TAX ALLOCATION AGREEMENT
AGREEMENT dated December 23, 1996 by and among Guaranty
National Corporation ("Parent") and each of its undersigned
subsidiaries
WITNESSETH
Whereas, the parties hereto are members of an affiliated
group ("Affiliated Group") as defined in Section 1504(a); and
Whereas, such Affiliated Group will be included in a U.S.
consolidated income tax return for its taxable year 1997; and
Whereas, it is the intent and desire of the parties hereto
that a method be established for allocating the consolidated tax
liability, including alternative minimum tax, of the Affiliated
Group among its members, for reimbursing the Parent for payment
of such tax liability, for compensating any party 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 taxable years,
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, the parties hereto agree as follows:
1. A U.S. consolidated income tax return shall be filed
for the taxable period ended December 31, 1997, and for
which the Affiliated Group is required or permitted to be
included in a consolidated tax return. Each subsidiary
shall execute and file such consent, elections, and other
documents that may be required or appropriate for the
proper filing of such returns.
2. a. For the taxable period, each member of the
Affiliated Group shall compute its separate tax liability
as if it had filed a separate tax return and shall pay
such amount to the Parent.
b. The separate return tax liability of each
member shall be computed in a manner consistent with the
provisions of Regulation 1.1552-1(a)(2)(ii), provided
that the carryover of any tax attribute from a prior
taxable year, which is not available in determining the
consolidated tax liability of the group for the taxable
period, shall be disregarded.
3. The Parent and Subsidiaries agree that in the taxable
year in which a consolidated alternative minimum tax
liability is imposed on the affiliated group by Section
55 of the Internal Revenue Code of 1986, the alternative
minimum tax liability shall be allocated among the
members in the following manner:
a. The consolidated regular federal income tax
liability of the affiliated group as defined in Section
55(c) of the Internal Revenue Code of 1986, shall be
allocated as provided in Paragraph (2) above, and
b. The consolidated alternative minimum tax
liability shall be allocated to each member whose
alternative minimum taxable income exceeds its break-even
alternative minimum taxable income. The amount of such
liability allocated to any such member shall be equal to
the consolidated alternative minimum tax liability
multiplied by a fraction, the numerator of which is the
excess of such member's alternative minimum taxable
income over its break-even alternative minimum taxable
income, and the denominator of which is the excess of the
sum of all such members' alternative minimum taxable
incomes over the sum of their break-even alternative
minimum taxable incomes over the sum of their break-even
alternative minimum taxable incomes. For purposes of
this Agreement, "break-even alternative minimum taxable
income" is the amount of alternative minimum taxable
income at which a member's tentative alternative minimum
tax liability would equal its regular federal income tax
liability.
c. The amount of a member's minimum tax credit
under Section 53 of the Internal Revenue Code of 1986
shall equal its alternative minimum tax liability as
allocated under this paragraph for all taxable years to
which this Agreement applies, reduced by the minimum tax
credit used as provided in Paragraph (4) below.
4. The Parent and Subsidiaries agree that, in the taxable
year in which the Affiliated Group reduces its
consolidated regular federal income tax liability by the
minimum tax credit provided under Section 53 of the
Internal Revenue Code of 1986, the amount of such credit
used attributable to each member is equal to the
consolidated minimum tax credit multiplied by a fraction,
the numerator of which is the separate minimum tax credit
of such member, and the denominator of which is the sum
of the separate minimum tax credits of all members having
such credits.
5. Payment of the consolidated tax liability for the
taxable period shall include the payment of estimated tax
installments due for the taxable period, and each
subsidiary shall pay to the Parent its share of each
payment within ten days of receiving notice of such
payment from the Parent, but in no event later than the
due date for each such payment. Any amounts paid by a
subsidiary on account of a separate return or separate
estimated tax payments which are credited against the
consolidated tax liability of the Affiliated Group shall
be included in determining the payments due from such
subsidiary. Any overpayment of estimated tax should be
refunded to the subsidiary within 10 days after the date
of filing on the consolidated return.
6. If for the taxable period the separate return
liability of each member of the Affiliated Group,
including the Parent, exceeds the consolidated tax
liability for such period as a result of any excess
losses or tax credits of one or more members, then the
Parent shall pay to each such member its allocable
portion of such excess amount within ten days after the
date of filing on the consolidated return for such
period.
7. If part or all of an unused loss or tax credit is
allocated to a member of the Affiliated Group pursuant to
Regulation 1.1502-79, and is carried back or forward to a
year in which such member filed a separate return or a
consolidated return with another affiliated group, any
refund or reduction in tax liability arising from the
carryback or carryover shall be retained by such member.
Notwithstanding the above, the Parent shall determine
whether an election shall be made not to carry back part
or all of a consolidated net operating loss for the
taxable year in accordance with Section 172(b)(3)(C).
8. If the consolidated tax liability is adjusted for the
taxable period, whether by means of an amended return,
claim for refund or after a tax audit by the Internal
Revenue Service, the liability of each member shall be
recomputed to give effect to such adjustments, and in the
case of a refund, the Parent shall make payment to each
member for its share of the refund, determined in the
same manner as in paragraph 2 above, within ten days
after the refund is received by the Parent, and in the
case of an increase in tax liability, each member shall
pay to the Parent its allocable share of such increased
tax liability within ten days after receiving notice of
such liability from the Parent.
9. If during the consolidated return period the Parent or
any subsidiary acquires or organizes another corporation
that is required to be included in the consolidated
return, then such corporation shall join in and be bound
by this agreement.
10. This agreement shall apply to the taxable period
ending December 31, 1997 unless the Parent and the
subsidiaries agree to terminate the agreement.
Notwithstanding such termination, this agreement shall
continue in effect with respect to any payment of refunds
due for the taxable period ending December 31, 1997.
11. This agreement shall be binding upon and inure to
the benefit of any successor, whether by statutory
merger, acquisition of assets or otherwise, to any of the
parties hereto, to the same extent as if the successor
had been an original party to the agreement.
In WITNESS WHEREOF, the parties hereto have caused this
agreement to be executed by their duly authorized representatives
on December 23, 1996.
Guaranty National Corporation
Guaranty National Insurance Company
Landmark American Insurance Company
Intercon General Agency, Inc.
Auto Insurance Centers, Inc.
Colorado Casualty Insurance Company
Peak Property and Casualty
Insurance Corporation
Guaranty National Insurance Company
of California
Viking Insurance Company of Wisconsin
Viking Insurance Holdings, Inc.
Viking General Agency, Inc.
Guaranty National Warranty Services Company
By s/Xxxxxx X. Xxxxxxxxxx
Assistant Treasurer
