Initial Public Offering (IPO): Pre-Effective Amendment to Registration Statement (General Form) — Form S-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-1/A Amendment No. 3 to Form S-1/A 3 18K
2: EX-1.1 Form of Underwriting Agreement 35 110K
3: EX-4.1 Specimen of Common Stock Certificate 2 11K
4: EX-5 Opinion of Hunton & Williams Re. Legality 2 9K
5: EX-10.1 Form of Bank Credit Facility 98 323K
6: EX-10.2 Stock Compensation Plan 25 95K
7: EX-10.3 Stock Purchase & Indemnification Agreement 24 64K
8: EX-10.4 Services Agreement 10 27K
9: EX-10.5 Tax Allocation Agreement 49 111K
10: EX-10.6 Computer & Information Tech. Agreements 69 121K
11: EX-10.7 Pension Plan Agreement 4 12K
EXHIBIT 10.5
TAX ALLOCATION AGREEMENT
BY AND AMONG
UNION PACIFIC CORPORATION,
OVERNITE CORPORATION,
OVERNITE HOLDING, INC.,
AND
OVERNITE TRANSPORTATION COMPANY
DATED AS OF _____________, 1998
TABLE OF CONTENTS
Page
----
[Download Table]
ARTICLE I - DEFINITIONS AND OTHER PROVISIONS...............................2
Section 1.1 Overnite Consolidated Group................................2
Section 1.2 UPC Consolidated Group.....................................3
Section 1.3 Combined Consolidated Group................................3
Section 1.4 Code.......................................................3
Section 1.5 Environmental Tax..........................................3
Section 1.6 Federal Income Tax.........................................3
Section 1.7 Item.......................................................3
Section 1.8 Minimizing Tax Liabilities.................................3
Section 1.9 Miscellaneous Taxes........................................4
Section 1.10 Party.....................................................4
Section 1.11 Taxes.....................................................4
Section 1.12 Timing Item; Turnaround...................................4
Section 1.13 Unitary Income Tax........................................5
Section 1.14 UPC Division; Division....................................5
Section 1.15 Actual Loss...............................................5
Section 1.16 1991 Agreement............................................6
ARTICLE II - FILING OF CONSOLIDATED RETURNS
AND ELECTIONS...........................................................6
Section 2.1 Consolidated Return........................................6
Section 2.2 Filing Information.........................................7
Section 2.3 Elections..................................................7
ARTICLE III - TAX ALLOCATIONS AND EFFECTS OF
ASSET RESTRUCTURING.....................................................8
Section 3.1 Consolidated Federal Income Tax; Environmental Tax.........8
Section 3.2 Unitary Income Taxes......................................10
Section 3.3 Miscellaneous Taxes.......................................11
ARTICLE IV - TAX PAYMENTS AND SETTLEMENTS.................................11
Section 4.1 Estimated and Current Taxes...............................11
Section 4.2 Future Settlements........................................13
Section 4.3 Payments/Refunds..........................................13
Section 4.4 Billing Disputes with Taxing Authorities..................14
ARTICLE V - AUDITS, AMENDED RETURNS, AND LITIGATION.......................14
Section 5.1 Conduct of Audits; Amended Returns........................14
Section 5.2 Protest; Litigation.......................................16
Section 5.3 Opinion Procedure.........................................17
Section 5.4 Adjustments...............................................20
[Download Table]
ARTICLE VI - COOPERATION ON RECORDS.......................................21
Section 6.1 Furnish Books and Records.................................21
Section 6.2 Notice of Audits..........................................21
Section 6.3 Record Retention..........................................22
Section 6.4 Cost of Producing Records.................................22
ARTICLE VII - INDEMNIFICATIONS...........................................22
Section 7.1 Federal Income, Environmental, and Unitary Income
Taxes.................................................................22
Section 7.2 Miscellaneous Taxes.......................................23
ARTICLE VIII - DISPUTES...................................................23
Section 8.1 Accounting Firm...........................................23
Section 8.2 Resolution of Dispute.....................................24
Section 8.3 Binding Resolution........................................24
Section 8.4 Costs of Dispute Resolution...............................24
ARTICLE IX - MISCELLANEOUS................................................25
Section 9.1 Sharing of Information....................................25
Section 9.2 Confidentiality...........................................25
Section 9.3 Successors................................................25
Section 9.4 Governing Law.............................................26
Section 9.5 Headings..................................................26
Section 9.6 Notices...................................................26
Section 9.7 Services..................................................27
Section 9.8 Severability..............................................28
Section 9.9 Effective Date; Termination...............................28
Section 9.10 Counterparts.............................................28
Section 9.11 Entire Agreement; Termination of Prior Agreements........28
APPENDIX I - ALLOCATION OF FEDERAL INCOME TAX LIABILITIES AND
BENEFITS ATTRIBUTABLE TO SPECIFIC TAX ITEMS.............................I-1
Net Operating Losses (NOLs).............................................I-1
Capital Gains and Losses................................................I-2
Section 1231 Gains and Losses...........................................I-3
Charitable Contribution Deductions......................................I-5
Dividends-Received Deduction............................................I-5
Alternative Minimum Tax (AMT) and
Minimum Tax Credit (AMT Credit).......................................I-6
Credit for Producing Fuel from a Nonconventional
Source (Fuel Credit)..................................................I-7
Investment Tax Credit (ITC) and Investment Tax Credit
Recapture (ITC Recapture).............................................I-7
i.Credit for Increasing Research Activities (R&D Credit)................I-8
j.Targeted Jobs Credit..................................................I-8
Credit for Federal Tax on Gasoline and Special Fuels....................I-9
[Download Table]
Enhanced Oil Recovery Credit (EOR Credit)..................................I-9
m.Foreign Tax Credits...................................................I-9
n.Interest on Tax Deficiencies and Refund Claims.......................I-10
Penalties; Additions to Tax............................................I-10
Unspecified Items......................................................I-11
APPENDIX II - ALLOCATION OF UNITARY INCOME TAX
LIABILITIES AND BENEFITS.................................................II-1
APPENDIX III - ADDITIONAL SERVICES......................................III-1
TAX ALLOCATION AGREEMENT
-------------------------
THIS AGREEMENT is entered into as of __________, 1998, between Union
Pacific Corporation ("UPC"), a Utah corporation, on behalf of itself and the
other members of the UPC Consolidated Group (as hereinafter defined), Overnite
Corporation, a Virginia corporation, Overnite Holding, Inc., a Delaware
corporation ("Overnite Holding"), and Overnite Transportation Company, a
Virginia corporation ("Overnite").
WHEREAS, UPC and Overnite Holding were parties to a certain Tax Allocation
Agreement between them dated as of January 1, 1991 (the "1991 Agreement")
setting forth and confirming certain matters relating to the inclusion of
Overnite Holding, Overnite, and certain other companies in the UPC consolidated
federal and state unitary income tax returns; the allocation of tax liabilities
for periods during which Overnite Holding, Overnite and other companies were or
had been subsidiaries of UPC; the administration of tax audits and proceedings;
and the principles embodied in tax allocation policies then in effect between
UPC and Overnite Holding and Overnite, after their revision per Article III and
Appendices I and II of the 1991 Agreement to accommodate then recent changes in
the tax law; and
WHEREAS, the 1991 Agreement provides that it may be amended only by written
agreement of UPC and Overnite Holding; and
WHEREAS, in connection with the initial public offering of Overnite
1
Corporation (the "IPO"), Overnite Holding will become a wholly-owned subsidiary
of Overnite Corporation; and
WHEREAS, UPC, Overnite Corporation, Overnite Holding, and Overnite desire
to amend and restate the 1991 Agreement to reflect the IPO and for other
reasons;
NOW, THEREFORE, the parties hereto, intending to be legally bound, agree
that the 1991 Agreement is amended and restated in full as follows:
ARTICLE I
---------
DEFINITIONS AND OTHER PROVISIONS
--------------------------------
1.1 Overnite Consolidated Group. For all periods through the date that
---------------------------
Overnite Holding becomes a wholly-owned subsidiary of Overnite Corporation, the
term "Overnite Consolidated Group" means Overnite Holding and the other
corporations and the passthrough entities included in that term as defined in
the 1991 Agreement. For all periods thereafter, the term "Overnite Consolidated
Group" means Overnite Corporation and all other corporations that are members
of the affiliated group of corporations (within the meaning of section 1504 of
the Code) of which Overnite Corporation is the common parent, together with
any passthrough entities (including single member partnerships and limited
liability companies) in which Overnite Corporation or any member of such
affiliated group is a member, and any other corporations which may become
members of such affiliated group or were members of such affiliated group in the
past and any
2
passthrough entities in which Overnite Corporation or any member of such
affiliated group may become or was a member.
1.2 UPC Consolidated Group. UPC is the common parent of an affiliated
----------------------
group of corporations which, excluding members of the Overnite Consolidated
Group, is referred to herein as the "UPC Consolidated Group".
1.3 Combined Consolidated Group. The group of corporations composed of the
---------------------------
Overnite Consolidated Group and the UPC Consolidated Group is referred to herein
as the "Combined Consolidated Group".
1.4 Code. The Internal Revenue Code of 1986, as amended (including the
----
corresponding provisions of any subsequent federal tax laws) is referred to
herein as the "Code". All references to provisions of the Code shall include any
temporary or final Treasury Regulations thereunder.
1.5 Environmental Tax. The environmental tax imposed under section 59A of
-----------------
the Code is referred to herein as the "Environmental Tax".
1.6 Federal Income Tax. Except as the context otherwise requires, the term
------------------
"Federal Income Tax" as used in this Agreement refers to the taxes imposed under
sections 1, 11, 47, 55, 531, and 1201 of the Code.
1.7 Item. The term "Item" of a party means any tax attribute, item of
----
income, loss, deduction, preference, or credit attributable to the assets or
activities of that party.
1.8 Minimizing Tax Liabilities. Except as the context otherwise requires,
--------------------------
to "Minimize" or "Minimizing" the tax liabilities of a consolidated group shall
mean minimizing the present value of the aggregate liabilities of such group
(including all of its members) for such tax or taxes in all periods discounted
at a rate of ten percent (10%) per
3
annum, determined under all the facts and circumstances known (or reasonably
anticipated) at the date such minimization is being tested and taking into
account the anticipated out-of-pocket costs of resolving administrative disputes
and litigation with the taxing authorities and the likelihood of prevailing.
1.9 Miscellaneous Taxes. All taxes other than consolidated Federal Income
-------------------
Tax, the Environmental Tax, or Unitary Income Taxes (including but not limited
to all federal excise taxes; windfall profits taxes; value added taxes;
nonunitary state income taxes; nonunitary state franchise taxes; nonunitary
local taxes; real property taxes; personal property taxes; severance taxes;
single business taxes; gross receipts taxes; state or local sales, use, or
excise taxes; employment and payroll taxes and premiums; and all foreign
(federal, local, or provincial) taxes) are referred to herein as "Miscellaneous
Taxes".
1.10 Party. The term "Party" means either UPC on the one hand or Overnite
-----
Corporation, Overnite Holding, and Overnite on the other hand together or
individually as the context requires; and the term "Parties" means both UPC on
the one hand and Overnite Corporation, Overnite Holding, and Overnite on the
other hand.
1.11 Taxes. Except as the context otherwise requires, the terms "tax" or
-----
"tax liability" or "tax benefit" as used in this Agreement include any
penalties, additions to tax, and interest associated with any such tax and, when
used by itself, the term "tax liability" includes both tax liabilities and tax
benefits.
1.12 Timing Item; Turnaround. The term "Timing Item" refers to an Item
-----------------------
where any change in the period or periods over which the Item is includible in
or deductible from taxable income or creditable against tax will result in an
offsetting adjustment
4
("Turnaround") that may be realized in another period or periods.
1.13 Unitary Income Tax. State or local taxing jurisdictions' consolidated
------------------
income taxes; unitary or combined reporting income taxes; or consolidated,
unitary, or combined reporting franchise taxes are referred to herein as
"Unitary Income Tax".
(a) Unitary Group. All members of the Combined Consolidated Group or
-------------
portions of such members and all other entities contained in a collective
business unit identified by a state or local taxing jurisdiction as the basis
for its Unitary Income Tax assessment and for which a Unitary Income Tax return
is filed or due, are referred to herein as a "Unitary Group".
(b) Nexus. A presence of property (owned or rented), payroll,
-----
employment of individuals, sales, or other factors which cause a Division's
activities to be subject to Unitary Income Tax in a particular taxing
jurisdiction is referred to herein as a "Nexus".
1.14 UPC Division; Division. Each grouping of members of the Combined
----------------------
Consolidated Group (and portions thereof), excluding the Overnite Consolidated
Group, whose financial results are or have been reported separately on the
consolidated uniform financial reports prepared by the UPC Corporate Accounting
Department is referred to herein as a "UPC Division". (For example, as of
January 1, 1991, there were seven Divisions: Corporate, Overnite, Railroad,
Realty, Resources, Technologies, and USPCI.) A UPC Division or the Overnite
Consolidated Group is referred to herein as a "Division".
1.15 Actual Loss. The term "Actual Loss" as used in this Agreement shall be
-----------
the net amount of all taxes actually incurred by a party as a result of an
action (or failure to act) by another party with respect to matters described in
this Agreement, taking into account the anticipated out-of-pocket costs of
resolving administrative disputes and
5
litigation with the taxing authorities over the action or failure to act and the
likelihood of prevailing (based on the assumption that the taxing authorities
would challenge the desired tax treatment). Such tax resulting from such action
(or failure to act) shall be calculated using the allocated Federal Income Tax,
Environmental Tax, or Unitary Income Tax liability for the appropriate tax
jurisdiction, net of the present value of reasonably anticipated related future
offsetting tax benefits (based upon the tax law in effect at the time of
computation) discounted at a rate of ten percent (10%) per annum.
1.16 1991 Agreement. Determinations under this Agreement made prior to its
--------------
amendment and restatement as of the date first set forth above shall remain
unchanged.
ARTICLE II
FILING OF CONSOLIDATED
RETURNS AND ELECTIONS
---------------------
2.1 Consolidated Return. For all periods through the date that Overnite
-------------------
Holding becomes a wholly-owned subsidiary of Overnite Corporation, UPC shall, to
the extent permitted by law, include the Overnite Consolidated Group in the
consolidated Federal Income Tax and Environmental Tax returns and the Unitary
Income Tax returns which UPC files for the Combined Consolidated Group. UPC
shall have the right to obtain extensions of time to file these returns as it
deems necessary. These returns shall be prepared by UPC and Overnite
Corporation and shall be filed in a timely manner. Overnite Corporation shall
have responsibility and control with respect to determining tax return positions
for Overnite Corporation Items in such returns, provided this is consistent with
lawfully Minimizing the aggregate Federal Income Tax, Environmental Tax, and
6
Unitary Income Tax liabilities of the Combined Consolidated Group.
2.2 Filing Information.
------------------
(a) Unless an extension is agreed to by UPC, Overnite Corporation shall
supply UPC with completed consolidated Federal Income Tax and Environmental Tax
returns for the Overnite Consolidated Group and the data and information
necessary to prepare the Unitary Income Tax returns to be filed by UPC under
this Agreement for the prior calendar year, with appropriate components of the
information necessary for the preparation of such returns, all to be provided
pursuant to reasonable timetables and instructions from UPC.
(b) UPC shall provide Overnite Corporation with a copy of the prior year's
UPC Consolidated Form 1120, separate Form 1120 pro forma return for the Overnite
Consolidated Group, Unitary Income Tax returns, and any appropriate detail or
supporting schedules for any period in which such returns include items of the
Overnite Consolidated Group as soon as practicable after filing thereof.
2.3 Elections. The members of the UPC and Overnite Consolidated Groups
---------
shall execute and file elections pursuant to section 338(h)(10) of the Code (and
corresponding state elections) with respect to Overnite Corporation's purchase
of Overnite Holding and Overnite Holding's deemed purchase of Overnite; and
shall execute and file any and all other consents, elections, or other similar
documents and shall maintain in effect previously filed elections, consents, or
other similar documents necessary or appropriate to effect the filing of the
consolidated Federal Income Tax and Unitary Income Tax returns for the Combined
Consolidated Group for all periods in a manner which lawfully Minimizes the
aggregate Federal Income Tax, Environmental
7
Tax, and Unitary Income Taxes for the Combined Consolidated Group.
ARTICLE III
TAX ALLOCATIONS
3.1 Consolidated Federal Income Tax; Environmental Tax.
---------------------------------------------------
(a) The Overnite Consolidated Group's share of consolidated Federal Income
Tax and Environmental Tax liabilities for the tax periods beginning on or after
January 1, 1991, shall be allocated in accordance with subsections (b) and (c)
hereof.
(b) The Overnite Consolidated Group's Federal Income Tax liability, or tax
benefit in the event of a loss, shall be determined jointly by UPC and Overnite
Corporation based upon separate Items of the Overnite Consolidated Group to the
extent such Items were included in the Combined Consolidated Group's tax returns
as filed or finally adjusted and resulted in either a marginal tax cost or
benefit to the Combined Consolidated Group. In general, the Federal Income Tax
cost or benefit to be allocated to the Overnite Consolidated Group shall be
equal to the difference between the Federal Income Tax actually payable by the
Combined Consolidated Group for a period and the amount of Federal Income Tax
which would have been payable by the Combined Consolidated Group for such period
if the Overnite Consolidated Group Items for such period had not been included
in the Combined Consolidated Group's tax returns for such period, provided that
the allocation principles enumerated in Appendix I to this Agreement shall
control to the extent such principles are inconsistent with the foregoing.
Except as otherwise specifically provided in this Agreement, for all periods
when UPC owns directly or indirectly 100% of the outstanding stock of Overnite
Holding or
8
Overnite, the computation of the Overnite Consolidated Group's Federal Income
Tax liability or tax benefit shall not reflect any limitations it would have
suffered or benefits it would have realized if it had filed its return on a
stand-alone basis, but rather shall reflect its allocation of Federal Income Tax
costs or benefits actually realized, either as originally reported or adjusted
upon audit, amended return, or ultimate settlement, or otherwise realized by the
Combined Consolidated Group for any period.
(c) The Overnite Consolidated Group's Environmental Tax liability shall be
determined jointly by UPC and Overnite Corporation and shall be equal to the
amount of Environmental Tax which would be owed by the Overnite Consolidated
Group on a stand-alone basis.
(d) Notwithstanding the foregoing, all items of income, gain, loss, or
deduction attributable to UPC's sale of the stock of Overnite Holding to
Overnite Corporation after the IPO pursuant to that certain Stock Purchase and
Indemnification Agreement between the Parties (the "Purchase Agreement"), and
the deemed sales of Overnite Holding's assets and Overnite's assets pursuant to
elections under Section 338(h)(10) of the Code shall be allocated to the UPC
Consolidated Group, except as set forth in the next following sentence. Any
item of income or gain attributable to pre-IPO contingent liabilities of the
Overnite Consolidated Group which become payable or are otherwise accrued at or
after the IPO and result in additional amounts realized under Section 338 of the
Code shall be allocated to the Overnite Consolidated Group except to the extent
the UPC Consolidated Group receives the benefit of corresponding and offsetting
deductions.
3.2 Unitary Income Taxes.
--------------------
9
(a) The Overnite Consolidated Group's share of Unitary Income Tax
liabilities for the tax periods beginning on or after January 1, 1991, shall be
allocated in accordance with subsections (b) and (c) hereof.
(b) The total Unitary Income Tax liability due to a taxing jurisdiction
where members of the Overnite Consolidated Group are included in a Unitary Group
with members of the UPC Consolidated Group shall be determined jointly by UPC
and Overnite Corporation and then allocated to the constituent Divisions in such
Unitary Group in accordance with the allocation principles enumerated in
Appendix II to this Agreement. Nexus both for purposes of the determination of
the Unitary Income Tax Liability in a particular jurisdiction and for purposes
of the allocation of such liability to constituent Divisions in the Unitary
Group shall be determined jointly by UPC and Overnite Corporation. Should a
particular taxing jurisdiction subsequently determine Nexus differently from a
determination previously used, the Unitary Income Tax liability shall be
governed by such taxing jurisdiction's sustained or agreed upon final
determination, and any additional Unitary Income Tax liabilities arising
therefrom shall be allocated among the constituent Divisions in the Unitary
Group in accordance with the allocation principles enumerated in Appendix II to
this Agreement.
(c) Notwithstanding the foregoing, all items of unitary income, gain, loss,
or deduction attributable to UPC's sale of the stock of Overnite Holding to
Overnite Corporation after the IPO pursuant to the Purchase Agreement, and the
deemed sales of Overnite Holding's assets and Overnite's assets pursuant to
elections under Section 338(h)(10) of the Code (or the corresponding provisions
of state or local law) shall be allocated to the UPC Consolidated Group, except
as set forth in the next following
10
sentence. Any item of income or gain attributable to pre-IPO contingent
liabilities of the Overnite Consolidated Group which become payable or are
otherwise accrued at or after the IPO and result in additional amounts realized
under Section 338 of the Code (or the corresponding provisions of state or local
law) shall be allocated to the Overnite Consolidated Group except to the extent
the UPC Consolidated Group receives the benefit of corresponding and offsetting
deductions.
3.3 Miscellaneous Taxes. All liabilities for Miscellaneous Taxes shall
-------------------
remain the sole responsibility of the particular entity which incurred or whose
predecessor incurred the liability or whose activities (or predecessors'
activities) resulted in the liability, provided, however, that the IPO and
related transactions (including elections under Section 338(h)(10) of the Code
or the corresponding provisions of state or local law) shall not be considered
an activity of UPC for purposes of determining responsibility for Miscellaneous
Taxes. Likewise, any additional Miscellaneous Taxes imposed, or refunds
received, as a result of audits, claims, amended returns, or any other reason
shall be the sole property or liability of the entity which incurred the
liability (or its successor) or is entitled to the refund or claim by operation
of law or under the terms of this Agreement.
ARTICLE IV
----------
TAX PAYMENTS AND SETTLEMENTS
----------------------------
4.1 Estimated and Current Taxes.
---------------------------
(a) Overnite Corporation shall provide to UPC the separate tax data
necessary to determine the Overnite Consolidated Group's share of estimated
Federal Income Tax,
11
Environmental Tax, and Unitary Income Tax ("Estimated Tax Payment") on such
schedule as is prescribed by UPC so that Estimated Tax Payments can be computed
and allocated in a timely fashion. On or before the due date for each Estimated
Tax Payment, UPC shall provide to Overnite Corporation a statement of the
Overnite Consolidated Group's allocable share of the Estimated Tax Payment to be
made. On or before such due date, Overnite Corporation shall pay to UPC the
amount of the Estimated Tax Payment identified in such statement.
(b) Overnite Corporation shall provide to UPC the separate tax data
necessary to determine the share of the prior-year consolidated Federal Income
Tax, Environmental Tax, and Unitary Income Tax liability allocable to members of
the Overnite Consolidated Group. Within 60 days of filing the tax returns, UPC
shall provide to Overnite Corporation a final statement of the Overnite
Consolidated Group's share of the actual prior-year consolidated Federal Income
Tax, Environmental Tax, and Unitary Income Tax liability. If the amount of the
Overnite Consolidated Group's prior-year tax liabilities exceeds the prior-year
Estimated Tax Payments previously remitted by members of the Overnite
Consolidated Group, Overnite Corporation shall pay to UPC the amount of such
excess. If the amount of the Overnite Consolidated Group's prior-year tax
liabilities is less than the prior-year Estimated Tax Payments previously
remitted by members of the Overnite Consolidated Group, UPC shall pay to
Overnite Corporation the amount of such difference. All such calculations shall
be made in accordance with Article III of this Agreement.
4.2 Future Settlements. UPC shall give Overnite Corporation reasonable
------------------
advance notice when any tax payment in connection with audit assessments, refund
12
claims, or amended returns is due from, or payable to, Overnite Corporation
under this Agreement. Overnite Corporation shall pay to UPC an amount equal to
the tax liabilities attributable to including the Overnite Consolidated Group in
the Combined Consolidated Group to the extent such tax liabilities were not
reflected in payments previously made by the members of the Overnite
Consolidated Group. UPC shall pay to Overnite Corporation an amount equal to the
tax benefits attributable to including the Overnite Consolidated Group in the
Combined Consolidated Group, to the extent that such tax benefits were not
previously paid to (or reflected in payments by) members of the Overnite
Consolidated Group. To the extent that all Items attributable to members of the
Overnite Consolidated Group for a tax period are finally settled or resolved but
a final settlement or resolution has not been reached with the taxing authority
because Items not attributable to members of the Overnite Consolidated Group
have not been settled or resolved, UPC shall pay Overnite Corporation its share
of such tax benefits, or Overnite Corporation shall pay UPC the Overnite
Consolidated Group's share of such tax liabilities, after the final settlement
or resolution of all such Items attributable to members of the Overnite
Consolidated Group. All such calculations shall be made in accordance with
Article III of this Agreement.
4.3 Payments/Refunds. Payments under this Agreement shall be made not
----------------
later than 11:00 a.m. (New York City time) on the day when due in U.S. dollars
by wire transfer of immediately available funds to the account designated for
that purpose by UPC or Overnite Corporation. Unless a different time is
specified for payment hereunder, such payments shall be due fifteen days after
appropriate notice is given that such payment is due. Whenever such payments
shall be stated to be due on a day other than a
13
day on which banks are not required or authorized to close in New York City (a
"Business Day"), such payment shall be made on the next succeeding Business Day.
If an amount due hereunder shall not have been paid when due, such amount shall
bear interest from the date such payment is due, to but excluding the date of
payment of such amount, at a rate per annum equal to ten percent (10%). Interest
shall be calculated on the basis of a year of 365 or 366 days for the actual
number of days elapsed and compounded quarterly.
4.4 Billing Disputes with Taxing Authorities. Where a taxing authority has
----------------------------------------
made or makes assessments, abatements, credits, refunds, or similar items or
posts payments, assessments, abatements, credits, refunds, or similar items on
or against one Party's tax account which are properly attributable hereunder to
the other Party's activities, the Parties shall cooperate with each other and
work together to resolve the billing discrepancies with the appropriate taxing
authority. Where the billing discrepancies cannot be resolved with the
appropriate taxing authority, the Parties shall make each other whole as if the
taxing authority had correctly posted the accounts of the Parties.
ARTICLE V
---------
AUDITS, AMENDED RETURNS, AND LITIGATION
---------------------------------------
5.1 Conduct of Audits; Amended Returns.
----------------------------------
(a) UPC shall have responsibility and control with respect to the conduct
of audit examinations, extending the statute of limitations and choice of forum
in connection with
14
audit examinations, and the filing of administrative refund claims or amended
returns for the Combined Consolidated Group and any member thereof (and for any
passthrough entity in which a member of the Combined Consolidated Group has an
interest) for consolidated Federal Income Tax, Environmental Tax, and Unitary
Income Tax liabilities for all periods beginning before the IPO. UPC shall
exercise such responsibility and control in a manner which lawfully Minimizes
the tax liabilities of the Combined Consolidated Group. UPC shall not exercise
such responsibility and control to jeopardize tax positions, elections, or other
items of the Overnite Consolidated Group, provided this is consistent with
lawfully Minimizing the tax liabilities of the Combined Consolidated Group.
(b) The Parties shall cause all members of the Combined Consolidated Group,
and any passthrough entities in which a member has an interest, fully to
cooperate with each other during the course of any audit. UPC shall keep
Overnite Corporation advised of, and shall honor all reasonable requests by
Overnite Corporation to be involved in, the preparation of such claims and
amended returns and the audit process to the extent Overnite Consolidated Group
Items or issues are involved.
(c) If Overnite Corporation shall determine that it is desirable for UPC,
Overnite Corporation, or a member of the Overnite Consolidated Group to file a
non-routine claim for refund or amended return with respect to any taxable
period beginning before the IPO, Overnite Corporation shall prepare and submit
such proposed claim to UPC, together with a reasoned legal analysis of the
merits of the proposed claim and a statement setting forth when the statute of
limitations on filing such claim will expire, in sufficient time for UPC to
consider and act on such proposed claim.
15
(d) Overnite Corporation may request that UPC not contest, or discontinue
the contest of, a consolidated Federal Income Tax, Environmental Tax, or Unitary
Income Tax issue relating to an Item of the Overnite Consolidated Group or its
members. UPC shall comply with such request only if it determines, in its sole
and absolute discretion, that doing so would have no adverse effect upon the UPC
Consolidated Group.
5.2 Protest; Litigation. If the consolidated Federal Income Tax,
-------------------
Environmental Tax, or Unitary Income Tax liability of the Combined Consolidated
Group (or any member thereof) or any other matter involving the Internal Revenue
Service with respect to any taxable period beginning before the IPO becomes or
has the potential to become the subject of litigation in any court or subject to
protest or any other administrative proceeding (including but not limited to
requests for rulings or technical advice memoranda), the decision to institute
the litigation or proceeding, the choice of forum, and the overall conduct of
the litigation or proceeding shall be the responsibility of, and shall be
controlled by, UPC. Such responsibility and control shall be exercised in a
manner which lawfully Minimizes the tax liabilities of the Combined Consolidated
Group. The Parties shall cause all members of the Combined Consolidated Group,
and any passthrough entities in which a member has an interest, fully to
cooperate with each other during the course of the litigation or proceeding. UPC
shall keep Overnite Corporation advised of, and shall honor all reasonable
requests by Overnite Corporation to be involved in, all litigation or
proceedings to the extent that Overnite Consolidated Group Items or issues are
involved.
5.3 Opinion Procedure.
-----------------
(a) UPC shall hold Overnite Corporation harmless in the manner provided in
16
Section 5.3(e) of this Agreement if
(i) without Overnite Corporation's consent, UPC adjusts, compromises,
or settles (or directs Overnite Corporation to adjust, compromise, or
settle) a consolidated Federal Income Tax, Environmental Tax, or Unitary
Income Tax issue relating to an Item of the Overnite Consolidated Group or
its members;
(ii) UPC fails to file (or directs Overnite Corporation not to file) a
claim for refund or amended return submitted to UPC pursuant to Section
5.1(d) of this Agreement; or
(iii) over Overnite Corporation's written objection UPC takes (or
directs Overnite Corporation to take) a consolidated Federal Income Tax,
Environmental Tax, or Unitary Income Tax return position relating to an
Item of the Overnite Consolidated Group or its members,
provided (x) with respect to clause (i) above a legal opinion is obtained that
the adjustment, compromise, or settlement does not reasonably reflect both the
likelihood of prevailing if the issue were fully and fairly litigated to a final
determination and the anticipated costs of resolving administrative disputes and
litigation with the taxing authorities, or (y) with respect to clauses (ii) and
(iii) above a legal opinion is obtained that Overnite Corporation's tax position
on the issue is more likely than not to prevail and to Minimize Tax Liabilities,
using the procedure (in the case of either (x) or (y) above) set forth in
Section 5.3(b) of this Agreement. This Section 5.3 shall not apply to an
adjustment, compromise, settlement, or return position which is preliminary to
commencing a refund claim or litigation in which such issue will be contested.
Article VIII of this Agreement shall not apply to any issue as to which a Party
invokes this
17
opinion procedure.
(b) If the Parties cannot agree within a reasonable time whether a return
position should be taken, or whether UPC should adjust, compromise, or settle an
Overnite Consolidated Group Item or file a claim for refund or amended return,
either Party can invoke the following opinion procedure as to such issue by
giving notice to the other. Within thirty (30) days of either Party's notice,
the Parties shall agree upon and simultaneously notify an outside law firm which
has recognized expertise in the field of taxation. Within thirty (30) days of
such notice to the law firm, the Parties shall supply to the law firm all
written support and supplementary documents which each Party deems necessary to
support its contention that the proposed adjustment, compromise, or settlement
does (or does not) reasonably reflect the likelihood of prevailing or that its
tax position on the issue under Section 5.3(a)(ii) or (iii) above is (or is not)
more likely than not to prevail. Either Party may discuss the issues with the
law firm prior to its decision, provided the other Party is given the
opportunity to be present. Within sixty (60) days of such notice to the law
firm,
(i) with respect to an adjustment, compromise, or settlement described
in clause (i) of Section 5.3(a), the law firm shall deliver to both Parties
either (x) the law firm's reasoned opinion that such adjustment,
compromise, or settlement reasonably reflects both the likelihood of
prevailing on the issue if the issue were fully and fairly litigated to a
final determination and the anticipated costs of resolving administrative
disputes and litigation with the taxing authorities, or (y) if such
adjustment, compromise, or settlement is not such a reflection, the law
firm's reasoned opinion as to the likelihood (expressed as a percentage) of
18
prevailing on the issue if fully and fairly litigated to a final
determination and the law firm's good faith estimate of the anticipated
costs (expressed in dollars) of resolving administrative disputes and
litigation with the taxing authorities; or
(ii) with respect to a claim for refund, amended return, or return
position described in clauses (ii) or (iii) of Section 5.3(a), the law firm
shall either (x) deliver its reasoned opinion to both Parties that, if the
issue were fully and fairly litigated to a final determination, Overnite
Corporation's tax position on the issue more likely than not would prevail,
or (y) notify the Parties that the law firm cannot so opine. In the case of
(x) above, the law firm shall also render its reasoned opinion as to the
likelihood (expressed as a percentage) of prevailing on the issue if fully
and fairly litigated to a final determination and the law firm's good faith
estimate of the anticipated costs (expressed in dollars) of resolving
administrative disputes and litigation with the taxing authorities. If in
the opinion of the law firm an expedited decision is necessary or advisable
to protect either Party's rights, the law firm shall accelerate the dates
for submissions and decision so as to protect the rights of the Parties. If
the Parties so agree, inside tax counsel may be utilized instead of an
outside law firm without affecting the remainder of this opinion procedure.
(c) The Party whose position does not prevail under Section 5.3(b) shall
pay the fees and costs of the outside law firm used for the opinion procedure,
notwithstanding any contrary provision of this Agreement.
(d) The determination made by the law firm (or inside tax counsel, as the
case may be) under Section 5.3(b) shall be conclusive and binding on the Parties
and shall not
19
be subject to appeal, except in the case of manifest mathematical
error.
(e) To the extent that the opinion procedure of this Section 5.3 is invoked
as to an Item (including but not limited to a Timing Item) and Overnite
Corporation prevails but Overnite Corporation's position with respect to the
Item is not adopted or implemented by UPC, the following reclassifications and
treatments shall occur for all purposes of this Agreement, including but not
limited to allocating tax costs or benefits related to such Item between the
Parties under Article III:
(i) Overnite Corporation shall not be allocated the amount of any tax
cost attributable to failure to adopt or implement Overnite Corporation's
position with respect to the Item; and
(ii) the benefit of the Turnaround of a Timing Item that is subject to
the opinion procedure shall be reclassified and specially treated as a UPC
Consolidated Group Item.
In the application of this Section 5.3(e), the principles contained in the
definition of the term Actual Loss shall apply.
(f) At any time, the Parties may (by written agreement) waive any portion
or all of this opinion procedure and reclassify or reallocate any Items as to
which a dispute arises within the contemplation of Section 5.3(b).
5.4 Adjustments. UPC and Overnite Corporation shall settle payments or
-----------
reimbursements of the portion of consolidated Federal Income Tax, Environmental
Tax, and Unitary Income Tax deficiencies or refunds relating to the Overnite
Consolidated Group resulting from audits of or the filing of applications for
refunds or amended returns for all periods calculated in accordance with Section
4.2 of this Agreement.
20
ARTICLE VI
----------
COOPERATION ON RECORDS
----------------------
6.1 Furnish Books and Records. The Parties shall furnish or cause to be
-------------------------
furnished to each other upon request, as promptly as practicable, such
information (including access to books, work papers, and other records) and
assistance as are reasonably necessary for the filing of any return, for the
preparation for or conduct of any audit, and for the prosecution or defense of
any claim, suit, or proceeding relating to any proposed tax adjustment. The
Parties shall cooperate with each other in the conduct of any audit or other
similar proceedings and each shall execute and deliver (or cause to be executed
and delivered) such documents (including but not limited to powers of attorney,
returns, elections, and consents) as are necessary to carry out the intent of
this Agreement. Overnite Corporation shall indemnify UPC for any Actual Loss
suffered by the UPC Consolidated Group due to any failure of Overnite
Corporation to comply with requests by UPC for the execution or delivery of
documents or for information held by Overnite Corporation. UPC shall indemnify
Overnite Corporation for any Actual Loss suffered by Overnite Corporation due to
any failure of UPC to comply with requests by Overnite Corporation for the
execution or delivery of documents or for information held by UPC.
6.2 Notice of Audits. Each Party shall promptly give notice to the other
----------------
of any examination, audit, inquiry, litigation, or proposed or actual assessment
by a federal, state, or local taxing authority covering any potential tax
liability where one Party may have a right to demand payment for such tax from,
or be indemnified by, the other Party.
6.3 Record Retention. The UPC and Overnite Consolidated Groups shall
----------------
21
comply with the record retention provisions of the Code, as interpreted by
Treasury Regulations and relevant administrative rulings of the Internal Revenue
Service. Neither the UPC nor the Overnite Consolidated Groups shall destroy, or
permit the destruction of, any records that may relate to any tax liability or
other payment of the Combined Consolidated Group without the other's written
consent. If any such records are willfully or negligently destroyed or permitted
to be destroyed after the date of this Agreement without such consent, the Party
destroying or permitting the destruction of such records shall indemnify the
other Party for any Actual Loss suffered by the other Party due to inability to
produce the records.
6.4 Cost of Producing Records. Each Party shall bear all of its own costs
-------------------------
reasonably incurred in connection with producing any records for the other Party
under this Agreement.
ARTICLE VII
-----------
INDEMNIFICATIONS
----------------
7.1 Federal Income, Environmental, and Unitary Income Taxes. Overnite
-------------------------------------------------------
Corporation, Overnite Holding, and Overnite jointly and severally indemnify and
hold the UPC Consolidated Group harmless from the share of consolidated Federal
Income Tax, Environmental Tax, and Unitary Income Taxes allocable to the
Overnite Consolidated Group for all periods, as determined under Article III
hereof. UPC indemnifies and holds Overnite Corporation, Overnite Holding, and
Overnite harmless from the share of consolidated Federal Income Tax,
Environmental Tax, and Unitary Income Taxes
22
allocable to the UPC Consolidated Group for all periods, as determined under
Article III hereof or under the provisions of the 1991 Agreement.
7.2 Miscellaneous Taxes. Overnite Corporation, Overnite Holding, and
-------------------
Overnite jointly and severally indemnify and hold the UPC Consolidated Group
harmless from the Miscellaneous Taxes of the Overnite Consolidated Group for all
periods, as determined under Section 3.3 hereof. UPC indemnifies and holds
Overnite Corporation, Overnite Holding, and Overnite harmless from the
Miscellaneous Taxes of the UPC Consolidated Group for all periods, as determined
under Section 3.3 hereof.
ARTICLE VIII
------------
DISPUTES
--------
8.1 Accounting Firm. If the Parties are unable to agree on the amount
---------------
which is allocable or due to one Party from the other under this Agreement, or
on whether an action or failure to act has the effect of Minimizing taxes, then
either Party may invoke this procedure by giving notice to the other. Upon
receipt of such notice, the Parties shall select and notify a single public
accounting firm to resolve the dispute. If the Parties cannot agree on a single
firm within ten (10) days, they shall each select a nationally recognized public
accounting firm, which may include the public accounting firm which regularly
opines on either Party's financial statements ("Auditor"). Those two firms shall
jointly select and notify, within ten (10) days, a third independent nationally
recognized public accounting firm, which shall not be the Auditor of either
Party, to resolve the dispute. This Article VIII shall not apply to any issue as
to which a Party has invoked the
23
opinion procedure of Section 5.3 hereof.
8.2 Resolution of Dispute. The chosen public accounting firm (the
---------------------
"Arbitrator") shall be provided with written arguments by each Party and all
supporting documents which each Party deems necessary within thirty (30) days of
selection of the Arbitrator. Each Party shall provide the other Party with
copies of all written arguments, documents, and correspondence submitted to the
Arbitrator. Either Party may discuss the issues with the Arbitrator provided the
other Party is given the opportunity to be present. Within sixty (60) days of
selection of the Arbitrator, the Arbitrator may request each Party to respond to
the written arguments provided by the other Party. The Arbitrator may also set a
date, time, and place for oral arguments. Within sixty (60) days of any oral
arguments or the last written arguments, whichever is later, the arbitrator
shall notify the Parties of its decision. If in the opinion of the Arbitrator an
expedited decision is necessary to protect either Party's rights, the Arbitrator
shall accelerate the dates for submissions, arguments, and decision so as to
protect the rights of the Parties.
8.3 Binding Resolution. The determination made by the Arbitrator under
------------------
Section 8.2 hereof shall be conclusive and binding upon the Parties and shall
not be subject to appeal, except in the case of manifest mathematical error.
8.4 Costs of Dispute Resolution. The Parties shall share equally in all
---------------------------
fees and costs of the Arbitrator.
24
ARTICLE IX
----------
MISCELLANEOUS
-------------
9.1 Sharing of Information. Each Party shall provide the other Party with
----------------------
all relevant tax accounting information and portions of returns, elections,
amended returns, claims for refund, consents, and extensions of the statute of
limitations which each files on behalf of the Combined Consolidated Group (or
any members thereof) for any periods which are reasonably requested.
9.2 Confidentiality. The Parties agree that, except as otherwise expressly
---------------
agreed in writing, any information furnished to the other Party pursuant to this
Agreement is confidential. Except to the extent required for the proper filing
of returns or resolving a dispute, audit, or litigation, the Parties covenant
not to disclose, and not to permit disclosure of, such information to persons
other than their own auditors or tax advisors.
9.3 Successors. This Agreement is being entered into by the Parties on
----------
behalf of themselves and each member of the UPC Consolidated Group and the
Overnite Consolidated Group, respectively. This Agreement shall bind each member
of the UPC Consolidated Group and the Overnite Consolidated Group, and shall
continue to bind each such member whether or not it remains affiliated with UPC
or Overnite Corporation, as the case may be, and shall be deemed to have been
readopted and affirmed on behalf of any corporation which, subsequent to the
date hereof, becomes a member of the UPC Consolidated Group or the Overnite
Consolidated Group. UPC and Overnite Corporation shall, upon the written request
of the other, cause any of their respective subsidiaries formally to ratify and
execute this Agreement. This Agreement shall be binding upon and
25
inure to the benefit of any successor to the Parties (by merger, consolidation,
liquidation, acquisition of assets, or otherwise) to the same extent as if the
successor had been an original party to this Agreement.
9.4 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York, without regard to the
conflict-of-laws principles thereof.
9.5 Headings. The table of contents and headings in this Agreement are for
--------
convenience only and shall not be deemed for any purpose to constitute a part of
or to affect the interpretation of this Agreement.
9.6 Notices. Except as otherwise specifically provided in this Agreement
-------
or agreed to in writing by UPC and Overnite Corporation, all notices, claims,
requests, demands and other communications under this Agreement shall be in
writing and shall be deemed to have been duly given either (i) when transmitted
by telecopy or electronic mail, receipt of which is acknowledged by telecopy or
electronic mail, provided a confirming copy is simultaneously mailed (registered
or certified mail, postage prepaid, return receipt requested) or (ii) three days
after being mailed (registered or certified mail, postage prepaid, return
receipt requested), addressed as follows:
(a) If to UPC: Assistant Vice President-Taxes
Union Pacific Railroad Company
1416 Dodge Street
Omaha, NE 68179
Telecopier No: (402) 271-5972
(b) If to Overnite Corporation: Executive Director-Tax
Overnite Corporation
1000 Semmes Avenue
26
Richmond, VA 23224-2246
Telecopier No.: (804)-231-8500
or to such other person or address as the party to whom the communication is to
be given may have most recently furnished by notice to the other party.
9.7 Services. Overnite Corporation shall reimburse UPC for all services
--------
rendered by UPC to Overnite Corporation in connection with this Agreement. For
purposes of this Section 9.7, services shall include, but not be limited to,
legal and accounting services and the services of consultants and expert
witnesses.
Charges for services performed by a third party shall be equal to the final
invoiced costs charged by such third party to UPC to perform those services. For
all other services, UPC and Overnite Corporation shall negotiate in good faith
the fees to be charged by UPC and shall include a reasonable allocation of
direct and indirect costs (including but not limited to employee salaries,
benefits, and other costs) incurred in connection therewith. Until such fees
are negotiated, such fees shall be $______ per hour for attorneys' time and
$______ per hour for non-attorneys' time (in each case, prorated for fractions
of an hour) until the end of 1998 and shall thereafter be adjusted for increases
in the Consumer Price Index.
UPC shall submit quarterly invoices to Overnite Corporation for the
services provided by UPC to Overnite Corporation. Overnite Corporation shall
pay such charges in accordance with the provisions of Section 4.3 hereof.
In addition to the foregoing services, UPC shall render to Overnite
Corporation the additional services described in Appendix III of this Agreement
during the periods specified therein ("Additional Services") that Overnite
Corporation requests (orally or in
27
writing) that UPC provide to it and Overnite Corporation shall reimburse UPC for
such Additional Services on the same basis as the foregoing services.
9.8 Severability. If any provision of this Agreement is held to be
------------
unenforceable for any reason, it shall be adjusted rather than voided, if
possible, in order to achieve the intent of the Parties to the maximum extent
practicable. In any event, all other provisions of this Agreement shall be
deemed valid, binding, and enforceable to their full extent.
9.9 Effective Date; Termination. Except as specifically provided to the
---------------------------
contrary in this Agreement, Articles II and III of this Agreement shall apply to
all taxable periods beginning on or after January 1, 1991, and Articles IV
through IX of this Agreement shall apply to all taxable periods. Unless
otherwise agreed in writing by the Parties, this Agreement shall remain in force
and be binding so long as the statutory period for assessments or refunds under
applicable law remains unexpired for any taxable period of UPC or Overnite
Corporation, Overnite Holding, and Overnite during which the Overnite
Consolidated Group was included in the Combined Consolidated Group or for any
period as to which either Party may have a claim against the other under this
Agreement.
9.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed shall be deemed an original but all
of which shall together constitute but one and the same instrument.
9.11 Entire Agreement; Termination of Prior Agreements. This Agreement
-------------------------------------------------
constitutes the entire agreement between the Parties concerning the subject
matter hereof and supersedes all prior agreements, written or oral, between or
among any member of
28
the UPC Consolidated Group, on the one hand, and any member of the Overnite
Consolidated Group, on the other hand, with respect to any taxes. Any such prior
agreements are hereby terminated and canceled to the extent not incorporated
herein, and any rights or obligations existing thereunder are hereby fully and
finally settled without any payment by any party thereto. This Agreement may not
be terminated or amended except by written agreement executed by the Parties.
IN WITNESS WHEREOF, each of the parties to this Agreement, intending to be
legally bound, has caused this Agreement to be executed by its duly authorized
officer as of the date first above written.
UNION PACIFIC CORPORATION
By: ______________________________
Title: ______________________________
OVERNITE CORPORATION
By: ______________________________
Title: ______________________________
29
OVERNITE HOLDING, INC.
By: ______________________________
Title: ______________________________
OVERNITE TRANSPORTATION COMPANY
By: ______________________________
Title: _______________________________
30
APPENDIX I
----------
ALLOCATION OF FEDERAL INCOME TAX
LIABILITIES AND BENEFITS
ATTRIBUTABLE TO SPECIFIC TAX ITEMS
Pursuant to Section 3.1 of this Agreement, the Overnite Consolidated Group
shall be allocated its pro rata contribution of Federal Income Tax cost or
benefit (either as originally filed or as adjusted upon audit, amended return,
or ultimate settlement, or otherwise), including interest and penalties, as a
result of the Combined Consolidated Group's activities for the applicable
periods. In general, the Federal Income Tax cost or benefit to be allocated to
the Overnite Consolidated Group shall be equal to the difference between the
Federal Income Tax actually payable by the Combined Consolidated Group for a
period and the amount of Federal Income Tax which would have been payable by the
Combined Consolidated Group for such period if the Overnite Consolidated
Group's Items for such period had not been included in the Combined Consolidated
Group's tax returns for such period, provided that the allocation principles
enumerated below shall control, subject to Section 3.1(d), to the extent such
principles are inconsistent with the foregoing:
a. Net Operating Losses (NOLs). To the extent that the Overnite
---------------------------
Consolidated Group incurs an NOL, it shall be allocated the Federal Income Tax
benefit attributable to such loss when such benefit is realized (including
carrybacks) by the Combined
I-1
Consolidated Group. If the Combined Consolidated Group does not fully utilize
the NOLs of all members of the Combined Consolidated Group for any period, the
Overnite Consolidated Group shall be allocated its pro rata share of the
Combined Consolidated Group's NOL benefit determined by multiplying such benefit
by a ratio the numerator of which is the NOL of the Overnite Consolidated Group
for such period and the denominator of which is the sum of the numerator and the
NOLs of any UPC Divisions which have an NOL for such period. The Overnite
Consolidated Group shall be allocated any tax benefit attributable to NOL
carryforwards when and to the extent the Combined Consolidated Group realizes
such benefit in a subsequent period as determined (on a first-in, first-out
basis) by applying the foregoing allocation principles in such subsequent
period.
b. Capital Gains and Losses. To the extent that the Overnite Consolidated
------------------------
Group realizes a net capital gain, the tax cost of such Item shall be determined
and allocated to the Overnite Consolidated Group at the applicable favorable
capital gain rate of tax, if any, for such Item for the period in question. To
the extent that the Overnite Consolidated Group realizes a net capital loss, the
Overnite Consolidated Group shall be allocated a tax benefit determined at the
applicable favorable capital gain rate, if any, but only when and to the extent
such net capital loss is fully utilized by the Combined Consolidated Group. To
the extent that the Combined Consolidated Group does not fully utilize the net
capital loss of the Combined Consolidated Group in any tax period, the net
capital loss of the Overnite Consolidated Group (for purposes of determining the
tax benefit) shall be limited to a pro rata share of the aggregate net capital
gains of the UPC Divisions which have net capital gains for the period, based on
a ratio the numerator of which is the net
I-2
capital loss of the Overnite Consolidated Group for the period and the
denominator of which is the sum of the numerator and the net capital losses of
the UPC Divisions which have net capital losses for the period. The balance
shall be carried forward, and the Overnite Consolidated Group shall be allocated
the tax benefit when and to the extent the Combined Consolidated Group realizes
such benefit in a subsequent period as determined (on a first-in, first-out
basis) by applying the foregoing allocation principles in such subsequent
period.
c. Section 1231 Gains and Losses.
-----------------------------
(1) To the extent that the Overnite Consolidated Group realizes a net
section 1231 gain (within the meaning of section 1231 of the Code), the tax cost
attributable to such Item shall be determined and allocated at the applicable
favorable rate of tax, if any, for items of section 1231 gain income for the tax
period in question. Where the Overnite Consolidated Group realizes a net
section 1231 loss (within the meaning of section 1231 of the Code), but the
Combined Consolidated Group for the tax year in question realizes a net section
1231 gain, the tax benefit attributable to the Overnite Consolidated Group's
net section 1231 loss shall be determined and allocated at the applicable rate
of tax for items of section 1231 gain income for such year. Where the Overnite
Consolidated Group realizes a net section 1231 loss and the Combined
Consolidated Group also realizes a net section 1231 loss for the tax year in
question:
(i) The Overnite Consolidated Group's net section 1231 loss shall be
multiplied by a ratio the numerator of which is the Combined Consolidated
Group's net section 1231 loss and the denominator of which is the sum of the net
section 1231 losses of the Overnite Consolidated Group and those UPC Divisions
realizing net section 1231
I-3
losses.
(ii) The tax benefit attributable to the Overnite Consolidated Group's
net section 1231 loss shall be determined and allocated in an amount equal to
the sum of (x) the tax benefit of the product determined in clause (i) above,
calculated at the applicable rate of tax for items of section 1231 loss for such
year, and (y) the tax benefit of the difference between the Overnite
Consolidated Group's net section 1231 loss and the product determined in clause
(i) above, calculated at the applicable rate of tax for items of section 1231
gain for such year.
(2) Notwithstanding the foregoing, to the extent that the Combined
Consolidated Group realizes a net section 1231 gain which is subject to the loss
recapture rules of section 1231 (c) of the Code, the additional tax associated
with the section 1231 loss recapture amount shall be borne by the members of the
Combined Consolidated Group which generated such net section 1231 losses during
the applicable look-back period. The net section 1231 losses which were
generated during the applicable look-back period and are the subject of loss
recapture in a post-1984 period shall be accounted for on a first-in, first-out
basis for purposes of sourcing the applicable period or periods to which such
loss recapture applies. To the extent that the loss recapture amount is sourced
from a year during the look-back period in which more than one Division had net
section 1231 losses, the Overnite Consolidated Group shall be allocated a pro-
rata share of such loss recapture amount determined by multiplying the sourced
loss recapture amount of the Combined Consolidated Group for the period in
question by a ratio the numerator of which is the Overnite Consolidated Group's
net section 1231 loss for the period and the denominator of which is the sum of
the numerator and the net section 1231 losses of the
I-4
UPC Divisions having net section 1231 losses for such period.
d. Charitable Contribution Deductions. The Overnite Consolidated Group
----------------------------------
shall be allocated a charitable contribution deduction under section 170 of the
Code in an amount equal to the deduction realized by the Combined Consolidated
Group multiplied by a ratio the numerator of which is the charitable
contributions of the Overnite Consolidated Group and the denominator of which
is the sum of the numerator and the charitable contributions of the UPC
Consolidated Group for such period. To the extent that the Combined Consolidated
Group is limited on the amount of its consolidated charitable contribution
deduction in any period, the Overnite Consolidated Group shall be allocated any
tax benefit attributable to the excess charitable contributions when and if the
Combined Consolidated Group realizes such benefit in a subsequent period as
determined (on a first-in, first-out basis) by applying the foregoing allocation
principles in such subsequent period.
e. Dividends-Received Deduction. To the extent that the Overnite
----------------------------
Consolidated Group has received dividends qualifying for a dividends-received
deduction under sections 243, 244, or 245 of the Code and the Combined
Consolidated Group's dividends-received deduction is not limited, the Overnite
Consolidated Group shall be allocated the full allowable deduction (as limited
by subsection 246(c) or section 246A of the Code) based on the dividends it so
receives. If the Combined Consolidated Group's dividends-received deduction is
limited in any tax period pursuant to a provision of the Code other than
subsection 246(c) or section 246A, the dividends received deduction allocated to
the Overnite Consolidated Group shall be limited to an amount equal to the
allowable dividends-received deduction of the Combined Consolidated Group
multiplied by a ratio
I-5
the numerator of which is the sum of qualifying dividends received by the
Overnite Consolidated Group and the denominator of which is the sum of the
numerator and the qualifying dividends received by the UPC Consolidated Group.
f. Alternative Minimum Tax (AMT) and Minimum Tax Credit (AMT Credit).
-----------------------------------------------------------------
(1) AMT. If the Combined Consolidated Group incurs an AMT liability under
---
section 55 of the Code, the Overnite Consolidated Group shall be allocated a
pro rata share of the excess of AMT over the regular tax liability (the "AMT
Increment") for the Combined Consolidated Group determined by multiplying the
Combined Consolidated Group's AMT Increment by a ratio the numerator of which is
the Overnite Consolidated Group's AMT Increment computed on a stand-alone basis
and the denominator of which is the sum of such numerator and the AMT Increments
of each UPC Division (using zero for any UPC Division which would have no AMT
Increment) computed on a stand-alone basis.
(2) AMT Credit. To the extent that the Combined Consolidated Group utilizes
----------
an AMT Credit (including an AMT Credit attributable to a Fuel Credit carryover)
under section 53 of the Code against its regular tax liability for post-1987
periods, the applicable period to source such AMT Credit shall be determined on
a first-in, first-out basis. The Overnite Consolidated Group shall be allocated
a pro rata share of such AMT Credit utilized by the Combined Consolidated Group
which is attributable to each sourcing period, determined by multiplying such
AMT Credit by a ratio the numerator of which is the Overnite Consolidated
Group's AMT Increment (as determined under subsection (1) above) for the
applicable sourcing period and the denominator of which is the sum of such
numerator and the AMT Increment of each UPC Division (as determined
I-6
under subsection (1) above, increased by any Fuel Credit carryover attributable
to that UPC Division) for such applicable sourcing period. Notwithstanding the
foregoing, the Overnite Consolidated Group shall not be allocated the benefit
from any AMT Credits which are attributable to any period ending prior to
January 1, 1998.
g. Credit for Producing Fuel from a Nonconventional Source (Fuel Credit).
--------------------------------------------------------------------
To the extent that the Combined Consolidated Group utilizes a Fuel Credit under
section 29 of the Code (other than AMT Credit which is attributable to a Fuel
Credit carryover, which shall be allocated under paragraph f above), the UPC
Consolidated Group shall be allocated all of such credit.
h. Investment Tax Credit (ITC) and Investment Tax Credit Recapture (ITC
--------------------------------------------------------------------
Recapture).
----------
(1 ) ITC. To the extent that the Overnite Consolidated Group has
---
generated ITC (under former section 38 of the Internal Revenue Code of 1954, as
amended) on qualified property, and to the extent that the Combined Consolidated
Group is not limited in its utilization of such ITC, whether attributable to the
current period or by way of a carryback or carryforward, the Overnite
Consolidated Group shall be allocated its full ITC based on its separate
qualified property. If the Combined Consolidated Group does not fully utilize
its ITC for any period, the Overnite Consolidated Group shall be allocated its
pro rata share of the Combined Consolidated Group's ITC benefit for such period
determined by multiplying such benefit by a ratio the numerator of which is the
ITC generated by the Overnite Consolidated Group for the period and the
denominator of which is the sum of the numerator and the ITC generated by all
UPC Divisions for the period. The Overnite Consolidated Group shall be
allocated any tax benefit attributable
I-7
to ITC carryovers when and if the Combined Consolidated Group realizes such
benefit in a subsequent period as determined (on a first-in, first-out basis) by
applying the foregoing allocation principles in such subsequent period.
(2) ITC Recapture. To the extent that qualified property with respect to
-------------
which the Overnite Consolidated Group has been allocated an ITC benefit is
prematurely disposed of (other than in connection with a deemed sale under the
Purchase Agreement pursuant to an election under Section 338(h)(10) of the Code)
thereby triggering ITC Recapture under section 47 of the Code, such ITC
Recapture shall be fully allocated to the Overnite Consolidated Group in the
period in which such disposition occurs.
i. Credit for Increasing Research Activities (R&D Credit). To the extent
------------------------------------------------------
that the Overnite Consolidated Group has an increase in its qualified research
expenses over its base period research expenses (the "Excess R&D Amount") as
defined in section 41 of the Code, and to the extent that the Combined
Consolidated Group utilizes an R&D Credit for such period, the Overnite
Consolidated Group shall be allocated a pro rata share of the R&D Credit
utilized by the Combined Consolidated Group, based on a ratio the numerator of
which is the Overnite Consolidated Group's Excess R&D Amount computed on a
stand-alone basis for the period and the denominator of which is the sum of the
numerator and the Excess R&D Amounts of each UPC Division having an Excess R&D
Amount computed on a stand-alone basis for the same period.
j. Targeted Jobs Credit. To the extent that the Combined Consolidated Group
--------------------
utilizes a targeted jobs credit within the meaning of section 51 of the Code,
the Overnite Consolidated Group shall be allocated a pro rata share of such
credit determined by multiplying such credit by a ratio the numerator of which
is the Overnite Consolidated
I-8
Group's allowable targeted jobs credit computed on a stand-alone basis and the
denominator of which is the sum of the numerator and the allowable targeted jobs
credits of each UPC Division computed on a stand-alone basis.
k. Credit for Federal Tax on Gasoline and Special Fuels. To the extent that
----------------------------------------------------
the Combined Consolidated Group utilizes a credit for federal tax on gasoline
and special fuels under section 34 of the Code, such credit shall be allocated
to the Division which generated it.
1. Enhanced Oil Recovery Credit (EOR Credit). To the extent that the
-----------------------------------------
Combined Consolidated Group generated EOR Credits (within the meaning of
section 43 of the Code), whether attributable to the current period or by way of
a carryback or carryforward, the UPC Consolidated Group shall be allocated all
of such EOR Credit.
m. Foreign Tax Credits. The Overnite Consolidated Group shall be allocated
-------------------
the benefit of any foreign tax credits (under section 27 of the Code) realized
by the Combined Consolidated Group which are attributable to foreign taxes paid
by members of the Overnite Consolidated Group. If the Combined Consolidated
Group's utilization of foreign tax credits is limited in any tax period pursuant
to a provision of the Code, the Overnite Consolidated Group shall be allocated a
pro rata share of the foreign tax credit in an amount equal to the Combined
Consolidated Group's utilized foreign tax credit multiplied by a ratio the
numerator of which is the foreign tax credit of the Overnite Consolidated Group
for such period and the denominator of which is the sum of the numerator and the
foreign tax credits of each UPC Division for such period. The tax benefit of any
unused foreign tax credit of the Overnite Consolidated Group shall be allocated
when and if the Combined Consolidated Group realizes such benefit in a
I-9
subsequent period as determined (on a first-in, first-out basis) by applying the
foregoing allocation principles in such subsequent period.
n. Interest on Tax Deficiencies and Refund Claims. To the extent that the
----------------------------------------------
allocated tax liability of the Overnite Consolidated Group is increased, or its
allocated benefit is reduced, for any period, interest expense at the applicable
underpayment rates under section 6621 of the Code (or such higher interest rate
as is chargeable by the relevant taxing authority) for the periods in question
shall be allocated to the Overnite Consolidated Group. To the extent that the
allocated tax liability of the Overnite Consolidated Group is reduced, or its
allocated benefit is increased, for any period, interest income at the
applicable overpayment rates under section 6621 of the Code (or such lower
interest rate as is payable by the relevant taxing authority) for the periods in
question shall be allocated to the Overnite Consolidated Group.
o. Penalties; Additions to Tax. Penalties and additions to tax assessed
---------------------------
against the Combined Consolidated Group arising from Items allocated to (or tax
deficiencies, tax adjustments, or other matters related to) the Overnite
Consolidated Group shall be directly allocated to the Overnite Consolidated
Group. If penalties or additions to tax assessed against the Combined
Consolidated Group arise from Items allocated to (or tax deficiencies, tax
adjustments, or other matters related to) both the UPC Consolidated Group and
the Overnite Consolidated Group, the Overnite Consolidated Group shall be
allocated the amount of penalties or additions to tax which would have been
assessed against the Overnite Consolidated Group on a stand-alone basis.
Notwithstanding the foregoing, if the amount of penalties or additions to tax
assessed is limited because the Overnite Consolidated Group is included in the
Combined Consolidated Group, the
I-10
Overnite Consolidated Group shall be allocated a pro rata share of the penalties
or additions to tax actually assessed determined by multiplying the amount of
such penalties or additions to tax by a ratio, the numerator of which is the
amount of penalties or additions to tax which would have been assessed against
the Overnite Consolidated Group on a stand-alone basis and the denominator of
which is the sum of the numerator and the amount of penalties or additions to
tax which would have been assessed against UPC on a stand-alone basis. Interest
on penalties and additions to tax shall be allocated to the party which is
allocated the penalties or additions to tax to which such interest relates.
p. Unspecified Items. To the extent that an Item arises during a tax period
-----------------
with respect to the Overnite Consolidated Group that is included in the
Combined Consolidated Group's Federal Income Tax return but limited by reason of
a certain Code provision, regulation, ruling, or case law, and the allocation
provisions of this Appendix I do not specifically address the proration of such
Item, then the Parties shall attempt to agree on an equitable proration formula
within a reasonable period of notice of such issue. In the event no agreement is
reached, UPC shall apply the following principles in resolving such dispute:
(i) The consolidated tax cost or benefit of an unspecified Item should be
allocated in proportion to the relative contribution of such unspecified Item by
the UPC Divisions and the Overnite Consolidated Group.
(ii) The amount of the allocation should be based on the actual
consolidated tax cost or benefit associated with such Item, rather than any
hypothetical costs or benefits
I-11
which would arise if both the UPC Consolidated Group and the Overnite
Consolidated Group had filed separate returns on a stand-alone basis.
(iii) The proration formula selected to allocate the tax cost or benefit
associated with such Item should be determined in a manner consistent with the
allocation procedures adopted herein for that specified Item most similar to the
unspecified Item in dispute. Failing resolution of the dispute on such basis, a
proration formula should be adopted which results in an equitable allocation of
the consolidated Item after taking into account the basis for the limitation
associated with the particular Code provision, regulation, ruling, or case law
dealing specifically with such unspecified Item.
I-12
APPENDIX II
-----------
ALLOCATION OF
UNITARY INCOME TAX
LIABILITIES AND BENEFITS
Pursuant to Section 3.2 of this Agreement, the Overnite Consolidated
Group, or any member thereof, shall be allocated a pro rata share of any Unitary
Income Tax cost or benefit, including interest and penalties (either as
originally reported or as adjusted upon audit, amended return, or ultimate
settlement, or otherwise), arising by reason of its activities' being included
in a Unitary Income Tax return with activities of the UPC Consolidated Group or
any member thereof. In order to ascertain the Overnite Consolidated Group's
allocated tax cost or benefit of such Unitary Income Tax Return in a particular
jurisdiction for a particular tax period, the following determinations and
allocation principles shall apply, subject to Section 3.2(c):
Step 1. A hypothetical stand-alone Unitary Income Tax liability or benefit
------
before application of NOLs and before credits ("Stand-alone Liability or
Benefit") for each Division in the Unitary Group shall be determined and
allocated to each Division. Divisions reporting a loss shall receive a benefit.
In the computation of each Division's Stand-alone Liability or Benefit, the
principles set forth in Section 3.1 and Appendix I of this Agreement with
respect to the computation and allocation of Federal Income Tax liability shall
be applied to the extent not inconsistent with Step 2 below, and all
limitations, modifications, allocation and apportionment methods, and elections
utilized
II-1
in the Unitary Income Tax return as filed or adjusted shall govern the
computation of Divisions' Stand-alone Liability or Benefit.
Step 2. The total of the Divisions' Stand-alone Liabilities (reduced by
------
Stand-alone Benefits) as calculated in Step 1 shall be subtracted from the total
actual Unitary Income Tax liability before credits. The difference shall be
allocated to increase or reduce the Stand-alone Liability or Stand-alone Benefit
of each Division in an amount determined by multiplying such difference by a
ratio the numerator of which is the absolute value of such Division's Stand-
alone Liability or Benefit and the denominator of which is the sum of the
absolute values of each Division's Stand-alone Liability or Benefit.
Notwithstanding the foregoing, the portion of such difference which does not
exceed any NOL of the Unitary Group for the period (and the benefit, when
realized, of the NOL carryover or carryback associated with such portion) shall
be allocated to those Divisions which have a Stand-alone Benefit in an amount
determined by multiplying such portion by a ratio the numerator of which is such
Division's Stand-alone Benefit and the denominator of which is the sum of each
Division's Stand-alone Benefits. The benefit of any other NOL carryovers or
Carrybacks shall be allocated when realized based upon the ratio described in
the second sentence of this paragraph using Stand-alone Liabilities and Benefits
attributable to the period in which such NOL was generated.
Step 3. Credits shall be allocated when realized to the Division which
------
generated the credits.
II-2
APPENDIX III
ADDITIONAL SERVICES
DESCRIPTION OF SERVICES TIME PERIOD
----------------------- -----------
Annual analysis of consolidated Federal Until expiration of this
Income Tax, Environmental Tax and Unitary Agreement
Income Tax audit exposure as it relates to
settlement of all tax periods beginning
before the IPO.
Support with the "Corp Tax" system Until all consolidated Federal
Income Tax, Environmental Tax
and Unitary Income Tax
returns are filed for the
short period ending on or
before the IPO
Continuity and consultation on ERISA Until 6 months after the IPO
issues pending at the time of the IPO
Continuity and consultation on litigation Until 6 months after the IPO
in progress related to Massachusetts state
income tax for the years 1988-93 and a
dispute in progress related to Oklahoma
IRP registration for the years 1993-94
Continuity and consultation on state Until 6 months after the IPO
income tax issues related to the corporate
structure of Overnite Corporation
Transition support on property tax issues Until 2 months after the IPO
equivalent to 75% of one full-time position
Transition support on property tax issues From 2 months until 4 months
equivalent to 25% of one full-time position after the IPO
III-1
Dates Referenced Herein and Documents Incorporated by Reference
| Referenced-On Page |
|---|
| This ‘S-1/A’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| Filed on: | | 7/22/98 | | | | | | | None on these Dates |
| | 1/1/98 | | 41 |
| List all Filings |
↑Top
Filing Submission 0000950130-98-003632 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
Copyright © 2024 Fran Finnegan & Company LLC – All Rights Reserved.
About — Privacy — Redactions — Help —
Fri., Apr. 19, 5:03:25.1pm ET 