Exhibit 10.1
TAX SHARING
AGREEMENT
THIS TAX SHARING AGREEMENT (“
Agreement ”) is entered into as of October 30,
2008 by and between Hearst Holdings, Inc., a Delaware
corporation (“ Hearst ”), and Hearst-Argyle
Television, Inc., a Delaware corporation (“
Argyle ”).
RECITALS
WHEREAS, Hearst is the common parent
of an affiliated group of corporations for U.S. federal income tax
purposes within the meaning of Section 1504(a) of the
Internal Revenue Code of 1986, as amended (the “ Code
”), and the Hearst Group (as defined below) files and intends
to continue to file consolidated U.S. federal income tax returns as
permitted by Section 1501 of the Code;
WHEREAS, as of July 1, 2008,
the Argyle Group (as defined below) became a member of
Hearst’s affiliated group of corporations (for U.S. federal
income tax purposes), and Argyle desires that the Argyle Group (as
defined below) join in the filing of the Hearst Group’s
consolidated U.S. federal income tax return as of such
date;
WHEREAS, certain members of the
Argyle Group and certain members of the Hearst Sub-Group (as
defined below), desire that such members file and intend to file
returns relating to Combined State Taxes (as defined below);
and
WHEREAS, Hearst and Argyle desire to
agree upon a method for determining the financial consequences to
each party and their subsidiaries resulting from the filing of
consolidated U.S. federal income tax returns and returns related to
Combined State Taxes; and
WHEREAS, Argyle desires Hearst to
provide certain services to Argyle and Hearst desires to provide
certain services to Argyle, in each case, relating to U.S. federal,
state, local and non-U.S. taxes.
NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Hearst and Argyle, for themselves, their
successors and assigns, hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1
Definitions. For purposes of this Agreement, the terms set
forth below shall have the following meanings.
“ Argyle Combined State Tax
Liability ” shall mean, with respect to any taxable year
(or portion thereof) and any jurisdiction, an amount of Combined
State Taxes determined in accordance with the principles set forth
in the definition of Argyle U.S. Federal Tax Liability.
“ Argyle Separate
Returns ” shall mean any tax return required to be filed
by Argyle or a subsidiary of Argyle (including any consolidated,
combined or unitary tax return) that does not include any member of
the Hearst Sub-Group.
“ Argyle U.S. Federal Tax
Liability ” shall mean, with respect to any taxable year
(or portion thereof), the sum of the Argyle Group’s U.S.
Federal Tax liability and any interest, penalties and other
additions to such taxes for such taxable year, computed as if the
Argyle Group were not and never were part of the Hearst Group, but
rather were a separate affiliated group of corporations filing a
consolidated U.S. federal income tax return pursuant to
Section 1501 of the Code, provided , however ,
that transactions with members of the Hearst Sub-Group shall be
reflected according to the provisions of the consolidated return
regulations promulgated under the Code governing intercompany
transactions, and any Deconsolidation shall trigger any deferred
amounts, excess loss accounts or similar items. Such
computation shall be made (A) without regard to the income,
deductions (including net operating loss and capital loss
deductions) and credits in any year of any member of the Hearst
Sub-Group, (B) by taking into account any Tax Asset of the
Argyle Group in accordance with Section 2.1(c)(iv) hereof
(without duplication), (C) as though the highest rate of tax
specified in subsection (b) of Section 11 of the Code (or
any other similar rates applicable to specific types of income)
were the only rates set forth in that subsection, and with other
similar adjustments as described in Section 1561 of the Code,
and (D) reflecting the positions, elections and accounting
methods used by the Hearst in preparing the consolidated U.S.
federal income tax return for the Hearst Group.
“ Argyle Group ”
shall mean, at any time, Argyle and any direct or indirect
corporate subsidiaries of Argyle that would be eligible to join
with Argyle, (i) with respect to U.S. Federal Taxes, in the
filing of a consolidated U.S. federal income tax return if Argyle
were not consolidated with Hearst and (ii) with respect to
Combined State Taxes, in the filing of a consolidated, combined or
unitary income or franchise tax return if Argyle were not
consolidated, combined or filing on a unitary basis with any member
of the Hearst Sub-Group.
“ Combined State Tax
” means, with respect to each state or local taxing
jurisdiction, any income, franchise or similar tax payable to such
state or local taxing jurisdiction in which a member of the Argyle
Group files tax returns with a member of the Hearst Sub-Group, on a
consolidated, combined or unitary basis for purposes of such income
or franchise tax.
“ Deconsolidation
” means any event pursuant to which Argyle ceases to be a
subsidiary corporation includible in a consolidated tax return of
the Hearst Group for U.S. Federal Tax purposes.
“ Final Determination
” shall mean (i) with respect to U.S. Federal Taxes, a
“determination” as defined in
Section 1313(a) of the Code or execution of an Internal
Revenue Service Form 870AD (or any other settlement or
resolution of U.S. Federal Tax intended to be final) and, with
respect to taxes other than U.S. Federal 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, (ii) any final
disposition of a tax issue by reason of the expiration of a statute
of limitations or (iii) the payment of any tax by Hearst with
respect to any item disallowed or adjusted by any taxing authority
where Hearst determines in good faith, and after giving due
consideration to any concerns or objections raised by Argyle, that
no action should be taken to recoup such payment.
“ Hearst Group ”
shall mean, at any time, Hearst and each direct and indirect
corporate subsidiary eligible to join with Hearst in the filing of
a consolidated U.S. federal income tax return.
“ Hearst Sub-Group
” shall mean, at any time, Hearst and each of its direct and
indirect corporate subsidiaries other than those subsidiaries that
are members of the Argyle Group.
“ Post-Deconsolidation Tax
Period ” means (i) any tax period beginning and
ending after the date of Deconsolidation and (ii) with respect
to a tax period that begins before and ends after the date of
Deconsolidation, such portion of the tax period that commences on
the day immediately after the date of Deconsolidation.
“ Pre-Deconsolidation Tax
Period ” means (i) any tax period beginning and
ending before or on the date of Deconsolidation and (ii) with
respect to a period that begins before and ends after the date of
Deconsolidation, such portion of the tax period ending on and
including the date of Deconsolidation.
“ Tax Asset ”
means any net operating loss, net capital loss, investment tax
credit, foreign tax credit, charitable deduction or any other
deduction, credit or tax attribute which could reduce taxes
(including, without limitation, deductions and credits related to
alternative minimum taxes).
“ U.S. Federal Tax
” means any tax imposed under Subtitle A of the Code,
including any interest, penalties or additions to tax.
1.2
Internal References. Unless the context indicates otherwise,
references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Agreement
and references to the parties shall mean the parties to this
Agreement.
ARTICLE II
TAX SHARING
2.1
Tax Sharing.
(a) General. Subject to
Section 2.1(c)(iv) below, for each taxable year (or
portion thereof) of the Hearst Group during which income, loss, or
credit against tax of the Argyle Group are includible in the
consolidated U.S. federal income tax return of the Hearst Group,
Argyle shall pay to Hearst an amount equal to the Argyle U.S.
Federal Tax Liability, and for each taxable period during which
income, loss or credit against tax of any member of the Argyle
Group are includible in a return relating to a Combined State Tax,
Argyle shall pay Hearst an amount equal to the Argyle Combined
State Tax Liability for such taxable period, each as shown on the
Pro Forma Returns (as defined in paragraph (c) below) in the
manner specified in Sections 2.1(b) and 2.1(c)(ii).
(b) Estimated Payments.
Hearst shall determine the amount of the estimated tax installment
of the Argyle U.S. Federal Tax Liability (corresponding to
Hearst’s estimated U.S. Federal Tax installment), as
determined under the
principles of Section 2.1(a) of this
Agreement, and shall provide Argyle with notice of such
amount. Argyle shall, within 5 business days of receipt of
such notice (but in no event earlier than 5 business days prior to
the due date of Hearst’s corresponding estimated tax
payment), pay to Hearst the amount set forth in such notice.
Hearst shall determine under provisions of applicable law the
amount of the estimated tax installment of the Argyle Combined
State Tax Liability (corresponding to the relevant estimated
Combined State Tax installment), as determined under the principles
of Section 2.1(a) of this Agreement. Argyle shall,
within 5 business days of receipt of such notice (but in no event
earlier than 5 business days prior to the due date of
Hearst’s corresponding estimated tax payment), pay to Hearst
the amount so determined. Hearst shall in good faith give due
consideration to any concerns or objections raised by Argyle with
respect to the amounts set forth in the foregoing
notices.
(c) Payment of Taxes at
Year-End.
(i) On or before the due
date (including all applicable and valid extensions) for the Hearst
Group’s consolidated U.S. federal income tax return, Hearst
shall prepare a pro forma U.S. Federal Tax return (a “ Pro
Forma U.S. Federal Return ”) of the Argyle Group
reflecting the Argyle U.S. Federal Tax Liability. On or
before the due date for each Combined State Tax return, Hearst
shall prepare the relevant pro forma Combined State Tax return
(each a “ Pro Forma Combined State Return ” and
together with the Pro Forma U.S. Federal Return, the “ Pro
Forma Returns ”) of the Argyle Group reflecting the
relevant Argyle Combined State Tax Liability. The Pro Forma
Returns shall be prepared in good faith and in a manner generally
consistent with past practice. Hearst shall provide Argyle
with copies of such Pro Forma Returns on or prior to their due
date, and Argyle shall have the right at its own expense to review,
ask questions and provide comments (including asking questions of
and providing comments to Deloitte (or such other accounting firm
engaged to review such returns pursuant to
Section 2.1(e) below)) with respect to the Pro Forma
Returns, and Hearst shall in good faith give due consideration to
any such questions or comments raised by Argyle.
(ii) Argyle shall pay to
Hearst, or Hearst shall pay to Argyle, as appropriate, an amount
equal to the difference, if any, between the Argyle U.S. Federal
Tax Liability reflected on the Pro Forma U.S. Federal Return for
such year and the aggregate amount of the estimated installments of
the Argyle U.S. Federal Tax Liability for such year made pursuant
to Section 2.1(b). Argyle shall pay to Hearst, or Hearst
shall pay to Argyle, as appropriate, an amount equal to the
difference, if any, between the Argyle Combined State Tax Liability
reflected on the relevant Pro Forma Combined State Tax Return for
such year and the aggregate amount of the estimated installments
paid for such year with respect to the corresponding Argyle
Combined State Tax Liability pursuant to Section 2.1(b).
Hearst shall provide notice to Argyle of amounts payable pursuant
to this Section 2.1(c)(ii), and Hearst shall in good faith
give due consideration to any concerns or objections raised by
Argyle with respect to such amounts. Amounts payable pursuant
to this Section 2.1(c)(ii) shall be paid within ten
(10) days of the delivery of the related Pro Forma
Returns.
(iii) In the event that Hearst
makes a cash deposit with a taxing authority in order to stop the
running of interest or makes a payment of tax and correspondingly
takes action to recoup such payment (such as suing for a refund),
Argyle shall pay to Hearst an amount equal to Argyle’s share
of the amount so deposited or paid (calculated in a manner
consistent with the determinations provided in this
Article 2). Upon receipt by Hearst of a refund of any
amounts paid by it in respect of which Argyle shall have advanced
an amount hereunder, Hearst shall pay to Argyle the amount of such
refund, together with any interest received by it on such refund,
as soon as practicable following receipt. If and to the
extent that any claim for refund or contest based thereupon shall
be unsuccessful, the payment by Argyle under this
Section 2.1(c)(iii) shall be credited toward
Argyle’s obligations under this
Section 2.1(c)(iii) and any other payment obligation of
Argyle under Section 2.1(d) below.
(iv) If a Pro Forma Return
reflects a Tax Asset of the Argyle Group, Hearst shall pay to
Argyle (including by crediting amounts otherwise payable by Argyle
pursuant to this Agreement) an amount equal to the actual tax
savings that would otherwise have been achieved by the Argyle Group
as a result of such Tax Asset determined as if the Argyle Group was
not (and had not been) a member of the Hearst Group; provided,
however, that to the extent Hearst (x) is not required to pay
an amount to Argyle with respect to a Tax Asset of the Argyle Group
pursuant to the foregoing clause of this
Section 2.1(c)(iv) (because, for example, such Tax Asset
would have expired unused if the Argyle Group was not (and had not
been) a member of the Hearst Group) and (y) such Tax Asset of
the Arg
