EXHIBIT 10.4
EXECUTION COPY
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TAX SHARING AGREEMENT
Dated as of July 23, 1996
by and between
LOCKHEED MARTIN CORPORATION,
a Maryland corporation
and
CALCOMP TECHNOLOGY, INC.,
a Delaware corporation
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TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT (this "Agreement"), dated as of July 23, 1996,
is made and entered into by and between LOCKHEED MARTIN CORPORATION, a Maryland
corporation ("Lockheed Martin"), and CALCOMP TECHNOLOGY, INC., a Delaware
corporation ("CalComp Technology").
RECITALS
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WHEREAS, pursuant to the Plan of Reorganization and Agreement for the
Exchange of Stock of CalComp Inc. for Stock of Summagraphics Corporation, dated
as of the 19th day of March, 1996, as amended (the "Reorganization Agreement"),
by and among Summagraphics Corporation, a Delaware corporation
("Summagraphics"), CalComp Inc., a California Corporation ("CalComp"), and
Lockheed Martin, Summagraphics agreed to issue and deliver to Lockheed Martin
89.7% of the outstanding shares of Summagraphics' Common Stock, par value $.01
per share, determined on a fully diluted basis, in exchange for the transfer and
delivery of all the issued and outstanding capital stock of CalComp to
Summagraphics;
WHEREAS, as a result of the Closing of the transactions contemplated
by the Reorganization Agreement, Lockheed Martin is the common parent
corporation of an affiliated group of corporations within the meaning of Section
1504(a) of the Internal Revenue Code of 1986, as amended and CalComp Technology
is a member of such affiliated group;
WHEREAS, the affiliated group of which Lockheed Martin is the common
parent and CalComp Technology is a member files a consolidated Federal income
tax return as defined in Code Section 1501; and
WHEREAS, Lockheed Martin and CalComp Technology desire to provide for
the allocation of liabilities, procedures to be followed, and other matters with
respect to certain taxes for tax periods in which CalComp Technology and its
subsidiaries are included in a consolidated Federal income tax return filed for
the Combined Consolidated Group, and with respect to certain carrybacks and
carryforwards of amounts relating to other periods.
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 I
DEFINITIONS
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1. "Code" shall mean the Internal Revenue Code of 1986, as amended.
2. "Combined Consolidated Group" shall mean the Lockheed Martin
Consolidated Group together with the CalComp Technology Consolidated Group, and
any other corporations which may become members of either.
3. "Combined Consolidated Return" shall mean a consolidated Federal
income tax return filed for the Combined Consolidated Group.
4. "CalComp Technology Consolidated Group" shall mean the affiliated
group of corporations of which CalComp Technology would be the common parent for
consolidated Federal income tax return filing purposes if it were not a
subsidiary of Lockheed Martin, and any other corporations which are or may
become members of that affiliated group.
5. "Estimated Tax Sharing Payments" shall have the meaning given that
term in Section 2 of ARTICLE III.
6. "Federal Income Taxes" and "Federal Income Tax Liability" shall
mean the taxes imposed by Sections 11, 55, 59A, and 1201(a) of the Code, or any
successor provisions to such sections and any other income based U.S. Federal
taxes which are hereinafter imposed upon corporations.
7. "IRS" shall mean the Internal Revenue Service.
8. "Lockheed Martin Consolidated Group" shall mean the affiliated
group of corporations of which Lockheed Martin is the common parent, and any
other corporations which may become members of the affiliated group, but
excluding members of the CalComp Technology Consolidated Group.
9. "Pro Forma CalComp Technology Return" shall mean a pro forma
consolidated Federal income tax return for the CalComp Technology Consolidated
Group prepared pursuant to ARTICLE III, Section 1 or 5. For 1996, the Pro Forma
CalComp Technology Return shall include CalComp and its subsidiaries commencing
January 1 and CalComp Technology and its subsidiaries commencing on the Closing
Date (as defined in the Reorganization Agreement).
10. "Regulations" shall mean the U.S. Treasury regulations in effect
from time to time.
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ARTICLE II
PROCEDURAL MATTERS
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1. Lockheed Martin shall have the sole and exclusive responsibility
for the preparation and filing of the consolidated U.S. Federal income tax
return of the Combined Consolidated Group, including any amended returns and any
other returns, documents, or statements required to be filed with the IRS with
respect to the determination of the Federal Income Tax Liability of the Combined
Consolidated Group. Lockheed Martin shall have the same responsibility with
respect to state combined or consolidated returns filed by the Combined
Consolidated Group. All returns shall be filed by Lockheed Martin on a timely
basis, taking into account extensions of the due dates for the filings of such
returns.
2. The CalComp Technology Consolidated Group shall continue to join
in filing consolidated Federal income tax returns and consolidated or combined
state income tax returns with the Lockheed Martin Consolidated Group for all
such taxable years for which the CalComp Technology Consolidated Group is
eligible to do so under the Code, the Regulations and applicable state statutes,
unless Lockheed Martin shall request and be granted permission to discontinue
filing on a consolidated or combined basis by the appropriate Federal or state
authority.
3. Lockheed Martin shall make all Federal and state income and
franchise tax payments, including estimated payments, with respect to combined
and consolidated tax returns of the Combined Consolidated Group, and Lockheed
Martin shall have the right to exercise all powers of a common parent with
respect to filing the consolidated Federal income tax returns and consolidated
or combined state income tax returns as are conferred on it by the Regulations
and applicable state statutes.
4. Lockheed Martin shall be the sole and exclusive agent of the
CalComp Technology Consolidated Group and any member of such group in any and
all matters relating to the U.S. Federal Income Tax Liability of the Combined
Consolidated Group for all consolidated return years. The same shall apply with
respect to any state income tax liability where consolidated or combined returns
are filed by the Combined Consolidated Group. Lockheed Martin shall consult
with CalComp Technology regarding the matters set forth in this paragraph as
they apply to the Pro Forma CalComp Technology Return described in ARTICLE III,
Section 1 hereof, and shall consider all changes requested by CalComp
Technology; provided, however, that in its sole discretion, Lockheed Martin
shall have the right with respect to any Federal or state consolidated or
combined returns which it files (a) to determine (i) the manner in which such
returns shall be prepared and filed, including, without limitation, the manner
in which any item of income, gain, loss, deduction or credit shall be reported,
(ii) whether any extensions may be requested and (iii) the elections
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that will be made by any member of the Combined Consolidated Group, (b) to
contest, compromise or settle any adjustment or deficiency proposed, asserted or
assessed as a result of any audit of such returns by the IRS or applicable state
authority, (c) to file, prosecute, compromise or settle any claim for refund and
(d) to determine whether any refunds, to which the Combined Consolidated Group
may be entitled, shall be paid by way of refund or credited against the tax
liability of the Combined Consolidated Group. CalComp Technology hereby
irrevocably appoints Lockheed Martin as its agent and attorney-in-fact to take
such action (including the execution of documents) as Lockheed Martin may deem
appropriate in accordance with the terms of this Section 4 to effect the
foregoing.
Lockheed Martin shall consult with CalComp Technology regarding any
material issue relating to the CalComp Technology Consolidated Group which
arises pursuant to an audit by the IRS or applicable state authorities of a
Combined Consolidated Return or combined or consolidated state return of the
Combined Consolidated Group or a return of Lockheed Martin to which an attribute
of the CalComp Technology Consolidated Group is carried back, and shall consider
CalComp Technology's views regarding any proposed adjustment relating to any
such issue.
5. CalComp Technology shall reimburse Lockheed Martin for any outside
legal and accounting expenses incurred by Lockheed Martin in the course of the
conduct of any audit or contest regarding the tax liability of the Combined
Consolidated Group, and for any other expenses incurred by Lockheed Martin in
the course of any litigation relating thereto, to the extent such costs are
reasonably attributable to a CalComp Technology Consolidated Group issue;
provided, however, that prior to incurring any such expenses, Lockheed Martin
shall, in good faith, consult with CalComp Technology and consider CalComp
Technology's views with regard to the retention of outside professional
assistance.
6. CalComp Technology shall furnish to Lockheed Martin in a timely
manner such information and documents as Lockheed Martin may reasonably request
for purposes of preparing the returns referred to in Section 1 of this ARTICLE
II.
ARTICLE III
CALCULATION AND PAYMENT OF TAX SHARING PAYMENTS
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1. For each taxable year for which Lockheed Martin files a Combined
Consolidated Return, Lockheed Martin shall prepare a Pro Forma CalComp
Technology Return taking into account elections, methods of accounting, and
positions with respect to specific items that are consistent with those made or
used by Lockheed Martin for purposes of the Combined Consolidated Return. The
tax liability for the Pro Forma CalComp Technology Return shall be computed as a
flat tax at the highest marginal rate applicable to corporations
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with respect to each category of reported taxable income (at the date of this
Agreement, the highest marginal rate under Section 11 of the Code is 35%);
provided, however, that if the taxable income of the Combined Consolidated Group
has not reached the level (the "Flat Rate Level") at which the effect of the
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lower marginal rates set forth in Section 11 of the Code (or any successor
provision) is eliminated (as of the date hereof, the Flat Rate Level is
$18,333,333.33), then the tax liability for the Pro Forma CalComp Technology
Return shall be based on a rate sharing agreement to be agreed upon by the
parties at such time. The Pro Forma CalComp Technology Return shall reflect any
carryovers of net operating losses, net capital losses, excess tax credits or
other tax attributes from prior years' Pro Forma CalComp Technology Returns
which could have been utilized by the CalComp Technology Consolidated Group if
the CalComp Technology Consolidated Group had never been included in the
Combined Consolidated Group. Subject to the limitations imposed by Section 382
of the Code, the Pro Forma CalComp Technology Return shall also reflect any
carryovers of net operating losses, net capital losses, excess tax credits or
other tax attributes from CalComp Technology or CalComp Technology consolidated
returns for any taxable year in which CalComp Technology was not included in the
Combined Consolidated Group which could have been utilized by the CalComp
Technology Consolidated Group if the CalComp Technology Consolidated Group had
not been included in the Combined Consolidated Group. The Pro Forma CalComp
Technology Return shall also reflect any carryovers of net operating losses, net
capital losses, excess tax credits or other tax attributes from CalComp and its
United States subsidiaries (excluding AGT Holdings, Inc. and all of its
subsidiaries) for tax periods ending on or prior to December 31, 1995, that were
used on a consolidated basis by the affiliated group of corporations of which
Lockheed Corporation was the common parent or by the Lockheed Martin Group, but
which could have been utilized by the CalComp Technology Consolidated Group if
the CalComp Technology Consolidated Group had not been included in the Combined
Consolidated Group. The Pro Forma CalComp Technology Return shall not, however,
reflect carryovers of any attributes from the Lockheed Martin Consolidated
Group, other than carryovers of pre-January 1, 1996, attributes of CalComp and
its subsidiaries. Sections 1.1502-13 and 1502-13T of the Regulations shall be
applied as if the CalComp Technology Consolidated Group and the Lockheed Martin
Consolidated Group were separate affiliated groups, except that the Pro Forma
CalComp Technology Return shall include all gains or losses recognized by the
CalComp Technology Consolidated Group on transactions between members of the
CalComp Technology Consolidated Group which are restored pursuant to such
aforementioned Sections of the Regulations and actually reflected on the
Combined Consolidated Return as a result of the CalComp Technology Consolidated
Group ceasing to be included in the Combined Consolidated Group.
2. For each taxable year in which a Combined Consolidated Return is
filed, CalComp Technology shall make periodic payments ("Estimated Tax Sharing
Payments") to Lockheed Martin in such
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amounts as, and no later than the dates on which, payments of estimated tax
would be due from the CalComp Technology Consolidated Group under Section 6655
of the Code if it were not included in the Combined Consolidated Group. The
Estimated Tax Sharing Payments shall be determined by Lockheed Martin. Prior to
March 15 of the following year, Lockheed Martin shall prepare a preliminary tax
calculation for the CalComp Technology Consolidated Group for such taxable year.
The amount, if any, by which the Federal Income Tax Liability determined
pursuant to such preliminary tax calculation exceeds the Estimated Tax Sharing
Payments for the taxable year shall be paid by CalComp Technology to Lockheed
Martin not later than such March 15. CalComp Technology shall pay to Lockheed
Martin not later than 10 days after the date on which a Combined Consolidated
Return for the taxable year is filed, an amount equal to (i) the Federal Income
Tax Liability shown on the Pro Forma CalComp Technology Return prepared for the
taxable year, reduced by (ii) the Federal Income Tax Liability determined
pursuant to the preliminary tax calculation, plus (iii) interest on such net
amount. If the Estimated Tax Sharing Payments paid to Lockheed Martin plus the
excess, if any, of the Federal Income Tax Liability determined pursuant to the
preliminary tax calculation over the Estimated Tax Sharing Payments exceeds the
amount of the Federal Income Tax Liability shown on the Pro Forma CalComp
Technology Return, Lockheed Martin shall refund such excess to CalComp
Technology within 10 days after the date on which a Combined Consolidated Return
for the taxable year is filed, plus interest.
Lockheed Martin shall furnish to CalComp Technology the preliminary tax
calculation no later than 10 days prior to March 15 of the year following the
taxable year, and shall furnish to CalComp Technology the Pro Forma CalComp
Technology Return no later than 30 days before the Combined Consolidated Return
for the taxable year is filed.
3. If a Pro Forma CalComp Technology Return reflects a net operating
loss, net capital loss, excess tax credit or other tax attribute, Lockheed
Martin shall pay to CalComp Technology within 10 days after the Combined
Consolidated Return for the taxable year is filed, the refund which the CalComp
Technology Consolidated Group would have received as a result of the carryback
of such attribute 1) to a Pro Forma CalComp Technology Return for any taxable
year or years in which the CalComp Technology Consolidated Group is included in
the Combined Consolidated Group, or 2) to a CalComp Technology or CalComp
Technology consolidated return for any taxable year or years in which CalComp
Technology was not included in the Combined Consolidated Group. The amount of
the refund shall be determined as if the CalComp Technology Consolidated Group
had never been included in the Combined Consolidated Group and Pro Forma CalComp
Technology Returns had been actual returns. All calculations of deemed refunds
pursuant to this Section 3 shall include interest computed as if CalComp
Technology had filed a claim for refund or an application for a tentative
carryback adjustment pursuant to Section 6411(a) of the Code on the date on
which the Combined Consolidated Return is due,
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without regard to extensions. For purposes of determining the refund which the
CalComp Technology Consolidated Group would have received in accordance with the
preceding sentence, such attributes shall not be deemed to be available as a
carryback to any Lockheed Martin Consolidated Group return for any period.
4. For each taxable year in which a Combined Consolidated Return is
filed, CalComp Technology shall take or cause to be taken all actions necessary
to ensure that CalComp Foreign Sales Corporation or, at Lockheed Martin's
election, a newly incorporated company (herein both referred to as "CCFSC")
qualifies as a "foreign sales corporation", and that commissions are paid to
CCFSC in amounts which will cause CCFSC to realize profits on each transaction
equal to the largest amount permitted for CCFSC under the provisions of the
Code. For each taxable year for which a Pro Forma CalComp Technology Return is
prepared, a determination shall be made (at the time at which the preliminary
tax calculation is made for such taxable year pursuant to ARTICLE III, Section
2) as to the net Federal Income Tax cost or saving to the CalComp Technology
Consolidated Group resulting from the transactions engaged in between members of
the CalComp Technology Consolidated Group and CCFSC during such taxable year.
If it is determined that there is a net Federal Income Tax cost to the CalComp
Technology Consolidated Group resulting from such transactions, either CalComp
Technology shall reduce the amount it is required to pay to Lockheed Martin by
March 15 pursuant to ARTICLE III, Section 2 by the amount of such net Federal
Income Tax cost or, if no amount is required to be paid by CalComp Technology,
Lockheed Martin shall refund to CalComp Technology by March 15 the amount of
such net Federal Income Tax cost. If it is determined that there is a net
Federal Income Tax cost to the CalComp Technology Consolidated Group from
transactions engaged in with CCFSC during a taxable year, the amounts of any
carryovers of a net operating loss, net capital loss, excess tax credits or
other tax attributes from such taxable year which are reflected on the Pro Forma
CalComp Technology Group Return for a subsequent year shall be reduced by the
equivalent net Federal Income Tax cost. Such reduction shall be accomplished in
two steps, as follows: first, if there is a carryover of a net operating loss
or net capital loss, the reduction shall be an amount equal to the net Federal
Income Tax cost divided by the highest marginal tax rate applicable to such
category of taxable income for the tax year in which such Federal Income Tax
cost is incurred; second, any carryovers of other tax attributes shall be
reduced by an amount equal to the remaining unrecovered net Federal Income Tax
cost.
5. If, in any year after the CalComp Technology Consolidated Group
ceases to be included in the Combined Consolidated Group, a Pro Forma CalComp
Technology Return for such period reflects a net operating loss, a net capital
loss, excess tax credit or any other tax attribute, and such attribute could be
carried back to a Combined Consolidated Return, Lockheed Martin shall pay to
CalComp Technology an amount equal to the refund that would be attributable
thereto (including interest thereon). Pro Forma CalComp Technology
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Returns under this Section shall be prepared by CalComp Technology, and shall be
subject to review and approval by Lockheed Martin, such approval not to be
unreasonably withheld. After the CalComp Technology Consolidated Group ceases
to be included in the Combined Consolidated Group, it shall not be entitled to
any payment by Lockheed Martin with respect to any net operating losses, net
capital losses, excess tax credits or other tax attributes not used by the
CalComp Technology Consolidated Group prior to its ceasing to be included in the
Combined Consolidated Group, whether or not the Combined Consolidated Group
receives a refund or other benefit relating to such tax attributes.
6. If, in any year after a member of the CalComp Technology
Consolidated Group ceases to be a member of both the CalComp Technology
Consolidated Group and the Combined Consolidated Group, such member has a net
operating loss, a net capital loss, excess tax credit or any other tax
attribute, and such attribute could be carried back to a Combined Consolidated
Return, Lockheed Martin shall pay to such member an amount equal to the refund
that would be attributable to such member (including interest thereon). After a
member of the CalComp Technology Consolidated Group ceases to be a member of
both the CalComp Technology Consolidated Group and the Combined Consolidated
Group, it shall not be entitled to any payment by Lockheed Martin with respect
to any net operating losses, net capital losses, excess tax credits or other tax
attributes not used by the member prior to its ceasing to be a member of the
CalComp Technology Consolidated Group and the Combined Consolidated Group,
whether or not the CalComp Technology Consolidated Group or the Combined
Consolidated Group receives a refund or other benefit relating to such tax
attributes.
7. To the extent that any audit, litigation, claim or refund with
respect to a Combined Consolidated Return results in an increase or decrease in
taxable income relating to the treatment of a CalComp Technology Consolidated
Group issue, a corresponding adjustment shall be made to such item and to
CalComp Technology's Consolidated Group Federal Income Tax Liability reflected
on the applicable Pro Forma Return. Within 10 days after any such adjustment is
finally determined, CalComp Technology shall pay to Lockheed Martin any increase
in the CalComp Technology Consolidated Group Federal Income Tax Liability as a
result of such adjustment plus interest and any penalties consistent with such
adjustment and consistent with the penalties and interest actually assessed by
the IRS, or Lockheed Martin shall refund to CalComp Technology any reduction in
the CalComp Technology Federal Income Tax Liability as a result of such
adjustment plus interest, as the case may be.
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ARTICLE IV
INTEREST
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Interest required to be paid by or to CalComp Technology pursuant to
this Agreement shall, except as otherwise specified in Section 2 of ARTICLE V,
be computed at the rate and in the manner provided in the Code for interest on
underpayments and overpayments, respectively, of Federal income tax for the
relevant period.
ARTICLE V
STATE & LOCAL INCOME AND FRANCHISE TAXES
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1. The principles expressed with respect to the Combined Consolidated
Group Federal income tax matters throughout this Agreement (including the
Miscellaneous Provisions of ARTICLE VI) shall apply with equal force and effect
to state and local income and franchise tax matters to the extent such taxes are
determined on a combined or consolidated basis, including the preparation and
filing of state and local income tax and franchise tax returns required to be
filed by the Combined Consolidated Group.
2. Any interest charge required to be paid by or to CalComp
Technology pursuant to this Agreement with respect to any state or local income
tax or franchise tax return shall be computed at the rate and in the manner as
provided under the applicable state or local statute for interest on
underpayments and overpayments of such tax for the relevant period.
ARTICLE VI
MISCELLANEOUS PROVISIONS
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1. Lockheed Martin and CalComp Technology agree that any information
furnished one another pursuant to this Agreement is confidential and, except as,
and to the extent, required during the course of an audit or litigation or
otherwise required by law, shall not be disclosed to another person or entity.
2. This Agreement shall be binding upon and inure to the benefit of
any successor to any of the parties, by merger, acquisition of assets or
otherwise, to the same extent as if the successor had been an original party to
this Agreement. For purposes of this Section 2, the term "successor" shall be
deemed to include the acquiror of a substantial part of the assets of either of
the parties hereto.
3. This Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland without giving effect to conflicts of law
principles thereof.
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4. This Agreement may be amended from time to time by agreement in
writing executed by all the parties hereto or all of the parties then bound
thereby. This Agreement constitutes the entire agreement with respect to the
subject matter hereof and supersedes all prior written and oral understandings
with respect thereto.
5. (a) With respect to each member of the CalComp Technology
Consolidated Group, if such member is no longer eligible to file consolidated
returns with Lockheed Martin for any reason (including, without limitation, the
sale, exchange, or other disposition of all or any portion of the stock of
CalComp Technology or any other member sufficient to disaffiliate CalComp
Technology or such member from the Combined Consolidated Group, or the
termination of the Combined Consolidated Group), the parties hereto agree that
as between Lockheed Martin and the departing member, except as otherwise
provided herein, this Agreement shall be terminated at the time specified in the
following paragraph b. After the date of the disaffiliation, the parties agree
to continue sharing on a timely basis information necessary to the preparation
of applicable Federal, state and local tax returns.
(b) This Agreement shall become operative as of the Closing Date
(as defined in the Reorganization Agreement) and with respect to any member of
the CalComp Technology Consolidated Group, shall terminate and be of no further
force or effect only upon the expiration of all applicable statutes of
limitations relating to federal and state income taxes (including refunds
thereof) for all periods in which such member was a member of the Combined
Consolidated Group, provided that any amounts payable hereunder by one party to
the other as of the date of any such termination shall continue to be a valid
and binding obligation of such party and shall be paid as provided herein.
6. Lockheed Martin hereby agrees to indemnify and hold each member of
the CalComp Technology Consolidated Group harmless with respect to:
(a) any Federal Income Tax Liability attributable to any taxable
period of such member for which such member has paid Lockheed Martin its
separate Federal Income Tax Liability, if any, in accordance with this
Agreement; and
(b) any Federal Income Tax Liability of the Combined Consolidated
Group for any taxable period of Lockheed Martin where such liability arises
solely by reason of the member being severally liable for any taxes of the
Lockheed Martin Consolidated Group pursuant to Treas. Reg. 1.1502-6.
7. Any notice, request or other communication required or permitted
in this Agreement shall be in writing and shall be sufficiently given if
personally delivered or if sent by registered or certified mail, postage
prepaid, addressed as follows:
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TO CALCOMP TECHNOLOGY:
CalComp Technology, Inc.
2411 West LaPalma Avenue
Anaheim, California 92801
Attention: General Counsel
TO LOCKHEED MARTIN:
Lockheed Martin Corporation
6801 Rockledge Drive
Bethesda, Maryland 20817
Attention: Vice President
and General Tax Counsel
With a copy to:
Lockheed Martin Information &
Technology Services
6801 Rockledge Drive
Bethesda, Maryland 20817
Attention: Director of Finance
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their authorized representatives.
LOCKHEED MARTIN CORPORATION,
a Maryland corporation
By:/s/ ARNOLD CHIET
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Arnold Chiet
Vice President and
General Tax Counsel
CALCOMP TECHNOLOGY, INC.,
a Delaware corporation
By:/s/ MICHAEL S. BENNETT
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Michael S. Bennett
President and Chief Executive
Officer
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