Exhibit 10.1
TAX ALLOCATION AGREEMENT
THIS AGREEMENT is entered into this 1st day of June, 1978, by LANE
INDUSTRIES, INC., a Delaware corporation ("Lane"), AMERICAN
MALTING, INC., a New
York corporation, and NORTHWEST GENERAL DATA SYSTEMS, INC., an
Illinois
corporation, which corporations are more specifically defined below
as the "Lane
Group", and GENERAL BINDING CORPORATION, a Delaware corporation
("GBC"), GENERAL
BINDING SALES CORP., a Nevada corporation, PHO-TRONICS, INC., a
Wisconsin
corporation, WEBTRON CORPORATION, an Illinois corporation, and U.S.
RING BINDER
CORP., a Massachusetts corporation, which corporations are more
specifically
defined below as the "GBC Group."
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Lane is at present the parent member of the Lane Group,
and
WHEREAS, GBC is at present the parent member of the GBC Group, and
WHEREAS, it is proposed that GBC become affiliated with Lane
pursuant
to the Recapitalization Plan described in the GBC proxy statement
dated December
19, 1977 and that, upon the effectiveness of such Plan, the members
of the GBC
Group be included with the Lane Group in consolidated federal
income tax returns
filed by Lane, which combined group is more specifically defined
below as the
"Combined Group", and
WHEREAS, it is the desire of the parties hereto that the
consolidated
tax liability of the Combined Group, and any tax savings resulting
to such Group
from the consolidation of the Lane Group and the GBC Group, be
allocated among
the members of such Groups as herein provided,
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings and covenants herein contained, the parties hereto
hereby agree as
follows:
ARTICLE 1
DEFINITIONS
-----------
For purposes of this Agreement, the following definitions shall
apply:
1.1 Additional Liability means, with respect to any taxable year,
an
amount equal to 80% of any Tax Savings realized by a Subgroup for
such year.
1.2 Affiliated Group means an "affiliated group" as defined in
Section
1504(a) of the Code.
1.3 Code means the Internal Revenue Code of 1954, as amended and in
effect from time to time and any law which may be a successor
thereto. A
reference to any section of the Code means such section as in
effect from time
to time and any comparable provision of any successor law.
1.4 Combined Group means any Affiliated Group in which Lane is the
common parent corporation and GBC is an includible corporation.
1.5 GBC Group means GBC and any Affiliated Group of corporations
having
GBC as its common parent corporation, determined without regard to
whether GBC
is itself a subsidiary member of another Affiliated Group.
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1.6 Hypothetical Tax Liability means, with respect to any taxable
year,
the Tax Liability of a Subgroup computed as if the Members of such
Subgroup
filed a consolidated federal income tax return for such year (or if
a Subgroup
consists of only one corporation, determined as if such corporation
filed a
separate return for such year), without regard to items of income,
gain, loss,
deduction or credit of the Members of the other Subgroup for such
year except as
otherwise provided herein. In making such computation for a taxable
year, (i)
the modifications set forth in Regs. ss. 1.1552-1(a)(2)(ii) shall
be reflected
as between the Subgroups; (ii) carryover items shall not be taken
into account
to the extent that such items were deemed absorbed in computing
allocations of
Tax Liabilities and Additional Liabilities for prior taxable years;
(iii)
carryback items shall be taken into account only to the extent that
such items
are deemed absorbed in computing the allocation of the Tax
Liability of the
Combined Group and any Additional Liability for such year; and (iv)
any
elections which would be available to the Subgroup for such year,
including
elections as to whether to claim an item as a deduction or credit,
or as a
carryback, shall be made on a basis consistent with any elections
actually made
by the Combined Group for such year provided, however, that if no
election has
been made for or is available to the Combined Group in respect of
such item, the
Subgroup to which such item is available shall make its election
with respect to
such item in writing and shall give notice of such election to the
parent Member
of the other Subgroup. Any such hypothetical election shall be
effective to the
same extent as if made in an actual return by such Subgroup.
1.7 Lane Group means Lane and any Affiliated Group of corporations
having Lane as its common parent corporation, excluding, however,
any
corporation which is a Member of the GBC Group.
1.8 Member means each corporation included within an Affiliated
Group.
1.9 Regulations and Regs. means Regulations in effect from time to
time
under the Code including, but not by way of limitation, the
Regulations relating
to the filing of consolidated federal income tax returns, the
determination of
consolidated federal tax liabilities, and the allocation of such
liabilities. A
reference to any section of the Regulations means such section as
in effect from
time to time and any comparable regulation under any successor to
the Code.
1.10 Subgroup means the GBC Group or the Lane Group, as
appropriate.
1.11 Tax Liability means, with respect to any taxable year, the
consolidated tax liability determined under Regs. 51.1502-2 and
Chapter 6 of
Subtitle A of the Code for an Affiliated Group (including, as to a
Subgroup, so
much of the Tax Liability of the Combined Group as is allocable to
such Subgroup
under Section 3.1 of this Agreement), and the separate tax
liability determined
under Chapter 1 of Subtitle A of the Code for a corporation which
is not a
Member of an Affiliated Group (or is not to be considered as such
for the
purpose of the computation), including in each case any
recomputations of such
liability as may be required on account of items which may be
carried back or
over to the taxable year and adjustments to items reported or
reportable in such
taxable year.
1.12 Tax Savings means, with respect to the Combined Group, the
excess,
if any, of the sum of the Hypothetical Tax Liabilities of the
Subgroups for the
taxable year over the Tax Liability of the Combined Group for such
year and,
with respect to a Subgroup, means the excess of the Hypothetical
Tax Liability
of such Subgroup for the year over that portion of the Tax
Liability of the
Combined Group allocable to such Subgroup under Section 3.1 for
such year.
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ARTICLE 2
STATEMENT OF INTENTION
----------------------
2.1
Except as otherwise expressly provided herein, this Agreement
shall be understood and construed consistent with the following
statement of the
general intention of the parties which is intended as an aid in the
interpretation and construction of the operative provisions of this
Agreement as
set forth below:
(a) This Agreement shall be considered a two-party agreement,
with the GBC Group being one party and the Lane Group being the
other party.
(b) For each taxable year for which the GBC Group is included in
a consolidated federal income tax return filed by Lane, (i) the
Hypothetical Tax
Liability for such taxable year will be calculated for each
Subgroup, and (ii)
the Tax Liability of the Combined Group will be calculated for the
consolidated
return actually filed by the Combined Group for such taxable year.
(c) The allocations of Tax Liabilities and Additional
Liabilities under this Agreement are intended to be in conformity
with the
allocations required for determining the earnings and profits of
the members of
the Combined Group for federal income tax purposes.
(d) If the Tax Liability of the Combined Group as reflected on
its consolidated return is less than the sum of the Hypothetical
Tax Liabilities
of the Subgroups for such year, the difference shall be considered
the Tax
Savings for such year, and an amount equal to 80% of such Tax
Savings shall be
considered an Additional Liability of the Subgroup which realizes
the benefit of
such Tax Savings. Such Additional Liability shall be payable to the
Subgroup
generating the items of loss, deduction or credit which produced
such Tax
Savings.
(e) In order to avoid any detriment to the GBC Group from
inclusion in consolidated federal income tax returns filed by Lane,
Lane shall
reimburse GBC for the excess, if any, of (i) the cumulative Tax
Liabilities
(including the portions of the Tax Liabilities of the Combined
Group allocable
to the GBC Group under this Agreement) and Additional Liabilities
payable by the
GBC Group for all taxable years beginning after 1974, reduced by
any Additional
Liabilities of the Lane Group payable to the GBC Group under this
Agreement,
over (ii) what the GBC Group's cumulative Tax Liabilities would
have been for
all such years had the Members of the GBC Group not become Members
of the
Combined Group.
(f) Lane shall indemnify GBC for any interest and penalties
which may be assessed against the GBC Group by reason of the GBC
Group being
included in consolidated federal income tax returns filed by Lane
if and to the
extent that it is determined that such interest or penalties exceed
the
aggregate amount of such items that would have been payable by the
GBC Group had
the Members of the GBC Group not become Members of the Combined
Group. Lane
shall pay all costs and expenses incurred in connection with any
determination
as to the includability of the GBC Group in consolidated federal
income tax
returns filed by Lane.
(g) Any refund or other benefit resulting from a carryback of
an item of loss, deduction or credit arising in a taxable year for
which the
Members of the GBC Group are not included in a consolidated federal
income tax
return filed by Lane shall be the sole property of the corporation
to which such
item is attributable, subject, however, to the limitation that any
such post
consolidation benefits derived by the Lane Group (or any of its
Members) shall
not reduce any benefits derived by the
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GBC Group (or any of its Members) for or in respect of any taxable
year for
which the Members of the GBC Group were included in a consolidated
federal
income tax return filed by Lane.
ARTICLE 3
ALLOCATION OF TAX LIABILITY BETWEEN SUBGROUPS
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3.1
For each taxable year for which the Combined Group files a
consolidated federal income tax return, the Tax Liability of
