MCO HOLDINGS, INC. TAX ALLOCATION AGREEMENT OF MAY 21, 1988
Exhibit
10.39
MCO
HOLDINGS, INC.
TAX ALLOCATION
AGREEMENT
OF MAY 21,
1988
This Agreement is made as of May 21,
1988, between MCO Holdings, Inc. ("Parent"), a Delaware corporation, and the
signatory corporations hereto (each such corporation is hereinafter individually
and collectively referred to as "Subsidiary").
WHEREAS, each Subsidiary is currently a
member of an affiliated group within the meaning of Section 1504 (a) of The
Internal Revenue code (the "Code") of which Parent is the common parent
corporation (the "Group"); and
WHEREAS, pursuant to a tax allocation
agreement dated as of March 17, 1987 ("March 87 Agreement") among Parent and
certain of its then existing subsidiaries shown on Schedule A hereto ("Prior
Group"), Parent and such subsidiaries established a Tax Allocation Method, as
hereinafter defined, for the Prior Group. As used herein, the term "Tax
Allocation Method" shall mean a method for allocating the consolidated tax
liability of a group among its members and for reimbursing the group's parent
for the payment of such liability; and
WHEREAS, pursuant to a tax allocation
agreement dated as of May 1, 1987, as amended ("May 87 Agreement"), MAXXAM Group
Inc. ("MAXXAM") and certain of its then existing subsidiaries shown on Schedule
B hereto, established a Tax Allocation Method for the affiliated group of which
MAXXAM was the parent ("MGI Group"); and
WHEREAS, on May 20, 1988, a
wholly-owned subsidiary of Parent merged with and into MAXXAM ("MAXXAM
Merger".), and MAXXAM became a wholly-owned subsidiary of Parent;
and
WHEREAS, as a consequence of the MAXXAM
Merger, the MGI Group no longer remains in existence within the meaning of
Treasury Regulation §1.1502-75(a) and therefore the May 87 Agreement has
terminated with respect to taxable periods beginning after May 20, 1988;
and
WHEREAS, Parent and its undersigned
subsidiaries, including MAXXAM and its undersigned subsidiaries, desire to
establish a Tax Allocation Method for the Group which includes all current
members of the Group, including MAXXAM and its undersigned
subsidiaries.
NOW, THEREFORE, in consideration of the
promises and of the mutual agreements and covenants contained herein, Parent and
each Subsidiary hereby agree as follows:
1. The
March 87 Agreement is hereby terminated with respect to taxable periods
beginning on and after January 1, 1988;
2. Each
undersigned subsidiary (each referred to herein as a "Subsidiary") agrees to be
included in, and Parent agrees to file a consolidated Federal income tax return
for all taxable years in which Parent and each Subsidiary are eligible to file
consolidated returns as an affiliated group of corporations as such term is
defined in Section 1504 of the Code.
3.
All elections relating to the filing of a consolidated Federal income tax return
which are required or are available and the computation of the consolidated
Federal income tax liability of the Group shall be made by Parent. Each
Subsidiary shall execute such consents and other documents as are necessary in
connection therewith.
4. Parent,
as the common parent and agent of the Group, shall be responsible for, and shall
pay, any consolidated Federal income tax liability of the Group.
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5.
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(a)
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There
shall be computed a Federal income tax liability for each Subsidiary for
any taxable period covered by Section 7 of this Agreement (the "Applicable
Period") as if (i) each Subsidiary had filed a separate return for such
period and all prior Applicable Periods and (ii) each Subsidiary was never
a member of the Group. In calculating such liability the separate returns
shall be prepared by taking into account all inter-company transactions,
including those eliminated by reason of the consolidated return Treasury
Regulations.
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(b)
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If
the foregoing calculation results in a Federal income tax liability for a
Subsidiary with respect to the Applicable Period, then, in that
event, the Subsidiary shall pay such computed income tax liability to
Parent in such amounts and at such times as the Subsidiary would have been
required to pay to the Internal Revenue Service if it were an unaffiliated
corporation making separate estimated payments of tax and filing a
separate tax return.
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(c)
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If
the foregoing calculation with respect to the Applicable Period results in
a net operating loss that can be carried back to a prior taxable
period or periods of a Subsidiary with respect to which the
subsidiary previously made payments to Parent pursuant to the preceding
paragraph (b), then, in that event, Parent shall pay the Subsidiary an
amount equal to the tax refund to which the Subsidiary would have been
entitled if it were an unaffiliated corporation that filed separate income
tax returns in respect of all the relevant taxable
periods.
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(d)
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If
the foregoing calculation with respect to the Applicable Period results in
a net operating loss that cannot be carried back to a prior taxable period
or periods of a Subsidiary with respect to which the Subsidiary previously
made payments to Parent pursuant to the preceding paragraph (b), then, in
that event, such net operating loss shall be a net operating loss
carryover to be used by the Subsidiary in computing its Federal income tax
liability pursuant to the preceding paragraph (a) for future taxable
periods, under the law applicable to net operating loss carryovers in
general.
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(e)
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Any
adjustment other than a net operating loss carryback described in
paragraph (c) -above,
for whatever reason including, without limitation, audits or amended
returns), to any item affecting a calculation of tax liabilities under
paragraph (a), (b), (c) or (d) above, shall be given effect by
redetermining the amount payable by or due to each Subsidiary pursuant to
this Agreement as if such adjustment was part of the original
determination hereunder and including any interest due to or from the
Internal Revenue Service as a result of such
adjustment.
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6.
The foregoing principles shall apply in similar-fashion
to any consolidated state or other local income tax return which the Group may
elect or be required to file.
7.
With respect to each Subsidiary, this Agreement shall be effective for the
Group's 1988 taxable period and all subsequent taxable periods (excluding any
period of time in 1988 in which the Subsidiary was not a member of the Group),
until the date on which (i) the Subsidiary ceases to be a member of the Group,
(ii) the Group no longer remains in existence within the meaning of Treasury
Regulation §1.1502-75(a), or (iii) the Group is no longer eligible to file, or
is no longer eligible to join in the filing of, a consolidated
return for Federal-income
tax purposes. Prior too or upon termination of this agreement, the parties may
enter into a new agreement, consistent with the provisions of this agreement,
taking into account, among other things, to the extent applicable, the manner in
which the Subsidiary ceased to be a member of the Group, the reason that the
Group is no longer in existence, or the reason that Parent and Subsidiary can no
longer join in the same consolidated return.
8. This
agreement is entered into by the parties solely in recognition of the mutual
benefits resulting from filing a Federal (or state or other local) consolidated
tax return. The respective amounts of tax liability allocated to Parent and each
Subsidiary :for purposes of computing such corporations' earnings and profits
for Federal (or any other) income tax purposes may differ from those determined
in accordance with this agreement. Furthermore, any amount treated for Federal
(or state) income tax purposes, on account of such a difference, as a
contribution to capital or distribution with respect to stock, or a combination
thereof, as the case may be, shall be treated as a contribution to capital, a
distribution with respect to stock, or a combination thereof, solely for Federal
(or state) income tax purposes.
IN WITNESS WHEREOF, Parent and each
Subsidiary have executed this Agreement by authorized officers thereof as of the
date first above written.
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MCO
Holdings, Inc.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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Braztah
Corporation
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TW
Energy Corp.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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Carbon
Fuel Company
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MCOP
Advertising, Inc.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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XxXxxxxxx
Consolidated Coal Company
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Cattleman’s
Title Guarantee Company
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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MCO
Development, Inc.
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American
Land Realty Services, Incorporated
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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MCO
Investments, Inc.
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Havasu
Development Corporation
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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MCO
Equities, Inc.
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Holiday
Island Development Co.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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Fountain
Hills Management Corporation
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MCO
Realty, Inc.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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Holiday
Island Realty, Inc.
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Spring
Creek Recreation Corp.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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MCO
Real Estate, Inc.
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Chaparral
City Water Company
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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Pueblo
West Properties, Inc.
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Westcliff
Development Corporation
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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Spring
Creek Corporation
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Top
of Aspen, Inc.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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XxXxxxxxx
Community Properties of Texas, Inc.
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MCO
Communities, Inc.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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Xxxxx
Development Co.
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Pueblo
West Storage Co., Inc.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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Spring
Creek Utilities Co.
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Pueblo
West Development Co.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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MCO
Properties Inc.
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MCO
Consulting, Inc.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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Houston
Holdings, Inc.
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MAXXAM
Group Inc.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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Candelero
Hotel Corporation
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Eagle
Creek Country Club, Inc.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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Eagle
Creek Realty Company
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Eagle
Creek Utility Company
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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Houston
Group Inc.
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KaiserTech
Acquisition Corporation
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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KLU
Holdings, Inc.
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MAXXAM
(Cayman) Corporation
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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MAXXAM
Mortgage Corp.
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MAXXAM
Properties Inc.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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MPI
Investments Corp.
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Palmas
Holding Corp.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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The
Pacific Lumber Company
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The
Pacific Lumber Company of Illinois
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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Palco
Export Company
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Palco,
Inc.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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Redwood
Sales Company
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Sangre
de Cristo Timber Corporation
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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Yoshuba
Farms
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By:
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/s/
Xxxxx X. Xxxx, Xx.
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Schedule A
MCO
Holdings, Inc.
Braztah
Corporation
Carbon
Fuel Company
XxXxxxxxx
Consolidated Coal Company
MCO
Development Inc.
TW Energy
Corp.
MCOP
Advertising, Inc.
Cattleman's
Title Guarantee Company
American
Land Realty Service, Incorporated
MCO
Investments, Inc.
MCO Equities,
Inc. MGPC, Inc.
Fountain
Hills Management Corporation Holiday Island Realty, Inc.
MCO Real
Estate, Inc.
Pueblo
West Properties, Inc.
Spring
Creek Corporation
XxXxxxxxx
Community Properties of Texas, Inc.
Havasu
Development Corporation
Holiday
Island Development Co.
MCO
Realty, Inc.
Spring
Creek Recreation Corp.
Chaparral
City. Water Company
Westcliff
Development Corporation
Top of
Aspen, Inc.
MCO
Communities, Inc.
Pueblo
West Storage Co., Inc.
Xxxxx
Development Co.
Spring
Creek Utilities Co.
MCO
Properties Inc.
Pueblo
West Development Co.
MCO
Consulting, Inc.
Schedule
B
MAXXAM
Group Inc.
Candelero
Hotel Corporation
Eagle
Creek Country Club, Inc. Eagle Creek Realty Company
MXM-2
Corporation
MXM-3
Corporation
PALCO
Industries, Inc.
MAXXAM
Properties Inc.
MAXXUS
Properties Inc.
Palmas
del Mar Company
Palmas
Holding Corp.
MAXXAM
Mortgage Corporation
MXM Holdings
Corporation
The
Pacific Lumber Company
Yosuba
Farms
Xxxxxx
Equipment Company
Tweco
Products, Inc.
Thermal
Dynamics Corporation PALCO International Corp.
Xxxxx
Cylinder Co.
Cyclomatic
Industries, Inc.
