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EXHIBIT 10.17
TAX SHARING AND TAX SERVICES AGREEMENT
This Agreement is entered into the ___ day of _______, 1996, by
and among Ingram Industries Inc. ("Industries"), Ingram Entertainment Inc.
("Entertainment") and Ingram Micro Inc. ("Micro") (Entertainment and Micro are
sometimes hereinafter referred to collectively as the "Subsidiaries" and
individually as a "Subsidiary").
WHEREAS, Industries is the common parent corporation of an
affiliated group of corporations (the "Affiliated Group") within the meaning of
section 1504(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
which files consolidated federal income tax returns ("Consolidated Federal
Returns");
WHEREAS, the Subsidiaries are currently wholly- owned
subsidiaries of Industries and members of the Affiliated Group;
WHEREAS, Industries files consolidated, combined or unitary
state income tax returns (collectively, "Consolidated State Returns") in certain
states for groups of corporations which include the Subsidiaries;
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WHEREAS, Industries is distributing all of its stock in each of
the Subsidiaries to certain of the shareholders of Industries in a split-off
transaction (the "Split-off");
WHEREAS, the parties hereto desire to set forth their agreement
concerning the manner in which various matters relating to federal, state and
foreign taxes based upon income (collectively, "Income Taxes") will be handled
after the date of the Split-off;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties agree as follows:
1. Termination of Other Income Tax Sharing Agreements. Any
existing Income Tax sharing agreements or arrangements, whether written or
unwritten, between Industries and a Subsidiary are hereby terminated, and this
Agreement shall on and after the date hereof constitute the sole Income Tax
sharing agreement between Industries and each Subsidiary.
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2. Filing of Income Tax Returns and Payment of Tax Liability.
(a) Federal Income Tax Returns.
(i) Return for Affiliated Group. Industries will prepare
and file the Consolidated Federal Return for the Affiliated Group for the
taxable year which includes the date of the Split-off (the "Split-off Date").
(ii) Separate Federal Income Tax Returns. Industries shall
prepare on behalf of each Subsidiary, in consideration of a fee to be negotiated
by the parties, a separate federal income tax return for the short taxable year
of the Subsidiary which begins immediately after the Split-off Date.
(b) State Income Tax Returns.
(i) Consolidated State Income Tax Returns. Industries shall
prepare and file state income tax returns for the taxable year which includes
the Split-off Date for those states in which Consolidated State Returns are
filed.
(ii) Separate State Income Tax Returns. With respect to
those states in which a Subsidiary files a separate income tax return,
Industries shall prepare on behalf of such Subsidiary, in consideration of a fee
to be negotiated by the
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parties, an income tax return for the taxable year of the Subsidiary which
includes the Split-off Date. With respect to those states in which Consolidated
State Returns are filed in accordance with section 2(b)(i) above, Industries
shall prepare on behalf of each Subsidiary, in consideration of a fee to be
negotiated by the parties, a separate income tax return for the short taxable
year of the Subsidiary which begins immediately after the Split-off Date.
(c) In preparing the Consolidated Federal Return and any
Consolidated State Returns for the taxable period which includes the Split-off
Date, the items attributable to a Subsidiary for the portion of such taxable
period ending on the Split-off Date shall be determined by closing the books of
the Subsidiary as of the Split-off Date. All such returns shall be prepared
using the same procedures and on the same basis as returns for prior periods,
except as the parties hereto may otherwise agree.
(d) Payment of Tax.
(i) Consolidated Federal and State Returns. Within thirty
(30) days after the Consolidated Federal Return and each Consolidated State
Return for the taxable year which includes the Split-off Date is filed,
Industries shall notify each Subsidiary of the amount of the tax liability
reflected on
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such return which is allocable to such Subsidiary. Each Subsidiary shall pay to
Industries, within ten (10) days after the date of such notice, the excess of
the amount of tax liability reflected on such tax return which is allocable to
the Subsidiary over the amount previously paid by such Subsidiary to Industries
with respect to the Subsidiary's tax liability for such taxable year, together
with interest, at the intercompany rate of interest determined by Industries'
Treasury Department (the "Inter-Company Rate") for such period, on such excess
amount for the period from the date the tax return is filed until the date of
payment by the Subsidiary. In the event that the amount of tax liability
reflected on such tax return which is allocable to the Subsidiary is less than
the amount previously paid by such Subsidiary to Industries with respect to the
Subsidiary's tax liability for such taxable year, Industries shall pay such
Subsidiary the difference, together with interest at the InterCompany Rate on
such amount for the period from the date the tax return is filed until the date
of payment to the Subsidiary; provided, however, that interest shall only be
paid to the extent such Subsidiary's overpayment was used to fund an
underpayment by Industries or another Subsidiary or interest on such overpayment
was actually received from the relevant taxing authority. Industries shall
allocate the tax liability reflected on the Consolidated Federal Return and each
Consolidated State Return in accordance with the method prescribed in Treas.
Reg. Section 1.1552-1(a)(3).
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(ii) Separate Federal and State Returns. Each Subsidiary
shall be responsible for the payment of any Income Tax liability reflected on
the separate Income Tax returns prepared by Industries on behalf of such
Subsidiary pursuant to sections 2(a)(ii) and 2(b)(ii) of this Agreement.
3. Subsequent Adjustments.
(a) In the event that adjustments are made to a Consolidated
Federal Return, a Consolidated State Return or a foreign or separate state
Income Tax return of Industries or a Subsidiary for any taxable year or portion
thereof ending on or before the Split-off Date, whether by reason of an audit,
amended return or otherwise, and such adjustments result in an increase in the
Income Tax liability for such taxable period, the responsibility for the payment
of such increase in Income Tax liability and any interest, penalties, or
additions to tax imposed with respect to such increase (collectively, a
"Deficiency") shall, except as provided in section 3(b) and section 4(b) below,
be determined in the following manner:
(i) The amount of a Deficiency shall first be offset
against and reduce the amount reflected in the reserve for taxes (the "Reserve")
recorded on the books of Industries as of the Split-off Date. Industries shall
be responsible for
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payment of the amount of such Deficiency which is offset against the Reserve in
accordance with this section 3(a)(i).
(ii) To the extent that the amount of a Deficiency exceeds
the balance in the Reserve (after giving effect to any prior reduction in the
Reserve made pursuant to section 3(a)(i)), the parties hereto shall be
responsible for the payment of the amount of such excess in the following
proportions:
Industries 23.01 percent
Micro 72.84 percent
Entertainment 4.15 percent;
(iii) Provided, however, that in the event that a
Deficiency involves a timing issue and results in a decrease in income or an
increase in a deduction, credit or other tax attribute (an "Offsetting
Adjustment") for a taxable period or portion thereof beginning after the
Split-off Date, the amount of the Deficiency to be taken into account for
purposes of applying sections 3(i) and 3(ii) above shall be reduced by the
present value (using a discount rate equal to 10 percent) of the tax benefit
(based on the applicable maximum corporate tax rate in effect on the date of
such adjustment) which will result from the Offsetting Adjustment and the
Subsidiary benefitting from such Offsetting Adjustment shall pay one hundred
percent (100%) of the foregoing reduction in the Deficiency.
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(b) (i) Notwithstanding the provisions of section 3(a),if the
Split-off fails to qualify for tax-free treatment under Section 355 of the Code
as the result of the breach by one of Industries, Micro or Entertainment of a
representation or covenant contained in Section 6.2 or Section 6.3 of the
Exchange Agreement dated _____, 1996, to which Industries and the Subsidiaries
are parties, the responsibility for the payment of any resulting Deficiency
shall be borne solely by the corporation which committed such breach; and in the
event the Deficiency results from the breach by more than one of the
corporations of such representations or covenants, the responsibility for the
payment of the Deficiency shall be shared by each of the corporations which
committed such breach in the proportion which the percentage specified for such
corporation in section 3(a)(ii) bears to the sum of the percentages specified
therein for each of the corporations which committed such breach. (ii) If a
Deficiency is attributable to a transaction, other than the Split-off, which was
consummated pursuant to the Reorganization Agreement dated ___, 1996, among
Industries, Micro and Entertainment, the responsibility for the payment of such
Deficiency shall be borne 23.01 percent by Industries, 72.84 percent by Micro
and 4.15 percent by Entertainment, as determined after the application of the
procedures set forth in section 3(a)(iii), if appropriate.
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4. Refunds.
(a) In the event that a refund of Income Tax (other than a
refund attributable to a carryback of a loss or tax credit) is received by
Industries with respect to a Federal Consolidated Return or a State Consolidated
Return for any taxable year or portion thereof ending on or before the Split-off
Date, the portion of such refund which is attributable to items of a Subsidiary
shall be promptly paid by Industries to such Subsidiary, together with any
interest received on such portion; provided, however, that in the event that a
refund is received with respect to an amount of a Deficiency which was paid by
Industries or a Subsidiary in accordance with section 3(a)(i) or 3(a)(ii) above,
Industries and each Subsidiary shall be entitled to the portion of such refund,
together with interest thereon, which is the same as the proportion of the
Deficiency which was paid by such party.
(b) In the event that a Subsidiary has a net operating loss,
net capital loss or credits against tax for a taxable year beginning after the
Split-off Date which, under applicable federal or state law, may be carried back
to a Consolidated Federal Return or State Consolidated Return for a taxable
period or portion thereof of the Subsidiary which ends on or before the
Split-off Date, Industries shall pay to such Subsidiary, within 10 days of the
receipt of such refund, the amount of the Income Tax benefit actually received
by the
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Affiliated Group or the applicable state consolidated, combined or unitary
group, as the case may be, as a result of such carryback. The tax benefit
received as a result of a carryback shall be considered to be equal to the
excess of (i) the Income Taxes which would have been payable for the taxable
period to which the loss or credit is carried in the absence of such carryback
over (ii) the Income Taxes actually payable for such period after taking such
carryback into effect. In the event that any portion of a carryback is
disallowed following payment to a Subsidiary of the tax benefit received from
such carryback, the Subsidiary shall repay to Industries the amount which would
not have been payable to the Subsidiary hereunder if only the portion of the
carryback actually allowed had been taken into account.
5. Allocation of Items. In the case of an assessment or refund
which is imposed or received with respect to an Income Tax Return filed for a
taxable period that includes but does not end on the Split-off Date, the amount
of the assessment or refund which relates to the portion of the taxable period
ending on the Split-off Date shall be determined by allocating the items to
which the assessment or refund relates to the date on which such items are
properly taken into account for Income Tax purposes, and in the case of any item
which cannot be allocated to a specific date, by ratably allocating such item
between the portion of the taxable period ending on the Split-off Date and the
portion of the taxable period beginning immediately
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after the Split-off Date based on the number of days in such respective
portions.
6. Certain Changes. Following the Split-off Date, neither
Industries nor any Subsidiary shall, without the prior written consent of the
other parties to this Agreement, make or change any Income Tax election, adopt
or change any accounting method, file any amended Income Tax Return or agree to
or settle any claim, proposed adjustment or assessment if such action would
result in an increase in Income Tax liability or a reduction in any deduction,
credit loss or other Income Tax attribute for any taxable period or portion
thereof of Industries or a Subsidiary which ends on or before the Split-off
Date.
7. Deductions Related to Options. It is agreed by the parties
that where an option to purchase stock of Industries which is held by an
employee of Industries or Entertainment is converted in connection with the
Split-off into an option to purchase stock of Micro, and Micro issues its stock
to such employee pursuant to the exercise of the converted option, then, to the
extent that Industries or Entertainment is entitled to an Income Tax deduction
for the amount of compensation which results to the employee from exercise of
the converted option, Industries or Entertainment shall pay to Micro the amount
of the tax benefit received by such corporation from the compensation deduction.
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8. Contests. Industries shall have the right to control any
audit, administrative or judicial proceeding involving a claim, proposed
adjustment, assessment or other contest with respect to a Consolidated Federal
Return, Consolidated State Return, or a separate Income Tax return filed by
Industries or a Subsidiary for any taxable period or portion thereof ending on
or prior to the Split-off Date, and Industries shall have the right to determine
when to settle such claim, adjustment, assessment or contest; provided, however,
that Industries shall consult with a Subsidiary regarding any such proceeding to
the extent that such proceeding may affect the tax liability of such Subsidiary
for a taxable period or portion thereof beginning after the Split-off Date and
shall obtain the consent of a Subsidiary, which consent shall not be
unreasonably withheld, to any proposed settlement if such settlement would
increase the tax liability of such Subsidiary for a taxable period of portion
thereof beginning after the Split-off Date. The legal fees and other expenses
incurred by Industries in connection with any such proceeding shall be borne
23.01 percent by Industries, 72.84 percent by Micro and 4.15 percent by
Entertainment. Industries shall allow a Subsidiary and its counsel to
participate in any such proceeding to the extent that the proceeding relates to
such Subsidiary, and the legal fees and other expenses incurred by a Subsidiary
in this regard shall be borne by the parties in the same proportions set forth
in the immediately preceding sentence.
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9. Cooperation and Assistance. Industries and each Subsidiary
agree to provide each other with such cooperation and information as either of
them may reasonably request in connection with the preparation of Income Tax
returns, amended returns, claims for refunds or other income tax filings or the
conduct of any audit, administrative or judicial proceeding relating to Income
Taxes. The parties further agree to retain all books, records, documents,
accounting data or other information which relate to Income Tax returns for
taxable periods ending on or prior to or which include the Split-off Date, until
the expiration of the applicable statute of limitations (giving effect to any
extension, waiver or mitigation thereof).
10. Governing Law. This Agreement shall be construed under and
governed by the laws of the State of Tennessee.
11. Headings. The headings contained in this Agreement are for
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.
12. Entire Agreement; Amendment; Waiver. This Agreement
constitutes the entire agreement between the parties with respect to the subject
matter hereof and may not be altered or amended except in writing signed by the
parties. The failure
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of a party hereto at any time to require the performance of any provision
hereunder shall in no manner affect the right to enforce the same. No waiver by
either party hereto of any condition, or of the breach of any provision of this
Agreement shall be deemed or construed as a further or continuing waiver of any
such condition or of the breach of any other provision herein contained.
13. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. This Agreement shall not be construed so as
to benefit any person other than the parties hereto and such successors and
assigns.
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement on the date first written above.
INGRAM INDUSTRIES INC.
By:_______________________
Title:____________________
INGRAM ENTERTAINMENT INC.
By:_______________________
Title:____________________
INGRAM MICRO HOLDINGS INC.
By:_______________________
Title:____________________
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