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Exhibit
10.12
EXECUTION
VERSION
TAX SHARING
AGREEMENT
between
MORGAN
STANLEY,
on behalf of
itself
and the
members
of the MS
Group,
and
MSCI INC.,
on behalf of
itself
and the
members
of the MSCI
Group
This Agreement is entered
into as of the 20 th day
of November, 2007 between Morgan Stanley (“ MS
”), a Delaware corporation, on behalf of itself and the
members of the MS Group, as defined below, and MSCI Inc. (“
MSCI ”), a Delaware corporation, registered to do
business in New York as NY MSCI, on behalf of itself and the
members of the MSCI Group, as defined below.
WITNESSETH:
WHEREAS, pursuant to the tax
laws of various jurisdictions, certain members of the MSCI Group
presently file, and will continue to file prior to certain
transactions, certain tax returns on an affiliated, consolidated,
combined, unitary, fiscal unity or other group basis (including as
permitted by Section 1501 of the Internal Revenue Code of
1986, as amended (the “ Code ”)) with certain
members of the MS Group;
NOW, THEREFORE, in
consideration of the mutual covenants and agreements hereinafter
set forth, the parties agree as follows:
1.
Definitions.
(a) As used in this
Agreement:
“ Actually
Realized ” or “Actually Realizes ”
shall mean, for purposes of determining the timing of the
incurrence of any Tax liability or the realization of a Refund (or
any related income tax or other Tax cost or benefit) in respect of
any payment, transaction, occurrence or event, the time at which
the amount of income taxes paid (or Refund realized) is increased
above (or reduced below) the amount of income taxes that would
otherwise have been required to be paid (or Refund that would
otherwise have been realized) but for such payment, transaction,
occurrence or event.
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“ Affiliate
” of any Person shall mean any individual, corporation,
partnership or other entity directly or indirectly owning more than
50 percent (by vote or value) of, owned more than 50 percent (by
vote or value) by, or under more than 50 percent (by vote or value)
common ownership with, such Person.
“ After-Tax
Amount ” shall mean an additional amount necessary to
reflect the hypothetical Tax consequences of the receipt or accrual
of any payment, using the maximum statutory rate (or rates, in the
case of an item that affects more than one Tax) applicable to the
recipient of such payment for the relevant Taxable year, reflecting
for example, the effect of the deductions available for interest
paid or accrued and for Taxes, such as state and local income
taxes.
“ AMT ”
shall mean the alternative minimum tax, within the meaning of
Section 55 of the Code.
“ Barra ”
shall mean Barra, Inc., a Delaware corporation.
“ Code ”
shall have the meaning ascribed to it in the first
“whereas” clause in this Agreement.
“ Combined
Apportionment Factor ” shall mean the apportionment
factor reflected on the applicable consolidated, combined or
unitary state or local income tax return and utilized in computing
the combined, consolidated or unitary state or local income tax
liability.
“ Consolidated
Federal Return ” shall mean a Pre-Deconsolidation Period
Return filed in respect of federal income taxes by a Consolidated
Group.
“ Consolidated
Group ” shall mean any group consisting of (i) at
least one member of the MS Group that filed (or will file) any
Pre-Deconsolidation Period Return that reflects the income, assets
or operations of any member of the MSCI Group or (ii) at least
one member of the MSCI Group that filed (or will file) any
Pre-Deconsolidation Period Return that reflects the income, assets
or operations of any member of the MS Group.
“ Consolidated State
Return ” shall mean a Pre-Deconsolidation Period Return
filed in respect of state or local income taxes by a Consolidated
Group.
“ Deconsolidation
Date ” shall mean with respect to a Return the date on
which any member of the MSCI Group is no longer consolidated,
combined or in a unitary relationship (as the case may be) with any
member of MS Group in filing such Return.
“ Federal Separate
Group Tax Liability ” shall mean the product of a
Group’s Separate Group Taxable Income, computed for federal
income tax
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purposes, and the highest federal income
tax rate imposed under the Code on the Taxable income of a
corporation for the relevant Taxable period (or portion thereof),
reduced by any Tax credits that the Group would be able to use if
it were calculating its federal income Tax liability on a
stand-alone basis.
“ Final
Determination ” shall mean (i) with respect to
federal income taxes, (A) a “determination” as
defined in Section 1313(a) of the Code, or (B) the date
of acceptance by or on behalf of the IRS of Form 870-AD (or any
successor form thereto), as a final resolution of Tax liability for
any Taxable period, except that a Form 870-AD (or successor form
thereto) that reserves the right of the taxpayer to file a claim
for Refund or the right of the IRS to assert a further deficiency
shall not constitute a Final Determination with respect to the item
or items so reserved; (ii) with respect to Taxes other than
federal income taxes, any final determination of liability in
respect of a Tax that, under applicable law, is not subject to
further appeal, review or modification through proceedings or
otherwise; (iii) with respect to any Tax, any final
disposition by reason of the expiration of the applicable statute
of limitations; or (iv) with respect to any Tax, the payment
of Tax by any member of the MS Group or the MSCI Group, whichever
is responsible for payment of such Tax under applicable law, with
respect to any item disallowed or adjusted by a Taxing Authority,
provided that the provisions of Section 13 hereof have been
complied with, or, if such section is inapplicable, that the party
responsible under the terms of this Agreement for such Tax is
notified by the party paying such Tax that it has determined that
no action should be taken to recoup such disallowed item, and the
other party agrees with such determination.
“ Gain Group
” shall mean a Group with Separate Group Taxable Income for
the relevant Taxable period.
“ Group ”
shall mean the MSCI Group or the MS Group, as appropriate. “
IRS ” shall mean the Internal Revenue
Service.
“ Loss Group
” shall mean a Group that incurs a Separate Group Taxable
Loss for the relevant Taxable period.
“ MSCI Group
” shall mean one or more of (i) MSCI, (ii) on or
before the Deconsolidation Date, any Person that is, or was, a
Subsidiary of MSCI for such period of ownership by MSCI and
(iii) to the extent not previously included by (ii), Barra and
its Subsidiaries, including for (i), (ii) and (iii) any
predecessors and successors thereto.
“ MS Group
” shall mean one or more of MS and its Subsidiaries other
than those entities comprising the MSCI Group.
“ Overpayment
Rate ” shall mean the overpayment rate as set forth in
Section 6621 of the Code.
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“ Person ”
shall have the meaning ascribed to it in Section 7701(a)(1) of
the Code.
“
Post-Deconsolidation Period ” shall mean any Taxable
period (or portion thereof) beginning after the close of business
on the Deconsolidation Date.
“
Pre-Deconsolidation Period ” shall mean any Taxable
period ending on or before the close of business on the
Deconsolidation Date; provided that if a Taxable period ending
after the Deconsolidation Date contains any days which fall prior
to or on the Deconsolidation Date, only the portion of such Taxable
period up to and including the Deconsolidation Date shall be
included in the Pre-Deconsolidation Period.
“ Refund ”
shall mean any refund of Taxes, including any reduction in Taxes by
means of a credit, offset or otherwise.
“ Return ”
shall mean any Tax return, statement, report, form, election, claim
or surrender (including estimated Tax returns and reports,
extension requests and forms, and information returns and reports)
required to be filed with any Taxing Authority.
“ Separate Group
Taxable Income ” shall mean, with respect to a Group,
such Group’s Taxable income computed as if such Group were a
separate consolidated, combined or unitary group, and applying such
Tax principles, including limitations and carryovers (excluding
limits for charitable contributions and dividends-received
deduction, and accounting for deferred intercompany transactions
consistent with the deferral and recognition rules of Treasury
Regulations Section 1.1502-13 (or any successor rule) or
analogous state or local rule), that would have been applicable to
such Group had such Group never been part of the Consolidated Group
or any other consolidated, combined or unitary group. In the
context of state and local tax, Separate Group Taxable Income shall
be computed prior to the application of any apportionment formula.
Additionally, to the extent a member of a Group has a net operating
loss or any other tax attribute that was created prior to becoming
a member of the Group but can be carried forward and used by the
Group (in the context of state or local law, either before or after
apportionment, as determined under applicable law), such attribute
will factor into such Group’s calculation of Separate Group
Taxable Income (taking into account any applicable limitations on
the use thereof).
“ Separate Group
Taxable Loss ” shall mean, with respect to a Group, such
Group’s Taxable loss computed as if such Group were a
separate consolidated, combined or unitary group, and applying such
Tax principles, including limitations and carryovers (excluding
limits for charitable contributions and dividends-received
deduction, and accounting for deferred intercompany transactions
consistent with the deferral and recognition rules of Treasury
Regulations Section 1.1502-13 (or any successor rule) or
analogous state or local rule), that would have been applicable to
such Group had such Group never been
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part of the Consolidated Group or any
other consolidated, combined or unitary group. In the context of
state and local tax, Separate Group Taxable Loss shall be computed
prior to the application of any apportionment formula.
Additionally, to the extent a member of a Group has a net operating
loss or any other Tax attribute that was created prior to becoming
a member of the Group but can be carried forward and used by the
Group (in the context of state or local law, either before or after
apportionment, as determined under applicable law), such attribute
will factor into the Group’s calculation of Separate Group
Taxable Loss (taking into account any applicable limitations on the
use thereof).
“ State Separate
Group Tax Liability ” shall mean, with respect to a
particular state or locality, the product of the Group’s
Separate Group Taxable Income and the Combined Apportionment Factor
and the State Tax Rate, reduced by any applicable Tax credits that
the Group would be able to use if it were calculating its Tax
liability on a stand-alone basis.
“ State Tax Rate
” shall mean, with respect to a particular state or locality,
the highest applicable tax rate imposed under applicable law on the
Separate Group Taxable Income of the Group for the relevant Taxable
period (or portion thereof).
“ Subsidiary
” of any Person shall mean any corporation, partnership or
other entity directly or indirectly owned more than 50 percent (by
vote or value) by such Person.
“ Tax ”
(and the correlative meaning, “ Taxes ,” “
Taxing ” and “ Taxable ”) shall
mean (A) any tax imposed under Subtitle A of the Code, or any
net income, gross income, gross receipts, alternative or add-on
minimum, sales, use, business and occupation, value-added, trade,
goods and services, ad valorem, franchise, profits, license,
business royalty, withholding, payroll, employment, capital,
excise, transfer, recording, severance, stamp, occupation, premium,
property, asset, real estate acquisition, environmental, custom
duty, or other tax, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest and any
penalty, addition to tax or additional amount imposed by a Taxing
Authority; (B) any liability of a member of the MS Group or
the MSCI Group, as the case may be, for the payment of any amounts
of the type described in clause (A) for any Taxable period
resulting from such member being a part of a consolidated group
pursuant to the application of Treasury Regulations
Section 1.1502-6 or any similar provision applicable under
state, local or foreign law; or (C) any liability of a member
of the MS Group or the MSCI Group for the payment of any amounts
described in clause (A) as a result of any express or implied
obligation to indemnify any other Person.
“ Tax Benefit
” shall have the meaning ascribed to it in Section 10(d)
of this Agreement.
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“ Tax Proceeding
” shall mean any Tax audit, dispute or proceeding (whether
administrative, judicial or contractual).
“ Taxing
Authority ” shall mean any governmental authority
(domestic or foreign), including, without limitation, any state,
municipality, political subdivision or governmental agency,
responsible for the imposition of any Tax.
“ Underpayment
Rate ” shall mean the underpayment rate as set forth in
Section 6621 of the Code.
(b) Any term used in
this Agreement which is not defined in this Agreement shall, to the
extent the context requires, have the meaning assigned to it in the
Code or the applicable Treasury regulations thereunder (as
interpreted in administrative pronouncements and judicial
decisions), or in comparable provisions of applicable
law.
2. Tax Sharing
Agreements. Any and all existing Tax sharing agreements or
arrangements, written or unwritten, between any member of the MS
Group and any member of the MSCI Group, other than this Agreement,
shall terminate upon the execution of this Agreement. Upon the
execution of this Agreement, neither the members of the MSCI Group
nor the members of the MS Group shall have any further rights or
liabilities thereunder, and this Agreement shall be the only Tax
sharing agreement between the members of the MSCI Group and the
members of the MS Group. MS and MSCI shall act in good faith in the
performance of this Agreement.
3. Federal Income
Taxes.
(a) Return
Filing.
(i) MS shall prepare and
file, or cause to be prepared and filed, Consolidated Federal
Returns for which the Consolidated Group is required or permitted
to file a Consolidated Federal Return using, inter alia,
information provided by MSCI. MSCI shall provide MS with all
necessary information to file a Consolidated Federal Return not
later than 45 days after MS’s fiscal year-end and shall
respond promptly to all information requests, but in no event more
than two business days following a request. Each member of the
Consolidated Group shall execute and file such consents, elections
and other documents as may be required or appropriate for the
filing of such Consolidated Federal Returns. All Tax elections
shall be at the sole discretion of MS provided, however, that MSCI
shall be entitled to direct MS to make any and all Tax elections
that exclusively affect the MSCI Group, subject to MS’s
consent. All income tax computations performed on a consolidated
basis will be performed or approved by MS. MS shall not change any
method of accounting that
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relates exclusively to the
MSCI Group for any Tax purpose if such change adversely affects the
MSCI Group unless such change is required by law. MS shall notify
and discuss with MSCI prior to the filing of a Consolidated Federal
Return any potential material differences in the information
provided by MSCI to be used in the preparation of such Consolidated
Federal Return and the position MS intends to take on such
Consolidated Federal Return.
(ii) MS shall pay, or cause
to be paid, and, subject to the provisions of Section 3(b),
shall be responsible for, any and all federal income taxes due or
required to be paid with respect to, or required to be reported on,
any such Consolidated Federal Return.
(iii) In the event a
Consolidated Federal Return is not filed, each relevant member of
the MS Group and MSCI Group shall be responsible for
(i) filing its own Pre-Deconsolidation Period Return in
respect of federal income taxes as a separate entity, including
requests for extension, as if this Agreement were not in effect and
(ii) making Tax payments (including estimated Tax payments, if
necessary). Each such member filing a Return as a separate entity
shall be entitled to any Tax Benefit and shall be liable for any
Tax burden resulting from the filing of such separate
Return.
(b) Allocated Tax
Charge.
(i) MS shall be responsible
for calculating the Separate Group Taxable Income or Separate Group
Taxable Loss of each Group included in the Consolidated Federal
Return. Each Group included in the Consolidated Federal Return
shall bear its Federal Separate Group Tax Liability, if any. For
purposes of such calculation, the deduction for state and local
taxes to which each Group is entitled will be determined in a
manner consistent with Section 4 of this Agreement.
(ii) If the MSCI Group
included in the Consolidated Federal Return incurs a Separate Group
Taxable Loss, MS shall pay to the MSCI Group (A) the amount,
if any, by which the federal income taxes payable with respect to
the Consolidated Federal Return are actually reduced by reason of
the MSCI Group’s Separate Group Taxable Loss and (B) any
Refund of federal income taxes or other federal income Tax Benefit
attributable to such Separate Group Taxable Loss that is Actually
Realized, in each case as determined by MS in its sole discretion
(including that any Tax Benefits of the MS Group shall be fully
utilized before utilizing any Tax Benefits of the MSCI Group). To
the extent the MSCI Group receives a payment or credit
from
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MS in respect of a Separate
Company Taxable Loss pursuant to this Section 3(b)(ii), such
loss shall not be carried forward or carried back by the MSCI Group
for purposes of determining Separate Group Taxable Income or
Separate Group Taxable Loss in any other Taxable period (or portion
thereof). To the extent the MSCI Group does not receive a payment
or credit from MS in respect of a Separate Group Taxable Loss
pursuant to this Section 3(b)(ii), such loss may be carried
forward or carried back, subject to any applicable limitation with
respect to carry forward or carry back losses, by the MSCI Group
for purposes of determining Separate Group Taxable Income or
Separate Group Taxable Loss in another Taxable period (or portion
thereof).
(iii) If the MSCI Group
included in the Consolidated Federal Return has a foreign Tax
credit or other Tax credit that it is unable to use in its
calculation of Federal Separate Group Tax Liability (other than an
AMT credit), MS shall pay to the MSCI Group (A) the amount, if
any, by which the federal income taxes payable with respect to the
Consolidated Federal Return is actually reduced by reason of the
MSCI Group’s Tax credit and (B) any Refund of federal
income taxes or other federal income Tax Benefit attributable to
such Tax credit that is Actually Realized, in each case as
determined by MS in its sale discretion (including that any Tax
Benefits of the MS Group shall be fully utilized before utilizing
any Tax Benefits of the MSCI Group). To the extent the MSCI Group
receives a payment or credit from MS in respect of a Tax credit
pursuant to this Section 3(b)(iii), the MSCI Group’s
Federal Separate Group Tax Liability will be adjusted to reflect
the fact that the MSCI Group has previously received the benefit of
such credit. To the extent the MSCI Group does not receive a
payment or credit from MS in respect of a Tax credit pursuant to
this Section 3(b)(iii), such Tax credit may be carried forward
or carried back, subject to any applicable limitation with respect
to carry forward or carry back of Tax credits, by the MSCI Group
for purposes of calculating its Separate Group Tax Liability in
another Taxable period (or portion thereof).
(iv) In the event a
Consolidated Group incurs an AMT liability with respect to any
Taxable period (or portion thereof), MS shall be solely responsible
for such liability. Any Tax Benefit arising from the utilization of
a consolidated federal AMT credit shall be for the sale benefit of
MS.
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4. State and Local Income
Taxes.
(a) Return
Filing.
(i) MS shall prepare and
file, or cause to be prepared and filed, Consolidated State Returns
for which a Consolidated Group is required or permitted to file a
Consolidated State Return using, inter alia, information
provided by MSCI. MSCI shall provide MS with all necessary
information to file a Consolidated State Return not later than 45
days after MS’s fiscal year-end and shall respond promptly to
all information requests, but in no event more than two business
days following a request. Each member of the Consolidated Group
shall execute and file such consents, elections and other documents
as may be required or appropriate for the filing of such
Consolidated State Returns. All Tax elections shall be made at the
discretion of MS provided, however, that MSCI shall be entitled to
direct MS to make any and all Tax elections that exclusively affect
the MSCI Group, subject to MS’s consent. All Tax computations
performed on a combined, consolidated or unitary basis will be
performed or approved by MS. MS shall not change any method of
accounting that relates exclusively to the MSCI Group for any Tax
purpose if such change adversely affects the MSCI Group unless such
change is required by law. MS shall notify and discuss with MSCI
prior to the filing of a Consolidated State Return any potential
material differences in the information provided by MSCI to be used
in the preparation of such Consolidated State Return and the
position MS intends to take on such Consolidated State
Return.
(ii) MS shall pay, or cause
to be paid, and, subject to the provisions of Section 4(b),
shall be responsible for, any and all income taxes due or required
to be paid with respect to, or required to be reported on, any such
Consolidated State Return.
(iii) In the event a
Consolidated State Return is not filed, each relevant member of the
MS Group and MSCI Group shall be responsible for (A) filing
its own Return as a separate entity, or its own Return in respect
of state and local income Taxes relating to a group consisting
solely of members of the MS Group or members of the MSCI Group, as
the case may be, on behalf of the separate group, in each case
including requests for extension, as if this Agreement were not in
effect and (B) making Tax payments (including estimated Tax
payments, if necessary). Each such member filing a Return as a
separate entity shall be entitled to any Tax Benefit and shall be
liable for any Tax burden resulting from the filing of such
separate Return.
(b) Allocated Tax
Charge.
(i) MS shall be responsible
for calculating the Separate Group Taxable Income or Separate Group
Taxable Loss
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for each Group included in a
Consolidated State Return. Each Group included in a Consolidated
State Return shall bear its State Separate Group Tax Liability, if
any.
(ii) If the MSCI Group
included in a Consolidated State Return incurs a Separate Group
Taxable Loss, MS shall pay, or shall cause to be paid, to the MSCI
Group (A) the amount, if any, by which the state or local
income taxes reflected on such Return are actually reduced by
reason of the MSCI Group’s Separate Group Taxable Loss and
(B) any Refund of state or local income taxes or other state
or local income Tax Benefit attributable to such Separate Group
Taxable Loss that is Actually Realized, in each case as determined
by MS in its sole discretion (including that any Tax Benefits of
the MS Group shall be fully utilized before utilizing any Tax
Benefits of the MSCI Group). To the extent the MSCI Group receives
a payment or credit from MS in respect of a Separate Group Taxable
Loss pursuant to this Section 4(b)(ii), such loss shall not be
carried forward or carried back by the MSCI Group for purposes of
determining Separate Group Taxable Income or Separate Group Taxable
Loss in any other Taxable period (or portion thereof). To the
extent the MSCI Group does not receive a payment or credit from MS
in respect of a Separate Group Taxable Loss pursuant to this
Section 4(b)(ii), such loss may be carried forward or carried
back, subject to any applicable limitation with respect to carry
forward or carry back losses, by the MSCI Group for purposes of
determining Separate Group Taxable Income or Separate Group Taxable
Loss in another Taxable period (or portion thereof).
(iii)
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