1
EXHIBIT 10.6(a)
TAX ALLOCATION AGREEMENT
This TAX ALLOCATION AGREEMENT, made this 28th day of April, 1992,
between and among Pacific USA Holdings Corp. (hereinafter referred to
as "Parent"), Pacific American Homes, Inc., Lifescape Development Corporation,
Pacific Southwest Bank, F.S.B. and such of their affiliates, whether presently
existing or hereafter acquired, as are or shall be part of the "Group" as
hereinafter defined (hereinafter referred to individually as "Subsidiary" and
collectively as "Subsidiaries"), for taxable years commencing on and after
December 29, 1988.
WITNESSETH:
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 desire to file a consolidated
Federal income tax return for the taxable year ending September 30, 1989, and
for any subsequent taxable period for which the Group is required or permitted
to file a consolidated 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 smaller Federal income tax being paid by all
parties, if a consolidated Federal income tax return is filed
which will include any subsidiaries and affiliates of the
parties in accordance with the terms of the Internal Revenue
Code (the "Code") and related Income Tax 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.
2
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.
II. Calculation of Individual Corporate Income Tax Liability
A. Beginning with the year ended September 30, 1989 and for each
tax year thereafter, each member of the Group will calculate
its Federal corporate income tax liability as if it were to
file a separate Federal income tax return for such period.
For purposes of this Agreement, any Subsidiary ("Covered Asset
Subsidiaries") of Pacific Southwest Bank, F.S.B. that is a
Covered Asset as defined in Section l(q) of the Assistance
Agreement dated December 29, 1988 shall be treated as directly
owned by Pacific Southwest Bank, F.S.B. and shall be subject
to this Agreement. The income, loss and credits of the
Covered Asset Subsidiaries shall be taken into consideration
in computing Pacific Southwest Bank, F.S.B.'s Federal income
tax liability.
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 Income Tax
Regulations under the Code;
(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 such
calculation 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 Sections
170(b)(2), 172(b)(2), 38(c), 53(a) and similar
limitations shall be applied on a consolidated basis;
(5) The corporate alternative minimum tax (AMT) imposed
in Section 55 and AMT limitations and adjustments
provided in Section 56 through 59, shall be
determined on a consolidated basis;
2
3
(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 to subsequent year's separate company tax
liability as determined under Code Section
172(b)-(3)(c) shall be made on a separate company
basis.
III. Liability for Tax Payments
A. Parent will pay the Federal corporation income tax liabilities
of the Group for any year in which the Group is required to
file consolidated Federal income tax returns.
B. If any Subsidiary would be subject to Federal corporate income
tax if it filed a separate income or franchise 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
corporate 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 reduced 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' profits, the
excess will be carriedforward 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 tax will be
payable to Parent by the Subsidiary 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 corporate 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.
3
4
IV. Method and Time of Payment
Payments by Parent of consolidated estimated 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, each 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 or state franchise 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 redetermined after fully giving effect
to such adjustment as if such adjustment had been made as part of the
original computation.
VI. Earnings and Profits Ad
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.
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.
4
5
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 Federal income 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 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 agreement, 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.
5
6
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.
PACIFIC USA HOLDINGS CORP.
By: /s/ XXXX X. XXXXXXX Date: April 28, 1992
------------------------------------------------------- ---------------------------------------------
Xxxx X. Xxxxxxx (Name)
-----------------------------------------
CEO (Title)
-----------------------------------------
PACIFIC SOUTHWEST BANK, F.S.B.
By: /s/ XXXXX X. XXXXXXX Date: April 28, 1992
------------------------------------------------------- ---------------------------------------------
Xxxxx X. Xxxxxxx (Name)
-----------------------------------------
President and CEO (Title)
-----------------------------------------
PACIFIC AMERICAN HOMES, INC.
By: /s/ XXXXXXX XXXXXXX Date: May 21, 1992
------------------------------------------------------- ---------------------------------------------
Xxxxxxx Xxxxxxx (Name)
-----------------------------------------
President (Title)
-----------------------------------------
LIFESCAPE DEVELOPMENT CORPORATION
By: /s/ XXXXXXX XXXXXXX Date: May 21, 1992
------------------------------------------------------- ---------------------------------------------
Xxxxxxx Xxxxxxx (Name)
-----------------------------------------
President (Title)
-----------------------------------------
NEWMARK HOMES CORP.
By: Date:
------------------------------------------------------- ---------------------------------------------
(Name)
-----------------------------------------
(Title)
-----------------------------------------
6
