Tax Sharing And Indemnity Agreement

Exhibit 10.27


TAX SHARING AND INDEMNITY AGREEMENT


This TAX SHARING AND INDEMNITY AGREEMENT (the "Agreement"), dated as of this ___ day of ______, 2004, by and between ZAPATA CORPORATION ("Zapata"), a Nevada corporation, and SAFETY COMPONENTS INTERNATIONAL, INC. ("Safety"), a Delaware corporation.


R E C I T A L S:


A. Zapata is the common parent of an affiliated group of corporations within the meaning of Section 1504(a) of the Internal Revenue Code of 1986, as amended.


B. Safety and its affiliates are members of the affiliated group of corporations with respect to which Zapata is the common parent.


C. Zapata has filed consolidated income tax returns, and intends to file consolidated income tax returns, and combined income tax returns where advisable.


D. Zapata and Safety desire to agree upon a method of determining the financial consequences to each party resulting from the filing of consolidated or combined income tax returns.


E. Safety desires to be indemnified by Zapata with respect to certain tax liabilities.


F. Zapata desires to be indemnified by Safety with respect to certain tax liabilities.


NOW, THEREFORE, in consideration of their mutual promises, the parties hereby agree as follows:


ARTICLE 1
DEFINITIONS


1.1 As used in this Agreement, the following terms shall have the following meanings:


"After-Tax Cash Benefit" means the excess, if any, of a member's separate return tax liability for the Consolidated Group under Treas. Reg. Section 1.1552-1(a)(2)(ii) over the amount of the tax liability of the Consolidated Group allocated to the member pursuant to Section 3.1 of this Agreement.


"Code" means the Internal Revenue Code of 1986, as amended, or any successor thereto, as in effect for the taxable period in question.


"Consolidated Group" means the group of corporations that immediately prior to the Effective Date are members of the affiliated group of corporations (within the meaning of


Section 1504 of the Code) that files or is required to file consolidated tax returns of which Zapata, or its successor, is the common parent.


"Effective Date" means the date upon which Zapata and its affiliates cease to own eighty percent (80%) of the issued and outstanding shares of Safety within the meaning of Section 1504(a) of the Code.


"Final Determination" shall mean the final resolution of liability for any Tax for a taxable period, including any related interest or penalties, (a) by Internal Revenue Service Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance by or on behalf of the Internal Revenue Service ("IRS"), or by a comparable form under the laws of other jurisdictions; except that a Form 870 or 870-AD or comparable form that reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for refund and/or the right of the Taxing Authority to assert a further deficiency shall not constitute a Final Determination; (b) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (c) by a closing agreement or accepted offer in compromise under Section 7121 or 7122 of the Code, or comparable agreements under the laws of other jurisdictions; (d) by 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 (including by way of offset) by the Tax imposing jurisdiction; or (e) by any other final disposition, including by reason of the expiration of the applicable statute of limitations.


"Representative" means with respect to any person or entity, any of such person's or entity's directors, officers, employees, agents, consultants, advisors, accountants, attorneys, and representatives.


"Safety Businesses" means the present and future subsidiaries, divisions and business of Safety and any Safety Post-Closing Affiliate.


"Safety Pre-Closing Affiliate" means any corporation, partnership or other entity directly or indirectly controlled by Safety on or before the Effective Date.


"Safety Post-Closing Affiliate" means any corporation, partnership or other entity directly or indirectly controlled by Safety after the Effective Date.


"Tax" or "Taxes" means (a) all forms of taxation, whenever created or imposed, and whenever imposed by a national, municipal, governmental, state, federal or other body, whether domestic or foreign (a "Taxing Authority"), and without limiting the generality of the foregoing, shall include net income, alternative or add-on minimum tax, gross income, sales, use, ad valorem, gross receipts, value added, franchise, profits, license, transfer, recording, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profit, custom duty, or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any related interest, penalties, or other additions to tax, or additional amounts imposed by any such Taxing Authority, (b) liability for the payment of any amounts of the type described in (a) as a result of being a member of an affiliated, consolidated, combined or unitary group for any period, including any liability arising pursuant to Treas. Reg. Section 1.1502-6, or as a result of being a party to any agreement or arrangement whereby liability for payment of such amounts was determined or taken into account with reference to the


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liability of another party and (c) liability for the payment of any amounts of the type described in (a) as a result of any express or implied obligation to indemnify any other person.


"Tax Attributes" shall include, but not be limited to, losses (i.e. current, carryback and carryforward), deductions and credits with respect to "regular" and "alternative minimum" Taxes.


"Taxing Authority" is defined under the term "Taxes."


"Taxable Period" or "Taxable Periods" means the tax year for the "Consolidated Group" as that term is defined in this Article 1.


"Tax Return" means any return, filing, questionnaire or other document required to be filed, including requests for extensions of time, filings made with estimated Tax payments, claims for refund and amended returns that may be filed, for any taxable period with any Taxing Authority in connection with any Tax (whether or not a payment is required to be made with respect to such filing).


"Zapata Affiliate" means any corporation, partnership or other entity directly or indirectly controlled by Zapata, other than Safety, a Safety Pre-Closing Affiliate, or a Safety Post-Closing Affiliate.


"Zapata Businesses" means the present and future subsidiaries, divisions and business of any member of the Consolidated Group, other than the present and future subsidiaries, divisions and business of Safety, any Safety Pre-Closing Affiliate and any Safety Post-Closing Affiliate.


"Zapata Group" means the group of corporations that immediately after the Effective Date are members of the affiliated group of corporations (within the meaning of Section 1504 of the Code) that files or is required to file consolidated tax returns of which Zapata, or its successor, is the common parent.


ARTICLE 2
PREPARATION AND FILING OF TAX RETURNS


2.1 Income Included. All Tax Returns required to be filed by the Consolidated Group relating to Taxable Periods ending before or including the Effective Date and filed after the date of this Agreement shall include the income of Safety and Safety Pre-Closing Affiliates (as determined in this Section 2.1) attributable to such Taxable Periods (including, for federal income Tax purposes, any deferred income triggered into income by Treas. Reg. Section 1.1502-13 and any excess loss accounts taken into income under Treas. Reg. Section 1.1502-19) required to be reported in the Consolidated Group's consolidated federal income Tax Returns (or under any similar rules applicable to any state, local or other income Tax Returns filed on a consolidated or combined basis). The income of Safety and Safety Pre-Closing Affiliates will be apportioned beginning with the first day of the Taxable Period through and including the Effective Date and the period after the Effective Date by closing the books of Safety and such Safety Pre-Closing Affiliates as of the end of the Effective Date. The income of Safety and any Safety Pre-Closing Affiliate shall not include: (1) any deferred income triggered into income by


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Treas. Reg. Section 1.1502-13 or any similar Treasury Regulation or state law; and (2) any excess loss accounts taken into income under Treas. Reg. Section 1.1502-19 or any similar Treasury Regulation or state law, attributable to any other member of the Consolidated Group.


2.2 Tax Returns for Taxable Periods Ending Before or Including the Effective Date. Zapata shall have the responsibility and authority to timely prepare and file, or cause to be timely prepared and filed, the federal Consolidated Group Tax Returns and any state, local or other income Tax Returns, filed on a consolidated or combined basis relating to Taxable Periods ending before or including the Effective Date. Safety shall provide Zapata with any tax-related information reasonably requested by Zapata with respect to any Taxable Periods ending on or before the Effective Date. Furthermore, with respect to separate Tax Returns of Safety or any Safety Pre-Closing Affiliates, Safety shall provide Zapata, upon Zapata's request, with a pre-filing draft of such returns no later than fifteen (15) business days prior to their due date, and proof of timely filing and payment of any associated Taxes.


2.3 Tax Returns for Taxable Periods Beginning After the Effective Date. Safety shall prepare and file, or cause to be prepared and filed, all Tax Returns for Safety and any Safety Post-Closing Affiliate for taxable periods of Safety and any Safety Post-Closing Affiliate beginning after the Effective Date. Zapata shall prepare and file, or cause to be prepared and filed, all Tax Returns for the Zapata Group for taxable periods beginning after the Effective Date.


2.4 Carry-Over Period Returns.


(a) Safety shall prepare and file on a timely basis any Tax Returns (but not including any federal income Tax Return, or any state, local, or other income Tax Return filed on a consolidated or combined basis) of Safety and any Safety Pre-Closing Affiliate for any Taxable Period beginning before and ending after the Effective Date (a "Carry-Over Period").


(b) All other Tax Returns for a Carry-Over Period required to be filed by any member of the Consolidated Group other than Safety or any Safety Pre-Closing Affiliate shall be timely prepared and filed, or caused to be timely prepared and filed, by Zapata.


ARTICLE 3
ALLOCATION OF INCOME TAX LIABILITIES; PAYMENT OF TAX


3.1 Allocation of Income Tax Liabilities with Respect to Taxable Periods Ending Before or Including the Effective Date.


(a) Except as otherwise provided in this Agreement, the consolidated federal income Tax liability of the Consolidated Group for all Taxable Periods ending before or including the Effective Date shall be allocated pursuant to Section 1552(a)(1) of the Code and the Regulations thereunder among the members of the Consolidated Group in accordance with the ratio which that portion of the consolidated taxable income attributable to each member of the Consolidated Group having taxable income bears to the consolidated taxable income of the Consolidated Group. The same allocation principles shall apply in determining each member's share of any sta ...