mining excessive profits there shall be taken into consideration the following factors:

(2) The net worth, with particular regard to the amount and source of public and private capital employed;

(b) Comment. The net worth of a sales organization is rarely of sufficient importance to have a bearing upon the reasonableness of sales commissions; nor, as a general rule, is any substantial amount of capital, either public or private, employed in its operations. However, when sufficient capital or net worth is employed, consideration will be given thereto in determining the existence and amount of excessive profits of such a contractor. § 1490.11

Extent of risk assumed. (a) Statutory provision. Section 103 (e) of the act provides that in determining excessive profits there shall be taken into consideration the following factor:

(3) Extent of risk assumed, including the risk incident to reasonable pricing policies;

(b) Comment. If the contractor undertakes financial obligations or incurs financial or other risks in connection with his renegotiable business, such obligations and risks will be taken into consideration in determining what constitutes excessive profits. To receive such consideration, such risk must be an unusual one, such as the risk of saturating post-emergency markets, and not merely the risk of expending the efforts and capacities of a sales organization without assurance of compensation. Any risk incident to the performance of sales services on a contingent basis is one which is assumed by most sales organizations and, furthermore, is one which diminishes with the increased volume of business resulting from the defense effort.

§ 1490.12 Contribution to the defense effort.

(a) Statutory provision. Section 103 (e) of the act provides that in determining excessive profits there shall be taken into consideration the following factor:

(4) Nature and extent of contribution to the defense effort, including inventive and developmental contribution and cooperation with the Government and other contractors in supplying technical assistance.

(b) Comment. This factor is especially significant in determining excessive profits under subcontracts described in section 103 (g) (3) of the act. A manufacturer's representative or salesman can make a substantial contribution to the defense effort by (1) making sources of materials and services available to defense contractors, including the exercise of ingenuity in bringing facilities and services into defense work and developing new uses for old products; (2) correlating the productive capacity of a manufacturer with the procurement needs of the defense effort; (3) expediting the purchase and flow of materials to contractors; (4) servicing sales contracts during performance to meet the requirements of the buyer; (5) rendering expert engineering or other technical assistance to the buyer, the seller and the Government. The contractor who assists the prosecution of the defense effort in any of the above ways, or in other ways, will be given more favorable consideration than the contractor who does not. The profits allowed to be retained by the contractor as nonexcessive will include a suitable financial reward for any exceptional accomplishments or outstanding efforts that inured or might reasonably have inured to the benefit of the defense effort. To determine this, comparison will be made with the services and activities customarily performed by similar contractors in the same field. § 1490.13 Character of business.

(a) Statutory provision. Section 103 (e) of the act provides that in determining excessive profits there shall be taken into consideration the following factor:

(5) Character of business, including source and nature of materials, complexity of manufacturing technique, character and extent of subcontracting, and rate of turnover.

(b) Comment. Consideration will be given to the character of the business of the contractor. This will vary greatly from one sales organization to another. The contractor who merely takes orders and transmits them to his principal generally is not entitled to as large a profit as the contractor who, in addition to such functions, also performs technical services in adapting his principal's products to the needs of his buyers or devotes substantial effort to expediting shipments and servicing the sales he has made. The profits allowed to be retained

dollars represents the amount of profits which should be eliminated pursuant to the act.

ART. 2. Warranty. This agreement has been entered into in reliance, among other things, upon the representations of the Contractor, including the financial and other data submitted by the Contractor upon the basis of which the statement set forth in Exhibit A annexed hereto and made a part hereof was prepared.

The Contractor warrants that to its best knowledge, information and belief, the representations made by it to the Government in connection with this renegotiation are true and correct and it has disclosed all material facts required to make its representations complete and not misleading.

ART. 3. Tax credit under section 1481 of the Internal Revenue Code of 1954. (a) The Contractor represents that the profits agreed in article 1 hereof to be eliminated were included in income in the Federal income tax return (or income and excess profits tax returns) of the Contractor for the fiscal year under review and that the Contractor has applied or will apply within fifteen (15) days after the date that this agreement is executed by the Contractor for a computation by the Internal Revenue Service, based upon the assessments made to the date of such computation, of the amount by which the taxes of the Contractor for the fiscal year under review payable under the Internal Revenue Code are decreased by reason of the application of section 1481 of the Internal Revenue Code of 1954. The amount, if any, so computed will be allowed as a credit against the amount of profits agreed in article 1 hereof to be eliminated.

(b) In the event that any additional excessive profits are eliminated pursuant to the provisions of article 5 or article 9 hereof, there shall be allowed to the Contractor the credit, if any, to which the Contractor shall be entitled under section 1481 of the Internal Revenue Code of 1954 with respect to such additional profits.

ART. 4. Terms of payment. (a) The Contractor agrees to pay to the Government an amount equal to the difference between the amount of profits agreed in article 1 hereof to be eliminated and the amount of the tax credit, if any, referred to in article 3 (a) hereof. Such payment shall be made within forty (40) days after the date of this agreement, except that if the Contractor shall have applied for a tax credit computation from the Internal Revenue Service within the time provided in article 3 (a) hereof, then such payment shall be made within forty (40) days after the date of this agreement or within thirty (30) days after the date of receipt by the Contractor of such computation, whichever is later.

(b) With respect to any additional profits eliminated pursuant to article 5 or article 9 hereof, payment shall be made within thirty (30) days after the date when the Contractor becomes liable therefor as pro

vided in said article 5 or article 9 hereof, except that if the Contractor shall have applied for a tax computation within fifteen (15) days after such date, then such payment shall be made within thirty (30) days after such date or within thirty (30) days after the Contractor receives such tax credit computation from the Internal Revenue Service, whichever is later.

ART. 5. Additional profits to be eliminated. If, as a result of the elimination of the profits agreed in article 1 hereof to be eliminated, the Contractor shall either receive a refund, whether by repayment or credit, or shall recognize a reduction in its liability or reserve by giving effect thereto on its books, in respect of any item which was allowed as an item of cost in the determination of such profits, the Contractor agrees that the amount of such refund or reduction in liability or reserve shall be deemed to be additional profits to be eliminated pursuant to the act, and the Contractor agrees to pay to the Government an amount equal to the difference between the amount of such additional profits and the amount of the tax credit, if any, provided by section 1481 of the Internal Revenue Code of 1954.

ART. 6. Covenant against contingent fees. The Contractor warrants that it has not employed any person to solicit or secure this agreement upon any agreement for a commission, percentage, brokerage, or contingent fee. Breach of this warranty shall give the Government the right to annul this agreement.

ART. 7. Officials not to benefit. No Member of or Delegate to Congress, or Resident Commissioner, shall be admitted to any share or part of this agreement, or to any benefit that may arise therefrom; but this provision shall not be construed to extend to this agreement if made with a corporation for its general benefit.

ART. 8. Discharge of liability. This agreement shall be final and conclusive according to its terms, and performance by the Contractor in accordance herewith shall be in full discharge of all liability of the Contractor under the act for excessive profits received or accrued under contracts and subcontracts subject to the act for the fiscal year under review and, except upon a showing of fraud or malfeasance or a willful misrepresentation of a material fact, this agreement shall not, for the purposes of the act, be reopened as to the matters agreed upon, and shall not be modified by any officer, employee, or agent of the United States, and this agreement and any determination made in accordance herewith shall not be annulled, modified, set aside or disregarded in any suit, action or proceeding.

ART. 9. Waiver of claims. The Contractor waives any and all claims against the United States or a contractor or subcontractor which, if realized, would constitute income subject to renegotiation under the Act for the fiscal year under review; provided, however, that this wavier shall not extend to or

be deemed to include (1) claims reported by the Contractor in this renegotiation and (2) claims for reimbursement for costs not reported by the Contractor in this renegotiation.

In the event that the Contractor shall receive payment or credit for any claim waived in this article 9, the Contractor agrees that the amount of such payment or credit shall be deemed to be additional profits to be eliminated pursuant to the act, and the Contractor agrees to pay to the Government an amount equal to the difference between the amount of such additional profits and the amount of the tax credit, if any, provided by section 1481 of the Internal Revenue Code of 1954.

ART. 10. Interest. The Contractor agrees to pay to the Government interest at the rate of four (4%) per centum per annum upon any unpaid portion of the amount to be paid pursuant to the provisions of article 4, article 5, or article 9 hereof, which said interest shall accrue and be payable from and after the due date of such unpaid portion and shall continue until payment thereof.

Any

ART. 11. Form and place of payment. payment pursuant to this agreement shall be made by check to the order of the Treasurer of the United States and forwarded to Washington

(Appropriate collecting officer) 25, D. C.

In witness whereof, this agreement has been duly executed in four (4) counterparts by or on behalf of the parties hereto pursuant to proper authority. [CORPORATE SEAL]

after referred to as "the fiscal year under review") from contracts and subcontracts subject to the act which should be eliminated pursuant to the act.

(c) Variation in article 1 ("floor" provision). If the amount of excessive profits to be refunded is limited by the provisions of section 105 (f) (1) or (2) of the act, delete article 5 in its entirety and the period at the end of article 1, and add the following to article 1:

but for the limitation set forth in section 105 (f) (1) [105 (f) (2)] of the act. In view of such limitation, the Government and the Contractor determine and agree that the sum of ($------) dollars represents the amount of profits which should be eliminated pursuant to the act.

(d) Variations in article 3 (tax credit). (1) If the Contractor has not filed its Federal income or income and excess profits tax returns, or has filed such returns but has not included in income reported therein the profits to be eliminated, article 3 (a) should be varied to read as follows:

(a) The amount of profits agreed in article 1 hereof to be eliminated not having been included in income in the Federal income tax return (or income and excess profits tax returns) of the Contractor for the fiscal year under review, the taxes of the Contractor for the fiscal year under review payable under the Internal Revenue Code are not decreased in any amount by reason of the application of section 1481 of the Internal Revenue Code of 1954 and no amount will be allowed under said section 1481 as a credit against the amount of profits agreed in article 1 hereof to be eliminated. In the event, however, that Federal income or excess profits taxes shall be assessed upon the amount of profits agreed in article 1 hereof to be eliminated, or any part thereof, there shall be allowed to the Contractor the credit, if any, to which the Contractor shall be entitled under section 1481 of the Internal Revenue Code of 1954 with respect to such profits.

(2) When the Contractor has included in income as reported in its tax returns less than all of the profits to be eliminated, article 3 (a) should be varied to read as follows:

(a) The Contractor represents that of the profits agreed in article 1 hereof to be eliminated, only the sum of

($------) dollars was included in income in the Federal income tax return (or income and excess profits tax returns) of the Contractor for the fiscal year under review and that the Contractor has applied or will apply within fifteen (15) days after the date that this agreement is executed by the Contractor for a computation by the Internal Revenue Service, based upon the assessments made to the date of such computation, of the amount by which the taxes of the Contractor for the fiscal year under review payable under the Internal Revenue Code are decreased by reason of the application of section 1481 of the Internal Revenue Code of 1954. The amount, if any, so computed will be allowed as a credit against the amount of profits agreed in article 1 hereof to be eliminated. In the event, however, that Federal income or excess profits taxes shall be assessed upon that portion of the profits agreed in article 1 hereof to be eliminated which was excluded from income in the Federal income tax return (or income and excess profits tax returns) of the Contractor for the fiscal year under review, there shall be allowed to the Contractor the credit, if any, to which the Contractor shall be entitled under section 1481 of the Internal Revenue Code of 1954 with respect to such profits.

(3) In the case of a partnership, since the tax credit applicable against the amount of profits to be eliminated is the

aggregate of the credits to which the partners are severally entitled, article 3 should be varied to read as follows:

(a) Each of the partners comprising the Contractor represents that his proportionate share of the profits, the amount of which is agreed in article 1 hereof to be eliminated, was included in his income for his taxable year in which the fiscal year under review ended in computing his total tax in his Federal income tax return for said taxable year. Each of such partners has applied or will apply within fifteen (15) days after the date that this agreement is executed by him for a computation by the Internal Revenue Service, based upon the assessments made to the date of such computation, of the amount by which his taxes for said taxable year under the Internal Revenue Code are decreased by reason of the application of section 1481 of the Internal Revenue Code of 1954. The aggregate of the amounts, if any, so computed shall be allowed as a credit against the amount of profits agreed in article 1 hereof to be eliminated.

(b) In the event that any additional excessive profits are eliminated pursuant to the provisions of article 5 or article 9 hereof, there shall be allowed, as a credit against such additional profits, the aggregate of the amounts, if any, to which the partners comprising the Contractor shall be severally entitled under section 1481 of the Internal Revenue Code of 1954 with respect to such additional profits.

When the above variation is used, the last sentence of article 4 (a) should also be varied to read as follows (and a corresponding change made in article 4 (b)):

Such payment shall be made within forty (40) days after the date of this agreement, except that if each of the partners comprising the Contractor shall have applied for a tax credit computation from the Internal Revenue Service within the time provided in article 3 (a) hereof, then such payment shall be made within forty (40) days after the date of this agreement or within thirty (30) days after the date of receipt of the last such computation by the partner who requested the same, whichever is later.

(4) If the amount of the tax credit has been ascertained before the agreement is drawn, article 3 (a) should be varied to read as follows:

(a) The Contractor represents that the profits agreed in article 1 hereof to be eliminated were included in income in the Federal income tax return (or income and excess profits tax returns) of the Contractor for the fiscal year under review. The amount by which the taxes of the Contractor for the fiscal year under review payable under