FEDERAL INCOME TAX ALLOCATION AGREEMENT
Federal Income Tax Allocation Agreement ("Agreement") made and entered into
as of this 25th day of September, 1998, by and between United Wisconsin
Services, Inc., a Wisconsin corporation, herein after referred to as the
"Parent", and Unity Health Plans Insurance Corporation, Hometown Insurance
Services, Inc., HMO-W, Inc., Valley Health Plan, Inc., Compcare Health Services
Insurance Corporation, United Wisconsin Insurance Company, Meridian Marketing
Services, Inc., United Heartland, Inc., United Wisconsin Proservices, Inc.,
Meridian Resource Corporation, Meridian Managed Care, Inc., CNR Health, Inc.,
Intercare Network, Inc., Heartland Dental Plan, Inc., Heartland Dental Plan of
Michigan, Inc. herein after referred to as the "Subsidiaries." Parent and
Subsidiaries are sometimes hereinafter referred to severally as the "Member
Company," and collectively as the "Affiliated Group."
WITNESSETH:
WHEREAS, Parent owns, directly or indirectly, at least 80 percent of the
issued and outstanding stock of each of the Subsidiaries as defined in Section
1504(a)(2) of the Internal Revenue Code of 1986 (the "Code") and the related
Treasury Regulations ("Regulations"); and
WHEREAS, the Member Companies are an affiliated group within the meaning
of Code Section 1504(a) and the related Regulations, therefore, are eligible
to file a consolidated income tax return for federal income tax purposes; and
WHEREAS, the Affiliated Group intends to file consolidated federal income
tax returns for so long as Parent shall determine; and
WHEREAS, the Affiliated Group desires to establish a method for allocating
the consolidated federal income tax liability of the Affiliated Group among the
Member Companies in an agreed fashion and to compensate any Member Company for
use of its net operating and net capital losses, and tax credits utilized in
computing consolidated federal taxable income, and to provide for the allocation
and payment of any refund arising from a carryback of net operating or capital
losses, or tax credits generated in subsequent taxable years.
NOW THEREFORE, in consideration of their mutual covenants herein, the
Member Companies agree as follows:
1. CONSOLIDATED RETURN ELECTION. If at any time and from time to time
Parent so elects, all Member Companies will join in the filing of a
consolidated federal income tax return for the Affiliated Group for such
initial period, and for any subsequent taxable period for which the
Affiliated Group is required or permitted to file such a return. Each
Member Company agrees to file such consents, elections and other documents
and take such other action as may be necessary or appropriate to carry out
the purpose of this Paragraph 1. Any
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period for which a Member Company is included in a consolidated federal
income tax return filed by the Affiliated Group is referred to in this
Agreement as a "Consolidated Return Year."
2. APPOINTMENT OF PARENT AS AGENT. Parent is hereby appointed as agent for
the Subsidiaries in payment of consolidated federal income taxes, pursuant
to the applicable provisions of the Code for the tax year ended December
31, 1998, and any tax year thereafter where 80 percent or more of the
issued and outstanding stock of the Subsidiaries as defined in Code Section
1504(a)(2) and the related Regulations is owned directly or indirectly by
the Parent for all or any portion of such tax year.
3. PAYMENT TO PARENT BY SUBSIDIARIES. The Subsidiaries agree to pay Parent
for all years or portions of years where the Subsidiaries are included in
the consolidated federal income tax return with Parent, the portions of the
consolidated federal income tax liability attributable to the Subsidiaries
as determined in accordance with Paragraph 4, below.
4. COMPUTATION OF TAX LIABILITY TO PARENT FOR CONSOLIDATED RETURN YEAR.
a) Each Subsidiary agrees to pay to Parent, at the times specified in
Paragraphs 5 and 6, below, the amount (if any) of the consolidated
federal income tax liability attributable to each Subsidiary as
contained in Regulation Sections 1.1552-1(a)(2) and 1.1502-33(d)(3). The
fixed percentage used to reflect the absorption of one Member's tax
attributes by another Member under Regulation Section 1.1502-33(d)(3)
shall be 100 percent. The alternative minimum tax exemption provided by
Code Section 55(d)(2) shall be allocated to Parent.
b) Parent shall calculate the payments due to it from each Subsidiary
under this Paragraph 4, and Paragraphs 5 and 6, in a manner consistent
with the tax elections, methods of accounting, and other positions taken
by Parent on the Affiliated Group's consolidated federal income tax
return.
5. INTERIM ESTIMATED PAYMENTS. Prior to the end of any Consolidated Return
Year, each Subsidiary shall advance to Parent (within a reasonable
period after request by Parent) amounts necessary to reimburse Parent
for that portion of any estimated federal income tax payments
attributable to the inclusion of such Subsidiary in the Affiliated
Group. These amounts shall be computed on an interim basis as described
in Paragraph 4. Any amounts so paid in any year shall be credited
against the amount payable to Parent following the end of such year
pursuant to Paragraph 4, and any excess resulting from such payments
shall promptly be refunded by Parent to such Subsidiary.
6. TAX ADJUSTMENTS.
a) In the event of any adjustment to the tax returns of the Affiliated
Group as filed (by reason of an amended return, claim for refund, or an
audit by the Internal Revenue Service (IRS)), the liabilities of the
Member Companies, including Parent, under Paragraphs 4 and 5, shall be
re-determined to give effect to any such adjustment as if it was made as
part of the original computation of tax liability. Corresponding
adjusting payments among Member Companies will be made within 30 days
after any such payments
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are made to or refunds are received from the IRS or, in the case of
contested proceedings, within 30 days after a final resolution of the
dispute. To the extent that interest and penalties are imposed by the
IRS or interest is included in any refund, any adjusting payment among
the Member Companies shall reflect the same in an equitable manner. All
amounts shall be settled with cash or other securities eligible as
investments pursuant to the Wisconsin Insurance Code.
b) It is agreed that Parent shall be responsible for coordinating and
overseeing any IRS agent's examinations. All expenses of the
examination and of defending any final or proposed adjustments directly
identifiable with a Member Company shall be borne by that Member. All
costs and expenses not specifically identifiable with a Member Company
shall be allocated based upon relevant facts and circumstances as Parent
deems just and proper.
c) The Subsidiaries agree that they will inform Parent promptly of
all questions raised by IRS agents conducting an examination of federal
income tax returns and shall cooperate with Parent's accountants, tax
advisors, and counsel in preparing responses to IRS information requests
and proposed adjustments.
d) The Subsidiaries agree that any adjustments to their tax
liabilities arising out of an examination by the IRS shall be computed
on the basis of agreement reached by Parent and the IRS, or on the basis
of the decision of a court of applicable jurisdiction.
e) Each Subsidiary hereby waives any and all present and future
claims against Parent relating to a compromise, arrangement or agreement
between Parent and the IRS based upon an allegation that such
compromise, arrangement or agreement improperly causes overstatements of
their liabilities to Parent, or that such Subsidiary could have reached
more favorable agreements with the IRS on a separate company basis,
unless such overstatements result from gross negligence or fraudulent
conduct on the part of Parent, its agents, or representatives.
7. NEW MEMBER COMPANIES. All subsidiaries of Parent from time to time shall
be subject to this Agreement. If at any time Parent acquires or creates
one or more Subsidiary corporations that become corporations of the
Affiliated Group, they shall be subject to this Agreement, and the term
Affiliated Group as used herein shall be deemed to include such
Subsidiaries. Each newly acquired or created corporation along with Parent
will need to sign an attachment to this agreement. This signature will
acknowledge agreement on behalf of the newly acquired or created
corporation to the conditions specified in this agreement and also state
the effective date of the agreement for the newly acquired or created
corporation.
8. INTENT OR INTERPRETATION. The liability of each Member Company as
established under this Agreement shall be computed in a manner
consistent with the provisions of Regulation Sections 1.1502-33(d)(3)
and Section 1.1552-1(a)(2). The intent of this Agreement is that each
Subsidiary shall make Parent whole, but not more than whole, by
reimbursing Parent only to the extent of such Subsidiary's actual
federal income tax expense incurred. The
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determination of the regularly-employed independent certified
accountants for the Affiliated Group as to this calculation and all
others required by this Agreement will be binding and conclusive on all
parties to this Agreement.
9. SUCCESSORS. This Agreement shall be binding on and inure to the benefit
of successors to all the parties hereto (including without limit any
successor of any Member Company succeeding to the tax attributes of such
Member Company under Section 381 of the Code), to the same extent as if
such successor had been an original party to the Agreement.
10. EXECUTION OF DOCUMENTS. Each Member Company agrees to cause its proper
officers to execute the documents, including, but not limited to,
statements, elections, certificates, and schedules deemed necessary by
the Parent's tax advisors to the Affiliated Group's federal income tax
return in order to carry out the intent of the provisions of the
applicable law and regulations thereunder in effect from time to time.
11. TERMINATION. This Agreement shall be terminated if:
a) The Member Companies agree in writing to such termination; or
b) The Affiliated Group fails to file a consolidated federal income
tax return for any taxable year; or
c) A Subsidiary ceases to be a member to the Affiliated Group but,
then, termination of this Agreement is only with respect to such
Subsidiary.
d) Termination of this Agreement shall not affect the obligations of
the Member Companies for any taxable year ending on or prior to
termination, except that no carryback from a year to which this
Agreement does not apply shall be taken into account in applying this
Agreement to any taxable year ending on or prior to termination.
12. DEPARTING MEMBERS.
a) Except as provided in Paragraph 11, a Member Company whose
membership in the Affiliated Group ceases or is terminated for any
reason whatsoever shall not have any further remedies, rights, or
obligations under this Agreement.
b) Notwithstanding the termination of a Member Company, the provisions
of this Agreement will remain in effect with respect to such Member,
with respect to any period of time during the tax year in which the
departure occurs, for which the income of the departing member must be
included in the consolidated federal income tax return.
13. AVAILABILITY OF RECORDS. Notwithstanding termination of this
Agreement, all material including, but not limited to, returns,
supporting schedules, workpapers, correspondence and other documents
relating to the consolidated return shall be available to any Member
Company during regular business hours.
14. ASSIGNABILITY. This Agreement shall not be assigned by any Member
Company without the prior written consent of the other Member Companies.
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15. NOTICES. All notices and other communications hereunder shall be deemed
to have been duly given if delivered by hand or mailed, by certified or
registered mail with postage prepaid, addressed to the party to which
notice or other communication is given
a) if to the Parent, at:
United Wisconsin Services, Inc.
000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attn: Xx. Xxxx Xxxxxx, Treasurer
b) if to a Subsidiary, at addresses listed in Attachment A, or
c) such other addresses as may be designated by notice in the
manner herein provided.
16. APPLICABLE LAW. Tax calculations shall be made pursuant to the Code and
Regulations. In all other respects this Agreement shall be construed in
accordance with the laws of the State of Wisconsin without regard to
conflict of law provisions.
17. MODIFICATION. The Subsidiaries agree that Parent shall have the authority
to make any necessary alterations to this Agreement to comply with any
changes or amendments in the provisions of the Code or Regulations enacted
thereunder relating to consolidated federal income tax returns. The Member
Companies hereby consent to the application of all Code and Regulations
sections relating to the filing of consolidated federal income tax returns.
Subject to the rights of Parent to modify the provisions of this Agreement
for purposes of conforming with the applicable provisions of the Code
related to filing consolidated federal income tax returns, and the
Regulations thereunder, all alterations, modifications, and amendments of
this Agreement shall be in writing and signed by all Member Companies.
IN WITNESS THEREOF, the parties hereto have duly executed this
Agreement by authorized officers thereof as of the date first above written.
PARENT'S NAME: UNITED WISCONSIN SERVICES, INC.
By: _____________________________________
Xxxx X. Xxxxxx
Treasurer
SUBSIDIARY NAME: COMPCARE HEALTH SERVICES INSURANCE CORPORATION
By: _____________________________________
Xxxx X. Xxxxxx
Treasurer
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SUBSIDIARY NAME: VALLEY HEALTH PLAN, INC.
By: _____________________________________
Xxxx X. Xxxxxx
Treasurer
SUBSIDIARY NAME: INTERCARE NETWORK, INC.
By: _____________________________________
Xxxxx Xxxxxxx
President
SUBSIDIARY NAME: UNITY HEALTH PLANS INSURANCE CORPORATION
By: _____________________________________
Xxxx X. Xxxxxx
Treasurer
SUBSIDIARY NAME: HOMETOWN INSURANCE SERVICES, INC.
By: _____________________________________
Xxxx X. Xxxxxx
Treasurer
SUBSIDIARY NAME: HMO-W, INC.
By: _____________________________________
Xxxx X. Xxxxxx
Treasurer
SUBSIDIARY NAME: UNITED WISCONSIN INSURANCE COMPANY
By: _____________________________________
Xxxx X. Xxxxxx
Treasurer
SUBSIDIARY NAME: MERIDIAN MARKETING SERVICES, INC.
By: _____________________________________
Xxxx X. Xxxxxx
Treasurer
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SUBSIDIARY NAME: UNITED HEARTLAND, INC.
By: _____________________________________
Xxxx X. Xxxxxx
Treasurer
SUBSIDIARY NAME: UNITED WISCONSIN PROSERVICES, INC.
By: _____________________________________
Xxxx X. Xxxxxx
Treasurer
SUBSIDIARY NAME: MERIDIAN RESOURCE CORPORATION
By: _____________________________________
Xxxx X. Xxxxxx
Treasurer
SUBSIDIARY NAME: MERIDIAN MANAGED CARE, INC.
By: _____________________________________
Xxxx X. Xxxxxx
Treasurer
SUBSIDIARY NAME: CNR HEALTH, INC.
By: _____________________________________
Xxxx X. Xxxxxx
Treasurer
SUBSIDIARY NAME: HEARTLAND DENTAL PLAN, INC.
By: _____________________________________
Xxxx X. Xxxxxx
Treasurer
SUBSIDIARY NAME: HEARTLAND DENTAL PLAN OF MICHIGAN, INC.
By: _____________________________________
Xxxx X. Xxxxxx
Treasurer
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ATTACHMENT A
TO
FEDERAL INCOME TAX ALLOCATION AGREEMENT
Subsidiary Name: Compcare Health Services Insurance Corporation
Subsidiary Address: 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Tax Department
Subsidiary Name: Valley Health Plan, Inc.
Subsidiary Address: 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Tax Department
Subsidiary Name: Intercare Network, Inc.
Subsidiary Address: 000 Xxxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attn: Tax Department
Subsidiary Name: Unity Health Plans Insurance Corporation
Subsidiary Address: 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Tax Department
Subsidiary Name: Hometown Insurance Services, Inc.
Subsidiary Address: 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Tax Department
Subsidiary Name: HMO-W, Inc.
Subsidiary Address: 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Tax Department
Subsidiary Name: United Wisconsin Insurance Company
Subsidiary Address: 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Tax Department
Subsidiary Name: Meridian Marketing Services, Inc.
Subsidiary Address: 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Tax Department
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Subsidiary Name: United Heartland, Inc.
Subsidiary Address: 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Tax Department
Subsidiary Name: United Wisconsin Proservices, Inc.
Subsidiary Address: 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Tax Department
Subsidiary Name: Meridian Resource Corporation
Subsidiary Address: 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Tax Department
Subsidiary Name: Meridian Managed Care, Inc.
Subsidiary Address: 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Tax Department
Subsidiary Name: CNR Health, Inc.
Subsidiary Address: 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Tax Department
Subsidiary Name: Heartland Dental Plan, Inc.
Subsidiary Address: 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Tax Department
Subsidiary Name: Heartland Dental Plan of Michigan, Inc.
Subsidiary Address: 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Tax Department
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ATTACHMENT TO
FEDERAL INCOME TAX ALLOCATION AGREEMENT
SUBSIDIARY NAME: XXXX ENTERPRISES, INC.
By: _____________________________________
Xxxxx Xxxx
President
PARENT NAME: UNITED WISCONSIN SERVICES, INC.
By: _____________________________________
Xxxx X. Xxxxxx
Treasurer
Effective date of subsidiary's participation in Agreement: December 17, 1998
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ATTACHMENT TO
FEDERAL INCOME TAX ALLOCATION AGREEMENT
SUBSIDIARY NAME: MICHIGAN HEALTHCARE COLLECTIONS, INC.
By: _____________________________________
Xxxxx Xxxx
President
PARENT NAME: UNITED WISCONSIN SERVICES, INC.
By: _____________________________________
Xxxx X. Xxxxxx
Treasurer
Effective date of subsidiary's participation in Agreement: December 17, 1998
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