TAX SHARING AGREEMENT
This Tax Sharing Agreement (the " Agreement") is made and entered into as of the
30th. Day of March 1999, by and among RIVIERA HOLDINGS CORPORATION, a Nevada
corporation ("RHC" or "PARENT"), and RIVIERA BLACK HA WK, INC., a Colorado
corporation ("RBH").
WHEREAS, RHC is to become the common parent of an affiliated group of
corporations within the meaning of Section 1504(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and RBH, a wholly-owned subsidiary of RHC, is
the only other member of said affiliated group (the "RHC Group); and
WHEREAS, the RHC Group, to the extent permitted by applicable law, will file
consolidated federal income tax returns under the Code; and
WHEREAS, RHC and RBH wish to provide for the allocation of the consolidated
federal income tax liability of the RHC Group;
NOW, THEREFORE, in consideration of the foregoing promises and of the mutual
covenants contained herein and in the operating Agreement, dated June 30, 1993
by and among RHC and RBH (the "Operating Agreement") the parties hereto agree as
follows:
1. DEFINITION
(a) Terms used in this Agreement shall have the meanings ascribed to them in,
and shall be interpreted in accordance with, the relevant provisions of the Code
and the regulations and rulings issued thereunder, as from time to time in
effect.
(b) Tax -- Regular federal/corporate income tax or federal/corporate
alternative minimum tax, together with any and all interest, additions to tax,
fines, and penalties payable with
respect thereto.
2. FILING OF CONSOLIDATED RETURNS AND PAYMENT OF TAX.
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(a) RHC shall, on a timely basis, file or cause to be filed consolidated federal
income tax returns and estimated tax returns for the RHC Group for each taxable
year and shall pay in full any Tax shown due on such returns. RHC, in its sole
discretion, shall make all elections relating to the filing of such returns, and
shall compute the consolidated federal income tax liability of the RHC Group.
RBH shall execute such consents and other documents as are necessary in
connection therewith.
3. ALLOCATION OF CONSOLIDATED FEDERAL INCOME TAX LIABILITY
(a) Except as otherwise provided in paragraph 3(c), RHC and RBH agree that RBH
shall pay to RHC an amount (not less than zero) equal to the Separate Tax
Liability of RBH. The "Separate Tax Liability" of RBH shall be the federal Tax
liability of RBH for the taxable period, determined as if RBH were at all times
subject to federal income taxation as a separate taxpayer, not included or
includable in the RHC Group ( or in any other consolidated group); provided,
however that such determination shall be made without regard to any carrybacks
or carryforwards of any tax attributes of RBH (including without limitation net
operating losses) that would be available to it if it, at all times, had filed a
separate federal income tax return, but which in fact are not available under
applicable federal income tax law as a result of its inclusion in the RHC Group,
provided, further, that: (i) such determination shall be made by giving effect
to the modifications listed in Treasury regulation Section 1.1552-1 (a) (2)
(ii); (ii) such determination
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shall be computed using the highest marginal corporate Tax rate in effect for
such taxable period; (iii) if, for any taxable period, a Tax would be imposed on
RBH pursuant to Section 55 of the Code, the Separate Tax Liability of RBH shall
be increased by the amount of Tax that would be imposed on RBH under such Code
section, computed using the alternative minimum tax rate set forth in Section
55(b)(1) of the Code and taking into account items specified in Section 55(b)
(2) of the Code attributable to RBH; (iv) such determination shall be made using
the same elections and methods of accounting as are used in determining the
consolidated federal income tax liability of the RHC Group for such taxable
period; and (v) notwithstanding any provision herein to the contrary, in no
event shall RBH be required to make any payment hereunder to the extent that,
prior to giving effect to the Operating Agreement, such payment would cause (or
increase ) a violation of any "minimum bankroll requirement," or other
applicable gaming obligation, except to the extent such payment constitutes
RBH's share of the RHC Group's federal income tax liability based on its
contribution to the RHC Group's consolidated taxable income (as such
contribution would be determined under Treasury Regulation Section 1.1552-1 (
a)(1 ), regardless of whether such regulation is actually applicable to the RHC
Group for any purpose) or is otherwise required of RBH under applicable federal
income tax law.
(b) Not less than fifteen (15) days prior to the day the RHC Group's
consolidated federal income tax return is required to be filed in respect of any
taxable year (taking account of any extensions thereof), RHC shall provide RBH a
schedule that sets forth in reasonable detail the calculation of the Separate
Tax Liability for such taxable year. The amount required to be paid
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by RBH to RHC pursuant to paragraph 3(a) of this Agreement for such taxable year
shall be paid not later than five (5) days prior to the date on which the RHC
Group's consolidated federal income tax return is required to be filed for such
taxable year (taking account of any extension thereof) .
(c) If the RHC Group is required to make payments of estimated federal income
tax, then, no later than five (5) days from the date the RHC Group would be
required to make such payments, RBH shall make payments to RHC in an amount
equal to the Estimated Tax Liability of RBH. The "Estimated Tax Liability" of
RBH shall be the federal estimated Tax liability of RBH for the taxable period,
determined as if RBH were at all times subject to federal income taxation as a
separate taxpayer, not included or includable in the RHC Group (or in any other
consolidated group); provided, however, that such determination shall be made
without regard to any carrybacks or carryforwards of any tax attributes of RBH
(including, without limitation, net operating losses) that would be available to
it if it, at all times, had filed a separate federal income tax return, but
which in fact are not available under applicable federal income tax law as a
result of its inclusion in the RHC Group; provided, further, that: (i) such
determination shall be made by giving effect to the modifications listed in
Treasury Regulation Section 1-1552-1- (a)(2)(ii); (ii) such determination shall
be computed using the highest marginal corporate Tax rate in effect for such
taxable period; (iii) if, for any taxable period, a Tax would be imposed on RBH
pursuant to Section 55 of the Code, the Estimated Tax Liability of RBH shall be
increased by the amount of Tax that would be imposed on RBH under such Code
section, computed using the
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alternative minimum tax rate set forth in Section 55(b)(1) of the Code and
taking into account items specified in Section 55 (b)(2) of the Code
attributable to RBH; (iv) such determination shall be made using the same
elections and methods of accounting as are used in determining the consolidated
federal income tax liability of the RHC Group for such taxable period; and (v)
notwithstanding any provision herein to the contrary, in no event shall RBH be
required to make any payment hereunder to the extent that, prior to giving
effect to the Operating Agreement, such payment would cause (or increase) a
violation of any, "minimum bankroll requirement" or other applicable gaming
obligations except to the extent such payment constitutes RBH's share of the RHC
Group's federal income tax liability based on its contribution to the RHC
Groups, consolidated taxable income (as such contribution would be determined
under Treasury Regulation section 1.1552-1(a)(1), regardless of whether such
regulation is actually applicable to the RHC Group for any purpose) or is
required of RBH under applicable federal income tax law. Any payment made by RBH
to RHC Pursuant to this Paragraph 3(c) shall be applied to reduce the amount, if
any, owing by RBH to RHC for the corresponding taxable year pursuant to
paragraphs 3(a) and 3(b). Any excess of the aggregate of payments made by RBH
pursuant to this paragraph 3(c) during a taxable year over the payment, if any,
owing by RBH to RHC for such taxable year pursuant to paragraphs 3(a) and 3(b),
shall be repaid to RBH by RHC: (i) to the extent such excess (or part thereof)
represents all or a part of a tax refund to be received by the RHC Group, such
repayment to be made not later than five (5) days after the receipt of such
refund; (ii) to the extent such excess (or part thereof) represents all or part
of a credit against the
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RHC Group's estimated Tax for a succeeding taxable year, not later than five (5)
days after an estimated Tax payment against which such excess is credited
otherwise is to be paid by RHC; or (iii) to the extent clauses (i) of this
paragraph 3(c) and (ii) of this paragraph 3(c) do not apply to such excess (or a
portion thereof), not later than the date on which the RHC Group's consolidated
federal income tax return is required to be filed (taking into account any
extension thereof).
4. CHANGES IN T AX LIABILITY FOR A TAXABLE YEAR
(a) If any RHC Group consolidated federal income tax for a taxable year is
changed or otherwise adjusted (including, without limitation, by reason of (i) a
"determination" within the meaning of Section 1313(a) of the Code, (ii) the RHC
Group's filing an amended federal income tax return, or (iii) any of the events
specified in Section 6213(b) or (d) of the Code ), then the amount of the
payments required from RBH to RHC under Paragraphs 3 (a) and (c), or RHC to RBH
under paragraph 3 (c), as the case may be, shall be recomputed by substituting
the Separate Tax Liability of RBH, or the loss, deduction or credit of RBH as
computed after giving effect to the changes or adjustments described above in
place of the Separate Tax Liability overbid, or the loss, deduction or credit of
RBH as previously computed hereunder. No later than (i) five (5) days before the
due date for any additional payment of Tax by the RHC Group, (ii) five (5) days
after the receipt of a refund by the RHC Group or (iii) five (5) days after the
determination becomes final, the amended return is filed or other event giving
rise to the recomputation (if such determination, amended return or other event
does not result in any additional Tax due or the receipt of a refund), RBH shall
pay to RHC or RHC shall pay to RBH, as the case may be,
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without interest, the difference between (x) the amounts as recomputed by
substituting the Separate Tax Liability of RBH, or the loss, deduction or credit
of RBH as determined after giving effect to the change or adjustment, and (y)
the amounts previously paid hereunder. The parties recognize that such
recomputation for a taxable year does not necessarily reflect the final Tax
liability for such year, and, hence, the amount of payments due hereunder may be
recomputed under this paragraph more than once.
(b) Payments made pursuant to subparagraph (a) shall include an allocable
portion of any interest paid or credited by the Internal Revenue Service (net of
tax; provided, such interest shall not be treated as an item of income of RBH).
RHC, in its sole discretion, shall determine the amount of any allocable portion
of interest under this subparagraph 4(b).
5. ALLOCATION OF STATE AND LOCAL INCOME T AX LIABILITY
For purposes of state and local consolidated, combined and unitary income Taxes
(if any), principles analogous to those in Sections 3,4, 5,6,7 and 8 shall be
used to determine the liability therefor and the payments to be made. All Nevada
gaming, business, employee, license and other taxes incurred by RBH that are not
described in the preceding sentence shall be solely the responsibility of RBH,
except as otherwise provided in the Operating Agreement.
6. EARNINGS AND PROFITS.
Any election under Section 1552 of the Code of a method of allocating the tax
liability of the RHC Group for purposes of determining the earnings and profits
of the members of the RHC Group, including, but not limited to, an election of a
method prescribed in Treasury Regulation
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Section 1.1502-33 (or any successor provision, including Proposed Regulation
Section 1.1502- 33(d)), and including, but not limited to, a decision not to
elect any such method, shall be made by RHC in its sole discretion, and RBH
agrees to take whatever action may be necessary to effect any such election.
7. TERMINATION OF AFFILIATION
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(a) The parties recognize that at some future date RBH may cease to be included
in the RHC Group but continue to be a corporation subject to federal income tax
("Former Member"). In such event, RHC and RBH shall consult and shall furnish
each other with information required to prepare accurately (i) the consolidated
federal income tax return of the RHC Group for the last taxable year in which
RBH was included in the RHC Group, and (ii) the federal income tax returns for
all taxable years thereafter of RBH and RHC, respectively, in which the tax
liability of either may be affected by their former affiliation (including, for
example, the apportionment of any consolidated net operating loss or capital
loss or investment or foreign tax credit to RBH), and (iii) any other
consolidated federal income tax return of the RHC Group for a taxable year in
which RBH was included in the RHC Group, including information necessary. to
make the final determination of any tax liability payable with respect to such
return, to the extent such determination is based on the operations of RBH.
(b)In connection with any audit by any taxing authority for any period ending on
or prior to the date on which RBH is no longer included with RHC in filing a
consolidated federal
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income tax return (the "Deconsolidation Date"), RBH will make available to RHC
and its representatives such records and documents in their possession as may be
requested by such taxing authority or reasonably requested by RHC to defend
against such audit. RBH will cause its employees to cooperate with and assist
such taxing authority as requested by such taxing authority in the completion of
such audit ( except as otherwise instructed by RHC within the bounds of
applicable law), and (ii) cooperate with and assist tax personnel and tax
counsel of RHC, as may be reasonably requested by RHC in the conduct of all tax
audits of tax returns, and also with respect to a claim for refund or amended
return for any period ending on or prior to the Deconsolidation Date to the
extent that such audit, claim for refund or amended return may involve the
operations of the RBH. RHC shall have the sole right to represent the interests
of RBH in any tax audit or administrative or court proceeding relating to
taxable periods of RBH which end on or before the Deconsolidation Data,
including the sole right to enter into a settlement of such audit or proceeding
on behalf of RBH. RBH shall forward to Parent any notice it receives of any tax
audit for any taxable period ending on or prior to the Deconsolidation
Date.
(c) RHC, upon request, will furnish to RBH a complete and accurate statement of
the information which pertains to RBH and which relates to any consolidated
federal income tax return filed by the RHC Group for a period, or portion of any
period, in which RBH was included in the RHC Group presented in a pro forma
separate return format.
(d) RBH agrees that it will elect or exercise any option then available to it
under the
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Code (or any analogous or similar, state, local or foreign law) to forego the
carryback of any net operating loss, net capital loss, or other tax benefit
arising in a taxable year beginning an or after the Deconsolidation Date to a
taxable year of the RHC Group ending on or prior to the Deconsolidation Date. If
the Code requires such item first to be carried back (and such item cannot by
the making of an election or otherwise, be carried forward without first being
carried back), then RBH may file an application with the appropriate taxing
authority for a carryback adjustment of the Tax for a taxable year in which RBH
was included in the RHC Group and a consolidated federal income tax return was
filed and shall be entitled to that portion of the actual refund that is
attributable to RBH under the consolidated return regulations; provided, that
RBH shall not be entitled to all or a portion of such refund to the extent the
items giving rise to such carryback have been previously utilized to reduce
Separate Tax Liability of RBH or previously gave rise to a payment to RBH under
this Agreement.
(e) Payments that would have been required under this Agreement to or by RBH,
were RBH still a member of the RHC Group, and with respect to taxable years for
which RBH was a member of the RHC Group, shall be made in accordance with
principles analogous to those set forth in the above paragraph(s) of this
Agreement and at the time(s) set forth therein.
(f) Whether in contemplation of or pending a deconsolidation or otherwise, RHC
shall have the following unilateral rights:
i. to determine whether and when to report a worthless stock deduction under
Section 165(g) of the Code;
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ii. to detennine the allocation of any consolidated Code Section 382 limitation
of the RHC Group;
iii. to file all consolidated federal income tax returns (and to amend such
returns) and to compute the tax due with respect thereto (including, without
limitation, determining the deductibility of interest during any taxable period
for purposes of this Agreement), and to control, in its sole discretion, all tax
audits and controversies affecting the RHC Group;
iv. to determine whether to elect under Treasury Regulation Section 1.1502-
20(g) to reattribute the losses of RBH to RHC: and
v. to determine whether a bad debt deduction may be claimed with respect to any
liability of RBH to RHC.
8. RESOLUTION OF DISPUTES.
Any disputes between or among the parties with respect to this Agreement shall
be resolved by a nationally recognized public accounting firm or a nationally
recognized law firm, which accounting firm or law firm shall be reasonably
satisfactory to the disputing parties, and whose fees and expenses shall be
shared equally by the disputing parties. Such determination shall be binding and
conclusive on the disputing parties for the purposes hereof.
9. TERM.
This Agreement shall commence as of January 1, 1999, and shall remain in effect
indefinitely.
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10. MISCELLANEOUS.
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(a) The Agreement constitutes the entire agreement of the parties concerning the
subject matter hereof and supersedes all other agreements, whether or not
written, in respect of any tax between or among RHC and RBH (though it shall
operate in conjunction with the Operating Agreement). This Agreement may not be
amended except by an agreement in writing, signed by the parties thereto.
(b) This Agreement has been made in and shall be construed in accordance with
the laws of the State of Nevada.
(c) This Agreement shall be binding upon and inure to the benefit of each
party hereto and its respective successors and assigns.
(d) All notices and other communications hereunder shall be in writing and shall
be delivered by hand or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses and shall be deemed given
on the date on which such notice is received:
If to RHC:
Riviera Hotel & Casino
0000 Xxx Xxxxx Xxxxxxxxx Xx.
Xxx Xxxxx, Xxxxxx 00000
If to RBH:
Riviera Black Hawk Casino
000 Xxxxxxx Xxxxxx
Xxxxx Xxxx, XX 00000
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(e) This Agreement may be executed simultaneously in two or more counterparts
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(f) The headings of the paragraphs of this Agreement are inserted for
convenience only and shall not constitute a part hereof.
(g) If any term or provision of this Agreement or the application thereof to any
person or circumstance shall be invalid or unenforceable, to any extent, the
remainder of this Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Agreement shall be valid and be enforced to the fullest extent permitted by
law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
RIVIERA HOLDINGS CORPORATION
By Xxxxx Xxxxx
Its: Treasurer
RIVIERA BLACK HAWK, INC.
By_____________________
Its:___________________
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