This excerpt taken from the XCO 8-K filed Jul 25, 2006.
4.14 Taxes. Except as set forth on Company Schedule 4.14:
(A) Each of the Company and Winchester is taxable as a corporation for federal (but not Texas) tax purposes, each of the Subsidiaries (other than Winchester) is a disregarded entity for federal (but not Texas) tax purposes as defined in Treasury Regulation §§ 301.7701-1 to 301.7701-3, and Winchester will become such a disregarded entity effective before the Closing Date as provided in Section 7.7(C)(1).
(B) Each of the Company and the Subsidiaries has timely filed (taking into account all properly granted extensions) all material Tax Returns required to be filed by it with respect to all Taxes, and all such Tax Returns are true, correct and complete in all material respects.
(C) Each of the Company and the Subsidiaries has paid all Taxes which are due and payable by it, and there are no unpaid Taxes of any predecessor entity for which any of the Company and the Subsidiaries is liable. The reserve for Tax liabilities (other than liabilities for income Taxes and liabilities for property Taxes) of the Company and the Subsidiaries reflected in the Balance Sheet adequately reflects (in accordance with GAAP) all such Taxes accrued through the date thereof. Neither the Company nor any of the Subsidiaries has incurred any liability for Taxes (excluding any federal income Taxes of the PFC Group) after the date of the Balance Sheet other than in the Ordinary Course of Business or as a result of the transactions contemplated by this Agreement. All Tax withholding and deposit requirements imposed on or with respect to the Company and the Subsidiaries, or for which the Company or any of the Subsidiaries are liable, have been satisfied in all material respects.
(D) There are no Liens for Taxes upon the assets or properties of any of the Company and the Subsidiaries other than Liens for Taxes not yet due and those which are being contested in good faith by appropriate proceedings.
(E) Neither the PFC Group (with respect to the Company or any of the Subsidiaries), the Company nor any of the Subsidiaries has granted (or is subject to) any waiver or extension that is currently in effect for the period of limitations for the assessment or payment of any Tax or the filing of any Tax Return. No unpaid Tax assessment, deficiency or adjustment has been assessed or asserted in writing against or with respect to the PFC Group (with respect to the Company or any of the Subsidiaries), the Company, or any of the Subsidiaries, by any Governmental Entity; there are no currently pending or, to the Knowledge of the Company, threatened, audits, administrative or judicial proceedings, or any deficiency or refund litigation, with respect to Taxes owed by the Company, any of the Subsidiaries or the PFC Group (with respect to the Company or any of the Subsidiaries).
(F) No unresolved claim has been made by any Governmental Entity in any jurisdiction in which the Company or any of the Subsidiaries does not file Tax Returns that any such Person is or may be subject to Taxation by that jurisdiction.
(G) Neither the Company nor any of the Subsidiaries will be required to include any amount in income for any Taxable period ending after the Closing Date as a result of a change in accounting method for any Taxable period ending on or before the Closing Date or
pursuant to any agreement with any Governmental Entity with respect to any such Taxable period. Neither the Company nor any of the Subsidiaries will be required to include in any period ending after the Closing Date any income that accrued in a prior period but was not recognized in any prior period as a result of the installment method of accounting, the completed contract method of accounting, the long-term contract method of accounting, the cash method of accounting, or otherwise.
(H) Excluding (1) agreements and arrangements to which all parties are members of the PFC Group and (2) agreements and arrangements under which the lessee or similar user of property is required to pay property or severance Taxes, neither the Company nor any of the Subsidiaries is party to or has any obligation under any Tax-sharing, Tax indemnity or Tax allocation agreement or similar arrangement, nor does the Company or any of the Subsidiaries have any liability or potential liability to another party under any such agreement or arrangement.
(I) Neither the Company nor any of the Subsidiaries has consummated, has participated in, or is currently participating in any transaction that was or is a listed transaction as defined in Sections 6011, 6662A or 6707A of the Code or the Treasury Regulations promulgated thereunder, including, but not limited to, transactions identified by the IRS by notice, regulation or other form of published guidance as set forth in Treasury Regulation Section 1.6011-4(b)(2).
(J) Neither the Company nor any of the Subsidiaries is a party to any safe harbor lease within the meaning of Section 168(f)(8) of the Code, as in effect prior to amendment by The Tax Equity and Fiscal Responsibility Act of 1982. None of the assets of the Company or any of the Subsidiaries (directly or indirectly) secures any debt the interest on which is exempt from Tax under Section 103(a) of the Code, and none of the property owned by the Company or any of the Subsidiaries is tax-exempt use property within the meaning of Section 168(h) of the Code.
(K) Neither the Company nor any Subsidiary thereof (1) has been a member of an affiliated group (other than the PFC Group or a group not including a member other than the Company and its subsidiaries) or (2) has any liability for the Taxes of any Person (other than the members of the PFC Group or a group not including a member other than the Company and its subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law) or as a transferee or successor.