Exhibit 10.68
TAX ALLOCATION AND INDEMNIFICATION AGREEMENT
TAX ALLOCATION AND INDEMNIFICATION AGREEMENT (this "Agreement")
dated as of November 4th, 1996, among American Mutual Holding Company
("AMHC"), an Iowa mutual insurance holding company, AmerUs Group Co.
("AmerUs Group"), an Iowa corporation, AmerUs Life Holdings, Inc. ("ALH"), an
Iowa corporation, AmerUs Life Insurance Company ("AmerUs Life"), an Iowa life
insurance company, AmerUs Bank ("AmerUs Bank"), a federal savings bank, Iowa
Realty Co., Inc. ("Iowa Realty"), an Iowa corporation, and AmerUs Properties,
Inc. ("AmerUs Properties"), an Iowa corporation, on behalf of themselves and
their wholly-owned subsidiaries:
WHEREAS, the parties to this Agreement are currently members
("Members") of an affiliated group (the "Group") within the meaning of
Section 1504(a) of the Internal Revenue Code of 1986 (the "Code"), of which
AMHC has been the common parent since June 30, 1996;
WHEREAS, AMERUS LIFE, as the predecessor common parent of the
Group, has filed consolidated federal income tax returns ("Group Tax
Returns") and other tax returns on behalf of the Group for certain periods
ending prior to June 30, 1996;
WHEREAS, AMHC has filed or will file Group Tax Returns and other
tax returns on behalf of the Group for certain periods relevant hereto;
WHEREAS, as a result of the proposed distribution by AmerUs Life of
the stock of its non-life insurance subsidiaries to AmerUs Group, the
non-life insurance subsidiaries will cease to be subsidiaries of AmerUs Life
but continue to be Members of the Group;
WHEREAS, as a result of the subsequent proposed initial public
offering of Class A Common Stock of ALH, ALH and its subsidiaries ("ALH and
Subsidiaries"), including AmerUs Life and its remaining subsidiaries, will
cease to be Members of the Group;
WHEREAS, Members of the Group may be subject to state income and
franchise tax liabilities on a combined or consolidated basis for periods
both before and after the proposed initial public offering; and
WHEREAS, AMHC and ALH desire to set forth their rights and
obligations with respect to certain tax liabilities.
NOW THEREFORE, in consideration of the mutual promises and
covenants contained herein, the parties agree as follows:
1. APPLICABLE PERIOD; TAX PERIOD. For purposes of this
Agreement, the term "Applicable Period" shall refer to the period January 1,
1996 through the date on which ALH and Subsidiaries cease to be Members of
the Group. The term "Tax Period" shall refer to all taxable periods
beginning or ending in the Applicable Period.
2. COOPERATION IN FILING RETURNS. AMHC shall be responsible for
preparing the Group Tax Returns for each Tax Period and shall prepare those
returns in a manner which fairly
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reflects the interests of ALH and Subsidiaries. ALH and Subsidiaries will
cooperate with AMHC in the preparation and filing of the Group Tax Returns
for each Tax Period, regardless of whether such returns are prepared after
the Applicable Period, and provide such assistance and documents, without
charge, as may reasonably be requested by AMHC for that purpose.
3. GROUP TAX LIABILITY; GROUP AMT LIABILITY. For purposes of
this Agreement, the term "Group Tax Liability" shall mean the consolidated
Federal income tax liability, if any, reported on the Group Tax Return (as
adjusted under Section 8 of this Agreement). For purposes of this Agreement,
the term "Group AMT Liability" shall mean the alternative minimum tax
liability under Section 55 of the Code, if any, reported on the Group Tax
Return (as adjusted under Section 8 of this Agreement).
4. ALLOCATION OF GROUP TAX LIABILITY TO ALH AND SUBSIDIARIES.
The Group Tax Liability for each Tax Period shall be allocated among the
Members as provided in this Section 4.
a. The separate Federal income tax liability of each Member
with Federal income tax liability for each Tax Period shall first be
ascertained under the applicable provisions of the Code and the Consolidated
Return Regulations. Any gain or loss (including a gain or loss attributable
to a corporate restructuring) that is treated as recognized by one or more
members of an affiliated group under the Internal Revenue Code and
regulations shall be treated as attributable to that member for purposes of
this Agreement. In computing the Federal income tax liability of each Member
(a "Profit Member"), the surtax exemption to which the Group as a whole is
entitled shall be apportioned among the Profit Members in proportion to their
respective separate taxable incomes.
b. The separate Federal income tax liabilities of all of the
Profit Members computed under Section 4(a) for each Tax Period shall then be
aggregated into a single sum.
c. Each Profit Member shall then be allocated a portion of
the Group Tax Liability, if any, for each Tax Period equal to the product of
(i) the Group Tax Liability for such Tax Period and (ii) a fraction, the
numerator of which is the separate Federal income tax liability of such
Profit Member for such Tax Period determined under Section 4(a) and the
denominator of which is the aggregate sum for such Tax Period determined
under Section 4(b).
d. Notwithstanding the foregoing provisions of this Section
4, the amount of the Group Tax Liability for any Tax Period allocated to any
Member shall not exceed the excess of
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(i) the total of the Federal income tax liabilities of such Member computed
under Section 4(a) for all Tax Periods (including the Tax Period under
consideration and taking into account any loss and credit carryovers that
such Member would have been entitled to had it filed on a separate return
basis), over (ii) the total of the portions of the Group Tax Liabilities
allocated to such Member for all previous Tax Periods. Any excess tax
liability resulting from the foregoing limitation shall be reallocated among
the other Members in accordance with Section 1.1502-33(d)(2)(i)(b) of the
Consolidated Return Regulations.
e. The portion of the Group Tax Liability allocated in the
manner described in this Section 4 to ALH and Subsidiaries shall be a joint
and several liability of each of ALH and Subsidiaries to AMHC.
5. ALLOCATION OF GROUP AMT LIABILITY TO ALH AND ITS SUBSIDIARIES.
If the Group should incur any Group AMT Liability for any Tax Period:
a. The separate alternative minimum taxable income of each
Member with positive separate alternative minimum taxable income (an "AMT
Member") shall be computed under Section 55(b)(2) of the Code;
b. The exemption amount under Section 55(d)(2) of the Code
(as adjusted under Section 55(d)(3)(A) of the Code) shall be apportioned
among the AMT Members in proportion to their respective separate alternative
minimum taxable incomes;
c. The amount allocated to each AMT Member in Section 5(a)
shall be reduced by the amount, if any, allocated to such AMT Member under
Section 5(b) (the resulting amount referred to as the "AMT Base Amount");
d. The separate AMT Base Amounts of each AMT Member shall be
aggregated into a single total; and
e. Each AMT Member shall then be allocated a portion of the
Group AMT Liability for each Tax Period equal to the product of (i) such
Group AMT Liability and (ii) a fraction, the numerator of which is the AMT
Base Amount allocated to such AMT Members under Section 5(c) and the
denominator of which is the aggregate sum determined under Section 5(d).
f. Notwithstanding the foregoing provisions of this Section
5, the amount of the Group AMT Liability for any Tax Period allocated to any
Member shall not exceed the excess of (i) the total of the alternative
minimum tax liabilities of such
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Member computed in accordance with Section 5(a) for all Tax Periods (including
the Tax Period under consideration and taking into account any loss and credit
carryovers that such Member would have been entitled to had it filed on a
separate return basis), over (ii) the total of the portions of the Group Tax
Liabilities allocated to such Member for all previous Tax Periods. Any excess
alternative minimum tax liability resulting from the foregoing limitation shall
be reallocated among the other Members in accordance with Section 1.1502-33 (d)
(2) (i) (b) of the Consolidated Return Regulations.
g. The portion of the Group AMT Liability allocated in the manner
described in this Section 5 to ALH and Subsidiaries shall be a joint and several
liability of each of ALH and Subsidiaries to AMHC.
6. PAYMENT OF ALLOCABLE TAX LIABILITY. Section 4 and Section 5 are
intended to allocate liability for the payment of the Group Tax Liability and
any Group AMT Liability for each Tax Period to ALH and Subsidiaries in
proportion to their respective contributions to such liabilities. The amounts
allocated in this manner shall be a joint and several liability of ALH and
Subsidiaries enforceable by AMHC and the other Members of the Group under the
terms of this Agreement, and requiring ALH and Subsidiaries promptly to transmit
payment in the amount of the allocation to AMHC in a timely manner so that such
payment may be included with the filing of the Group Tax Return for such Tax
Period. ALH and Subsidiaries shall be jointly and severally liable for any
interest or penalties resulting from their failure to tender such payments
timely. Each AMT Member shall be entitled to a portion of any minimum tax
credit computed under Section 53 based on its respective payments of the Group
AMT Liability. Notwithstanding the foregoing, ALH and Subsidiaries shall pay
their allocable share of estimated Federal income taxes (including estimated
alternative minimum taxes) to AMHC in a timely manner so that AMHC may timely
pay required estimated Federal income taxes during each Tax Period. The amount
of any payment for taxes owed by any Profit Member or AMT Member to AMHC shall
be net of any estimated income or alternative minimum taxes, as the case may be,
paid by such Member with respect to the particular Tax Period. AMHC shall
promptly provide ALH with evidence of the timely payment of each Group Tax
Liability, Group AMT Liability and estimated tax liability.
7. PAYMENTS TO LOSS MEMBERS.
a. In addition to the allocations set forth above with respect to
the Group Tax Return for each Tax Period, each Profit Member for such Tax Period
shall also be allocated an amount equal to the difference between (i) the
federal income tax
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liability that would have been due on the Profit Member's separate taxable
income under Section 4(a) if such party had filed a separate tax return for such
Tax Period and (ii) the tax amount allocated to it under Section 4(d) (the
"Additional Allocation").
b. A portion of the Additional Allocation determined under Section
7(a) with respect to each Profit Member shall be a liability of that Profit
Member to each Member generating a net operating loss ("NOL") in the particular
Tax Period (the "Loss Member") in an amount equal to the product of (i) the
Additional Allocation and (ii) a fraction the numerator of which is such Loss
Member's NOL (including NOLs carried forward from prior periods) actually used
in computing the Group Tax Liability and the denominator of which is the total
NOLS of all the Loss Members actually used in computing the Group Tax Liability.
c. The amounts allocated to ALH and Subsidiaries under Sections 7(a)
and 7(b) shall be netted against each other and, (i) to the extent that it
results in a net payment liability, shall be paid by ALH to AMHC, and (ii) to
the extent that it results in a net amount receivable, shall be paid by AMHC to
ALH. The appropriate liability or receivable, as the case may be, shall be paid
within 45 days after the filing of the Group Tax Return for the particular Tax
Period and shall be a joint and several liability of each Profit Member of the
Group or of ALH and Subsidiaries, as the case may be.
8. AUDITS AND OTHER ADJUSTMENTS.
a. If, as a result of any final determination or settlement with the
Internal Revenue Service (the "IRS") or any court decision relating to a Group
Tax Return (for Tax Periods and for taxable periods prior to the Applicable
Period):
(1) each audited Member has an increase in its separate Federal
income tax liability, then each such Member shall be allocated the portion of
the increase in the Group Tax Liability or Group AMT Liability that is
attributable to its respective increased separate Federal income tax liability;
(2) each audited Member has a reduction in its separate Federal
income tax liability, then each such Member shall be allocated the portion of
the refund received by AMHC on behalf of the Group that is attributable to its
respective decreased separate Federal income tax liability; or
(3) some audited Members have increases in, but some audited
Members have reductions in, their respective
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separate Federal income tax liabilities, then each Member with increased tax
liability shall be allocated the increase in its separate return tax liability,
and each Member with reduced tax liability shall be allocated (A) a portion of
any refund received by AMHC on behalf of the Group, together with (B) a portion
of any excess in the increased separate return tax liabilities of the Members
with increased tax liabilities over the increase in the Group Tax Liability or
Group AMT Liability assessed as a result of the final determination, settlement
or other resolution of the audit. The portion of such refund or difference
allocated to each Member with reduced tax liability shall be based on a
fraction, the numerator of which is such Member's reduction in its separate
return tax liability and the denominator of which is the total reduction in
separate return tax liabilities of all Members with reduced tax liabilities.
b. For purposes of this Agreement, the term "Profit Member" shall
include any Member that has separate Federal income tax liability as a result of
such final determination, and the term "AMT Member" shall include any Member
that becomes an AMT Member as a result of such final determination. The amounts
allocated to each member of ALH and Subsidiaries under Section 8(a) shall be
aggregated and netted against each other and, (i) to the extent that this
computation results in a net payment liability, shall be paid by ALH to AMHC,
and (ii) to the extent that it results in a net amount receivable, shall be paid
by AMHC to ALH. The appropriate liability or receivable, as the case may be,
together with any interest or penalties thereon, shall be paid in a timely
fashion and shall be a joint and several liability of each Profit Member of the
Group or of ALH and Subsidiaries, as the case may be. Any additional minimum
tax credit under Section 53 of the Code will be apportioned to the appropriate
Member under Section 6.
9. CONDUCT OF DISPUTES. If AMHC as common parent of the Group receives
notice of any audit of other examination by the IRS of any Group Tax Return,
AMHC shall promptly notify ALH of such audit or examination. AMHC may, at its
option upon timely notice to ALH, control the conduct of any audit and the
defense of any suit, action or proceeding resulting therefrom. AMHC shall
discharge its fiduciary responsibilities to ALH and Subsidiaries by representing
them in a manner which fairly reflects their interests. ALH and Subsidiaries
will cooperate with AMHC in these proceedings and provide such assistance and
documents, without charge, as may reasonably be requested by AMHC for such
purpose.
10. CERTAIN POST-APPLICABLE PERIOD RETURNS. For any taxable year in which
the federal income tax liability of ALH and Subsidiaries is not reported on the
same tax return as that of
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AMHC and its wholly-owned subsidiaries, the person or persons preparing the
returns and representing the taxpayers in any examination or appeal shall do so
in a manner which fairly reflects the interests of all taxpaying entities.
11. STATE AND LOCAL INCOME AND FRANCHISE TAXES.
a. In the case of any taxable year for which a consolidated
income or franchise tax return is filed with any state or local jurisdiction,
which return includes any member of ALH and Subsidiaries, ALH shall pay to AMHC
the proportionate share of any taxes reported on such return, and AMHC shall pay
to ALH the proportionate share of any tax benefits from losses reported on such
return, attributable to ALH and Subsidiaries computed in a manner consistent
with the principles set forth in Sections 4 and 7 of this Agreement. The
principles set forth in Sections 2, 6, 8, 9 and 10 shall also be applicable to
state and local income and franchise tax returns.
b. If the state income or franchise tax liability of AMHC or
any one or more of its direct or indirect subsidiaries (other than ALH and
Subsidiaries) is determined by reference to the income, loss, assets, expenses,
or activities of any member of ALH and Subsidiaries:
(i) ALH shall cause a payment to be made to AMHC equal to
the amount of state tax liability (determined on a with and without basis)
attributable to the income, loss, assets, expenses, or activities of that member
or members of ALH and Subsidiaries;
(ii) AMHC shall cause a payment to be made to ALH equal to
the amount, if any, by which the State income tax liability of AMHC and its
subsidiaries (determined on a with and without basis) is reduced by the income,
loss, assets, or activities of that member or members of ALH and Subsidiaries;
and
(iii) All such computations shall be netted, such that a
payment shall be made to or from ALH only to the extent that the activities of
it and all of its subsidiaries has resulted in a net increase or decrease in the
state income or franchise tax liability of AMHC and all of its subsidiaries.
Such payments shall be adjusted to reflect any examination adjustments or
amended returns consistent with the principles set forth in Section 8.
c. Principles similar to those set forth in Section 11(b) shall
apply if the state income or franchise tax liability of any member of ALH and
Subsidiaries is determined by
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reference to the income, loss, assets, expenses, or activities of AMHC or one or
more of its direct or indirect subsidiaries (other than ALH and Subsidiaries).
d. In the event that the State income or franchise tax
liability of AMHC or one or more of its subsidiaries (other than ALH and
Subsidiaries) is determined with reference to the amount of any dividend or
similar distribution made by ALH with respect to its stock, no payment shall be
made under this agreement.
e. No state income or franchise tax return or report shall be
made on a basis that combines or consolidates the income of any member of ALH
and Subsidiaries with AMHC, or any of its direct or indirect subsidiaries,
unless such combined reporting has been approved by the boards of directors of
both AMHC and ALH or has been determined to be required by the taxing authority
of the state in which such return or report is filed.
12. INDEMNIFICATION. Each party shall pay and be responsible for,
and shall indemnify, defend and hold harmless all other parties to this
Agreement from and against all liabilities allocated to it under this Agreement.
If any party pays or has paid any Group Tax Liability, Group AMT Liability or
state or local income or franchise tax liability for which another party to this
Agreement is or becomes liable pursuant to the terms of this Agreement,
appropriate reimbursement shall be made no later than 10 days after demand
therefore together with interest calculated on such reimbursement at the rate
specified under Section 6621(a)(2) of the Code (the "Underpayment Rate") from
the date such payment is due pursuant to this Agreement to the date of
reimbursement. The portion of any refund, rebate or reimbursement received by
any party to which another party is entitled pursuant to this Agreement shall be
paid over within 10 days to the party which is entitled thereto. Any other
payments required to be made between the parties pursuant to this Agreement
which are not made in a timely fashion shall bear interest at the Underpayment
Rate from the date the payment is due until the date the payment is made.
13. COMPLETE AGREEMENT. This Agreement shall constitute the entire
agreement among the parties with respect to the subject matter hereof and shall
supersede any previous negotiations, commitments and writings with respect to
such subject matter.
14. SUCCESSORS AND ASSIGNS. This Agreement and all of its provisions
hereof shall be binding upon and shall inure to the benefit of the parties and
their respective successors and permitted assigns.
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15. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Iowa, without regard to its
principles of conflicts of law.
16. AMENDMENTS. This Agreement may not be modified or amended except
by an agreement in writing signed by the parties hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers as of the 4th day of November, 1996.
Attest AMERICAN MUTUAL HOLDING
COMPANY
By: /s/ Xxxxx X. Xxxxxxxxxxxxx By: /s/ Xxx X. Xxxxxxxx
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Attest AMERUS GROUP CO.
By: /s/ Xxxxx X. Xxxxxxxxxxxxx By: /s/ Xxx X. Xxxxxxxx
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Attest AMERUS LIFE HOLDINGS, INC.
By: /s/ Xxxxx X. Xxxxxxxxxxxxx By: /s/ Xxxxx X. Xxxxxx
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Attest AMERUS LIFE INSURANCE
COMPANY
By: /s/ Xxxxx X. Xxxxxxxxxxxxx By: /s/ Xxxxx X. Xxxxxx
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Attest AMERUS BANK
By: /s/ Xxxxxx Xxxxxxxx By: /s/ Xxxxxx X. Xxxxxx
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Attest IOWA REALTY CO., INC.
By: /s/ Xxxxx X. Xxx By: /s/ R. Xxxxxxx Xxxxx
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Attest AMERUS PROPERTIES, INC.
By: /s/ Xxxxx X. Xxxxxxxx By: /s/ Xxxxxxx X. Xxxxx XX
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