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Exhibit 10.3
EXECUTION VERSION
TAX SEPARATION AGREEMENT
This TAX SEPARATION AGREEMENT is dated as of December 18,
2008, by and between The Phoenix Companies, Inc. (" PNX "),
a Delaware corporation, and Virtus Investment Partners, Inc. ("
Spinco "), a Delaware corporation.
WHEREAS, as of the date hereof, PNX is the common parent of an
affiliated group of domestic corporations within the meaning of
Section 1504(a) of the Code, and the members of the affiliated
group have heretofore joined in filing consolidated federal income
Tax returns (the " Affiliated Group ");
WHEREAS, Phoenix Investment Management Company (" PIMCO
"), a Delaware corporation, is a direct wholly-owned subsidiary of
PNX;
WHEREAS, Spinco has entered into an Investment Agreement (as
defined herein), pursuant to which, among other things,
(i) PIMCO contributed (the " Contribution ") all of the
issued and outstanding shares of common stock, par value $0.01 per
share, of Virtus Partners, Inc. (formerly known as Virtus
Investment Partners, Inc.) that PIMCO held to Spinco in exchange
for (x) all of the shares of common stock, par value $0.01, of
Spinco (the " Spinco Common Stock "), (y) 9,783 shares
of Series A Non-Voting Convertible Preferred Stock of Spinco (the "
Series A Preferred Stock "), all of which was sold to the
Investor (as defined herein) subject to the terms and conditions of
the Investment Agreement, and (z) 35,217 shares of Series B
Voting Convertible Preferred Stock of Spinco (the " Series B
Preferred Stock ") and (ii) PIMCO will, after such
Contribution and immediately after the Distribution (as defined
herein), subject to the terms and conditions of the Investment
Agreement, sell to the Investor all of the Series B Preferred Stock
owned by PIMCO and exchange all shares of the Series A Preferred
Stock previously delivered to Harris with the same number of shares
of the Series B Preferred Stock in a two-step transaction for an
aggregate purchase price of $35 million.
WHEREAS, for United States federal income tax purposes, it is
intended that the Contribution and the issuance and sale of the
Spinco Common Stock, Series A Preferred Stock and Series B
Preferred Stock will not qualify as tax-free under Section 351
of the Code;
WHEREAS, PNX and Virtus have entered into a Separation Agreement
(as defined herein) whereby, subject to the terms and conditions
thereof, PNX will, after the contribution by PIMCO of all of the
outstanding shares of Spinco to PNX in accordance with the
Separation Agreement, including the transfer of all the assets and
liabilities of the Spinco Business (as defined herein) and subject
to the terms and conditions of the Separation Agreement, distribute
(the " Distribution ") to PNX’s stockholders all the
shares of Spinco Common Stock;
WHEREAS, prior to the Distribution, PNX intends to cause Spinco
to distribute Goodwin Capital Advisers, Inc. to PNX (the "
Internal Distribution "). For all purposes of this Tax
Separation Agreement, Goodwin Capital Advisers, Inc. shall be
treated as a subsidiary of PNX, and not a subsidiary of Spinco;
and
WHEREAS, as a result of the Distribution, the Parties desire to
enter into this Tax Separation Agreement to provide for certain Tax
matters, including the assignment of responsibility for the
preparation and filing of Tax Returns, the payment of and
indemnification for Taxes, entitlement to refunds of Taxes, and the
prosecution and defense of any Tax controversies;
NOW, THEREFORE, in consideration of the mutual
agreements, provisions and covenants contained in this Agreement,
the Parties hereby agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.1. General . Capitalized terms used in
this Agreement and not defined herein shall have the meanings that
such terms have in the Separation Agreement. As used in this
Agreement, the following terms shall have the following
meanings:
" Affiliated Group " shall have the meaning specified in
the preamble hereof.
" Agreement " shall mean this Tax Separation
Agreement.
" Business Day " or " Business Days " shall mean a
day which is not a Saturday, Sunday or a day on which banks in New
York City are authorized or required by law to close.
" Closing of the Books Method " shall mean the
apportionment of items between portions of a taxable period based
on a closing of the books and records on the Distribution Date (as
if the Distribution Date was the end of the taxable period),
provided that any items not susceptible to such
apportionment (such as real or personal property taxes imposed on a
periodic basis) shall be apportioned on the basis of elapsed days
during the relevant portion of the taxable period.
" Code " shall mean the Internal Revenue Code of 1986, as
amended.
" Confidentiality Agreement " shall mean any agreement
pursuant to which the parties named therein have agreed to terms
under which they were permitted to review certain financial
information relating to Spinco or the Spinco Business.
" Combined Group " shall mean a combined, unitary, or
consolidated tax group that includes PNX or any of its
subsidiaries, not including Spinco or any of its subsidiaries, on
the one hand, and Spinco or any of its subsidiaries.
" Consolidated Return " shall mean any Tax Return
relating to Income Taxes filed pursuant to Section 1502 of the
Code, or any comparable combined, consolidated, or unitary group
Tax Return relating to Income Taxes filed under state or local tax
law which, in each case, includes PNX and at least one
subsidiary.
" Contribution " shall have the meaning set forth in the
preamble hereof.
" Distribution " shall have the meaning specified in the
Separation Agreement.
" Distribution Date " shall mean the Business Day on
which the Distribution is effected.
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" Final Determination " shall mean the
final resolution of liability for any Tax for any taxable period,
including any related interest or penalties, by or as a result of:
(i) a final and unappealable decision, judgment, decree or
other order by any court of competent jurisdiction; (ii) a
closing agreement or accepted offer in compromise under
Section 7121 or 7122 of the Code, or comparable agreement
under the laws of other jurisdictions which resolves the entire Tax
liability for any taxable period; or (iii) any allowance of a
refund or credit in respect of an overpayment of Tax, but only
after the expiration of all periods during which such refund may be
recovered by the jurisdiction imposing the Tax.
" Income Tax " shall mean any income, franchise or
similar Taxes imposed on (or measured by) net income or net
profits.
" Income Tax Returns " shall mean all Tax Returns
relating to Income Taxes.
" Indemnification Tax Benefit " shall have the meaning
specified in Section 2.4(b).
" Indemnified Tax " shall have the meaning specified in
Section 2.4(b).
" Internal Distribution " shall have the meaning set
forth in the preamble hereof.
" Investment Agreement " shall mean the agreement
entitled "Investment and Contribution Agreement," entered into by
and among PIMCO, Spinco, the Investor and PNX, dated as of
October 30, 2008.
" Investor " shall mean Harris Bankcorp, Inc.
" IRS " shall mean the Internal Revenue Service.
" Other Tax " shall mean any Tax other than an Income
Tax.
" Party " shall mean either PNX or Spinco, as the case
maybe.
" Payment Period " shall have the meaning specified in
Section 2.4(c).
" PIMCO " shall have the meaning set forth in the
preamble hereof.
" PNX " shall have the meaning specified in the preamble
hereof.
" Preferred Stock " shall have the meaning set forth in
the preamble hereof.
" Proceeding " shall mean any audit, examination or other
proceeding brought by a Taxing Authority with respect to Taxes.
" Refund " shall have the meaning specified in
Section 2.2.
" Retained Liabilities " shall have the meaning specified
in the Separation Agreement.
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" Retained Liability Payment " shall have
the meaning specified in Section 2.5.
" Retained Liability Tax Benefit " shall have the meaning
specified in Section 2.5.
" Separation Agreement " shall mean the agreement
entitled "Separation Agreement, Plan of Reorganization and
Distribution," entered into by and between PNX and Spinco, dated as
of December 18, 2008.
" Series A Preferred Stock " shall have the meaning set
forth in the preamble hereof.
" Series B Preferred Stock " shall have the meaning set
forth in the preamble hereof.
" Spinco " shall have the meaning set forth in the
preamble hereof.
" Spinco Business " shall have the same meaning as
"Spinco Business" as defined in the Separation Agreement.
" Spinco Common Stock " shall have the meaning set forth
in the preamble hereof.
" Straddle Period " shall mean any taxable period
commencing prior to, and ending after, the Distribution Date.
" Tax " or " Taxes " shall mean any federal,
state, local or foreign income, gross receipts, property, sales,
use, license, excise, franchise, employment, payroll, withholding,
alternative or add on minimum, ad valorem, transfer or excise tax,
or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any Taxing Authority.
" Taxing Authority " shall mean any governmental
authority (whether United States or non-United States, and
including, any state, municipality, political subdivision or
governmental agency) responsible for the imposition of any Tax.
" Tax Returns " shall mean all reports or returns
(including information returns and amended returns) required to be
filed or that may be filed for any period with any Taxing Authority
in connection with any Tax or Taxes (whether domestic or
foreign).
SECTION 1.2. References; Interpretation .
References in this Agreement to any gender include references to
all genders, and references to the singular include references to
the plural and vice versa. The words "include," "includes" and
"including" when used in this Agreement shall be deemed to be
followed by the phrase "without limitation." Unless the context
otherwise requires, references in this Agreement to Articles,
Sections, Exhibits and Schedules shall be deemed references to
Articles and Sections of, and Exhibits and Schedules to, such
Agreement. Unless the context otherwise requires, the words
"hereof," "hereby" and "herein" and words of similar meaning when
used in this Agreement refer to this Agreement in its entirety and
not to any particular Article, Section or provision of this
Agreement.
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ARTICLE II. ALLOCATION OF TAX
LIABILITIES
SECTION 2.1. Indemnity . (a) Without
duplication, PNX shall indemnify Spinco from all liability for
(i) Income Taxes of Spinco or any of its subsidiaries or
relating to the Spinco Business with respect to taxable periods
ending on or before the Distribution Date, (ii) Income Taxes
of Spinco or any of its subsidiaries or relating to the Spinco
Business for any Straddle Period, but only to the extent
attributable to the portion of the Straddle Period ending on or
before the Distribution Date, (iii) Income Taxes of any member
of the Affiliated Group or any Combined Group, other than Spinco or
any of its subsidiaries, for any taxable period, and
(iv) Income Taxes resulting from the Internal Distribution.
Taxes for a Straddle Period shall be apportioned in accordance with
the Closing of the Books Method.
(b) Spinco shall indemnify PNX from all liability for
(i) Other Taxes (excluding any such Taxes covered by
Section 2.6) of Spinco or relating to the Spinco Business for
any taxable period, (ii) any Income Taxes of Spinco or its
subsidiaries or relating to the Spinco Business accruing after the
Distribution Date under the Closing of the Books Method, including
the portion of any Straddle Period beginning on the Distribution
Date.
SECTION 2.2. Refunds . (a) Subject to
Section 3.5, if a Party receives a refund, offset, credit, or
other benefit (including interest received thereon) (a "
Refund ") of Tax which the other Party would have been
obligated to indemnify had the Refund been a payment, then the
Party receiving the Refund shall promptly pay the amount of the
Refund to the other Party, less reasonable costs and expenses
incurred in connection with such Refund, including any Taxes on
such Refund or interest thereon (net of any tax benefit actually
realized for paying over such Refund).
(b) Each Party shall, if reasonably requested by the other
Party, cause the relevant entity to file for and use its reasonable
best efforts to obtain and expedite the receipt of any Refund to
which such requesting Party is entitled under this
Section 2.2.
SECTION 2.3. Contests .
(a) In the case of any Proceeding that relates to Taxes for
which PNX is responsible under Section 2.1 hereof, PNX shall
have the right to control, in its sole discretion, the conduct of
such Proceeding. Subject to the foregoing, Spinco shall have the
right to participate jointly in any Proceeding if the consequences
of the resolution of such Proceeding could reasonably be expected
to affect the tax liability of Spinco for any tax period to the
extent such tax liability of Spinco is not subject to an
indemnification by PNX hereinunder.
(b) In the case of any Proceeding that relates to Taxes for
which Spinco is responsible under Section 2.1 hereof, Spinco
shall have the sole right to control the conduct of such
Proceeding. Subject to the foregoing, PNX shall have the right to
participate jointly in any Proceeding if the consequences of the
resolution of such Proceeding could reasonably be expected to
affect the tax liability of PNX for any tax period to the extent
such tax liability of PNX is not subject to
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