FORM OF
TAX ALLOCATION AGREEMENT
This Agreement, dated _____________, 1996, is entered into by and among ARM
Financial Group, Inc. ("ARM"), Integrity Holdings, Inc. ("Integrity Holdings"),
SBM Certificate Company ("SBM Cert"), ARM Capital Advisors, Inc. ("ARMCAP"), SBM
Financial Services, Inc. ("SBMFS"), and ARM Transfer Agency, Inc. ("ARM TA"),
(collectively the "Consolidated Companies").
WHEREAS, Integrity Holdings, SBM Cert, ARMCAP, SBMFS, and ARM TA (the
"Subsidiaries") are wholly-owned subsidiaries of ARM; and
WHEREAS, the Consolidated Companies are includible corporations of an
affiliated group within the meaning of Section 1504 of the Internal Revenue Code
of 1986 as amended (the "Code"), qualified to file federal income tax returns on
a consolidated basis pursuant to Section 1501 of the Code; and
WHEREAS, ARM and the Subsidiaries desire to file a consolidated federal
income tax return and, where permissible, consolidated state income tax returns
(a "Consolidated Return"); and
WHEREAS, the Consolidated Companies desire to enter into this Agreement to
provide for the allocation of consolidated tax liabilities among the parties
hereto, for reimbursing ARM for payment of such tax liability, for compensating
any party hereto for use of its losses or tax credits, and to provide for the
allocation and payment of any refund arising from a carryback of losses or tax
credits from subsequent tax years;
NOW, THEREFORE, in consideration of the premises and of the mutual promises
set forth herein, and intending to be legally bound hereby, the Consolidated
Companies agree as follows:
I. EFFECTIVE DATE/TAX YEARS
This Agreement shall be in effect for the taxable period beginning January
1, 1995, and for any taxable period thereafter for which ARM is required or
permitted to file a Consolidated Return, except that no Subsidiary shall be
considered to be a member of the Consolidated Companies for any period that it
would not qualify as a member thereof pursuant to the Code.
II. ALLOCATION
For each taxable period, consolidated income tax liabilities shall be
apportioned among the Consolidated Companies based upon each members'
proportionate share of taxable income determined in accordance with Section
1552(a)(1) of the Code and Regulation 1.552-1(a)(1) thereunder. Additional
amounts will be allocated among the Consolidated Companies in accordance with
Regulation 1.1502-33(d)(3) by assuming a 100% allocation of any decreased tax
liability.
Each Subsidiary shall reimburse ARM for the Subsidiary's proportion of any
tax liability, and for the dollar amount of any tax benefit it received by
virtue of the filing of a Consolidated Return regardless of whether or not the
benefit resulted in a tax liability on a consolidated return basis. Any payments
received by ARM for reimbursement of tax benefits shall be allocated among the
Consolidated Companies pursuant to this Agreement.
ARM shall reimburse each Subsidiary having a loss for the Subsidiary's
proportion of any tax credit utilized to reduce the tax liability on a
consolidated return basis.
For purposes of this Agreement, the consolidated tax liability shall
include any liability for alternative minimum tax.
III. CONSENTS
The Consolidated Companies agree to file such consents, elections, and
other documents, and to take such other action as may be necessary or
appropriate to carry out the purpose of this Agreement.
IV. PAYMENTS
Within 30 days after completion of a Consolidated Return, each Subsidiary
shall pay to ARM the amount of any tax liability and any tax benefit allocated
to the Subsidiary. At least five business days prior to the due date of any
consolidated estimated tax payments which ARM determines to be payable, each
Subsidiary shall advance to ARM that portion of such estimated tax payment
attributable to the Subsidiary as determined equitably by ARM. Such advances
shall reduce any amount payable to ARM following completion of the next
subsequent federal Consolidated Return and any negative balance resulting from
such reduction shall be refunded by ARM to the Subsidiary.
Within 60 days after completion of a Consolidated Return, ARM shall pay to
each Subsidiary the amount of any tax credit and any tax benefit reimbursement
allocated to the Subsidiary.
All payments between the Consolidated Companies pursuant to this Agreement
shall be made in cash.
V. TAX ADJUSTMENTS
In the event of any adjustment to any consolidated income tax liability
determined in accordance with this Agreement, whether by reason of an amended
return, claim for refund, or an audit by the Internal Revenue Service, the
allocations under Section II shall be redetermined to give effect to any such
adjustment, including statutory interest and penalties thereon, as if it had
been made as part of the original computation of consolidated income tax
liability. Payments between the Consolidated Companies as a result of such
redetermination shall be made within 60 days after any such payments are made or
refunds are received, or, in the case of protested proceedings, within 120 days
after final resolution of the matter.
VI. NEW MEMBERS
The Consolidated Companies recognize that from time to time other companies
may become members of the Consolidated Companies which are required to be
included in the Consolidated Return. ARM and the Subsidiaries hereby agree that
such new members become parties to and be bound by this Agreement.
VII. TERMINATION
This Agreement shall be terminated as to any Subsidiary as of the date that
the Subsidiary does not qualify as a member of the Consolidated Companies
pursuant to the Code. This Agreement may be terminated in its entirety by
written agreement of the then existing Consolidated Companies. Notwithstanding
such termination, this Agreement shall continue in effect with respect to any
payment or refunds due for all taxable periods prior to termination.
IN WITNESS WHEREOF the parties have caused this Agreement to be executed by
their officers duly authorized to do so, as of the date first written above.
ARM FINANCIAL GROUP, INC.
BY:
-----------------------------------
TITLE:
--------------------------------
INTEGRITY HOLDINGS, INC.
BY:
-----------------------------------
TITLE:
--------------------------------
SBM CERTIFICATE COMPANY
BY:
-----------------------------------
TITLE:
--------------------------------
ARM CAPITAL ADVISORS, INC.
BY:
-----------------------------------
TITLE:
--------------------------------
SBM FINANCIAL SERVICES, INC.
BY:
-----------------------------------
TITLE:
--------------------------------
ARM TRANSFER AGENCY, INC.
BY:
-----------------------------------
TITLE:
--------------------------------
