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EXHIBIT 10.14
_______________________________________________________________________________
TAX ALLOCATION
AGREEMENT
By and among
CLUB XXXXXX RESORTS, INC.
and
BANCOMER, S.A., INSTITUCION DE BANCA MULTIPLE, GRUPO FINANCIERO
_______________________________________________________________________________
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TAX ALLOCATION AGREEMENT
This Tax Allocation Agreement (this "AGREEMENT"), is made and entered
into to be effective as of August 18, 1997, by and between Club Xxxxxx Resorts,
Inc., a Nevada corporation ("BUYER") and Bancomer, S.A., Institucion de Banca
Mulitiple, Grupo Financiero, a Mexican corporation ("SELLER").
W I T N E S S E T H
WHEREAS, on December 20, 1996, Buyer, Seller, Desarrollos Turisticos
Xxxxxx, S. de X.X. de C.V. (formerly Desarrollos Turisticos, Bancomer, S.A. de
C.V.) (the "COMPANY") and CR Hotel Acquisition Company, LLC entered into a Stock
Purchase Agreement (as amended and restated by a First Amended and Restated
Stock Purchase Agreement dated as of June 25, 1997 and by a Second Amended and
Restated Stock Purchase Agreement dated as of August 18, 1997 hereinafter the
"PURCHASE AGREEMENT"), providing for the sale by Seller to Buyer of all of the
outstanding equity securities of the Company, as well as all of the equity
securities of the Real Estate Companies (as therein defined), held by Seller
(the "STOCK").
WHEREAS, in order to implement the sale of the Stock as contemplated in
the Purchase Agreement, Seller agreed to carry out before the Closing Date (as
defined in the Purchase Agreement), certain acts including those which are more
fully described in Exhibit A hereto (the "PRE-ACQUISITION ACTS"), except for
those Pre-Acquisition Acts described in paragraphs E., F., G., J., and M. of
said Exhibit, and
WHEREAS, the parties to this Agreement desire to clarify their
respective rights and obligations with respect to certain tax and other related
liabilities.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
Defined Terms. All capitalized terms used herein and not otherwise
defined shall have the meaning ascribed to them in the Purchase Agreement.
ARTICLE II
TAX ALLOCATION
2.1 Allocation of Tax Liability. (a) Seller shall be responsible for
and shall indemnify and hold Buyer, the Company and its Subsidiaries and their
respective Affiliates, absolutely harmless from and against all Taxes relating
to the ownership and operations of the Company and its Subsidiaries for all
taxable periods ending on or prior to the Closing Date, including the period
beginning January 1, 1997 and ending on the Closing Date,
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including all Damages incurred by any of them relating to tax audits for all
years open for the assessment of deficiencies through and including any taxable
period ending on or before the Closing Date. The obligation of Seller set forth
in this Section shall not be subject to any limitations, if any, contained
elsewhere in this Agreement or the Purchase Agreement, but will survive the
Closing Date until the expiration of the applicable statute of limitations
(giving effect to any waiver or extension thereof).
(b) Except as otherwise provided for herein, Buyer shall be responsible
for and shall indemnify and hold Seller absolutely harmless against all Taxes
relating to the ownership and operations of the Company and its Subsidiaries for
all taxable periods beginning after the Closing Date or taxable transactions
carried out and completed after the Closing Date, including all Damages incurred
by any of them for all taxable periods beginning after the Closing Date.
(c) Taxes attributable to a taxable period beginning before and ending
after the Closing Date shall, except as otherwise provided hereunder, be
allocated between Seller and Buyer on the actual activities carried out, taxable
income or taxable loss of the Company and its Subsidiaries during such
pre-closing partial period and such post-closing partial period based on an
actual closing of the books and records of the Company and each of its
Subsidiaries. The asset tax attributable to the Seller will be calculated using
the tax basis of the assess and those deductible liabilities of the Company and
its Subsidiaries as recorded on their books and records throughout the period
from January 1, 1997 to August 17, 1997 multiplied by the applicable asset tax
rate multiplied by the number of days between January 1, 1997 to August 17, 1997
divided by 365.
(d) Buyer shall inform Seller of (i) the commencement of any audit or
examination; (ii) any proposals of deficiencies; and (iii) the assessment of
deficiencies with respect to the Company or any of its Subsidiaries. Items (i),
(ii) and (iii), shall be limited to Taxes relating to the ownership and
operations of the Company and its Subsidiaries for all taxable periods ending on
or prior to the Closing Date, including the period beginning January 1, 1997 and
ending on the Closing Date. Seller shall not settle, compromise, accept, reject,
protest, or appeal any adjustment or proposed adjustment in connection with any
Tax audit or examination with respect to the Company or any of its Subsidiaries
unless Seller has first obtained Buyer's written approval with respect to such
adjustment, which written approval will not be unreasonably withheld. Buyer,
after receipt of notice regarding any claim, proceeding or litigation with
respect to (i),(ii) and (iii), shall notify Seller, within a term equivalent to
half of the deadline period remaining for presenting response by Seller to the
corresponding agencies, of such claim, proceeding or litigation. If Buyer does
not comply with the preceding sentence, then Buyer shall be liable for such
claim, proceeding or litigation. Buyer additionally agrees to provide Seller
with any and all documentation hereto related that Seller shall reasonably
request in order to respond, answer and/or defend any such claim, proceeding,
litigation or notice.
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(e) Regarding profit sharing to workers of the Company or any of its
Subsidiaries, Seller shall be responsible for any such profit sharing to worker
corresponding to periods up to the Closing Date. The profit sharing to workers
which may be payable for a period beginning before and ending after the Closing
Date shall be allocated between Seller and Buyer based on an actual closing of
the books and records of each the Company and its Subsidiaries and respective
Affiliates as of the Closing date.
(f) Tax Returns. Buyer at its own cost and expense will be responsible
for the filing of all Tax Returns of the Company or any of its Subsidiaries for
all periods ending after the Closing Date. Seller shall cooperate, at its own
cost and expense, with Buyer in the filing of all Tax Returns and reports with
respect to the ownership and operations of the Company and its Subsidiaries
which are required to be filed for all periods ending on or before the Closing
Date and in the period beginning before and ending after the Closing Date
(giving effect to any extensions available therefor).
2.2 Indemnification by Seller. Subject to the provisions of this
Article II, and without in any way limiting the obligations of Seller under
Article 2.1 of the Purchase Agreement, Seller shall protect, indemnify and hold
harmless the Buyer, the Company and its Subsidiaries and their respective
Affiliates from any and all Damages to which the Buyer, the Company and its
Subsidiaries and their respective Affiliates may become subject if such Damages
arise out of or are based upon:
(a) Any adverse change in the assets, liabilities, operations,
condition (financial or otherwise) of the Company or any of its Subsidiaries
from that reflected in the Interim Historical Balance Sheet, including changes
for Tax purposes, or the assumption of any obligation or liability either
accrued, absolute, contingent or otherwise for Taxes or the creation of
Encumbrances over any of their assets whether real, personal or intangible,
solely as a result of, or with respect to, any of the Pre-Acquisition Acts;
(b) Any charge to the Company or any of its Subsidiaries or the Buyer
(or its respective Affiliates) with any violation of any Applicable Fiscal Law
deriving from or related to any of the Pre-Acquisition Acts, which charge or
violation, if determined adversely to the Company, any of its Subsidiaries or
the Buyer (or any of its Affiliates) would adversely affect their business or
the results of their operations or if it reasonably is expected to affect the
rights of Buyer to own the Stock or operate the Business;
(c) Failure by the Company or any of its Subsidiaries to have caused to
be timely filed with appropriate federal, state, local and other Governmental
Entities any documentation required to be filed with respect to the Company or
its Subsidiaries, in connection with or otherwise relating to the
Pre-Acquisition Acts or the failure to pay all Taxes due with respect to such
documentation;
(d) Any notice of deficiency, assessment, audit or investigation by any
Governmental Entity with respect to the Company or its Subsidiaries or any
adjustment proposed by any Governmental Entity in connection with any of the
Company's or its Subsidiaries' tax returns deriving from the conduct of any of
the Pre-Acquisition Acts;
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(e) Any Proceeding of any nature existing prior to or after the Closing
arising out of any of the Pre-Acquisition Acts, or arising out of facts or
circumstances that existed at or prior to the Closing that are related to any of
the Pre-Acquisition Acts; or
(f) Any liabilities for federal, state or local Taxes, incurred or
accrued by the Buyers or their respective Affiliates, the Company or any of the
Subsidiaries as a result of the consummation of any of the Pre-Acquisition Acts.
2.3. Reimbursement of Taxes. Buyer expressly agrees that with respect
to any litigation, claim or proceeding which Seller shall have been a party to
during the pre-acquisition period of time, Seller shall be the sole party
responsible and/or beneficiary of the outcome of any such claim, proceeding or
litigation, and, f such outcome should result in a reimbursement or right to
set-off against any other taxes of any nature in favor of Seller, then Buyer
shall reimburse and/or indemnify Seller for such amount within 30 days after the
date of the decision. Seller expressly agrees that it will be its exclusive
responsibility to properly carry out all necessary activities and procedures to
obtain the final decision of said litigation, claim or proceeding. Seller
expressly agrees to furnish official evidence of a decision granting a
reimbursement or right to set-off.
2.4 Time Limits on Liability. Anything contained in this Agreement to
the contrary notwithstanding, the liability of Seller for indemnity shall only
extend during the time in which the statutes of limitations expires pursuant to
Mexican law provisions.
2.5 Indemnification Procedures. The obligations and liabilities of
Seller hereunder with respect to Damages shall be governed by the provisions of
Article 2.3 of the Purchase Agreement. Seller will agree to pay any such amount
that may be applicable under this indemnification provision within 30 days.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to the Buyer as follows:
3.1 Organization and Qualification. Seller is a corporation duly
organized and validly existing under the laws of Mexico and has the corporate
power and authority to enter into and perform this Agreement.
3.2 Validity of Agreement. This Agreement has been duly executed and
delivered by Seller and constitutes a legal, valid and binding obligation of
Seller, enforceable against it in accordance with its terms.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
4.1 Organization and Qualification. Buyer is a corporation duly
organized and validly existing under the laws of the United States and has the
corporate power and authority to enter into and perform this Agreement.
4.2 Validity of Agreement. This Agreement has been duly executed and
delivered by Buyer and constitutes a legal, valid and binding obligation of
Buyer, enforceable against it in accordance with its terms.
ARTICLE V.
GENERAL PROVISIONS
5.1 Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements of Seller contained in this Agreement
shall survive the Closing.
5.2 Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received, as follows:
(a) If to Seller:
Xxxxxx Xxxxxxxxx Xxxxxxxx
Chief Financial Officer
Xxxxxx Xxxxxx y Xxxxxx
General Counsel
Xxxxxxxxx Xxxxxxxxx Mirelles
Director of Mergers and Acquisitions
BANCOMER, S.A.
Av. Universidad 1200
Col. Xoco
00000 Xxxxxx, D.F.
(b) If to Buyer:
CLUB XXXXXX RESORTS, INC.
1900 Pennzoil Place-South tower
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000
X.X.X.
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Xxxxxxxxx Traurig
c/o Xxxxxx Xxxxxx
000 X. 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
or to such other address as either party shall have specified by notice
in writing to the other party.
5.3 Entire Agreement. This Agreement supplements and does not
supersede the Purchase Agreement.
5.4 Binding Effect; Benefit. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective permitted
successors and assigns. No right or obligation of Seller under this Agreement
may be assigned by Seller without the prior written consent of Buyer; provided,
however, that Buyer shall be entitled to assign this Agreement to an Affiliate
prior notice to Seller.
5.5 Severability. If any provision of this Agreement shall be declared
by any court of competent jurisdiction to be illegal, void or unenforceable, all
other provisions of this Agreement shall not be affected and shall remain in
full force and effect.
5.6 Applicable Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York.
5.7 Mediation/Arbitration. The provisions of Article XII of the
Purchase Agreement are hereby incorporated by reference.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
BANCOMER, S.A. INSTITUCION DE BANCA
MULTIPLE, GRUPO FINANCIERO
By:
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Xxxxxx Xxxxxxxxx Xxxxxxxx
Title Chief Financial Officer
CLUB XXXXXX RESORTS, INC.
By:
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Xxxxxxx X. Xxxx
Title President
