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EXHIBIT 10.10
TAX ALLOCATION AGREEMENT
This Tax Allocation Agreement, made this 15th day of March, 2000, by
and between Technical Olympic USA, Inc., a Delaware corporation ("Parent"),
Newmark Homes Corp., a Nevada corporation and its wholly-owned subsidiaries and
affiliates, whether presently existing or hereafter acquired (individually as
"Subsidiary" and collectively as "Subsidiaries"), for the taxable years
commencing on and after December 15, 1999.
Whereas, Parent, Subsidiaries, and any other corporation which together
with Parent form an affiliated group (the "Group") within the meaning of Section
1504(a) of the Internal Revenue Code ("Code") desire to file a consolidated
Federal income tax return for the taxable period beginning December 16, 1999 and
ending December 31, 1999, and for any subsequent taxable period for which the
Group is required or permitted to file a consolidated tax return; and
Whereas, Parent and Subsidiaries wish to preserve the economic rights
and privileges which would accrue to each from the filing of separate Federal
income tax returns and, further, wish to set forth their agreement regarding
those rights and privileges, in writing:
Now, therefore, Parent and Subsidiaries hereby agree as follows:
I. Consolidated Return
A. It would be to the mutual advantage to the parties hereto, and
could result in a smaller aggregate Federal income tax
liability for all parties, if a consolidated Federal income
tax return is filed which will include any subsidiary and
affiliate of the parties in accordance with the terms of the
Code and related Income Tax Regulations ("Regulations").
B. Parent and Subsidiaries shall file consents and other
documents and take such action as may be necessary to file and
to continue to file a consolidated tax return for the Group.
C. Parent and Subsidiaries shall cause any corporation which
hereafter becomes an affiliate of any of them and a member of
the Group to join in this Agreement.
D. Parent and Subsidiaries shall maintain, and shall cause any
subsidiaries subsequently formed or acquired to maintain,
concurrent fiscal years.
E. Parent shall make all elections under the consolidated return
Regulations or required to be made for the consolidated Group
and shall approve all elections made with respect to each
member of the Group.
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II. Calculation of Individual Corporate Income Tax Liability
A. Beginning with the period beginning December 16, 1999 and
ending December 31, 1999 and for each tax year thereafter,
each member of the Group will calculate its Federal income tax
liability as if it were to file a separate Federal income tax
return for such period.
B. In so computing the individual Federal income tax liability of
each member of the Group:
(1) Except as otherwise provided herein, "separate
company taxable income" shall be determined as if
Parent and each Subsidiary were filing a separate tax
return, and the term will not have the same meaning
as set forth in Section 1.1502-12 of the Regulations;
(2) Any dividends received by Parent from Subsidiaries,
or by one Subsidiary from another, will be assumed to
qualify for the 100% dividend received deduction of
Code Section 243, or shall be eliminated from the
calculation of separate company taxable income in
accordance with Regulation 1.1502-14(a)(1):
(3) Gain or loss on intercompany transactions, whether
deferred or not, shall be treated by each member of
the Group in the manner required by Regulation
1.1502-13:
(4) Limitations on the calculation of a deduction, the
utilization of credits, or the calculation of a
liability shall be made on a consolidated basis.
Accordingly, the limitations provided in Code
Sections 170(b)(2), 172(b)(2), 38(c), 53(c) and
similar limitations shall be applied on a
consolidated basis;
(5) The corporate alternative minimum tax ("AMT") imposed
in Code Section 55 and AMT limitations and
adjustments provided in Code Sections 56 through 59,
shall be determined on a consolidated basis;
(6) The amounts in each taxable income bracket in the tax
table in Code Section 11(b) shall be allocated in any
given year to members of the Group as Parent shall
elect. Such election shall be made on an annual basis
and shall be binding upon all parties to this
Agreement; and
(7) In calculating any carryback or carryover of net
operating losses, adjustments shall be made to such
prior and/or subsequent year's separate company tax
liability as determined under Code Section 172(b).
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III. Liability for Tax Payments
A. Parent will pay the Federal income tax liabilities of the
Group for any period in which the Group is required to file a
consolidated Federal income tax return.
B. If any Subsidiary would be subject to Federal income tax if it
filed a separate Federal income tax return, that Subsidiary
shall pay to Parent that sum which shall result from the
calculations required by Paragraph II above.
C. If any Subsidiary would be entitled to a refund of Federal
income tax if it filed a separate Federal income tax return,
Parent shall pay that Subsidiary that sum which shall result
from the calculation required by Paragraph II above. No
payments shall be made if currently generated losses or
credits of any Subsidiary reduce the current tax liability of
the consolidated Group until the Subsidiary can utilize the
loss or credits against its separate company taxable income by
way of a carryback or carryforward. In the event that a
Subsidiary's separate company taxable income is a loss in any
given year as calculated under Paragraph II, the Subsidiary
will first offset this loss against prior years' taxable
income. If the loss is greater than prior years' taxable
income, the excess will be carried forward against future
years' taxable income. The tax repayment from Parent to
Subsidiary under this paragraph will be calculated on the
amount of the loss carried back to prior years, and no further
amount will be payable by Subsidiary to Parent until the
losses carried forward are fully utilized against the
Subsidiary's future years' income.
D. With the exception of payment provided for under subparagraphs
B and C of this Paragraph III, neither Parent nor any
Subsidiary shall pay or credit any amount to the other
hereunder, even though the Federal income tax liability of the
Group may have been reduced by reason of the inclusion of a
particular Subsidiary as a member of the Group.
E. Payments to Parent by any Subsidiary must not include any
deferred tax liability incurred by the Subsidiary.
F. Notwithstanding anything to the contrary stated herein, Parent
shall indemnify Subsidiaries on an after-tax basis (taking
into account, when realized, any tax detriment or tax benefit
to Subsidiaries of (i) a payment hereunder or (ii) the
liability to the Internal Revenue Service giving rise to such
a payment), with respect to and in the amount of:
(1) Any liability for Federal income tax incurred by
Subsidiary or any subsidiary of Subsidiary for any
taxable year with respect to which Subsidiary is
included in the Parent's consolidated Federal income
tax return; provided that Subsidiary shall have made
payments to Parent as provided in this Agreement in
complete satisfaction of the Subsidiary's individual
corporate income tax liability for such taxable year;
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(2) Any liability for Federal income tax incurred by a
Subsidiary or any subsidiary of Subsidiary to the
extent attributable to any member of the Group (other
than Subsidiary or any subsidiary of Subsidiary) and
for which Subsidiary or such subsidiary is liable as
a result of being included in a consolidated Federal
income tax return of the Group; and
(3) Interest, penalties and additions to tax, and costs
and expenses in connection with any liabilities
described in subsections (1) or (2), above.
Parent shall pay to Subsidiary amounts due under subsections (1), (2),
or (3) to the extent such amounts are related to amounts under
subsections (1), (2) or (3) above, no later than seven (7) days after
the date of a final determination with respect thereto; provided,
however, that no such indemnification shall be made to the extent that
Subsidiary has failed to make a payment to Parent under the provisions
of this Agreement.
IV. Method and Time of Payment
Payments by Parent of consolidated estimated Federal income tax for the
consolidated Group at the normal quarterly due dates will be reimbursed by the
Subsidiaries at those quarterly due dates. Each Subsidiary shall make/receive
these quarterly payments/receipts of estimated tax liability/repayment on
account to/from Parent based on the Subsidiary's separate company taxable income
calculated under Paragraph II above, as of the close of the appropriate quarter.
As soon as the Group's consolidated tax liability for the year is determined,
such Subsidiary shall make/receive payment to/from Parent pursuant to Paragraph
III above, less amounts already paid for estimated tax.
V. Adjustment of Tax Liability
In the event of any adjustment of the tax liability shown on the Federal income
tax returns of the Group, by reason of the filing of an amended return or claim
for refund, or arising out of an audit by a taxing authority, the liability of
Parent and any Subsidiary hereunder shall be predetermined after fully giving
effect to such adjustment as if such adjustment had been made as part of the
original computation.
VI. Earnings and Profits Adjustments
This Agreement is not intended to establish the method by which the earnings and
profits of each member of the Group will be determined. Parent reserves the
right to elect the method for allocating tax liability for the purposes of
determining earnings and profits as set forth in Income Tax Regulations Sections
1.1552-1(a) and 1.1502-33(d).
VII. Financial Statement Tax Provision
In consolidated financial statements of Parent and its Subsidiaries, the
financial reporting policy for tax provision allocations shall be based upon a
separate entity. The difference between the separate tax return basis and the
consolidated financial reporting allocation basis shall be charged or credited
to Parent's separate tax provision.
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VIII. Successors Assigns
The provisions and terms of this Agreement shall be binding on and inure to the
benefit of any successor, by merger, acquisition of assets or otherwise, or any
of the parties hereto.
IX. New Members
If, at any time, any other company becomes a member of the Group, the parties
hereto agree that such member may become a party to this Agreement by executing
a duplicate copy of this Agreement. Unless otherwise specified, such named
member shall have all the rights and obligations of a Subsidiary under this
Agreement.
X. Duration
Unless earlier terminated by mutual agreement of the parties, this Agreement
shall remain in effect with respect to any tax year for which consolidated tax
returns are filed by the Group.
Notwithstanding the termination of this Agreement, its provisions will remain in
effect with respect to any period of time during the tax year in which
termination occurs, for which the income of the terminating party must be
included in the consolidated return. The preceding sentence shall not be
construed, however, to require a Subsidiary to contribute to consolidated tax
liability for any period for which it files a separate return. Allocations of
consolidated tax liability shall be made hereunder only for periods covered by a
consolidated Federal income tax return.
XI. General
All material including, but not limited to, returns, supporting schedules,
workpapers, correspondence and other documents relating to the consolidated
Federal income tax return shall be made available to any party to this Agreement
during regular business hours.
This Agreement contains the entire agreement of the parties and there
are no agreements, representations, or warranties not contained herein. This
Agreement may not be modified or amended except by written instrument executed
with the same formality as this Agreement.
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In Witness Whereof, the parties hereto have caused their names to be
subscribed and executed by their respective authorized officers on the dates
indicated, effective as of the date first written above.
TECHNICAL OLYMPIC USA, INC.
By: /s/ Xxxxx X. XxXxxx Date: March 20, 2000
Name: Xxxxx X. XxXxxx
Title: Vice President and Chief Financial Officer
NEWMARK HOMES CORP.
By: /s/ Xxxxxx X. Xxxxxxx Date: March 22, 2000
Name: Xxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
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JOINDER IN TAX ALLOCATION AGREEMENT
The undersigned entity hereby joins in the Tax Allocation Agreement
dated ____________ by and among Technical Olympic USA, Inc. and Newmark Homes
Corp. and such of their affiliates, whether presently existing or hereafter
acquired, as are or shall be part of the Group for taxable years commencing on
or after December 15, 1999. A copy of the Tax Allocation Agreement is attached
hereto as Exhibit A.
Dated effective the ____________________.
SUBSIDIARY
By:
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Name:
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Title:
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