EXHIBIT 10.13
FAIRFAX INC.
INTERCOMPANY TAX ALLOCATION AGREEMENT
(NY)
Agreement entered into this 15th day of December, 2000, by and between
Fairfax Inc, a Wyoming corporation (the "Parent") and United States Fire
Insurance Company, Xxxx & Xxxxxxx Indemnity Company, and Seneca Insurance
Company, Inc. (the "Subsidiaries").
WHEREAS, Parent owns, directly or indirectly, 100% of the issued and
outstanding stock of both the Subsidiary and the Affiliated Corporations listed
on Schedule A hereto (the "Affiliated Corporations", and referred to
collectively with Parent and Subsidiary, the "Group");
WHEREAS, the members of the Group have elected to file a consolidated
federal income tax return under the provisions of Section 1501, et. seq., of the
Internal Revenue Code of 1986 as amended (the "Code"); and
WHEREAS, Parent and Subsidiaries wish to allocate tax liability in
accordance with the requirements of New York Insurance Department Circular
Letter No. 33 (1979).
NOW, therefore, the parties do hereby agree as follows:
1. The Parent will compute and pay the consolidated federal income tax
liability for the Group in accordance with the Code and its regulations, and
will prepare, or cause to be prepared, and will file the consolidated federal
income tax return for the Group. The Parent and the Subsidiaries shall review
the accuracy of the accounting and methodology of the consolidated federal
income tax return and make any necessary adjustments no less than thirty (30)
days prior to the filing of the return.
2. Each Subsidiary shall compute and pay to the Parent its federal
income tax liability as if computed on a separate return. The Subsidiaries shall
have first use of all their respective current operating losses and credits. The
calculation of the separate federal income tax liability of the Subsidiaries
shall be made pursuant to the Code and its regulations, as well as applicable
cases, rulings, etc., and shall be determined by utilizing the maximum corporate
income tax rate.
3. Each Subsidiary shall pay its separate return tax liability to the
Parent by no later than the applicable due date or dates that such payments
would have been required by the Internal Revenue Service if the Subsidiaries had
filed a separate return, or as soon thereafter as possible.
4. If Subsidiaries would not have to pay any federal income tax or
would have a claim for refund of federal income taxes, the Parent will pay to
each Subsidiary an amount equal to the refund such Subsidiary would have been
entitled to obtain from the Internal Revenue Service had it filed a separate
return. Payment shall be made within thirty (30) days of the filing of the
applicable estimated or actual consolidated income tax return with the Internal
Revenue Service. However, where a refund is due to the Parent, it shall make
payment to the domestic
insurer within thirty (30) days of its receipt of such refund. All settlements
shall be made in cash or securities eligible for investment by the domestic
insurer, at marker value.
5. If all or a portion of the Group is required or has elected to file
a unitary or combined state income tax return (each such Group hereafter called
a "State Group"), the Parent of the particular State Group will compute, report
and pay the State Group's state income tax liability in accordance with the
applicable state laws and regulations and will file the State Group's required
annual return. Within thirty (30) days from the filing of the State Group's
annual return, the Parent of the State Group will calculate and assess to each
member of the State Group its share of the State Group's state income tax
liability based on (i) the methodology required or established by state income
tax law or (ii) if none, the percentage of each member's separate income or tax
divided by the total separate income or tax of the State Group. Within thirty
(30) days of such assessment, each member will pay to the Parent its share of
the state income tax liability.
6. If after the filing of a return it is determined that the liability
computed hereunder is incorrect, whether by reason of an Internal Revenue
Service or state audit, discovery of error, the learning of new information, or
otherwise, appropriate payments, including allocations of penalty and/or
interest, if applicable, shall be made promptly to reflect the payments that
should have been made.
7. In lieu of actual payments, adjustments to intercompany payables and
receivable may be made, and any net balances due will be paid within the period
for payments as set forth in Section 4 and will be otherwise subject to the
provisions of that section. All payments under this Agreement, including
subsequent changes in the amount of the Subsidiary's tax liability or
reimbursement payment, shall be considered an intercompany payable or
receivable, as the case may be, until such adjustment is paid, and shall not be
considered a dividend or surplus contribution.
8. The Parent agrees to indemnify and reimburse each Subsidiary for any
and all claims, demands and expenses in the event that the Internal Revenue
Service levies upon the assets of such Subsidiary for unpaid taxes, including
penalties and interest, in excess of that amount for which such Subsidiary may
be liable pursuant to the terms of this Agreement.
9. This Agreement shall be applicable only with respect to periods for
which the parties are members of the same affiliated Group filing a consolidated
federal income tax return. No adjustments hereunder shall be made with respect
to periods for which either the Parent or one or more of the Subsidiaries are
not members of the same affiliated Group.
10. This Agreement shall take effect as of January 1, 2000, and shall
continue until terminated by the mutual written agreement of all of the parties.
In the event any party ceases to be affiliated with the Group, this Agreement
automatically terminates only with respect to that member. This Agreement, shall
also terminate if the Group fails to file a consolidated federal income tax
return for any tax year of this Agreement. 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 federal income tax
return.
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11. This Agreement may, from time to time, be amended, modified, and
supplemented in such manner as may be mutually agreed upon by the parties,
subject to the approval of any regulatory authorities as required by law. Any
amendment, modification or supplement to this Agreement shall be in writing and
shall be executed by a duly appointed representative of each of the parties.
12. Every article, term, condition and provision of the Agreement is
declared to be independent of and severable from all other articles, terms,
conditions and provisions of the Agreement. Invalidation, whether judicial or
otherwise, of any article, term, condition or provision contained in this
Agreement shall in no way affect any other provision of this Agreement, all of
which shall remain in full force and effect.
13. The books, accounts, tax returns and records of the Parent and the
Subsidiaries shall be maintained so as to clearly and adequately disclose the
precise nature and details of the obligations and liabilities under this
Agreement. All materials relating to the tax returns, including but not limited
to the returns, supporting schedules, work papers, and correspondence, shall be
available for inspection at any time during normal business hours by the Parent
or any Subsidiary. Each party to this Agreement shall maintain, at its principal
or home office, records of all tax allocations, and any subsequent Internal
Revenue Service or state review or adjustment. The provisions of this section
shall survive termination of this Agreement.
14. This Agreement has been approved by the Board of Directors of each
party to this Agreement to the extent required by regulatory authorities. This
Agreement shall be effective upon approval of regulatory authorities as required
by law.
15. This Agreement is not assignable by any party without the prior
written consent of the other parties.
16. Any controversy or claim arising out of or relating to this
Agreement or breach thereof shall be settled by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association and
judgement upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof.
17. An escrow account shall be established and maintained by Parent for
each Member that is a New York domestic insurer in an amount equal to the amount
paid by such Member that is in excess of the actual amount paid by Parent to the
Internal Revenue Service. Assets in the escrow account shall consist of assets
eligible for investment by insurance companies in accordance with the New York
Insurance Law. Escrow assets may be released by Parent from the escrow account
at such time as the permissible period for loss carrybacks has elapsed. Instead
of establishing the Escrow Account, Parent may, at its option, secure its
obligation with a clean, irrevocable and evergreen letter of credit from a bank
that is a "qualified bank" pursuant to New York Regulation 133.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by duly authorized officers to be effective January 1, 2000.
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FAIRFAX, INC.
By: /s/ XXXXXXX X. XXXXXXXX
-------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President
UNITED STATES FIRE INSURANCE COMPANY
By: /s/ XXXX XXXX XXXXXXXXX
-------------------------------------
Name: Xxxx Xxxx Xxxxxxxxx
Title:
XXXX & XXXXXXX INDEMNITY COMPANY
By: /s/ XXXX XXXX XXXXXXXXX
-------------------------------------
Name:
Title:
SENECA INSURANCE COMPANY, INC.
By: /s/ XXXX XXXXX
-------------------------------------
Name: Xxxx Xxxxx
Title: Chief Financial Officer
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ATTACHMENT TO INTER-COMPANY
TAX ALLOCATION AGREEMENT
SCHEDULE A
COMPANIES INCLUDED IN FAIRFAX, INC. FEDERAL CONSOLIDATED GROUP F.E.I.N.
-------------------------------------------------------------- ----------
FAIRFAX INC. 00-0000000
XXXX & XXXXXXX XXXXXXXX, XXX. 00-0000000
XXXXXX XXXXXX FIRE INSURANCE COMPANY 00-0000000
THE NORTH RIVER INSURANCE COMPANY 00-0000000
SEN-TECH INTERNATIONAL HOLDINGS, INC. 00-0000000
EXCELSIOR CLAIMS ADMINISTRATORS, INC. 00-0000000
SENECA INSURANCE COMPANY, INC. 00-0000000
SENECA RISK SERVICES, INC. 00-0000000
SENECA SPECIALTY INSURANCE COMPANY, INC. 00-0000000
XXXX AND XXXXXXX INSURANCE COMPANY 00-0000000
XXXX & XXXXXXX UNDERWRITERS CO. OF OHIO 00-0000000
Xxxx & XXXXXXX INDEMNITY COMPANY 00-0000000
Xxxx & XXXXXXX CUSTOM SECURITIES, INC. 00-0000000
ODYSSEY RE HOLDINGS INC. 00-0000000
RIVERSTONE GROUP LLC 00-0000000
RIVERSTONE RESOURCES LLC 00-0000000
RIVERSTONE CLAIMS MANAGEMENT LLC 00-0000000
RIVERSTONE REINSURANCE SERVICES LLC 00-0000000
TIG HOLDINGS, INC. 00-0000000
TIG HOLDINGS 1, INC. 00-0000000
TIG HOLDINGS 2, INC. 00-0000000
TIG BERMUDA LTD. 00-0000000
TIG INSURANCE GROUP 00-0000000
PRIORIS, INC. 00-0000000
RUSCO SERVICES INC. 00-0000000
TIG INSURANCE COMPANY 00-0000000
TIG PREMIER INSURANCE COMPANY 00-0000000
TIG INDEMNITY COMPANY 00-0000000
FAIRMONT INSURANCE COMPANY 00-0000000
TIG INSURANCE COMPANY OF MICHIGAN 00-0000000
TIG INSURANCE CORPORATION OF AMERICA 00-0000000
TIG INSURANCE COMPANY OF NEW YORK 18-1073431
TIG INSURANCE COMPANY OF TEXAS 00-0000000
TIG LLOYDS INSURANCE COMPANY 00-0000000
TIG AMERICAN SPECIALTY INSURANCE COMPANY 00-0000000
TIG SPECIALTY INSURANCE COMPANY 00-0000000
TIG INSURANCE COMPANY OF COLORADO 00-0000000
TIG COMMONWEALTH HOLDINGS, INC. 00-0000000
COMMONWEALTH INSURANCE COMPANY OF AMERICA 00-0000000
COUNTRYWIDE CORPORATION 00-0000000
TIG HOLDINGS 4, INC. 00-0000000
RANGER INSURANCE COMPANY 00-0000000
RANGER INSURANCE MANAGERS, INC. 00-0000000
RANGER INSURANCE FINANCE COMPANY 00-0000000
RANGER MANAGERS CORP. 00-0000000
RANGER LLOYDS INSURANCE COMPANY 00-0000000
ODYSSEY AMERICA REINSURANCE CORPORATION 00-0000000
COMPANIES INCLUDED IN FAIRFAX, INC. FEDERAL CONSOLIDATED GROUP F.E.I.N.
-------------------------------------------------------------- ----------
ODYSSEY REINSURANCE CORPORATION 00-0000000
XXXXXX INSURANCE COMPANY 00-0000000
TIG RE UK HOLDINGS CORPORATION 00-0000000
TIG HOLDINGS 5, INC. 00-0000000
TIG LATIN AMERICA INC. 00-0000000
