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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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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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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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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If the
foregoing calculation with respect to the Applicable Period results
in a net operating loss that cannot be carried back to a
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