TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT ("Agreement") is entered into as of this
twenty-fourth day of June, 1997, by and between ROYAL ALOHA VACATION CLUB, a
Hawaii nonprofit corporation, whose principal place of business and post office
address is 0000 Xxxxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxx 00000
("Parent"), and ROYAL ALOHA DEVELOPMENT COMPANY, a Nevada corporation, whose
principal place of business and post office address is 000 Xxxx Xxxxxx Xxx Xxxx,
Xxx Xxxxx, Xxxxxx 00000 ("Subsidiary").
WHEREAS, Parent and Subsidiary are members of an affiliated group of
corporations as defined in section 1504(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), of which Parent is the common parent;
WHEREAS, the parties desire to set forth the method for determining the
financial consequences to Parent and Subsidiary of filing consolidated Federal
income tax returns by Parent and Subsidiary;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, the parties agree as follows:
1. DEFINITIONS
(a) Terms used in this Agreement shall have the meanings ascribed to them
in the Code, and the regulations and rulings issued thereunder, as from time to
time in effect. Concepts referred to in this Agreement shall be interpreted in
view of the provisions of the Code and the regulations and rulings thereunder
then in effect.
(b) For purposes of this Agreement, the terms set forth below shall be
defined as follows:
(i) "Combined Return" means any consolidated, combined or unitary
income or franchise tax returns or reports filed by Parent in any state or local
jurisdiction that includes the income of more than one Member.
(ii) "Consolidated Return" means any consolidated Federal income tax
return.
(iii) "Group" means Parent and all corporations (whether now existing
or hereafter formed or acquired) that at the time would be entitled or required
to join with Parent in filing a Consolidated Return.
(iv) "Member" means any corporate entity entitled to be included in
the Group.
(v) "Other Income Taxes" means all state and local income taxes and
all income taxes imposed by any foreign jurisdiction or taxing authority.
(vi) "Parent" means Parent, or any successor common parent corporation
of the Group.
(vii) "Subsidiary Tax Liability" means the hypothetical Federal
income tax liability of Subsidiary for a taxable year, beginning with the
taxable year ending November 30, 1997, determined as if Subsidiary had filed its
own separate Federal income tax return for such taxable year, except that
Subsidiary shall be treated as having available as loss or credit carryovers for
purposes of computing Subsidiary's Subsidiary Tax Liability all losses or
credits generated by it and utilized by other Members, except to the extent such
losses or credits were previously taken into account in computing Subsidiary's
Tax Liability or Subsidiary Tax Refund. Such hypothetical Federal income tax
liability shall be finally determined no later than ten days after the date of
the filing of the Consolidated Return of the Group for such taxable year and
shall reflect any tax elections, conventions, treatments or methods which are
actually utilized by the Group in filing its Consolidated Return. Such
hypothetical Federal income tax liability shall not be less than zero, provided,
however, that for this purpose a Subsidiary Tax Refund shall not be considered
to be a Federal income tax liability that is less than zero.
(viii) "Subsidiary Estimated Tax Liability" means the hypothetical
estimated consolidated Federal income tax liability for Subsidiary determined in
accordance with the principles of paragraph (b) (vii).
(ix) "Subsidiary Tax Refund" means the hypothetical Federal income
tax refund for any taxable year to which Subsidiary would be entitled determined
in accordance with the principles of paragraph (b) (vii).
2. ALLOCATIONS OF CONSOLIDATED
FEDERAL INCOME TAX LIABILITY
(a) Filing by Parent
Parent shall file Consolidated Returns for each taxable year ending after
the date hereof.
(b) Payment of Tax Liability
For each taxable year or portion thereof during which Subsidiary is
included in a Consolidated Return with Parent, Subsidiary will pay to Parent an
amount equal to its Subsidiary Tax Liability. To the extent that the obligation
to pay such amount has not been fully satisfied pursuant to paragraph 2(c) of
this Agreement, Subsidiary shall pay any such remaining amount to Parent no
later than ten days after receiving notice from Parent, which notice shall not
be given earlier than fifteen days before Parent is required to make a
corresponding payment on behalf of the Group, or if Parent is not required to
make such a payment, no earlier than fifteen days before the last date on which
a corporate taxpayer with the same taxable year as Parent would be required to
make its final payment of Federal income taxes for the taxable year without
incurring any penalties or additions to tax.
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(c) Estimated Payments
On or before any date on which a corporate taxpayer is required to make an
estimated payment of Federal income tax under the Code, Subsidiary will make
estimated payments to Parent in an amount such that its aggregate payments under
this paragraph 2 (c) for the taxable year for which such payments are being made
are equal to its aggregate Subsidiary Estimated Tax Liability for such taxable
year. If the total of such estimated payments made by Subsidiary to Parent with
respect to a taxable year shall be in excess of the liability of Subsidiary to
Parent pursuant to paragraph 2 (b) of this Agreement for such taxable year,
Parent shall pay the amount of such excess to Subsidiary no later than the date
on which Parent files the Consolidated Return for the Group.
(d) Tax Refunds
(i) Parent shall pay to Subsidiary the amount of the Subsidiary Tax
Refund for each taxable year ending after the date hereof.
(ii) The payments described in this paragraph 2 (d) shall be made not
later than ten days after such refund is received by Parent (or would have been
received by Parent if the Group were entitled to a refund for such taxable
year).
3. CHANGES IN TAX LIABILITY
(a) If the Subsidiary Tax Liability is changed as the result of the filing
of an amended Consolidated Return or of any final administrative or judicial
determination (including a final "determination" as defined in Section 1313 (a)
of the Code) with respect to Consolidated Returns actually filed by the Group,
then the amount of the payments required from Subsidiary to Parent under
paragraph 2 (b) or the amount of the payment required from Parent to Subsidiary
under paragraph 2 (d) (i), as the case may be, shall be recomputed by
substituting the amount of Subsidiary Tax Liability (or Subsidiary Tax Refund)
after the adjustments described above, plus the amount of any interest or
penalties incurred with respect to such adjustments that are properly allocable
(as determined by Parent) to Subsidiary, in place of Subsidiary Tax Liability
(or Subsidiary Tax Refund), provided that the principles of paragraph 1 (b)
(vii) shall be applied in connection with such recomputation notwithstanding any
contrary determination. If such filing of an amended Consolidated Return or such
final determination results in an increase in the Subsidiary Tax Liability,
Subsidiary shall pay to Parent not later than ten days after such filing or such
final determination an amount equal to the excess of the new Subsidiary Tax
Liability over the amount previously paid to Parent by Subsidiary. If such
filing of an amended Consolidated Return or such final determination results in
a Subsidiary Tax Refund or increases the amount of a Subsidiary Tax Refund,
Parent shall pay to Subsidiary not later than ten days after such filing or
receiving such refund an amount equal to the excess of the new Subsidiary Tax
Refund over the amount previously paid to Subsidiary by Parent. The parties
recognize that such new liability (or refund) for any taxable year is not
necessarily Subsidiary's final liability (or refund) for that year, and may be
recomputed more than once.
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(b) Payments made pursuant to paragraph (a) shall bear interest in the same
manner as any late payment or refund of Federal income tax.
4. PAYMENT
Any payment required by Subsidiary to Parent or by Parent to Subsidiary
under this Agreement shall be made in accordance with the method for settling
intercompany accounts then generally in effect between Parent and Subsidiary.
5. INDEMNITY
Parent agrees to indemnify, defend and hold Subsidiary harmless from and
against any and all liabilities for Federal income tax and Federal estimated
income tax (including, in both cases, interest and penalties thereon) with
respect to any taxable year; provided that the amount of such indemnity shall be
reduced by and shall offset any payment required to be made by Subsidiary
pursuant to this Agreement.
6. EFFECT OF AGREEMENT
(a) As between Parent and Subsidiary, the provisions of this Agreement
shall fix the liability of each to the other as to the matters covered
hereunder, even if such provisions are not controlling for tax or other purposes
(including, but not limited to, the computation of earnings and profits for
Federal income tax purposes).
(b) This Agreement shall be effective as between Parent and Subsidiary
beginning with taxable year ending November 30, 1997 and all taxable years
thereafter during which Subsidiary is a member of the Group.
7. STATE AND LOCAL TAXES
In the event Parent actually files Combined Returns in any state or local
jurisdiction on behalf of, and pays such taxes owed by, all or part of the
Group, and Subsidiary joins in such Combined Returns, the principles and
procedures (including the indemnity in paragraph 5) stated in this Agreement
shall apply for purposes of allocating such state tax liability beginning with
the taxable year or period ending November 30, 1997.
8. AGREEMENT OF COOPERATION
Subsidiary hereby designates Parent as its agent with respect to all
matters relating to any Consolidated Returns or Combined Returns beginning with
the taxable year ending November 30, 1997 and all taxable years and periods
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thereafter during which Subsidiary is a Member. Subsidiary agrees to cooperate
fully in any action or matter, or whatever nature, related to the preparation,
filing, audit, examination and contest of such Consolidated Returns and Combined
Returns including, but not limited to, (a) taking any action and furnishing
Parent with any and all information requested by Parent that is necessary or
incidental to filing of such Consolidated Returns and Combined Returns or the
filing of any procedural requests of whatever nature with the Internal Revenue
Service or other relevant taxing authority, (b) cooperating fully in connection
with any income tax refund claim and any related administrative or judicial
proceeding with respect to any year, (c) taking any action and furnishing Parent
with any and all information requested by Parent that is necessary or incidental
to the handling of any audit by the Internal Revenue Service or other relevant
taxing authority and any related administrative or judicial proceeding for any
Consolidated Return or Combined Returns for any year such return was or is filed
by or joined in by Subsidiary and cooperating fully with Parent in connection
with any such audit or proceeding and (d) paying its share of any costs or
expenses incurred by Parent in connection with such preparation, filing, audit,
examination or contest, as determined by Parent in good faith.
9. MISCELLANEOUS PROVISIONS
(a) This Agreement contains the entire understanding of the parties hereto
with respect to the subject matter contained herein. No alteration, amendment or
modification of any of the terms of this Agreement shall be valid unless made by
an instrument signed in writing by an authorized officer of each party.
(b) This Agreement has been made in and shall be construed and enforced in
accordance with the law of the State of Hawaii.
(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 deemed to have
been duly given if given in writing and delivered by hand or mailed, certified
or registered mail, with postage prepaid addressed to the party to which the
notice or other communication is given.
(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) Subsidiary and Parent agree to not unreasonably withhold their consent
to any amendment to this Agreement that is proposed by Parent, provided that
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such amendment cannot reasonably be expected to have the effect of increasing
the aggregate amounts payable by Subsidiary to Parent hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representatives as of the date first above
written.
ROYAL ALOHA VACATION CLUB
By:_________________________________
Its_________________________________
ROYAL ALOHA DEVELOPMENT COMPANY
By:__________________________________
Its__________________________________
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