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EXHIBIT 10.4
MASTER TAX SHARING AGREEMENT
This Master Tax Sharing Agreement
("Agreement"), which amends and restates in
its entirety the prior Tax Sharing
Agreement and incorporates all previous
amendments, is effective as of the first
day of the consolidated return year
beginning January 1, 2004, by and among
Westcorp (FEIN No. 51-0308535)
("Parent") and each of the undersigned
("Subsidiaries").
Westran Services Corp. (33-0681134)
Western Auto Investments (33-0696532)
Western Financial Bank (94-2504080)
WFS Financial Inc (33-0291646)
WFS Financial Auto Loans, Inc. (33-0149603)
WFS Financial Auto Loans 2, Inc. (33-0218079)
WFS Investments, Inc. (33-0712766)
WFS Funding, Inc. (33-0874765)
WFS Receivables Corporation (33-0885464)
WFS Receivables Corporation 2 (88-0466468)
WFS Receivables Corporation 3 (94-3401639)
WestFin Insurance Agency, Inc. (95-3439391)
Western Consumer Services, Inc. (94-2643049)
Western Reconveyance Company, Inc. (95-3360526)
Westhrift Life Insurance Company (86-0397136)
WFS Web Investments (26-0003040)
Western Consumer Products (33-0987340)
The Hammond Company, The Mortgage Bankers (95-2954207)
WFS Receivables Corporation 4 (FEIN No. 05-0576204)
Western Financial Associate Solutions (FEIN No. 20-0362710)
WHEREAS, the parties (hereinafter sometimes
referred to as "Members") hereto are
part of an affiliated group ("Affiliated
Group") as defined in Section 1504(a)
of the Internal Revenue Code of 1986, as
amended ("IRC"); and
WHEREAS, such Affiliated Group has since
December 31, 1986, filed a consolidated
federal income tax return in accordance
with IRC Section 1501 and is required to
file consolidated income tax returns for
years subsequent to such year of first
consolidated filing; and
WHEREAS, it is the intent and desire of the
parties hereto that a method be
established, pursuant to the Interagency
Policy Statement on Income Tax
Allocation in a Holding Company Structure
(developed by the Office of Thrift
Supervision, the Federal Deposit Insurance
Corporation, the Federal Reserve
Board, and the Office of the Comptroller of
the Currency) for allocating the
consolidated "federal income tax liability"
(as determined under Regulations
Section 1.1502-2) of the Affiliated Group
among its Members (as required by IRC
Section 1552 (a)); for reimbursing the
Parent for payment of such tax liability;
for compensating any Member for use of its
"net operating loss" or "tax credit"
in arriving at such tax liability; and to
provide for the allocation and payment
of any refund arising from a carryback of
net operating losses or tax credits of
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 federal income tax
return shall be filed by the Parent
for the taxable year ended December 31,
2003, and for each subsequent taxable
year in respect of which this Agreement is
in effect and for which the
Affiliated Group is required or permitted
to file a consolidated federal income
tax return. The Parent and each Subsidiary
shall execute and follow such
consents, elections, and other documents
that may be required or appropriate for
the proper filing of such returns.
2. The Parent and Subsidiaries have hereby
elected to allocate their federal tax
liability during consolidated tax return
years pursuant to Regulation Section
1.1552-1 (a)(1) using method one in
1
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conjunction with the election pursuant to
Regulation Section 1.1502-33(d)(3),
provided that the basis for allocation of
total tax is based on the ratio that
each Member's separate return taxable
income for the tax year bears to the sum
of the separate taxable income of each
Member. Each Member agrees that the
policy of the Affiliated Group is to
compute its taxable income on a separate
return basis. The fixed percentage to be
used under Regulation Section 1.1502-33
(d)(3) shall be 100%.
3. The taxable income of the Parent
Affiliated Group, which is all the Members,
shall be used to determine the allocation
of the tax liability, unless the use
of that number results in an allocation
which is unfavorable to the Bank
Affiliated Group, which is all the Members
except the Parent, Westran Services
Corporation, WFS Receivables Corporation 2,
Western Consumer Products and WFS
Receivables Corporation 4, in which case,
the separate tax liability of the
Bank's Affiliated Group shall be allocated
among the members of the Bank
Affiliated Group.
4. Each Member shall pay the Parent its
allocated consolidated federal income
tax liability under this Agreement. Such
payment is expressly limited to the
portion currently due and payable to the
Internal Revenue Service ("IRS"). The
timing of such payment shall be consistent
with the due date of the payment from
each Member if it had been filed on a
separate return basis provided that in no
event shall payment be made until
expiration of any extension that may be in
effect as to the Parent. Current payment by
any Member to the Parent of that
Member's deferred tax liability is
expressly forbidden. Each Member benefiting
from net operating losses and tax credits
shall pay to the Parent its added tax
assessment determined under paragraph 2 of
the Agreement. The Parent shall pay
to each Member with a net operating loss or
tax credit during the taxable year
its allocable share of the total of the
additional amounts due from other
Members pursuant to paragraph 2 of this
Agreement. Payments for these allocable
shares are to be made no later than 30 days
after the date of filing of the
consolidated federal income tax return for
such taxable year. Due to
administrative costs of completing cash
transfers, deminimus payments by and
among the Members, in the amount of twenty
dollars ($20.00) or less, need not be
allocated amongst the Members.
5. Each Member shall determine its share of
estimated tax payments to be made on
the projected consolidated federal income
tax liability for each year on a
separate return basis. Payment to the
Parent shall be made at the time the
estimated payment is due. Such Member will
receive credit for such prepayments
in the year end computation under paragraph
4 of this Agreement.
6. If part or all of an unused consolidated
net operating loss or tax credit is
allocated to a Member of the Affiliated
Group pursuant to Regulations Section
1.1502-79, and it is carried back or
forward to a year in which such Member
filed a separate income tax return or a
consolidated federal income tax return
with another affiliated group, any refund
or reduction in tax liability arising
from the carryback or carryover shall be
retained by such Member. (If such
refund or reduction goes to some entity
other than the
