Exhibit 10.32
TAX SHARING AGREEMENT
THIS TAX SHARING
AGREEMENT (the “Agreement”), dated as of May 10,
2004, is entered into between Emmis Communications Corporation, an
Indiana corporation (“Parent”), and Emmis Operating
Company, an Indiana corporation
(“Subsidiary”).
Parent is the
common parent corporation of an affiliated group of corporations
within the meaning of Section 1504(a) of the Internal Revenue Code
of 1986, as amended (the “Code”), that has elected to
file consolidated federal income tax returns, and Subsidiary is a
member of such group.
Parent and
Subsidiary desire to set forth in this Agreement their agreement as
to certain matters relating to the inclusion of the Subsidiary
Consolidated Group (as defined below) in the Parent Consolidated
Group (as defined below), including the allocation of tax
liabilities for years in which Subsidiary is so included, and
certain other matters relating to taxes.
The
parties agree as follows:
1. DEFINITIONS.
“Adjustment”
shall have the meaning set forth in Section 8.
“Agreement
Year” shall mean any taxable year beginning on or after
February 29, 2004 during which the Subsidiary Consolidated
Group is included in the Parent Consolidated Group.
“Balance
Payment” shall have the meaning set forth in
Section 4.
“Code”
shall have the meaning set forth above.
“Estimated
Tax Payments” shall have the meaning set forth in
Section 4.
“Final
Determination” shall mean the final resolution of any tax
matter, including, but not limited to, a closing agreement with the
IRS or the relevant state, local or foreign taxing authority, a
claim for refund which has been allowed, a deficiency notice with
respect to which the period for filing a petition with the Tax
Court or the relevant state, local or foreign tribunal has expired,
or a decision of competent jurisdiction that is not subject to
appeal or as to which the time for appeal has expired.
“IRS”
shall mean the Internal Revenue Service.
“Parent”
shall have the meaning set forth above.
“Parent
Consolidated Group” shall mean the affiliated group of
corporations (including any predecessors and successors thereto)
within the meaning of Section 1504(a) of the Code electing to file
consolidated federal income tax returns and of which Parent is the
common parent.
“Parent
Consolidated Return” shall have the meaning set forth in
Section 2.
“Post-Consolidation
Year” shall have the meaning set forth in Section 6 of
this Agreement.
“Pro-Forma
Subsidiary Attribute” shall have the meaning set forth in
Section 5.
“Pro Forma
Subsidiary Return” shall have the meaning set forth in
Section 3.
“Records”
shall have the meaning set forth in Section 8.
“Regulations”
shall mean the Treasury regulations promulgated under the
Code.
“Total
Periodic Payments” shall have the meaning set forth in
Section 4.
“Subsidiary”
shall have the meaning set forth above.
“Subsidiary
Consolidated Group” shall mean the affiliated group of
corporations (including any predecessors and successors thereto)
within the meaning of Section 1504(a) of the Code, of which
Subsidiary would be the common parent if it were not included in
the Parent Consolidated Group.
“Subsidiary
Return Items” shall have the meaning set forth in
Section 8.
“Subsidiary
Tax Package” shall have the meaning set forth in
Section 7.
2. FILING OF CONSOLIDATED RETURNS AND PAYMENT OF
CONSOLIDATED TAX LIABILITY.
For
all taxable years in which Parent files consolidated federal income
tax returns (any such return of the Parent Consolidated Group for
any taxable year, a “Parent Consolidated Return”) and
is entitled to include the Subsidiary Consolidated Group in such
returns, Parent shall include the Subsidiary Consolidated Group in
the consolidated federal income tax returns that it files as the
common parent corporation of the Parent Consolidated Group. Parent,
Subsidiary and the other members of the Parent Consolidated Group
shall file any and all consents, elections or other documents and
take any other actions necessary or appropriate to
2
effect the filing of such federal
income tax returns. For all taxable years in which the Subsidiary
Consolidated Group is included in the Parent Consolidated Group,
Parent shall pay the entire federal income tax liability of the
Parent Consolidated Group and shall indemnify and hold harmless
Subsidiary and each member of the Subsidiary Consolidated Group
against any such liability; provided, however, that Subsidiary
shall make payments to Parent or receive payments from Parent as
provided in this Agreement for any Agreement Year.
3. PRO FORMA SUBSIDIARY RETURN.
For
each Agreement Year, Parent shall prepare a pro forma federal
income tax return for the Subsidiary Consolidated Group (a
“Pro Forma Subsidiary Return”). Except as otherwise
provided in this Agreement, the Pro Forma Subsidiary Return for
each Agreement Year shall be prepared as if Subsidiary filed a
consolidated federal income tax return on behalf of the Subsidiary
Consolidated Group for such taxable period. The Pro Forma
Subsidiary Return shall reflect any carryovers of net operating
losses, net capital losses, excess tax credits, or other tax
attributes from prior Pro Forma Subsidiary Returns (excluding those
attributes that are carried back pursuant to Section 5) that could
have been utilized by the Subsidiary Consolidated Group if the
Subsidiary Consolidated Group had never been included in the Parent
Consolidated Group and all Pro Forma Subsidiary Returns had been
filed as actual returns. The Pro Forma Subsidiary Return shall be
prepared in a manner that reflects all elections, positions and
methods used in the Parent Consolidated Return that must be applied
on a consolidated basis and otherwise shall be prepared in a manner
consistent with the Parent Consolidated Return. The provisions of
the Code that require consolidated computations, such as
Sections 861, 1201-1212 and 1231, shall be applied separately
to the Subsidiary Consolidated Group as if the Subsidiary
Consolidated Group and the Parent Consolidated Group (excluding the
members of the Subsidiary Consolidated Group) were separate
affiliated groups, except that the Pro Forma Subsidiary Return
prepared for the last taxable year, or portion thereof, during
which the Subsidiary Consolidated Group is included in the Parent
Consolidated Return shall also include any gains or losses of the
members of the Subsidiary Consolidated Group on transactions within
the Subsidiary Consolidated Group that must be taken into account
pursuant to Section 1.1502-13 of the Regulations and reflected
on the Parent Consolidated Return when the Subsidiary Consolidated
Group ceases to be included in the Parent Consolidated Return. For
each Agreement Year, Section 1.1502-13 of the Regulations
shall be applied as if the Subsidiary Consolidated Group were not a
member of the Parent Consolidated Group. For purposes of the
Agreement, all determinations made as if the Subsidiary
Consolidated Group had never been included in the Parent
Consolidated Group and as if all Pro Forma Subsidiary Returns were
actual returns shall reflect any actual short taxable years
resulting from the Subsidiary Consolidated Group joining or leaving
the Parent Consolidated Group.
3
4. TAX PAYMENTS.
(a) Estimated
Income Tax Payments. For each Agreement Year, Subsidiary shall make
periodic payments (“Estimated Income Tax Payments”) to
Parent in such amounts as shall be equal to the estimated tax
payments that would be payable by the Subsidiary Consolidated Group
if it were not included in the Parent Consolidated Group, no later
than the dates on which such estimated tax payments would be due
from the Subsidiary Consolidated Group if it were not included in
the Parent Consolidated Group.
(b) Balance
Payment. For each Agreement Year, Subsidiary shall pay to Parent an
amount equal to the tax payment that would be payable by the
Subsidiary Consolidated Group if it were not included in the Parent
Consolidated Group, no later than March 15 of the following
year (the “Balance Payment”).
(c) Payments
based on Pro Forma Subsidiary Return. For each Agreement Year,
Subsidiary shall pay to Parent, no later than the date on which a
Parent Consolidated Return is filed for such Agreement Year, an
amount equal to the sum of (i) the federal income tax
liability shown on the corresponding Pro Forma Subsidiary Return
prepared for such Agreement Year and (ii) the additions to
tax, if any, under Section 6655 of the Code that would have
been imposed on the Subsidiary Consolidated Group (treating the
amount due to Parent under (i) above as its federal income tax
liability and treating any Estimated Tax Payments to Parent
pursuant to clause (a) as estimated payments under Section
6655 of the Code) and which result from the inaccuracy of any
information provided by Subsidiary to Parent pursuant to
Section 7 hereof or from the failure of Subsidiary to provide
any requested information, reduced by (iii) the sum for such
Agreement Year of the amount of the Estimated Tax Payments and the
Balance Payment (collectively, the “Total Periodic
Payments”), plus (iv) any interest and additions to tax
(other than under Section 6655 of the Code) that would be due
under the Code if the Total Periodic Payments were actual payments
of tax. If the Total Periodic Payments to Parent for any Agreement
Year exceed the amount of Subsidiary’s liability for such
Agreement Year under the preceding sentence, Parent shall pay to
Subsidiary an amount equal to such excess within 10 days after
filing the Parent Consolidated Return for such Agreement Year. For
purposes of this Agreement, the term “federal income tax
liability” includes the tax imposed by Sections 11, 55
and 59A of the Code, or any successor provisions to such Sections.
Parent shall notify Subsidiary of any amounts due from Subsidiary
to Parent pursuant to this Section 4 at least 5 business days
prior to the date such payments are due, and such payments shall
not be considered due until the later of the due date described
above or the fifth day after Parent gives such notice.
4
5. LOSSES; REFUNDS.
If
a Pro Forma Subsidiary Return for any Agreement Year reflects a net
operating loss, net capital loss, excess tax credit or other tax
attribute (a “Pro Forma Subsidiary Attribute”),which
attribute is actually utilized in a Parent Consolidated Return
(including any amendments thereto), then, within 30 days after the
later of (i) the due date for the relevant Parent Consolidated
Return for such Agreement Year (taking into account any extensions)
or (ii) the date such Pro Forma Subsidiary Attribute is
actually realized in cash (whether directly or by offset), Parent
shall pay to Subsidiary an amount equal to the lesser of
(x) the refund that the Subsidiary Consolidated Group would
have received as a result of the carryback of such Pro Forma
Subsidiary Attribute to a Pro Forma Subsidiary Return for any prior
Agreement Year or Years, assuming that all Pro Forma Subsidiary
Returns had been filed as actual returns and that the Subsidiary
Consolidated Group had filed returns as a separate affiliated group
for all prior taxable years or (y) the tax savings or tax
benefit actually realized by Parent with respect to the use of such
Pro Forma Subsidiary Attribute in a Parent Consolidated Return. For
purposes of Section 3, the portion of any such attribute that is
treated as carried back pursuant to this Section 5 shall be
appropriately adjusted to reflect the extent to which payment under
this Section 5 is limited by clause (y) of the preceding
sentence. All calculations of deemed refunds pursuant to this
Section 5 shall include interest computed as if the Subsidiary
Consolidated Group had filed a claim for refund or an application
for a tentative carryback adjustment pursuant to Section 6411(a) of
the Code on the date on which the relevant Parent Consolidated
Return is filed.
6. PAYMENTS FOR TAXABLE YEARS IN THE EVENT OF
DECONSOLIDATION.
(a) Payments
By Subsidiary To Parent. If for any taxable year after the
Subsidiary Consolidated Group ceases to be included in the Parent
Consolidat
