EXHIBIT 10.17
(EXECUTION COPY)
TAX SHARING AGREEMENT
BY AND AMONG
CENTEX CORPORATION
AND ITS AFFILIATES
AND
CAVCO INDUSTRIES, INC.
Dated June 30, 2003
This TAX SHARING AGREEMENT (the "Agreement") dated as of June 30, 2003,
by and among Centex Corporation ("Centex"), a Nevada corporation and each Centex
Affiliate (as defined below), and Cavco Industries, Inc. ("Cavco"), a newly
formed Delaware corporation and indirect, wholly owned subsidiary of Centex, is
entered into in connection with the Distribution (as defined below).
RECITALS
WHEREAS, the Centex Board of Directors has determined, subject to
certain conditions, that it is appropriate and desirable to make a pro rata
distribution of one hundred percent (100%) of the stock of Cavco to its common
shareholders, with cash distributed in lieu of any fractional shares of Cavco,
on the Distribution Date, as defined below (the "Public Distribution"); and
WHEREAS, in order to consummate the Public Distribution, it is
necessary and desirable for AAA Holdings, Inc. ("AAA"), a Delaware corporation
and currently the direct parent of Cavco Industries, LLC ("Cavco LLC") to form
Cavco and to then merge Cavco LLC with and into Cavco (the "Merger"); and
WHEREAS, in order to consummate the Public Distribution, it is
necessary and desirable for AAA to make a pro rata distribution of one hundred
percent (100%) of the stock of Cavco to its sole shareholder, Centex Real Estate
Corporation ("CREC") (the "Internal Distribution 1"); and
WHEREAS, in order to consummate the Public Distribution, it is
necessary and desirable for CREC to make a pro rata distribution of one hundred
percent (100%) of the stock of Cavco to its sole shareholder, Centex
International, Inc. ("International") (the "Internal Distribution 2"); and
WHEREAS, in order to consummate the Public Distribution, it is
necessary and desirable for International to make a pro rata distribution of one
hundred percent (100%) of the stock of Cavco to its sole shareholder, Centex
(the "Internal Distribution 3"); and
WHEREAS, the Merger is intended to qualify as a reorganization under
section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the Public Distribution and Internal Distributions 1 through 3
(collectively the "Internal Distributions") are intended to qualify as tax free
distributions under Code section 355; and
WHEREAS, it is appropriate and desirable to set forth the principles
and responsibilities of the parties to this Agreement regarding the allocation
of Tax (as defined below) and other related liabilities and adjustments with
respect to Taxes, Tax contests and other related Tax matters; and
WHEREAS, to that end, the parties wish to enter into this Tax Sharing
Agreement;
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1
DEFINITIONS
"Audit" includes any audit, assessment of Taxes, other examination by
any Tax Authority, proceeding, or appeal of such a proceeding relating to Taxes,
whether administrative or judicial.
"Centex Affiliate" means any corporation or other entity directly or
indirectly controlled by Centex, excluding Cavco.
"Centex Group" means the affiliated group of corporations as defined in
Section 1504 (a) of the Code, or similar group of entities as defined under
corresponding provisions of the laws of other jurisdictions, of which Centex is
the common parent, and any corporation or other entity which may be, may have
been or may become a member of such group from time to time, but excluding
Cavco.
"Combined Group" means a group of corporations or other entities that
files a Combined Return.
"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 Cavco joins in the filing of such
Tax Return (for any taxable period or portion thereof) with Centex or one or
more Centex Affiliates.
"Consolidated Group" means an affiliated group of corporations within
the meaning of Section 1504 (a) of the Code that files a Consolidated Return.
2
"Consolidated Return" means any Tax Return with respect to Federal
Income Taxes filed on a consolidated basis wherein Cavco joins in the filing of
such Tax Return (for any taxable period or portion thereof) with Centex or one
or more Centex Affiliates.
"Distribution" means the Internal Distributions and/or the Public
Distribution.
"Distribution Date" means the close of business on the date on which
the Public Distribution is effected.
"Federal Income Tax" 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),
and any interest, additions to Tax or penalties applicable or related thereto,
and any other income-based United States federal Tax which is hereinafter
imposed upon corporations.
"Federal Tax" means any Tax imposed or required to be withheld by any
Tax Authority of the United States.
"Final Determination" means any of (a) the final resolution of any Tax
(or other matter) for a taxable period, including related interest or penalties,
that, under applicable law, is not subject to further appeal, review or
modification through proceedings or otherwise, including (1) by the expiration
of a statute of limitations or a period for the filing of claims for refunds,
amending Tax Returns, appealing from adverse determinations, or recovering any
refund (including by offset), (2) by a decision, judgment, decree, or other
order by a court of competent jurisdiction, which has become final and
unappealable, (3) by 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) by execution of an Internal Revenue Service Form 870 or
870AD, or by a comparable form under the laws of other jurisdictions (excluding,
however, with respect to a particular Tax Item for a particular taxable period
any such form that reserves (whether by its terms or by operation of law) the
right of the taxpayer to file a claim for refund and/or the right of the Tax
Authority to assert a further deficiency with respect to such Tax Item for such
period), or (5) by 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 Tax Item disallowed or
adjusted by a Tax Authority provided that Centex determines that no action
should be taken to recoup such payment.
"Income Taxes" means (a) any Tax based upon, measured by, or calculated
with respect to (1) net income or profits (including any capital gains Tax,
minimum Tax and any Tax on items of Tax preference, but not including sales,
use, real or personal property, gross or net receipts, transfer or similar
Taxes) or (2) multiple bases if one or more of the bases upon which such Tax may
be based, measured by, or calculated with respect to, is described in clause (1)
above, or (b) any U.S. state or local franchise Tax.
"Interest Accrual Period" has the meaning set forth in Section 6.4 of
this Agreement.
3
"Non-Federal Combined Tax" means any Non-Federal Tax with respect to
which a Combined Return is filed.
"Non-Federal Separate Tax" means any Non-Federal Tax other than a
Non-Federal Combined Tax.
"Non-Federal Tax" means any Tax other than a Federal Tax.
"Payment Period" has the meaning set forth in Section 5.3 of this
Agreement.
"Post-Distribution Period" means a taxable period beginning after the
Distribution Date.
"Pre-Distribution Period" means a taxable period beginning on or before
the Distribution Date.
"Privilege" means any privilege that may be asserted under applicable
law including, any privilege arising under or relating to the attorney-client
relationship (including the attorney-client and work product privileges), the
accountant-client privilege, and any privilege relating to internal evaluation
processes.
"Restructuring Tax" means any Tax imposed upon Centex or a Centex
Affiliate and reasonable professional fees that are attributable to, or result
from, the failure of the Distribution to qualify under Section 355 of the Code
(including any Tax attributable to the application of Section 355(e) or Section
355(f) of the Code to the Distribution) or corresponding provisions of the laws
of other jurisdictions. Each Tax referred to in the preceding sentence shall be
determined using the highest marginal corporate Tax rate for the relevant
taxable period (or any portion thereof). For the avoidance of doubt,
Restructuring Tax does not include an amount described in this paragraph that is
imposed upon a shareholder of Centex in its capacity as a shareholder of Centex.
"Ruling Documents" means (a) the request for a ruling under Section 355
and various other sections of the Code, filed with the Service on November 5,
2002, together with any supplemental filings or ruling requests or other
materials subsequently submitted on behalf of Centex, its subsidiaries and
shareholders to the Service, the appendices and exhibits thereto, and any
rulings issued by the Service to Centex (or any Centex Affiliate) in connection
with the Distribution or (b) any similar filings submitted to, or rulings issued
by, any other Tax Authority in connection with the Distribution.
"Separate Return" means any Tax Return with respect to Non-Federal
Separate Taxes filed by Centex, Cavco, or any of their respective affiliates.
"Service" means the Internal Revenue Service.
"Tax" means any charges, fees, levies, imposts, duties, or other
assessments of a similar nature, including income, alternative or add-on
minimum, gross receipts, profits, lease, service, service use, wage, wage
withholding, employment, workers compensation, business occupation,
4
occupation, premiums, environmental, estimated, excise, employment, sales, use,
transfer, license, payroll, franchise, severance, stamp, occupation, windfall
profits, withholding, social security, unemployment, disability, ad valorem,
estimated, 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 Tax Authority including any interest,
additions to tax, or penalties applicable or related thereto.
"Tax Authority" means governmental authority or any subdivision,
agency, commission or authority thereof or any quasi-governmental or private
body having jurisdiction over the assessment, determination, collection or
imposition of any Tax (including the Service).
"Tax Item" means any item of income, gain, loss, deduction or credit,
or other attribute that may have the effect of increasing or decreasing any Tax.
"Tax Return" means any return, report, certificate, form or similar
statement or document (including, any related or supporting information or
schedule attached thereto and any information return, amended tax return, claim
for refund or declaration of estimated tax) required to be supplied to, or filed
with, a Tax Authority in connection with the determination, assessment or
collection of any Tax or the administration of any laws, regulations or
administrative requirements relating to any Tax.
ARTICLE 2
PREPARATION AND FILING OF TAX RETURNS
2.1 In General.
(a) Centex shall have the sole and exclusive responsibility for
the preparation and filing of the following Tax Returns: (1)
all Consolidated Returns for any Pre-Distribution Period, (2)
all Combined Returns for any Pre-Distribution Period, and (3)
any Separate Return for any Pre-Distribution Period beginning
before and ending on or before the Distribution Date
(specifically including, but not limited to, any Texas
franchise tax returns for the fiscal year ending March 31,
2003).
(b) Except as provided in Section 2.1(a) of this Agreement, Cavco
shall have the sole and exclusive responsibility for the
preparation and filing of all other Tax Returns for Cavco (or
which relate to its businesses, assets or activities) which
are required to be filed for any Pre-Distribution Period
(including (i) any Pre-Distribution Period beginning before
and ending on or before the Distribution Date and (ii) any
Pre-Distribution Period beginning before and ending after the
Distribution Date) and any Post-Distribution Period.
2.2 Manner of Filing Tax Returns.
(a) All Tax Returns filed after the date of this Agreement by
Centex, any Centex Affiliate, or Cavco shall be
5
(1) prepared in a manner that is consistent with the
Ruling Documents, and
(2) filed on a timely basis (including extensions) by the
party responsible for such filing under Section 2.1
of this Agreement.
(b) Centex and Cavco agree to file all Tax Returns for any
Pre-Distribution Period, as provided for in Section 2.1, and
to take all other actions in a manner consistent with the
position that Cavco is part of any Consolidated Group and any
Combined Group for all days through and including the
Distribution Date.
(c) Except as otherwise provided in this Section 2.2, Centex shall
have the exclusive right, in its sole discretion, with respect
to any Tax Return described in Section 2.1(a) of this
Agreement to determine:
(1) the manner in which such Tax Return shall be prepared
and filed, including the elections, methods of
accounting, positions, conventions and principles of
taxation to be used and the manner in which any Tax
Item shall be reported;
(2) whether any extensions maybe requested;
(3) the elections that will be made by Centex, any Centex
Affiliate, and Cavco in such Tax Return;
(4) whether any amended Tax Returns shall be filed;
(5) whether any claims for refund shall be made;
(6) whether any refunds shall be paid by way of refund or
credited against any liability for the related Tax;
and
(7) whether to retain outside specialists to prepare such
Tax Return, whom to retain for such purpose and the
scope of any such retainer.
(d) In the event that a Tax Item is includable in a Tax Return
described in Section 2.1(a) of this Agreement and also in a
Tax Return described in Section 2.1(b) of this Agreement that
is filed after the date of this Agreement, Cavco preparing, or
causing the preparation of, such Tax Return under Section
2.1(b) of this Agreement shall conform the treatment of such
Tax Item in such Tax Return described in Section 2.1(b) of
this Agreement to the treatment of such Tax Item in the
applicable Tax Return described in Section 2.1(a) of this
Agreement.
(e) Any Tax Return described in (1) Section 2.1(a) of this
Agreement (but only with respect to Tax Items of Cavco) or (2)
Section 2.1(b) of this Agreement in either case which Tax
Return is filed after the date of this Agreement, shall be
prepared on
6
a basis consistent with the elections, methods of accounting,
positions, conventions and principles of taxation and the
manner in which any Tax Item or other information is reported
as reflected on the most recently filed Tax Returns involving
similar matters. The preceding sentence shall not apply (1) to
the extent otherwise required by Section 2.2(a)(1) of this
Agreement or (2) if (i) Cavco obtains Centex's prior written
consent (which consent shall not be unreasonably withheld),
(ii) there has been a controlling change in law or
circumstances, or (iii) the failure to be consistent will not
result in an increased Tax liability to, or reduction in a Tax
Asset of, Centex or any Centex Affiliate with respect to a
Pre-Distribution Period, not fully compensated by Cavco. For
purposes of this Section 2.2(e), a controlling change in law
or circumstances includes, with respect to Post-Distribution
Periods (but not Pre-Distribution Periods), permission to
change a method of accounting granted by the relevant Tax
Authority.
2.3 Agent. Cavco hereby irrevocably designates Centex as its sole and
exclusive agent and attorney-in-fact to take such action (including
execution of documents) as Centex, in its sole discretion, may deem
appropriate in any and all matters (including Audits) relating to any
Tax Return described in Section 2.1(a) of this Agreement.
2.4 Provision of Tax Return Information.
(a) Both Cavco and Centex agree to provide all documents and
information, and to make available their employees and
officers, as may be reasonably requested by either party to
prepare any Tax Return described in Section 2.1 of this
Agreement.
(b) In the case of any Tax Return described in Section 2.1(a) that
is filed after the date of this Agreement, Centex shall, upon
request of Cavco, provide Cavco a copy of each such Tax Return
and all related Tax accounting work papers to the extent that
they relate to Cavco.
(c) In the case of any Tax Return in Centex's possession that was
filed before the date of this Agreement, Centex shall, upon
request of Cavco, provide Cavco a copy of each such Tax Return
and all related Tax accounting work papers to the extent that
they relate to Cavco.
(d) Notwithstanding any other provision of this Agreement, no
member of the Centex Group shall be required to provide Cavco
access to or copies of:
(1) any information that relates to any member of the
Centex Group,
(2) any information as to which any member of the Centex
Group is entitled to assert the protection of any
Privilege, or
(3) any information as to which any member of the Centex
Group is subject to an obligation to maintain the
confidentiality of such information.
7
Centex shall use reasonable efforts to separate any such
information from any other information to which Cavco is
entitled to access or to which Cavco is entitled to copy under
this Agreement, to the extent consistent with preserving its
rights under this Section 2.4(d).
ARTICLE 3
TAX SHARING AND PAYMENT OF TAXES
3.1 Cavco Liability for Payment of Taxes. Cavco shall pay to the
appropriate Tax Authorities all Taxes due and payable for all
Pre-Distribution Periods and all Post-Distribution Periods for which it
is responsible for filing any Tax Return pursuant to Section 2.1(b).
Cavco shall also provide Centex a check made payable to the appropriate
Tax Authority for all Taxes due and payable for any Pre-Distribution
Period for which Centex is responsible for filing any Separate Return
pursuant to Section 2.1(a)(3). Cavco shall deliver such check to Centex
within 5 days of Centex's request for such payment.
3.2 Centex Liability for Payment of Taxes. Except as provided in
Section 3.1 (with respect to Cavco's payment of any Tax that may be due
of a Separate Return filed by Centex pursuant to Section 2.1 (a)(3)),
Centex shall pay to the appropriate Tax Authorities all Taxes due and
payable for all Pre-Distribution Periods for which it is responsible
for filing any Tax Return pursuant to Section 2.1.
3.3 Additional Liability Allocation. Except with respect to any
Restructuring Tax, Cavco shall have no further liability to Centex for
any Taxes for any Pre-Distribution Period for which Centex is
responsible for filing any Tax Return pursuant to Section 2.1(a)(1) and
2.1(a)(2).
ARTICLE 4
DECONSOLIDATION
4.1 Distribution Related Items.
(a) Restrictions on Certain Post-Distribution Actions.
(1) Cavco Restrictions. Cavco covenants to Centex that it
will not take or fail to take any action where such
action or failure to act would cause the Merger and
Distribution to fail to qualify under Sections 355(a)
and 368(a)(1)(D) of the Code or any corresponding
provisions of state or local law. Without limiting
the foregoing, Cavco covenants to Centex that: (i)
during the two-year period following the Distribution
Date, Cavco will not liquidate, merge or consolidate
with any other person; (ii) during the two-year
period following the Distribution Date, Cavco will
not sell, exchange, or distribute or otherwise
dispose of all or a substantial portion of its assets
except in the ordinary course of business; (iii)
during the two-year period following the Distribution
Date, Cavco will continue the active conduct of the
historic business as transferred to it in the Merger;
(iv) Cavco will not take any action inconsistent with
the information and representations in the Ruling
8
Documents; (v) Cavco will not repurchase stock of
Cavco in a manner contrary to the requirements of
Section 4.05(1)(b) of Revenue Procedure 96-30 or in a
manner contrary to the representations made in the
Ruling Documents; and (vi) Cavco will not enter into
any negotiations, agreements or arrangements with
respect to any of the foregoing.
(2) Centex Restrictions. Centex covenants to Cavco that
it will not take or fail to take any action where
such action or failure to act would cause the Merger
and Distribution to fail to qualify under Sections
355(a) and 368(a)(1)(D) of the Code or any
corresponding provisions of state or local law.
(b) Liability for Undertaking Certain Actions.
(1) Cavco Liability. Cavco shall be responsible for one
hundred percent (100%) of any Restructuring Taxes
that are attributable to, or result from, any act or
failure to act described in Section 4.1(a)(1) of this
Agreement by Cavco. Cavco shall indemnify Centex,
each Centex Affiliate and their directors, officers
and employees and hold them harmless from and against
any such Restructuring Taxes.
(2) Centex Liability. Centex and each Centex Affiliate
shall be responsible for one hundred percent (100%)
of any Restructuring Taxes that are attributable to,
or result from, any act or failure to act described
in Section 4.1(a)(2) of this Agreement by Centex or
any Centex Affiliate. Centex and each Centex
Affiliate shall jointly and severally indemnify Cavco
and their directors, officers and employees and hold
them harmless from and against any such Restructuring
Tax.
(c) Information. Centex has provided Cavco with copies of the
Ruling Documents submitted on or prior to the date hereof, and
shall provide Cavco with copies of any additional Ruling
Documents prepared after the date hereof prior to the
submission of such Ruling Documents to a Tax Authority.
(d) Liability for Breach of Representation. Each of Centex and
Cavco hereby represents that (1) it has read the Ruling
Documents submitted on or prior to the date hereof, (2) all
information contained in such Ruling Documents that concerns
or relates to such party or any affiliate of such party, other
than information which is provided by an external expert, is
true, correct and complete in all material respects, and (3)
except to the extent that such party shall have notified the
other party in writing to the contrary and with reasonable
specificity prior to the Distribution Date, all such
information that concerns or relates to such party or any
affiliate of such party, other than information which is
provided by an external expert, is and will be true, correct
and complete in all material respects as of the Distribution
Date.
9
Cavco acknowledges and agrees that the term "Ruling
Documents," whenever used in this Agreement, includes all
filings or ruling requests or other materials, appendices and
exhibits submitted after the date hereof to the Service or any
Tax Authority in connection with the Distribution and provided
by Centex to Cavco under Section 4.1 of this Agreement.
If any Tax Authority withdraws any portion of a ruling issued
to Centex in connection with the Distribution because of a
breach by Cavco of a representation made in this Section 4.1,
Cavco shall be responsible for one hundred percent (100%) of
any Restructuring Taxes. In such event, Cavco shall indemnify
Centex, each Centex Affiliate and their directors, officers
and employees and hold them harmless from and against any
Restructuring Taxes. If any Tax Authority withdraws any
portion of a ruling issued to Centex in connection with the
Distribution because of a breach by Centex or any Centex
Affiliate of a representation made in this Section 4.1, Centex
and each Centex Affiliate shall be responsible for one hundred
percent (100%) of any Restructuring Taxes. In such event,
Centex and each Centex Affiliate shall jointly and severally
indemnify Cavco and its directors, officers and employees and
hold them harmless from and against any Restructuring Taxes.
(e) Payment. Cavco shall make or cause to be made all payments for
which it may be liable under this Section 4.1. Such payments
shall be made to Centex or to the appropriate Tax Authority as
specified by Centex no later than five (5) days after delivery
by Centex to Cavco of written notice of a payment by or
liability of Centex (or a Centex Affiliate or a director,
officer or employee) based on a Final Determination, together
with a computation of the amounts due.
4.2 Information for Shareholders. Centex shall provide each shareholder
that receives stock of Cavco pursuant to the Public Distribution with
the information necessary for such shareholder to comply with the
requirements of Section 355 of the Code and the Treasury regulations
thereunder with respect to statements that such shareholders must file
with their Federal Income Tax Returns demonstrating the applicability
of Section 355 of the Code to the Public Distribution.
4.3 Special Indemnification. Centex expressly agrees to indemnify Cavco for
any Federal Income Tax with respect to any Consolidated Return for
which Centex is responsible for filing pursuant to Section 2.1(a)(l) in
the event that Cavco is liable to the Service for any such Federal
Income Tax pursuant to Treasury Regulation section 1.1502-6.
ARTICLE 5
ADDITIONAL OBLIGATIONS
5.1 Provision of Information.
(a) Cavco shall furnish to Centex in a timely manner such
information and documents as Centex may reasonably request for
purposes of (1) preparing any Tax Return for
10
which Centex has filing responsibility under this Agreement,
(2) contesting or defending any Audit, and (3) making any
determination or computation necessary or appropriate under
this Agreement.
(b) Cavco shall make its employees available to provide
explanations of documents and other materials and such other
information as Centex may reasonably request in connection
with any of the foregoing.
(c) Cavco shall cooperate in any Audit of any Consolidated Return
or Combined Return.
(d) Cavco shall 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.
(e) Cavco shall take such action as Centex may reasonably deem
appropriate in connection with the provision of information
under this Section 5.1.
5.2 Indemnification.
(a) Failure to Pay. Centex and each Centex Affiliate shall jointly
and severally indemnify Cavco and its respective directors,
officers and employees, and hold them harmless from and
against any loss, cost, damage or expense, including
reasonable attorneys' fees and costs, that is attributable to,
or results from the failure of Centex, any Centex Affiliate or
any director, officer or employee to make any payment required
to be made under this Agreement. Cavco shall indemnify Centex,
each Centex Affiliate and their respective directors, officers
and employees, and hold them harmless from and against any
loss, cost, damage or expense, including reasonable attorneys'
fees and costs, that is attributable to, or results from, the
failure of Cavco or any director, officer or employee to make
any payment required to be made under this Agreement.
(b) Inaccurate or Incomplete Information. Centex and each Centex
Affiliate shall jointly and severally indemnify Cavco and
their respective directors, officers and employees, and hold
them harmless from and against any cost, fine, penalty, or
other expense of any kind attributable to the negligence of
Centex or any Centex Affiliate in supplying Cavco with
inaccurate or incomplete information, in connection with the
preparation of any Tax Return. Cavco shall indemnify Centex,
each Centex Affiliate and their respective directors, officers
and employees, and hold them harmless from and against any
cost, fine, penalty, or other expenses of any kind
attributable to the negligence of Cavco in supplying Centex or
any Centex Affiliate with inaccurate or incomplete
information, in connection with the preparation of any Tax
Return.
11
5.3 Interest. Payments pursuant to this Agreement that are not made within
the period prescribed in this Agreement or, if no period is prescribed,
within thirty (30) days after demand for payment is made (the "Payment
Period") shall bear interest for the period from and including the date
immediately following the last date of the Payment Period through and
including the date of payment (the "Interest Accrual Period") at a per
annum rate equal to Cavco's weighted average interest rate for debt
capital for each year, or part thereof, included in the Interest
Accrual Period plus 50 basis points. Such interest will be payable at
the same time as the payment to which it relates and shall be
calculated on the basis of a year of 365 days and the actual number of
days for which due.
ARTICLE 6
AUDITS
6.1 In General.
(a) Centex shall have the exclusive right, in its sole discretion,
to control, contest, and represent the interests of Centex,
any Centex Affiliate, or Cavco in any Audit relating to any
Tax Return described in Section 2.1(a)(1) or 2.1(a)(2) of this
Agreement and to resolve, settle or agree to any deficiency,
claim or adjustment proposed, asserted or assessed in
connection with or as a result of any such Audit.
(b) Cavco shall have the exclusive right, in its sole discretion,
to control, contest, and represent the interests of Cavco in
any Audit relating to any Tax Return described in Section
2.1(b) or Section 2.1(a)(3) of this Agreement and to resolve,
settle, or agree to any deficiency, claim or adjustment
proposed, asserted or assessed in connection with or as a
result of any such Audit
(c) After the Distribution Date, Centex and Cavco shall cooperate
in order to transfer to Cavco the exclusive right to control,
contest and represent the interests of Cavco in any Audit and
to resolve, settle, or agree to any deficiency, claim or
adjustment proposed, asserted or assessed in connection with
or as a result of any such Audit in each case relating to all
Separate Returns of Cavco relating to Non-Federal Separate
Taxes.
6.2 Notice. If after the Distribution Date, Centex or any member of the
Centex Group receives written notice of, or relating to, an Audit from
a Tax Authority that asserts, proposes or recommends a deficiency,
claim or adjustment that, if sustained, would result in any
Restructuring Taxes for which Cavco could be responsible under this
Agreement, Centex shall notify Cavco in writing of such deficiency,
claim or adjustment within ten (10) days of its receipt. If Cavco
receives written notice of or relating to an audit from a Tax Authority
with respect to a Tax Return described in Section 2.1(a)(1) or 2.1
(a)(2) of this Agreement, Cavco shall provide a copy of such notice to
Centex within ten (10) days of receiving such notice of such Audit, but
in no case later than thirty (30) days before a response is required to
be provided to the relevant Tax Authority.
12
6.3 Participation Rights
(a) If a Tax Authority asserts, proposes or recommends a
deficiency, claim or adjustment that, if sustained, would
result in Restructuring Taxes for which Cavco could be
responsible under this Agreement, and Cavco acknowledges in
writing to Centex that, as between Cavco and Centex, Cavco
shall be responsible for one hundred percent (100%) of any
such Restructuring Taxes that are determined pursuant to a
Final Determination, then (1) Centex shall take all actions
requested by Cavco to contest such deficiency, claim or
adjustment, including administrative and judicial proceedings;
(2) Cavco shall have the right to fully participate with
respect to such deficiency, claim or adjustment and related
proceedings and Centex shall accept all reasonable suggestions
by Cavco in connection with the management and substance of
such proceedings, and (3) in no event shall Centex settle or
compromise any such deficiency, claim or adjustment without
the written consent of Cavco.
(b) If a Tax Authority asserts, proposes or recommends a
deficiency, claim or adjustment that, if sustained, would
result in Restructuring Taxes for which Cavco could be
responsible under this Agreement and has not admitted
liability for such Restructuring Taxes pursuant to Section
6.3(a):
(1) Centex shall keep Cavco informed in a timely manner
of all material actions taken or proposed to be taken
by Centex in connection with such deficiency, claim
or adjustment;
(2) Centex shall reasonably consider any comments that
Cavco makes with respect to the handling of the case
and provide Cavco an opportunity to attend any
meetings with the Tax Authority; and
(3) Centex shall have no obligation to appeal a
determination of any Tax Authority in any judicial
forum.
6.4 Failure to Notify, Etc. The failure of Centex promptly to notify Cavco
of any matter relating to a particular Tax for a taxable period or to
take any action specified in Section 6.3 of this Agreement shall not
relieve Cavco of any liability and/or obligation which it may have to
Centex or any Centex Affiliate under this Agreement with respect to
such Restructuring Taxes except to the extent that Cavco's rights
hereunder are materially prejudiced by such failure and in no event
shall such failure relieve Cavco of any other liability and/or
obligation which it may have to Centex or any Centex Affiliate.
13
ARTICLE 7
DISPUTE RESOLUTION
7.1 Governed by Distribution Agreement. Any dispute arising out of or
relating to this Agreement, including the breach or termination hereof,
shall be resolved in accordance with the procedures specified in
Article 8 of that certain Distribution Agreement between Centex and
Cavco dated as of May 30, 2003 to which this Agreement is attached as
an exhibit.
ARTICLE 8
MISCELLANEOUS
8.1 Effectiveness. This Agreement shall become effective upon execution by
both parties hereto.
8.2 Notices. Any notice, request, instruction or other document to be given
or delivered under this Agreement by any party to another party shall
be in writing and shall be deemed to have been duly given or delivered
when (1) delivered in person, (2) sent by facsimile, (3) deposited in
the United States mail, postage prepaid and sent certified mail, return
receipt requested, or (4) delivered to Federal Express or similar
service for overnight delivery to the address of the party set forth
below.
If to Centex or any Centex Affiliate, to:
Centex Corporation
2728 North Harwood
Dallas, Texas 75201
Fax No.: (214) 981-6080
Attention: Michael Albright
With copy to:
Centex Corporation
2728 North Harwood
Dallas, TX 75201
Fax. No.: (214) 981-6855
Attention: General Counsel
If to Cavco:
Cavco Industries, Inc.
1001 North Central Avenue
Suite 800
Phoenix, Arizona 85004
Fax No.: (602) 256-6189
Attention: Chief Executive Officer
14
Any party may, by written notice to the other parties, change the
address or the party to which any notice, request, instruction or other
document (or any copy thereof) is to be delivered.
8.3 Changes in Law. Any reference to a provision of the Code or a law of
another jurisdiction shall include a reference to any applicable
successor provision or law.
8.4 Confidentiality. Each party shall hold and cause its directors,
officers, employees, 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 (1) previously known by the party to which it was
furnished, (2) in the public domain through no fault of such party, or
(3) later lawfully acquired from other sources not under a duty of
confidentiality by the party to which it was furnished), and each party
shall not release or disclose such information to any other person,
except its directors, officers, employees, auditors, attorneys,
financial advisors, bankers and other consultants who shall be advised
of and agree to be bound by the provisions of this Section 9.4. 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.
8.5 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, to the same extent as if such successor had been
an original party.
8.6 Affiliates. Centex shall cause to be performed, and hereby guarantees
the performance of, all actions, agreements and obligations set forth
herein to be performed by a Centex Affiliate; provided, however, that
if a Centex Affiliate ceases to be a Centex Affiliate as a result of a
transfer of its stock or other ownership interests to a third party in
exchange for consideration in an amount approximately equal to the fair
market value of the stock or other ownership interests transferred and
such consideration is not distributed outside of the Centex Group to
the shareholders of Centex then Cavco shall, upon request, execute a
release of such Centex Affiliate from its obligations under this
Agreement upon such transfer provided that such Centex Affiliate shall
have executed a release of any rights it may have against Cavco or any
Cavco Affiliate by reason of this Agreement.
8.7 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.
15
8.8 Entire Agreement. This Agreement contains the entire agreement among
the parties hereto with respect to the subject matter hereof and amends
and restates all prior Tax sharing agreements between Centex or any
Centex Affiliate and Cavco and such prior tax sharing agreements shall
have no further force and effect.
8.9 Section Captions. Section captions used in this Agreement are for
convenience and reference only and shall not affect the construction of
this Agreement.
8.10 Governing Law. This Agreement shall be governed by and construed in
accordance with laws of the State of Texas without giving effect to
laws and principles relating to conflicts of law.
8.11 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.
8.12 Severability. If any term, provision, covenant, or restriction of this
Agreement is held by a court of competent jurisdiction (or an
arbitrator or arbitration panel) to be invalid, void, or unenforceable,
the remainder of the terms, provisions, covenants, and restrictions set
forth herein shall remain in full force and effect, and shall in no way
be affected, impaired, or invalidated. It is hereby stipulated and
declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants, and restrictions
without including any of such which may be hereafter declared invalid,
void, or unenforceable. In the event that any such term, provision,
covenant or restriction is held to be invalid, void or unenforceable,
the parties hereto shall use their best efforts to find and employ an
alternate means to achieve the same or substantially the same result as
that contemplated by such terms, provisions, covenant, or restriction.
8.13 No Third Party Beneficiaries. This Agreement is solely for the benefit
of Centex, the Centex Affiliates, and Cavco. This Agreement 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.
8.14 Waivers, Etc. No failure or delay on the part of the parties in
exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such
right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. No modification or waiver of any
provision of this Agreement nor consent to any departure by the parties
therefrom shall in any event be effective unless the same shall be in
writing, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given.
8.15 Setoff. All payments to be made by any party under this Agreement shall
be made without setoff, counterclaim, or withholding, all of which are
expressly waived.
16
8.16 Change of Law. If, due to any change in applicable law or regulations
or their interpretation by any court of law or other governing body
having jurisdiction subsequent to the date of this Agreement,
performance of any provision of this Agreement or any transaction
contemplated thereby shall become impracticable or impossible, the
parties hereto shall use their commercially reasonable efforts to find
and employ an alternative means to achieve the same or substantially
the same result as that contemplated by such provision.
[Signature Page Follows.]
17
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.
CENTEX CORPORATION, on behalf of itself
and its affiliates
By /s/ MICHAEL ALBRIGHT
Name: Michael Albright
---------------------------------
Title: Senior Vice President
--------------------------------
CAVCO INDUSTRIES, INC.
By /s/ JOSEPH H. STEGMAYER
Name: Joseph H. Stegmayer
---------------------------------
Title: President and C.E.O.
--------------------------------
18