corporation of which another
entity's ownership satisfies the 80-percent voting and value test of Section
1504(a)(2) of the Code.
(aj) "Tax" or "Taxes" whether used in the form of a noun or
adjective, shall mean taxes on or measured by income, franchise, gross receipts,
sales, use, excise, payroll, personal property, real property, ad-valorem,
value-added, leasing, leasing use or other taxes, levies, imposts, duties,
charges or withholdings of any nature. Whenever the term "Tax" or "Taxes" is
used (including, without limitation, regarding any duty to reimburse another
party for indemnified taxes or refunds or credits of taxes) it shall include
penalties, fines, additions to tax and interest thereon.
(ak) "Tax Benefit" shall mean the sum of the amount by which
the tax liability (after giving effect to any alternative minimum or similar
tax) of a corporation or group of affiliated corporations to the appropriate
taxing authority is reduced (including, without limitation, by deduction,
entitlement to refund, credit or otherwise) plus any interest from such
government or jurisdiction relating to such tax liability.
(al) "Tax Detriment" shall mean the sum of the amount by which
the tax liability (after giving effect to any alternative minimum or similar
tax) of a corporation or group of affiliated corporations to the appropriate
taxing authority is increased (including, without limitation, by the inclusion
of income or gain or by the denial of a deduction, entitlement to refund, loss
or credit) plus any interest owed to such government or jurisdiction relating to
such tax liability.
(am) "Tax Item" shall mean any item of income, capital gain,
net operating loss, capital loss, deduction, credit or
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other tax attribute relevant to the calculation of a Tax
liability.
(an) "Tax Returns" shall mean all reports or returns
(including information returns) required to be filed or that may be filed for
any period with any taxing authority (whether domestic or foreign) in connection
with any Tax or Taxes (whether domestic or foreign).
(ao) "Timing Adjustment" shall mean any adjustment which (i)
(x) decreases deductions, losses or credits or increases income, gains or
recapture of tax credits for the period in question, and (y) will permit Echelon
or any of its Subsidiaries to increase deductions, losses or tax credits or
decrease income, gains or recapture of tax credits for any taxable period or
periods beginning after the Distribution Date, or (ii) (x) increases deductions,
losses or credits or decreases income, gains or recapture of tax credits for the
period in question, and (y) will require Echelon or any of its Subsidiaries to
decrease deductions, losses or tax credits or increase income, gains or
recapture of tax credits for any taxable period or periods beginning after the
Distribution Date.
1.2 References; Interpretation. References in this Agreement
to any gender include references to all genders, and references to the singular
include references to the plural and vice versa. The words "include", "includes"
and "including" when used in this Agreement shall be deemed to be followed by
the phrase "without limitation". Unless the context otherwise requires,
references in this Agreement to Articles, Sections, Exhibits and Schedules shall
be deemed references to Articles and Sections of, and Exhibits and Schedules to,
such Agreement. Unless the context otherwise requires, the words "hereof",
"hereby" and "herein" and words of similar meaning when used in this Agreement
refer to this Agreement in its entirety and not to any particular Article,
Section or provision of this Agreement.
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
2.1 Manner of Preparation.
(a) All Tax Returns filed after the Distribution Date shall be
prepared on a basis that is consistent with the rulings obtained from the IRS or
any other Governmental Authority in connection with the Reorganizations or
Distribution (in the absence of a controlling change in law or circumstances)
and shall be filed on a timely basis (including pursuant to extensions) by the
party responsible for such filing under this Agreement. In the absence of a
controlling change in law or circumstances and unless deviation from past
practice would have no adverse effect on any of the parties, all Tax Returns
filed
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after the date of this Agreement shall be prepared on a basis consistent with
the elections, accounting methods, conventions, and principles of taxation used
for the most recent taxable periods for which Tax Returns involving similar Tax
Items have been filed. Subject to the provisions of this Agreement, all
decisions relating to the preparation of Tax Returns shall be made in the sole
discretion of the party responsible under this Agreement for its preparation;
provided, however, that to the extent a party (or any of its Subsidiaries) is
included in a Tax Return prepared by another party (the "Preparing Party"), the
party not responsible for preparing the Tax Return (the "Included Party") shall
have the right to review and comment on such Tax Return prior to the filing
thereof in the following manner:
(i) The Preparing Party shall submit any part of such Tax
Return relating to the Included Party to the Included Party at least 21 days
prior to the date on which such Tax Return is due (including extensions). The
Included Party shall submit its comments to the Preparing Party within 10 days
of receipt of the relevant portions of such Tax Return. The Preparing Party
shall alter such Tax Return to reflect the comments of the Included Party unless
the Preparing Party reasonably believes that such alteration is not required by
law and would have an adverse impact upon the Preparing Party. Notwithstanding
the foregoing, at least 30 days prior to the date on which such Tax Return is
due (including extensions), the Preparing Party shall use its best efforts to
notify the Included Party of and to discuss with the Included Party any
substantive issue that may adversely affect the Included Party.
(b) Unless otherwise required by the IRS, any Governmental
Authority or a court, the parties hereby agree to file all Tax Returns, and to
take all other actions, in a manner consistent with the position that the last
day on which the Echelon Group and each of its members are included in the Old
Florida Progress Consolidated Group is the Distribution Date. For any period
that includes but does not end on the Distribution Date, to the extent permitted
by law or administrative practice, the taxable year of each member of the Old
Florida Progress Consolidated Group and any group of such members shall be
treated as closing on the Distribution Date. If a taxable year of any member of
the Old Florida Progress Consolidated Group or any group or other combination of
such members that begins on or before and ends after the Distribution Date is
not treated under the previous sentence as closing on the Distribution Date, it
will be treated for purposes of this Agreement as if the member or group had a
taxable year that ended on the Distribution Date, except that Tax Items that are
calculated on an annual basis shall be apportioned on a time basis.
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2.2 Predistribution Tax Returns.
(a) All consolidated federal income Tax Returns of the Old
Florida Progress Consolidated Group that are required to be filed for periods
beginning before the Distribution Date shall be prepared and filed by Florida
Progress.
(b) All state and local income Tax Returns of any member of
the Old Florida Progress Consolidated Group that may be or are required to be
filed for periods beginning before the Distribution Date shall be prepared and
filed by Florida Progress.
(c) All Tax Returns for Other Taxes of any member of the Old
Florida Progress Consolidated Group that may be or are required to be filed for
any period beginning before the Distribution Date shall be prepared and filed by
the entity that filed the corresponding Tax Return for the most recent period
for which such a Tax Return has been filed, or, if no such corresponding Tax
Return has been filed, by the appropriate entity in accordance with local law or
custom. See Schedule 2.2(c) for a listing of these Tax Returns for Other Taxes
whose preparation and filing will be the responsibility of Echelon.
2.3 Post-Distribution Tax Returns. The filing of all Tax
Returns for periods beginning on or after the Distribution Date shall be the
responsibility of Florida Progress if they relate to the Florida Progress Group
or any Subsidiary of Florida Progress and shall be the responsibility of Echelon
if they relate to the Echelon Group or any Subsidiary of Echelon.
ARTICLE III
PAYMENT OF TAXES
3.1 Predistribution Taxes.
(a) Except to the extent provided for in Section 5.2, Florida
Progress shall be liable for and shall pay all Taxes due (and receive all
refunds) in connection with the filing of the Old Florida Progress Consolidated
Group's consolidated federal income Tax Returns, as well as any separate federal
income Taxes of any member of the Old Florida Progress Consolidated Group, for
all taxable periods beginning before the Distribution Date.
(b) Except to the extent provided for in Section 5.2 and in
subsection (i) below, Florida Progress shall be liable for and shall pay to the
relevant taxing authority all state and local Income Taxes (or receive all
refunds) for any taxable periods for which Florida Progress has filing
responsibility under Section 2.2(b) of this Agreement.
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(i) In the case of any such taxable period that does not end
on or before the Distribution Date, Echelon shall provide Florida Progress, at
least 90 days prior to the due date (including extensions) of the relevant Tax
Return, with a true and correct accounting of all relevant Tax Items and
corresponding Taxes of Echelon and each Subsidiary of Echelon as if the taxable
period for such entity began immediately after the Distribution Date (using the
principles provided in Section 2.1(b) of this Agreement) and Echelon shall be
liable for and shall pay to Florida Progress any such Taxes attributable to such
period, including any audit adjustments to such Taxes.
(c) Except to the extent that a liability for such Taxes has
been accrued on the balance sheet of a member of the Echelon Group on or prior
to the Distribution Date, Florida Progress shall be liable for and shall pay to
the relevant taxing authority all Other Taxes due or payable (or receive all
refunds) for any taxable periods described in Section 2.2(c) of this Agreement.
See Schedule 3.1(c) for a listing of those Other Taxes relating to any taxable
periods described in Section 2.2(c) of this Agreement for which any member of
the Echelon Group has accrued a liability either on or before the Distribution
Date.
3.2 Post-Distribution Taxes. Unless otherwise
provided in this Agreement:
(a) Florida Progress shall pay all Taxes and shall be entitled
to receive and retain all refunds of Taxes with respect to periods beginning on
or after the Distribution Date that are attributable to the Florida Progress
Group or any Subsidiary of Florida Progress;
(b) Echelon shall pay all Taxes and shall be entitled to
receive and retain all refunds of Taxes with respect to periods beginning on or
after the Distribution Date that are attributable to the Echelon Group or any
Subsidiary of Echelon.
3.3 Reorganization Taxes. Notwithstanding any statement to the
contrary in this Agreement, and except as otherwise provided in the Distribution
Agreement, to the extent that any Taxes are found to arise out of the
Reorganizations or as a result of the Distribution not qualifying as a tax-free
spin-off under Section 355 of the Code, then any such Tax liability (including
interest and penalties) incurred by the parties (or any Subsidiaries) shall be
the responsibility of Florida Progress.
3.4 Indemnification.
(a) Any and all Tax liabilities allocated to Florida Progress
by this Agreement shall be "Florida Progress Liabilities" within the meaning of
the Distribution Agreement and Section 4.1 thereof.
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(b) Any and all Tax liabilities allocated to Echelon by this
Agreement shall be "Echelon Liabilities" within the meaning of the Distribution
Agreement and Section 4.1 thereof.
(c) (i) Notwithstanding the provisions of Section 4.4 of the
Distribution Agreement, to the extent that one party (the "Indemnifying Party")
owes money to another party (the "Indemnitee") pursuant to this Section 3.4, the
Indemnitee shall, within 14 days after receiving the Indemnifying Party's
calculations, submit to the Indemnifying Party the Indemnitee's calculations of
the amount required to be paid pursuant to this Section 3.4, showing such
calculations in sufficient detail so as to permit the Indemnifying Party to
understand the calculations. The Indemnifying Party shall pay the Indemnitee, no
later than 30 days prior to the due date (including extensions) of the relevant
Tax Returns or 14 days after the Indemnifying Party receives the Indemnitee's
calculations, the amount for which the Indemnifying Party is required to pay or
indemnify the Indemnitee under this Section 3.4. The Indemnifying Party shall
have the right to disagree with the Indemnitee's calculations. Any dispute
regarding such calculations shall be resolved in accordance with Section 5.5 of
this Agreement.
(ii) All indemnity payments shall be calculated on a pre-tax
basis and shall be treated as contributions to capital and/or dividends
immediately prior to the Distribution.
(d) Florida Progress shall indemnify Echelon for any Income
Taxes or franchise taxes for any taxable period (or portion of a taxable period)
ending before or including the Distribution Date for which Echelon may be liable
solely as a result of the operation of United States Treasury regulation
sections 1.1502-6 and 1.1502-77 or any state counterpart statute or regulation.
ARTICLE IV
TAX ATTRIBUTES AND TIMING ADJUSTMENTS
4.1 Carrybacks.
(a) In the event of the realization of any Tax Item by Echelon
or any of its Subsidiaries for any taxable period beginning on or after the
Distribution Date which, under the applicable tax law, Echelon or any of its
Subsidiaries is permitted or required to carry back to a Consolidated Return or
a Prior Period Consolidated Return and the carry back of such Tax Item will
result in a Tax Benefit, Echelon shall inform Florida Progress of the existence
of such Tax Item and take any reasonable steps necessary to allow Florida
Progress to carry back such Tax Item to a Consolidated Return or a Prior Period
Consolidated Return. The amount of any Tax Benefit that results from the carry
back of any Tax Item pursuant to this paragraph
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shall be applied against the Note Balance at the time such Tax Benefit is
realized (as defined in Section 4.3(b)). To the extent the amount of the Tax
Benefit exceeds the Note Balance as of the date such Tax Benefit is realized (as
defined in Section 4.3(b)), Florida Progress shall remit any refund it receives
with respect to the carry back of such Tax Item to Echelon within 30 days of the
date such Tax Benefit is realized. In the event that two or more carrybacks of
Tax Items are available for use in a Consolidated Return or in any Prior Period
Consolidated Return, their order of use will be determined by the Code. Where
two or more carrybacks of Tax Items have equal priority and can not be used in
full, each such carryback shall be used in proportion to the total of such
carrybacks.
(b) In the event that the Note Balance is reduced and/or an
amount is paid to Echelon under Section 4.1(a) and the Tax Benefit that led to
such reduction and/or payment is subsequently modified (whether as the result of
an IRS adjustment or any other reason), then the amount of the reduction or
payment (plus any interest) relating to such Tax Benefit shall be added to the
Note Balance to the extent such Tax Benefit reduced the Note Balance and, to the
extent not applied against the Note Balance, repaid to Florida Progress within
30 days of a Final Determination that the claimed Tax Benefit has been denied.
4.2 Deductions or Credits. Except as provided in Section 4.3,
none of the parties shall be obligated to make a payment to another party as a
result of utilizing a net operating loss or similar tax attribute arising in a
period beginning prior to the Distribution Date.
4.3 Timing Adjustments.
(a) If an audit or other examination of any federal, state or
local Tax Return for any period beginning prior to the Distribution Date shall
result (by settlement or otherwise) in a Timing Adjustment in favor of Echelon
or any of its Subsidiaries, then:
(i) Florida Progress shall notify Echelon and shall provide
Echelon with adequate information so that it can reflect on the appropriate Tax
Returns any resulting increases in deductions, losses or tax credits or
decreases in income, gains or recapture of tax credits; and
(ii) Echelon shall pay Florida Progress the amount of any Tax
Benefit that results from such Timing Adjustment within 30 days of the date such
Tax Benefits are realized.
(b) If an audit or other examination of any federal, state or
local Tax Return for any period beginning prior to the Distribution Date shall
result (by settlement or otherwise) in a
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Timing Adjustment to the detriment of Echelon or any of its Subsidiaries, then:
(i) Florida Progress shall notify Echelon and shall provide
Echelon with adequate information so that it can reflect on the appropriate Tax
Returns any resulting decreases in deductions, losses or tax credits or
increases in income, gains or recapture of tax credits; and
(ii) Florida Progress shall pay Echelon the amount of any Tax
Detriment that results from such Timing Adjustment within 30 days of the date
such Tax Detriment is realized, provided, however, that the amount of any
payment made by Florida Progress pursuant to this Section 4.3(b)(ii) shall not
exceed the Tax Benefit realized by Florida Progress as a result of such Timing
Adjustment.
(c) For purposes of this Section 4.3, a Tax Benefit shall be
deemed to have been realized at the time any refund of Taxes is received or
applied against other Taxes due, or at the time of filing of a Tax Return
(including any Tax Return relating to estimated Taxes) on which a loss,
deduction or credit is applied in reduction of Taxes which would otherwise be
payable; provided, however, that where a party has other losses, deductions,
credits or similar items available to it, such deductions, credits or similar
items of such party may be applied prior to the use of any Timing Adjustment.
For purposes of this Section 4.3, a Tax Detriment shall be deemed to have been
realized at the time any refund of Taxes is received or applied against other
Taxes due provided that such refund was reduced as a result of the Tax
Detriment, or at the time of filing of a Tax Return (including any Tax Return
relating to estimated Taxes) provided the Tax Detriment caused an increase in
income, gain or recapture of a tax credit with respect to such Tax Return. In
the event of a Tax Benefit, Echelon may, at its election, pay the amount of any
Tax Benefit to Florida Progress rather than filing amended returns or otherwise
reflecting adjustments or taking positions on its Tax Returns. If such an
election is made, Echelon will be treated as having realized a Tax Benefit at
the time it would have realized a Tax Benefit had it chosen to file amended
returns or otherwise to reflect adjustments or to take positions on its Tax
Returns. If any Tax Benefit realized pursuant to Section 4.3 is subsequently
denied, then Florida Progress shall refund the amount of any payment for such
benefit within 30 days of its notification by Echelon that a Final Determination
has been reached denying the claimed Tax Benefit. In the event of a Tax
Detriment, Florida Progress will not be obligated to make any payment under
(b)(ii) above unless Echelon either files amended returns or otherwise reflects
the Tax Detriment on its Tax Returns. If any Tax Detriment realized pursuant to
Section 4.3 is subsequently reversed, then Echelon shall refund the amount of
any payment for such detriment within 30 days of its notification that a Final
Determination has been reached reversing the Tax Detriment.
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ARTICLE V
TAX AUDITS, TRANSACTIONS AND OTHER MATTERS
5.1 Tax Audits and Controversies. In the case of any audit,
examination or other proceeding ("Proceeding") with respect to Taxes of the Old
Florida Progress Consolidated Group or any member thereof for any taxable period
for which Florida Progress is or may be liable for such Taxes pursuant to this
Agreement, Echelon shall promptly inform Florida Progress and shall execute or
cause to be executed any powers of attorney or other documents necessary to
enable Florida Progress to take all actions desired by Florida Progress with
respect to such Proceeding to the extent such Proceeding may affect the amount
of Taxes for which Florida Progress is liable pursuant to this Agreement;
Florida Progress shall have the right to control any such Proceedings and to
initiate any claim for refund, file any amended return or take any other action
which it deems appropriate with respect to such taxable periods, provided,
however, that Florida Progress shall consult with Echelon with respect to any
Proceeding that may adversely affect the Echelon Group. In addition, Florida
Progress shall not enter into any final settlement or closing agreement with
respect to a matter that adversely affects Echelon without the consent of
Echelon, which consent may not be unreasonably withheld. Where Echelon withholds
its consent to any final settlement or closing agreement, Echelon shall continue
or initiate further proceedings with respect to such matter, at its own expense,
and the liability of Florida Progress shall not exceed the liability that would
have resulted from the proposed final settlement or closing agreement (including
interest, additions to tax and penalties which have accrued at that time).
Echelon shall have the right to control and to initiate any claim for refund,
file any amended return or take any other action which it deems appropriate with
respect to a Proceeding relating to Taxes for any taxable period beginning after
the Distribution Date provided such Proceeding does not involve any Taxes
attributable to any member of the Florida Progress Group.
5.2 Prior Agreements. Immediately prior to the Distribution,
Echelon shall pay to Florida Progress, on behalf of the Echelon Group, an amount
that represents Echelon Group's share of (i) Taxes due in connection with the
filing of the Old Florida Progress Consolidated Group's consolidated federal and
state income Tax Returns for all taxable periods beginning before the
Distribution Date, (ii) all state and local Income Taxes attributable to taxable
periods beginning before the Distribution Date and (iii) Other Taxes
attributable to taxable periods beginning before the Distribution Date. The
amount of this payment shall be determined under the Policy Statement. At the
time such payment is made, any member of the Echelon Group shall be deemed to
have satisfied all of its obligations under the Policy Statement.
Notwithstanding the foregoing, in consideration of the mutual indemnities and
other obligations of
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this Agreement, any and all prior tax sharing agreements or practices between
any member of the Florida Progress Group and any member of the Echelon Group,
including the Policy Statement, shall be terminated with respect to the Echelon
Group as of the date of the Distribution.
5.3 Cooperation. Florida Progress and Echelon shall cooperate
with each other in the filing of any Tax Returns and the conduct of any audit or
other proceeding and each shall execute and deliver such powers of attorney and
other documents and make available such information and documents as are
necessary to carry out the intent of this Agreement. To the extent such
cooperation requires the services of officers, directors, employees, or agents
of a party, such services shall be made available in accordance with the
Distribution Agreement and the cost of such services shall be borne by the party
requiring such services. Each party agrees to notify the other parties of any
audit adjustment that does not result in Tax liability but can reasonably be
expected to affect Tax Returns of the other parties or any of their
Subsidiaries.
5.4 Retention of Records; Access. Beginning on the
Distribution Date, Florida Progress and Echelon shall, and shall
cause each of their Subsidiaries to:
(a) retain adequate records, documents, accounting data and
other information (including computer data) necessary for the preparation and
filing of all Tax Returns required to be filed by any member of the Old Florida
Progress Consolidated Group or any combination of such members and for any
audits and litigation relating to such Tax Returns or to any Taxes payable by
any member of the Old Florida Progress Consolidated Group or any combination of
such members; and
(b) give to the other parties reasonable access to such
records, documents, accounting data and other information (including computer
data) and to its personnel and premises, for the purpose of the review or audit
of such reports or returns to the extent relevant to an obligation or liability
of a party under this Agreement and in accordance with the procedures provided
in Article VI of the Distribution Agreement. The obligations set forth in these
paragraphs 5.4(a) and 5.4(b) shall continue until the final conclusion of any
litigation to which the records and information relate or until expiration of
all applicable statutes of limitations, whichever is longer.
5.5 Dispute Resolution. Any dispute or claim arising out of,
in connection with, or in relation to the interpretation, performance,
nonperformance, validity or breach of this Agreement or otherwise arising out
of, or in any way related to this Agreement, shall be resolved in the manner set
forth in Article VIII of the Distribution Agreement.
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5.6 Confidentiality; Ownership of Information;
Privileged Information. The provisions of Section 6.5 of the Distribution
Agreement relating to confidentiality of information, ownership of information,
privileged information and related matters shall apply with equal force to any
records and information prepared and/or shared by and among the parties in
carrying out the intent of this Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Complete Agreement; Construction. This Agreement,
including the Schedules, and the Ancillary Agreements shall constitute the
entire agreement between the parties with respect to the subject matter hereof
and shall supersede all previous negotiations, commitments and writings with
respect to such subject matter. In the event of any inconsistency between this
Agreement and any Schedule hereto, the Schedule shall prevail. Notwithstanding
any other provisions in this Agreement to the contrary, in the event and to the
extent that there shall be a conflict between the provisions of this Agreement
and the provisions of any Ancillary Agreement, this Agreement shall control.
6.2 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more such counterparts have been signed
by each party and delivered to the other party.
6.3 Survival of Agreements. Except as otherwise contemplated
by this Agreement, all covenants and agreements of the parties contained in this
Agreement shall survive the Distribution Date.
6.4 Expenses. Except as otherwise set forth in this Agreement,
each party shall bear its own costs and expenses incurred after the Distribution
Date. Except as otherwise set forth in the Distribution Agreement or any
Ancillary Agreement, any amount or expense to be paid or reimbursed by any party
hereto to the other party hereto shall be so paid or reimbursed promptly after
the existence and amount of such obligation is determined and demand therefore
is made.
6.5 Notices. All notices and other communications hereunder
shall be in writing and hand delivered or mailed by registered or certified mail
(return receipt requested) or sent by any means of electronic message
transmission with delivery confirmed (by voice or otherwise) to the parties at
the following addresses (or at such other addresses for a party as shall be
specified by like notice) and will be deemed given on the date on which such
notice is received:
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To Florida Progress Corporation:
3201 34th Street South
St. Petersburg, Florida 33711
Telephone: (813) 866-5153
Telecopy: (813) 866-4881
Attn: General Counsel
To Echelon International Corporation:
One Progress Plaza
Suite 2400
St. Petersburg, Florida 33701
Telephone: (813) 824-6768
Telecopy: (813) 824-6536
Attn: Chief Executive Officer
6.6 Waivers. The failure of either party to require strict
performance by the other party of any provision in this Agreement will not waive
or diminish such party's right to demand strict performance thereafter of that
or any other provision hereof.
6.7 Amendments. Subject to the terms of Section 6.10 hereof,
this Agreement may not be modified or amended except by an agreement in writing
signed by each of the parties hereto.
6.8 Assignment. (a) This Agreement shall not be assignable, in
whole or in part, directly or indirectly, by either party hereto without the
prior written consent of the other party hereto, and any attempt to assign any
rights or obligations arising under this Agreement without such consent shall be
void.
(b) Echelon will not distribute to its stockholders any
interest in any Echelon Subsidiary, by way of a spin-off distribution, split-off
or other exchange of interests in a Echelon Subsidiary for any interest in
Echelon held by Echelon stockholders, or any similar transaction or
transactions, unless the distributed Echelon Subsidiary undertakes to Florida
Progress to be jointly and severally liable for all Echelon Liabilities
hereunder.
6.9 Successors and Assigns. The provisions to this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and permitted assigns.
6.10 Termination. This Agreement may be terminated,
amended, modified or abandoned at any time prior to the
17
Distribution by and in the sole discretion of Florida Progress without the
approval of Echelon or the stockholders of Florida Progress. In the event of
such termination, no party shall have any liability of any kind to any other
party or any other person. After the Distribution, this Agreement may not be
terminated except by an agreement in writing signed by the parties.
6.11 Subsidiaries. Each of the parties hereto shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by any Subsidiary of such party
or by any entity that is contemplated to be a Subsidiary of such party on and
after the Distribution Date.
6.12 Third Party Beneficiaries. Except as provided in Article
IV of the Distribution Agreement relating to Indemnities, this Agreement is
solely for the benefit of the parties hereto and their respective Subsidiaries
and should 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 reference to this Agreement.
6.13 Title 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.
6.14 Schedules. The Schedules shall be construed with
and as an integral part of this Agreement to the same extent as
if the same had been set forth verbatim herein.
6.15 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
FLORIDA APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE
STATE OF FLORIDA.
6.16 Consent to Jurisdiction. Without limiting the provisions
of Section 5.5 hereof, each of the parties irrevocably submits to the exclusive
jurisdiction of (a) the Circuit Court of the State of Florida, Pinellas County,
and (b) the United States District Court for the Middle District of Florida, for
the purposes of any suit, action or other proceeding arising out of this
Agreement or any transaction contemplated hereby. Each of the parties agrees to
commence any action, suit or proceeding relating hereto either in the United
States District Court for the Middle District of Florida or if such suit, action
or other proceeding may not be brought in such court for jurisdictional reasons,
in the Circuit Court of the State of Florida, Pinellas County. Each of the
parties further agrees that service of any process, summons, notice or document
by U.S. registered mail to such party's respective address set forth above shall
be effective service of process for any action, suit or proceeding in Florida
with respect to any matters to which it has submitted to jurisdiction in this
Section 6.16. Each of the parties
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irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (i) the Circuit Court of the State of Florida, Pinellas
County, or (ii) the United States District Court for the Middle District of
Florida, and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
6.17 Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed as of the day and year first above written.
FLORIDA PROGRESS CORPORATION,
a Florida corporation
By:/s/James V. Smallwood
------------------------
James V. Smallwood
Vice President and Treasurer
ECHELON INTERNATIONAL
CORPORATION,
a Florida corporation
By:/s/Darryl A. LeClair
------------------------
Darryl A. LeClair
President and Chief
Executive Officer
Schedule 2.2(c)
Tax Returns for Other Taxes whose preparation and filing will be the
responsibility of Echelon:
(i) Florida sales and use tax returns relating to the
Harborage of Bayboro; and
(ii) Florida sales and use tax returns relating to Talquin
Development Company (including operations under HEB
Partners, 100 Carillon Associates, Ltd. and Highpoint
Center Partners, Ltd.).
Schedule 3.1(c)
Other Taxes relating to any taxable periods described in Section 2.2(c) of this
Agreement for which any member of the Echelon Group has accrued a liability
either on or before the Distribution Date:
(i) Florida sales and use tax returns relating to the
Harborage of Bayboro; and
(ii) Florida sales and use tax returns relating to Talquin
Development Company (including operations under HEB
Partners, 100 Carillon Associates, Ltd. and Highpoint
Center Partners, Ltd.).