Exhibit 10.7
TAX MATTERS AGREEMENT
by and among
GENERAL ELECTRIC COMPANY,
GENERAL ELECTRIC CAPITAL CORPORATION,
GE FINANCIAL ASSURANCE HOLDINGS, INC.,
GEI, INC.,
and
GENWORTH FINANCIAL, INC.
Dated as of
,
, 2004
TABLE OF CONTENTS
i
TAX MATTERS AGREEMENT
This Agreement
is made this day of
,
2004 among the General Electric Company, a New York corporation (“GE”), General
Electric Capital Corporation, a Delaware corporation (“GECC”), GEI, Inc., a
Delaware corporation (“GEI”), GE Financial Assurance Holdings, Inc., a Delaware
corporation (“GEFAHI”, and collectively with GE, GEI, and GECC, the “GE
Parties”), and Genworth Financial, Inc., a Delaware corporation (“Genworth”).
A. Pursuant
to the Master Agreement dated as of
,
2004 among the GE Parties and Genworth (the “Master Agreement”), Genworth has
agreed, on the terms and subject to the conditions set forth in the Master
Agreement, to acquire (the “Acquisition”), directly or indirectly, all the
outstanding shares of stock of GNA Corporation, Inc., a Washington corporation
(“GNA”), and certain other Subsidiaries of GE (GNA and such other Subsidiaries,
together with Genworth, the “Genworth Companies”) in a transaction that will
constitute (as to certain of such Genworth Companies) a qualified stock
purchase within the meaning of Section 338(d)(3) of the Code.
B. GE
and certain of the Genworth Companies have been members of an affiliated group
of corporations of which GE is the common parent (the “GE Affiliated Group”)
within the meaning of Section 1504(a) of the Code, and the members of the GE
Affiliated Group have heretofore filed United States federal income tax returns
on a consolidated basis (the “GE Consolidated Returns”) pursuant to Section
1501 of the Code.
C. Certain
of GE and its Affiliates have heretofore joined in the filing of certain
combined, consolidated, or other similar United States state, local, or other
governmental or foreign
ii
income or
franchise tax returns (the “GE Combined Returns”), and each group filing such a
return that includes any Genworth Company and at least one of GE or a
non-Genworth Affiliate of GE is designated a “Combined Group.”
D. GEFAHI
and certain of its Subsidiaries have entered into a Tax Allocation Agreement
effective November 5, 1997 and supplemented and modified effective
December 4, 2001 (the “GEFAHI Tax Allocation Agreement”).
E. General
Electric Capital Assurance Corporation, a Delaware corporation (“GECA”), which
is a wholly owned indirect subsidiary of GEFAHI, and the Subsidiaries of GECA
that are domestic life insurance companies, including Union Fidelity Life
Insurance Company, an Illinois corporation
(“UFLIC”), have been treated as members of an affiliated group of life
insurance companies of which GECA is the common parent (the “GECA Affiliated
Group”) pursuant to Section 1504(c)(1) of the Code, and the members of the GECA
Affiliated Group have heretofore filed United States federal income tax returns
on a consolidated basis pursuant to Section 1501 of the Code.
F. GECA,
UFLIC, and the other Subsidiaries of GECA that are domestic life insurance
companies have entered into a Tax Allocation Agreement effective
December 31, 1995 and amended as of December 31, 2001 (the “GECA Tax
Allocation Agreement”).
G. GECC
and certain of the Subsidiaries of GECC have entered into a Federal Income Tax
Allocation Agreement effective June 1, 2001 (the “GECC Tax Allocation
Agreement”).
2
H. As
a consequence of the Acquisition and the Initial Public Offering, the Genworth
Companies that have been members of the GE Affiliated Group will no longer be
members of the GE Affiliated Group, one or more of the Genworth Companies may
no longer be members of a Combined Group, and UFLIC will no longer be a member
of the GECA Affiliated Group.
I. The
GE Affiliated Group has received a private letter ruling (the “Ruling”) from
the IRS dated October 6, 2003, based on submissions dated August 7, 2003,
August 29, 2003, and September 24, 2003 (the “Submissions”) with respect to the
Acquisition.
J. The
parties to this Agreement desire to make certain covenants with respect to tax
matters and to allocate the liability for certain United States and foreign
federal, state, local, and other taxes that may be owed to or asserted by
United States or foreign federal, state, local, or other governmental taxing
authorities, and to provide for the allocation of any Tax benefits which may
arise as a result of any Section 338 Election.
NOW,
THEREFORE, in consideration of the foregoing and of the mutual promises,
covenants, and conditions contained in this Agreement, the parties to this
Agreement agree as follows:
3
SECTION
1. Definitions. (a) The term “Acceleration Event” means (1) as
to Genworth, that any Person or group of Persons acting in concert (other than
GE and its Affiliates) acquires Effective Control of Genworth, and (2) as
to any Subsidiary of Genworth, that (i) any Person or group of Persons
acting in concert (other than Genworth and its Affiliates) acquires Effective
Control of such Subsidiary of Genworth, or (ii) Genworth and its Affiliates
otherwise cease to have Effective Control of such Subsidiary of Genworth; provided,
however, that in no event shall a sale of stock of Genworth by GE or its
Affiliates be treated as constituting an Acceleration Event.
(b) The
term “Acceleration Fraction” has the meaning specified in Section 9(d)(2).
(c) The term
“Acquisition” has the meaning specified in Recital A of this Agreement.
(d) The term
“Adjustment Payment” has the meaning specified in Section 13 of this Agreement.
(e) The term
“Affiliate” has the meaning specified in Section 1.1 of the Master Agreement.
(f) The term “After-Tax
Basis” means that, in determining the amount of the payment necessary to
indemnify any party against, or reimburse any party for, Liabilities, the
amount of such Liabilities will be determined net of any reduction in Tax
derived by the indemnified party as the result of sustaining or paying such
Liabilities, and the amount of such indemnification payment will be increased (i.e.,
“grossed up”) by the amount necessary to satisfy any
4
income or
franchise Tax liabilities incurred by the indemnified party as a result of its
receipt of, or right to receive, such indemnification payment (as so
increased), so that the indemnified party is put in the same net after-Tax
economic position (taking into account all amounts payable under Section 9 and
all other relevant facts and circumstances) as if it had not incurred such
Liabilities, in each case without taking into account any impact on the tax
basis that an indemnified party has in its assets.
(g) The
term “Agreement” means this Tax Matters Agreement.
(h) The
term “Brookfield” means Brookfield Life Insurance Co., Ltd., a Bermuda corporation.
(i) The
term “Brookfield Stock Purchase Agreement” means the Stock Purchase Agreement,
dated as of June 26, 2003, made among Brookfield, GECC, GE Capital Asia
Investments, a Delaware corporation, GEFAHI, and American International
Reinsurance Company, Ltd., a Bermuda company.
(j) The
term “Brookfield Taxes” means the excess (if any) of (1) the actual Tax liability
of Brookfield for the Taxable Year ending December 31, 2003, over (2)
the sum of (i) the amount of such Tax liability determined without regard
to the sale of the GEFA-Japan Shares pursuant to the Brookfield Stock Purchase
Agreement, and (ii) $200 million.
(k) The
term “Closing” has the meaning specified in Section 3.1 of the Master
Agreement.
5
(l) The
term “Closing Date” has the meaning specified in Section 3.1 of the Master
Agreement.
(m) The
term “Code” means the Internal Revenue Code of 1986, as amended.
(n) The
term “Combined Group” has the meaning specified in Recital C of this Agreement.
(o) The
term “Delayed Transfer Assets” has the meaning specified in Section 1.1 of the
Master Agreement.
(p) The
term “Delayed Transfer Liabilities” has the meaning specified in Section 1.1 of
the Master Agreement.
(q) The
term “Effective Control” means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
business enterprise, whether through the ownership of voting stock, the use of
a voting trust, contractual arrangements, or otherwise.
(r) The
term “Election Statement” has the meaning specified in Section 8(c) (2) of this
Agreement.
(s) The
term “Final Allocation Schedule” has the meaning specified in Section 8(b) of
this Agreement.
(t) The
term “Final Date” means the last date on which Genworth may be required to make
a Tax Benefit Payment pursuant to Section 9(a).
6
(u) The
term “Final Determination” means a final “determination” as defined in Section
1313(a) of the Code or any other event (including the execution of a Form
870-AD) which finally and conclusively establishes the amount of any liability
for Tax.
(v) The
term “GE” has the meaning specified in the Preamble of this Agreement.
(w) The
term “GE Affiliated Group” has the meaning specified in Recital B of this
Agreement.
(x) The
term “GE Combined Returns” has the meaning specified in Recital C of this
Agreement.
(y) The
term “GE Combined Taxes” has the meaning specified in Section 2 (a)(1) of this
Agreement.
(z) The
term “GE Consolidated Returns” has the meaning specified in Recital B of this
Agreement.
(aa) The
term “GE Consolidated Taxes” has the meaning specified in Section 2(a)(1) of
this Agreement.
(bb) The
term “GE Parties” has the meaning specified in the Preamble of this Agreement.
(cc) The
term “GE Tax Services” has the meaning specified in Section 15(b) of this
Agreement.
(dd) The
term “GECA” has the meaning specified in Recital E of this Agreement.
7
(ee) The
term “GECA Affiliated Group” has the meaning specified in Recital E of
this Agreement.
(ff) The
term “GECA Tax Allocation Agreement” has the meaning specified in Recital F of
this Agreement.
(gg) The
term “GECC” has the meaning specified in the Preamble of this Agreement.
(hh) The
term “GECC Tax Allocation Agreement” has the meaning specified in Recital G of
this Agreement.
(ii) The
term “GEFA-Japan Shares” has the meaning specified in the Preliminary
Statements of the Brookfield Stock Purchase Agreement.
(jj) The
term “GEFAHI” has the meaning specified in the Preamble of this Agreement.
(kk) The
term “GEFAHI Tax Allocation Agreement” has the meaning specified in Recital D
of this Agreement.
(ll) The
term “GEI” has the meaning specified in the Preamble of this Agreement.
(mm) The
term “Genworth” has the meaning specified in the Preamble of this Agreement.
8
(nn) The
term “Genworth Asset” has the meaning specified in Section 2.2(a) of the Master
Agreement.
(oo) The
term “Genworth Business” has the meaning specified in Section 1.1 of the Master
Agreement.
(pp) The
term “Genworth Companies” has the meaning specified in Recital A of this
Agreement.
(qq) The
term “Genworth Tax Services” has the meaning specified in Section 15(b) of this
Agreement.
(rr) The
term “GNA” has the meaning specified in Recital A of this Agreement.
(ss) The
term “Initial Public Offering” has the meaning specified in Section 1.1 of the
Master Agreement.
(tt) The
term “IRS” has the meaning specified in Section 1.1 of the Master Agreement.
(uu) The
term “IPO Date” means the date of closing of the Initial Public Offering.
(vv) The
term “Life/Non-Life Election” has the meaning specified in Section 2(a)(4).
(ww) The
term “Liabilities” has the meaning specified in Section 1.1 of the Master
Agreement.
9
(xx) The
term “Master Agreement” has the meaning specified in Recital A of this
Agreement.
(yy) The
term “Outstanding Obligations” has the meaning specified in Section 10 of
this Agreement.
(zz) The
term “Person” has the meaning specified in Section 1.1 of the Master Agreement.
(aaa)
The term “Reinsurance Agreements” has the
meaning specified in Section 1.1 of the Master Agreement.
(bbb)
The term “Reinsurance Transaction” means any
reinsurance transaction pursuant to the Reinsurance Agreements, which, for the
avoidance of doubt, does not include any deemed reinsurance transaction
resulting from any Section 338 Election.
(ccc)
The term “Ruling” has the meaning specified in
Recital I of this Agreement.
(ddd)
The term “Section 12 Rate” means the rate
specified in Section 12, compounded on a daily basis.
(eee)
The term “Schedule B Date” means April 15, June
15, September 15, and December 15.
(fff)
Unless otherwise specified, the term “Section”
means a section of this Agreement.
10
(ggg)
The term “Section 338 Election” means any
election under Section 338(g) or (h)(10) of the Code (or any successor
provision) or any comparable provision of state, local, or other governmental
income or franchise tax law made pursuant to Section 8 of this Agreement.
(hhh)
The term “Section 338 Sale Return” means each
Tax Return with respect to a Taxable Year that includes a deemed asset sale
pursuant to a Section 338 Election, including any such Tax Return that is a
consolidated return pursuant to Treas. Reg. § 1.338-10(a)(1).
(iii)
The term “Separation” has the meaning specified
in Section 1.1 of the Master Agreement.
(jjj)
The term “Submissions” has the meaning
specified in Recital I of this Agreement.
(kkk)
The term “Subsidiary” has the meaning specified
in Section 1.1 of the Master Agreement.
(lll)
The term “Tax” has the meaning specified in
Section 1.1 of the Master Agreement.
(mmm)
The term “Tax Attribute” means any net
operating loss, net capital loss, investment
tax credit, foreign tax credit, alternative
minimum tax credit, or other item (or carryforward or carryback thereof)
which could reduce any Tax.
(nnn)
The term “Tax Benefit Payment” has the meaning
specified in Section 9(a)(2).
11
(ooo)
The term “Tax Return” has the meaning specified
in Section 1.1 of the Master Agreement.
(ppp) The term “Taxable
Year” means a taxable year as defined in Section 441(b) of the Code (and thus
may include a period of less than 12 months for which a return is made).
(qqq)
The term “Taxing Authority” has the meaning
specified in Section 1.1 of the Master Agreement.
(rrr)
The term “Transaction” means (1)
the Separation; (2) any transfer of assets or assumption of liabilities
pursuant to Section 3.2(c), (e), or (i) of the Master Agreement; (3)
any other transfer of assets or assumption of liabilities pursuant to the
Transaction Documents (including any deemed transfer of assets or assumption of
liabilities as the result of any Section 338 Election) that is (i)
completed on or before the Closing Date, and (ii) made other than in the
ordinary course of business; and (4) any transfer of Delayed Transfer Assets
or assumption of Delayed Transfer Liabilities, provided, however,
that the term “Transaction” will in no event include any Reinsurance
Transaction (but will include any dividend paid in connection with a Reinsurance
Transaction).
(sss)
The term “Transaction Documents” has the
meaning specified in Section 3.2 of the Master Agreement.
(ttt)
The term “Transaction Taxes” means for any
Taxable Year the amount of Taxes incurred by the Genworth Companies that (1)
result from the Transactions that occur in such Taxable Year, and (2)
are payable with respect to such Taxable Year.
12
(uuu)
The term “Transfer Documents” has the meaning
specified in Section 3.4 of the Master Agreement.
(vvv)
The term “Transition Services Agreement” has
the meaning specified in Section 1.1 of the Master Agreement.
(www)
The term “UFLIC” has the meaning specified in
Recital E of this Agreement.
(xxx)
Unless the context otherwise requires,
references in this Agreement to any Person include the successors and assigns
of such Person, and any references in this Agreement to the “GECC Tax
Allocation Agreement” will include any successor or supplemental agreement
reasonably acceptable to GE entered into in connection with any election made
pursuant to Section 2(a)(4).
13
SECTION
2. Filing
of Tax Returns. (a) (1) GE
will prepare (or cause to be prepared) and file (or cause to be filed) all
necessary GE Consolidated Returns for all Taxable Years (whether ending before,
on, or after the Closing Date), all necessary GE Combined Returns for all
Taxable Years (whether ending before, on, or after the Closing Date), and each
Section 338 Sale Return. GE will pay (i)
any Taxes (“GE Consolidated Taxes”) with respect to such GE Consolidated
Returns, (ii) any Taxes (“GE Combined Taxes”) with respect
to such GE Combined Returns, and (iii) any Transaction Taxes. Genworth will pay all Taxes (other than
Transaction Taxes) with respect to each Section 338 Sale Return (other than a
GE Consolidated Return or GE Combined Return).
(2) As
promptly as reasonably practicable (and, in any event, no later than March 31,
2005), Genworth will provide GE with the necessary information relating to the
Genworth Companies for GE to prepare such Tax Returns and to pay such GE
Consolidated Taxes, GE Combined Taxes, and Transaction Taxes. Subject to Section 2(a)(4), such information
will be prepared by Genworth in a manner consistent with past practice, and
will be subject to review, adjustment, and approval by GE, which approval may
not be unreasonably withheld.
(3) Subject
to Section 2(a)(1), Genworth will have the right to be kept informed of, to
consult with GE regarding, and to participate in, preparing and filing any Tax
Returns described in Section 2(a)(1) to the extent that they may affect
Genworth. Except for any gain, loss, or
other item resulting directly from a Transaction, each item on each Section 338
Sale Return (other than a GE Consolidated Return or a GE Combined Return) will
be subject to review, adjustment, and approval by Genworth, which approval may
not be unreasonably withheld. If
Genworth proposes an adjustment to any Genworth item (other than any gain,
loss, or other
14
such item
resulting directly from a Transaction) on a GE Consolidated Return or a GE Combined
Return, and GE unreasonably declines to accept such proposal, then each amount
payable pursuant to this Agreement (including Section 5), the GEFAHI Tax
Allocation Agreement, the GECC Tax Allocation Agreement, and the GECA Tax
Allocation Agreement will be determined as if such proposal had been
accepted. For purposes of this
Section 2 and Section 6, a failure to accept or to approve is
unreasonable only if the proposal is reasonably expected (i) to result in lower
aggregate Taxes of GE and Genworth and their Affiliates on a present value
basis, and (ii) to have no adverse effect on GE and Genworth and
their Affiliates (as determined on a combined basis) under generally accepted
accounting principles.
(4) At
GE’s request, Genworth will cooperate fully, and will cause the Genworth
Companies to cooperate fully, in the making of an election under Section
1504(c)(2) of the Code and Treasury Regulation Section 1.1502-47 (a
“Life/Non-Life Election”) with respect to a Taxable Year ending after December
31, 2003, in a timely and valid manner.
GE will determine the time and manner for preparing and filing all
documents required in connection with any such election, and Genworth will
cooperate fully, and will cause Genworth Companies to cooperate fully, in
preparing, executing and filing all such documents. Genworth will use its best efforts to obtain any regulatory approvals
necessary in connection with such election as soon as practicable after the
date hereof.
(b)
(1) Except as provided in Section 2(a), Genworth
will prepare (or cause to be prepared) and file (or cause to be filed) all
necessary United States federal, state, local, and other governmental and
foreign Tax Returns with respect to the Genworth Companies for all
15
Taxable Years
(whether ending before, on, or after the Closing Date). Genworth will pay (or cause to be paid) any
Taxes due with respect to such Tax Returns.
(2) Promptly,
but no later than 180 days after the Closing Date (and, in any event, no later
than 30 days prior to the due date (without extensions) of the relevant Tax
Return), GE will provide Genworth with the necessary information relating to
UFLIC for Genworth to prepare such Tax Returns and to pay such Taxes. Such information will be prepared in a
manner consistent with past practice, and will be subject to review,
adjustment, and approval by Genworth, which approval may not be unreasonably
withheld.
16
SECTION
3. Indemnification
by GE. (a) (1) Subject
to receipt of, and except for, the tax sharing payments required to be made to
GE under Section 5, GE will indemnify and hold harmless on an After-Tax Basis
the Genworth Companies, and each other Affiliate of Genworth, from and against,
and reimburse each such Person for, any Liabilities with respect to (i) GE
Consolidated Taxes for all Taxable Years (whether ending before, on, or after
the Closing Date), including any such Liabilities with respect to any liability
for such GE Consolidated Taxes pursuant to Treas. Reg. § 1.1502-6, (ii) GE
Combined Taxes for all Taxable Years (whether ending before, on, or after the
Closing Date), including any such Liabilities with respect to any liability for
GE Combined Taxes pursuant to any provision comparable to Treas. Reg.
§ 1.1502-6, (iii) Transaction Taxes, (iv) any interest or Tax
penalties incurred by a Genworth Company as a result of, or in connection with,
taking a Tax position that such Genworth Company is required to take pursuant
to this Agreement (but any such
interest will be indemnified under this Section 3 only to the extent that it
does not duplicate interest otherwise paid by GE to Genworth under other
provisions hereof), and (v) any Brookfield Taxes.
(2) (i) For purposes of the definition of
Transaction Taxes in Section 1(ttt), the amount of Taxes incurred by any Genworth
Company that result from the Transactions that occur in any Taxable Year will
be equal to (A) the actual Tax liability of such Genworth Company for such
Taxable Year, reduced by (B) the Tax liability of such Genworth
Company for such Taxable Year determined as if none of such Transactions had occurred.
(ii) For
purposes of Section 3(a)(2)(i), (A) in the case of any Tax governed by
Section 5 of this Agreement, the GECA Tax Allocation Agreement, the GEFAHI Tax
Allocation Agreement, or the GECC Tax Allocation Agreement, the Tax liability
of any Genworth Company
17
that is a
member of the GECA Affiliated Group (except as provided in Section
3(a)(2)(ii)(C)) will be deemed to be equal to the liability allocated to such
Genworth Company pursuant to the GECA Tax Allocation Agreement, the Tax
liability of any Genworth Company that is a party to the GEFAHI Tax Allocation
Agreement will be deemed to be equal to the liability allocated to such
Genworth Company pursuant to the GEFAHI Tax Allocation Agreement, the Tax
liability of any Genworth Company that is a party to the GECC Tax Allocation
Agreement will be deemed to be equal to the liability allocated to such
Genworth Company pursuant to the GECC Tax Allocation Agreement, and the Tax
liability of any other Genworth Company that is a member of the GE Consolidated
Group will be deemed to be equal to the liability allocated to such Genworth Company
pursuant to Section 5 of this Agreement; (B) in the case of each such Genworth
Company, the amount determined under Section 3(a)(2)(i) in respect of Taxes to
which Section 3(a)(2)(ii)(A) applies will (as the result of the proviso in
Section 5(a) and the second proviso in Section 11) be equal to zero; (C)
the federal income Tax liability of GECA for any Taxable Year (other than a Taxable
Year for which a Life/Non-Life Election is in effect) will be equal to the
excess (if any) of (1) the consolidated federal income
Tax liability of the GECA Affiliated Group, over (2) the aggregate
amount of such liability allocated to other members of the GECA Affiliated
Group pursuant to the GECA Tax Allocation Agreement; and (D) in respect of Florida or
Illinois income Tax Returns of Genworth Companies that are insurance companies,
the income Tax liability will be decreased in an amount equal to any reduction
in Florida or Illinois premium, retaliatory, or similar Tax liability that the
Genworth Company obtains or would obtain as a result of the income Tax
liability, in each case, the calculation to be made with and without taking
into account the Transactions and the Section 338 Elections.
18
(b) GE will indemnify
and hold harmless on an After-Tax Basis the Genworth Companies and each other
Affiliate of Genworth from and against, and reimburse each such Person for, any
Liabilities that such Person may at any time suffer or incur, or become subject
to, as a result of or in connection with any failure by GE or any Affiliate of
GE to perform any of its covenants or agreements under this Agreement.
(c) Genworth will
notify GE in writing within 30 days after receipt of any written communication
to or by the Genworth Companies or any other Affiliate of Genworth from or with
any Taxing Authority concerning Taxes for which indemnification may be claimed
from GE pursuant to the provisions of this Section 3. In addition, Genworth will notify GE in writing at least 15 days
prior to the date on which Genworth, or any Affiliate of Genworth, intends to
make a payment of any Taxes that are indemnifiable by GE pursuant to the provisions
of this Section 3. GE will notify
Genworth in writing within 30 days after receipt of any written communication
to or by GE or any Affiliate of GE from or with any Taxing Authority concerning
Taxes owed by any Genworth Company or any Taxes for which indemnification may
be claimed from Genworth pursuant to the provisions of Section 4. In addition, GE will notify Genworth in
writing at least 15 days prior to the date on which GE, or any Affiliate of GE,
intends to make a payment of any Taxes that are indemnifiable by Genworth
pursuant to the provisions of Section 4.
The failure by a party to notify another pursuant to this Section 3(c)
or pursuant to any other provision of this Agreement will not constitute a
waiver of any claim to indemnification under this Agreement in the absence of
and except to the extent of material prejudice to the indemnifying party.
19
(d) Indemnification
payments under this Section 3 will be made in immediately available funds
within 30 days after receipt by GE of a written request therefor.
20
SECTION
4. Indemnification
by Genworth. (a) Subject to receipt of, and except
for, tax sharing payments from (or on behalf of) UFLIC pursuant to the GECA Tax
Allocation Agreement (insofar as such GECA Tax Allocation Agreement remains in
effect as to UFLIC pursuant to Section 11), Genworth will indemnify and hold
harmless on an After-Tax Basis GE and each Affiliate of GE from and against,
and reimburse each such Person for, any Liabilities (except for any Transaction
Taxes, determined, for purposes of this parenthetical exception, without regard
to Section 3(a)(2)(ii)(A) and (B), and except for any Liabilities described in
Section 3(a)(1)(i), (ii), (iv), or (v)) with respect to (i) United States federal
income Taxes of the GECA Affiliated Group for all Taxable Years (whether ending
before, on, or after the Closing Date), including any such Liabilities with
respect to any liability for such Taxes pursuant to Treas. Reg.
§ 1.1502-6, and (ii) United States federal, state,
local, or other governmental or foreign income or franchise Taxes imposed on
any Genworth Company for any Taxable Year (whether beginning before, on, or
after the Closing Date).
(b) Genworth
will indemnify and hold harmless on an After-Tax Basis GE and each Affiliate of
GE from and against, and reimburse each such Person for, any Liabilities that
any such Person may at any time suffer or incur, or become subject to, as a
result of or in connection with the failure by Genworth or any Affiliate of
Genworth to perform any of its covenants or agreements under this Agreement.
(c) Indemnification
payments under this Section 4 will be made in immediately available funds
within 30 days after receipt by Genworth of a written request therefor.
21
SECTION
5. Tax
Sharing Payments. (a) If any Genworth Company (other
than any Genworth Company that is a party to the GEFAHI Tax Allocation
Agreement or the GECC Tax Allocation Agreement for such Taxable Year) is included
in the GE Consolidated Return for any Taxable Year ending on or after December
31, 2003, then Genworth will make a tax sharing payment to GE (or,
notwithstanding Section 7(a), GE will make a tax sharing payment to
Genworth) for such Taxable Year determined in a manner consistent with tax
sharing practices existing as of the date of this Agreement (as determined in
the reasonable discretion of GE); provided, however, that any
amount payable pursuant to such existing tax sharing practices will be determined
for all purposes of this Section 5 without taking into account any Transaction
Taxes (determined for purposes of this proviso without regard to Section
3(a)(2)(ii)(A) and (B)).
(b) Notwithstanding
Section 7(a), if any Genworth Company (other than any Genworth Company that was
a party to the GEFAHI Tax Allocation Agreement or the GECC Tax Allocation
Agreement for such Taxable Year) is included in the GE Consolidated Return for
any Taxable Year (whether ending before, on, or after the Closing Date), and if
any adjustment is made, as the result of any amended return, audit, or
otherwise, to any income, deduction, or other item of such Genworth Company for
such Taxable Year, then Genworth will make a payment to GE (or GE will make a
payment to Genworth) in accordance with existing tax sharing practices as of
the date of this Agreement (as determined in the reasonable discretion of
GE). Such payment will be made in
immediately available funds within 30 days after such adjustment becomes final
together with interest at the rate applicable to underpayments or overpayments
of Tax, as the case may be, from (but not including) the due date (without
extensions) of the GE Consolidated Return for such Taxable Year to (and
including) the date such payment is actually made;
22
provided,
however, that in the case of any such adjustment for any Taxable Year
that results from the carryback of any net operating loss or other Tax
Attribute from any subsequent Taxable Year, such payment will be made together
with interest at the rate applicable to underpayments or overpayments of Tax,
as the case may be, from (but not including) the date on which the relevant Tax
Return is filed for such subsequent Taxable Year to (and including) the date
such payment is actually made.
(c) Genworth will make
estimated payments with respect to all amounts due pursuant to Section 5(a) in
a manner consistent with the principles of Section 6655 of the Code. At least three business days prior to the
date on which GE intends to file the GE Consolidated Return for such Taxable
Year (but in no event prior to the fifth day after Genworth receives notice of
such intention), Genworth will pay to GE any excess of (1) the amount due under
Section 5(a) in respect of such Genworth Company for such Taxable Year, over (2) the
amount of such estimated payments for such Taxable Year, or GE will pay to
Genworth an amount equal to any excess of the amount described in subparagraph
(2) over the amount described in subparagraph (1). Any such payment will be made in immediately available funds
together with interest at the Section 12 Rate from (but not including) the due
date (without extensions) of the GE Consolidated Return for such Taxable Year
to (and including) the date on which such payment is actually made.
(d) Nothing
in this Section 5 will require Genworth to make any payment to GE (or GE to
make any payment to Genworth) that would duplicate any amount previously paid
in accordance with existing tax sharing practices.
23
(e) The
provisions of Section 5(a), (b), (c), and (d) will apply, mutatis mutandis,
with respect to any Genworth Company included in any GE Combined Return.
24
SECTION
6. Control. (a) Except
as provided in Section 6(b), GE will have the exclusive right to file any
amended Tax Returns and to control any audit or other administrative or
judicial proceeding with respect to GE Consolidated Taxes, GE Combined Taxes,
Transaction Taxes and/or the allocation shown on the Final Allocation Schedule,
and the portion of any other audit or other administrative or judicial
proceeding regarding any other matter that may result in any Tax liability with
respect to which GE provides indemnification under this Agreement; provided,
however, that (1) GE will not settle any such proceeding
in a manner that would materially adversely affect Genworth without the consent
of Genworth, which consent may not be unreasonably withheld, and (2) if
GE unreasonably fails to accept a proposal by Genworth to file an amended Tax
Return, then each amount payable pursuant to this Agreement will be determined
as if such proposal had been accepted.
(b) Genworth
will have the exclusive right to file any amended Tax Returns and to control
any audit or other administrative or judicial proceeding with respect to any
Tax liability of Brookfield; provided, however, that (1) Genworth
will not settle any such proceeding in a manner that would materially adversely
affect GE without the consent of GE, which consent may not be unreasonably
withheld, and (2) if Genworth unreasonably fails to accept a proposal
by GE to file an amended Tax Return, then each amount payable pursuant to this
Agreement will be determined as if such proposal had been accepted.
(c) Subject
to Section 6(a), GE will keep Genworth informed of, consult with Genworth
regarding, and permit Genworth to participate in, any such filing, audit, or
other judicial or administrative proceeding that may affect Genworth or any
Affiliate of Genworth.
25
(d) Except
as otherwise provided in Section 6(a) and (b), Genworth will have the exclusive
right to control any audit or other administrative or judicial proceeding with
respect to the Tax liability of the Genworth Companies.
(e) Subject
to Section 6(d), Genworth will keep GE informed of, consult with GE regarding,
and permit GE to participate in, any such filing, audit, or other judicial or
administrative proceeding that may affect GE or any Affiliate of GE.
26
SECTION
7. Refunds. (a) (1) GE will be entitled to any
refunds (including interest paid therewith) in respect of any GE Consolidated
Taxes for any Taxable Year (whether ending before, on, or after the Closing
Date), any GE Combined Taxes for any Taxable Year (whether ending before, on,
or after the Closing Date), any Transaction Taxes, and any other Tax liability
with respect to which GE provides indemnification under this Agreement.
(2) UFLIC
will be entitled to any amount payable to UFLIC in respect of any refunds,
carrybacks, adjustments, or other items (including interest paid therewith)
pursuant to the GECA Tax Allocation Agreement for any Taxable Year.
(b) Except
as provided in Section 7(a), Genworth will be entitled to any refunds
(including interest paid therewith) in respect of any United States federal,
state, local, or other governmental or foreign Tax liability of the Genworth
Companies.
27
SECTION
8. Section
338 Elections. (a) If GE determines in its sole and
absolute discretion that an election will be made under Section 338(g) of the
Code, Section 338(h)(10) of the Code, and/or any of the Treasury Regulations
under Section 338 with respect to any of the Genworth Companies for which such
election may properly be made, and/or that an election will be made under any
comparable provision of state, local, or other governmental income or franchise
tax law, then GE and Genworth will join in making, or Genworth will make, such
election in a timely and valid manner, including by filing any necessary Forms
8023 and 8883 and any necessary attachments and comparable state forms. Subject to Section 8(b), GE will determine
the time and manner for preparing and filing all forms and documents required
in connection with any such election, and Genworth will cooperate fully in preparing
and filing all such forms and documents.
(b) The
parties agree that the “aggregate deemed sale price” and “adjusted grossed-up
basis” (as such terms are defined in the regulations under Section 338 of the
Code) with respect to each Section 338 Election will be determined by GE
consistent with the principles of Section 338.
Such aggregate deemed sale price and adjusted grossed-up basis will
initially be allocated as indicated on the pro forma schedule attached hereto
as Schedule A. Schedule A also
includes projections of the Tax Benefit Payments to be made on each Schedule B
Date under this Agreement (determined without regard to any items shown on
Schedule D attached hereto). As soon as
practicable after the Closing, but in no event later than ten days prior to the
last date on which the first Section 338 Election must be filed, GE will
prepare a final tax allocation schedule (the “Final Allocation Schedule”) in a
manner consistent with the principles applied and methodologies used in
preparing Schedule A (and thus without regard to any items
28
shown on
Schedule D attached hereto), but taking into account (1) any difference
between the actual fair market value as determined by GE of the Genworth common
stock and any other consideration transferred at Closing and the estimated fair
market value of such stock and other consideration used in preparing
Schedule A, and (2) any difference between the value
of any Genworth Asset as finally determined and the estimated value of such
Genworth Asset used in preparing Schedule A. GE will consult with Genworth in the preparation of the Final
Allocation Schedule, but GE will have the exclusive right, subject to the
principles of this paragraph and to Section 16, to make all determinations
relating thereto. The Final Allocation
Schedule will be attached hereto as Schedule B, and Schedule B will also
include projections as of each relevant Schedule B Date of the Tax Benefit
Payments to be made under this Agreement (which projections will be prepared in
a manner consistent with the principles applied and methodologies used in
preparing the projections of such Tax Benefit Payments included in Schedule
A). Schedule B will thereafter be
adjusted to reflect any inaccuracy of any of the assumptions contained therein,
whether as a result of any change in fact or law, audit, amended return, or
otherwise; provided, however, that Schedule B will not be
adjusted to reflect any inaccuracy or change (i) relating to the assumed
adequacy of the amount and character of Genworth’s taxable income, (ii)
relating to the projected tax rate, (iii) to the extent attributable to
Genworth’s breach of any covenant hereunder, (iv) relating to any
item shown on Schedule D attached hereto, (v) in the tax basis of any
asset of any Genworth Company (or any interest deduction) resulting from any
payment made pursuant to Section 9(b)(2) or (3) in any Taxable Year, or (vi)
in the tax basis of any asset of any Genworth Company resulting from any
compensation paid as described in Section 9(a)(1)(ii) in any Taxable Year. If Genworth or any of its Affiliates
receives notice that the allocations on Schedule B may be examined, reviewed,
or disputed by any Taxing Authority, Genworth will
29
promptly
notify GE in writing to that effect. If
GE or any of its Affiliates receives notice that the allocations on Schedule B
may be examined, reviewed, or disputed by any Taxing Authority, GE will
promptly notify Genworth in writing to that effect. The total projected Tax Benefit Payments by Genworth on Schedule
B (as originally attached hereto or as adjusted under this Section 8(b)) will
not exceed $640 million.
(c) (1) GE
and Genworth agree to treat the deemed transfer of insurance contracts pursuant
to each such Section 338 Election as a deemed assumption reinsurance
transaction for United States federal income tax purposes in accordance with
proposed Treas. Reg. § 1.338-11 (or any successor proposed or final
regulations).
(2) If
the combined federal income tax liability of GE and its Affiliates and Genworth
and its Affiliates is likely (in the reasonable judgment of GE) to be reduced
as the result of any election under Treas. Reg. § 1.848-2(g) with respect
to any Reinsurance Transaction (including any novation pursuant thereto) or any
deemed assumption reinsurance transaction described in Section 8(c), then GE
and Genworth will make (or cause to made) any such election. Any such election will be made by executing
(or causing to be executed) an Election Statement substantially in the form
attached hereto as Annex A (in the case of any Reinsurance Transaction) or
Annex B (in the case of any deemed assumption reinsurance transaction) prior to
the earliest due date of any federal income tax return to which a schedule must
be attached pursuant to Treas. Reg. § 1.848-2(g)(8)(ii) in respect of such
election (or on such earlier date as may be requested by GE or Genworth). The parties will treat any such Election
Statements as addenda to the relevant reinsurance agreements (in the case of
any Reinsurance Transactions) or to this
30
Agreement (in
the case of any deemed reinsurance transactions). No such election will be revoked without the express prior written
consent of both GE and Genworth.
(3) Genworth
will prepare (or cause to be prepared), subject to review, adjustment, and
approval by GE, a schedule as described in Treas. Reg. § 1.848-2(g)(8)(ii)
in respect of each such election, and each of Genworth (as to the Genworth
Companies) and GE (as to itself and its Affiliates) will attach (or cause to be
attached) such schedule in duly executed form to the applicable United States
federal income Tax Return for the first Taxable Year ending after the applicable
election becomes effective.
(d) From
and after the time that Genworth is no longer 100%-owned by GE (or its
Affiliates), Genworth will, and will cause each of the Subsidiaries of Genworth
to, comply with each of the representations made in the Submissions or stated
in the Ruling, extend the statute of limitations to the extent requested as
described in the caveat in the Ruling, and otherwise comply with and conform to
all applicable conditions of the Ruling; provided that this Section 8(d)
will not make Genworth responsible for any action or omission of any Person
other than Genworth or a Subsidiary of Genworth.
SECTION 9. Tax Benefit Payments. (a) (1) Not later than 30 days after the due date
(with extensions) for the filing by any Genworth Company of any United States
federal, Florida, or Illinois income Tax Return (other than an estimated
return), or any consolidated, combined, or other similar federal, Florida, or
Illinois income Tax Return (other than an estimated return) that includes any
Genworth Company, for any Taxable Year ending after the Closing Date and
on or before the twenty-fifth anniversary of the Closing Date, Genworth will
determine
31
(subject to review, adjustment, and approval
by GE, which approval may not be unreasonably withheld) the hypothetical Tax
liability that would have been shown on such return if each of the assumptions
set forth below is made (solely for purposes of such hypothetical determination).
(i) None
of the elections contemplated by Section 8 is made.
(ii) No
deduction is allowed for compensation (including without limitation any
deduction for amounts treated as compensation under Treas. Reg. § 1.83-7)
payable by GE or any Affiliate of GE (other than a Genworth Company) to any
employee of any Genworth Company in cash, stock or other property.
(iii)
In respect of Florida or Illinois income Tax
Returns of any Genworth Company that is an insurance company, the hypothetical
income Tax liability for any Taxable Year will be decreased in an amount equal
to any reduction in Florida or Illinois premium, retaliatory, or similar Tax
liability that such Genworth Company would have obtained at any time as a
result of such hypothetical income Tax liability for such Taxable Year.
(iv) In
respect of any Florida or Illinois income Tax Returns of Genworth Companies
that are not insurance companies, the hypothetical income Tax liability will be
deemed to be equal to zero.
(2) (i)
For each Taxable Year described in Section
9(a)(1), Genworth will make one or more payments (payments made by Genworth
under this Section 9(a), Section 9(d), or Section 9(e) being
hereinafter referred to as “Tax Benefit Payments”) to GEFAHI in an aggregate
amount equal to 80 percent of the excess (if any) of (A) the hypothetical Tax
liability (as
32
determined
under Section 9(a)(1)) that would have been shown on each Tax Return to which
Section 9(a)(1) applies, over (B) the actual Tax liability shown on such
Tax Return; provided, however, that if the amount determined
under clause (B) exceeds the amount determined under clause (A), then GEFAHI
will make a payment equal to 80 percent of the amount of such excess to
Genworth, and any such payments to Genworth, together with any payments to Genworth
under Section 9(d) or Section 9(e), will be treated as negative Tax Benefit
Payments. Notwithstanding anything in
this Agreement to the contrary, the total amount of all Tax Benefit Payments
(less negative Tax Benefit Payments) pursuant to this Agreement (determined
without regard to any payment made in respect of an increase or decrease in
Schedule B pursuant to Section 9(c)(1) or (2)) will not at any time exceed $640
million. The amount of any Tax Benefit
Payments not made by reason of the preceding sentence (together with interest
thereon at the Section 12 Rate) will be offset against and reduce (but not
below zero) the amount of any subsequent negative Tax Benefit Payments that
otherwise would be required to be made pursuant to this Agreement.
(ii) For
purposes of this Agreement, any right to receive a refund of Tax or tax sharing
payment will be treated as a negative Tax liability, the excess of a positive
Tax liability over a negative Tax liability will be equal to the sum of the
absolute values of such Tax liabilities, and the excess of a negative Tax
liability having a smaller absolute value over a negative Tax liability having
a larger absolute value will be equal to the difference in the absolute values
of such Tax liabilities.
33
(iii)
Any Tax Benefit Payments pursuant to Section
9(a)(2)(i) will be made by Genworth to GEFAHI (or any negative Tax Benefit
Payments pursuant to Section 9(a)(2)(i) will be made by GEFAHI to Genworth) in
accordance with clauses (A) through (F) set forth below.
(A) Except for any
payment deferred under Section 9(a)(2)(iii)(C), Tax Benefit Payments will be
made by Genworth on each Schedule B Date during the first Taxable Year ending
after the Closing Date and the first Taxable Year ending after the IPO Date as
shown in Schedule C.
(B) Except for any
payment deferred under Section 9(a)(2)(iii)(C), for each Taxable Year (other
than any Taxable Year described in Section 9(a)(2)(iii)(A)) beginning prior to
the Final Date, a positive or negative Tax Benefit Payment will be made on each
Schedule B Date during such then-current Taxable Year equal to 25% of the Tax
Benefit Payment determined under Section 9(a)(2)(i) for the prior Taxable Year,
multiplied in the case of a positive Tax Benefit Payment by a fraction whose
numerator is equal to (1) the total of the amounts shown
on Schedule B with respect to such then-current Taxable Year, and whose
denominator is equal to (2) the total of the amounts shown
on Schedule B with respect to such prior Taxable Year; provided, however,
that if such prior Taxable Year includes fewer than twelve full calendar
months, the denominator of such fraction will be multiplied by twelve, and the
numerator will be multiplied by the number of complete months in such prior Taxable
Year.
(C) If Genworth is
otherwise required to make any Tax Benefit Payment on any Schedule B Date
during any Taxable Year to GEFAHI pursuant to Section 9(a)(2)(iii), then
Genworth may (in its sole and absolute discretion) elect to defer such
payment. If Genworth elects to
34
defer any Tax
Benefit Payment pursuant to this Section 9(a)(2)(iii)(C), then (1)
such Tax Benefit Payment will be made on or before the due date (without
extensions) for such Taxable Year together with interest at the rate specified
in Section 12, compounded on a daily basis, from (but not including) such
Schedule B Date to (and including) the date of payment, and (2)
such Tax Benefit Payment will be deemed (for all other purposes of this Section
9) to have been made on such Schedule B Date.
(D) If (1) any
amount payable by Genworth to GEFAHI under Section 9(a)(2)(i) for any
Taxable Year exceeds (2) the aggregate amount of the
Tax Benefit Payments made by Genworth to GEFAHI for such Taxable Year under
Section 9(a)(2)(iii)(A), (B), or (C) (less the aggregate amount of
the negative Tax Benefit Payments made by GEFAHI to Genworth for such Taxable Year
under Section 9(a)(2)(iii)(B)), then Genworth will make a Tax Benefit
Payment equal to the amount of such excess to GEFAHI; provided, however,
that if the amount determined under subclause (2) exceeds the
amount determined under subclause (1), then GEFAHI will make a
payment equal to the amount of such excess to Genworth, and such payment to
Genworth will be treated as a negative Tax Benefit Payment.
(E) If (1)
any amount payable by GEFAHI to Genworth under Section 9(a)(2)(i) for any
Taxable Year, exceeds (2) the aggregate amount of the
negative Tax Benefit Payments made by GEFAHI to Genworth for such Taxable Year
under Section 9(a)(2)(iii)(B) (less the aggregate amount of the Tax Benefit
Payments made by Genworth to GEFAHI for such Taxable Year under Section
9(a)(2)(iii)(A), (B), or (C)), then GEFAHI will make a negative Tax Benefit Payment
equal to the amount of such excess to Genworth; provided, however,
that if the amount
35
determined
under subclause (2) exceeds the amount determined under subclause (1),
then Genworth will make a Tax Benefit Payment equal to the amount of such excess
to GEFAHI.
(F) Any positive or
negative Tax Benefit Payment pursuant to Section 9(a)(2)(iii)(D) or (E) will be
made in immediately available funds within 30 days after the due date (with
extensions) for the Genworth federal income Tax Return for the relevant Taxable
Year together with interest from the date that is midway between the first and
final Schedule B Dates of such Taxable Year to the date of payment.
(3) For
purposes of Section 9(a)(2)(i), actual Tax liability will be determined by
taking into account all relevant facts and circumstances including, for
avoidance of doubt, any payments made pursuant to this Section 9 or any other
provision of this Agreement; provided, however, that (i) any
net Tax benefit for such Taxable Year resulting from the items shown in
Schedule D attached hereto will not be taken into account; (ii) any change in the
tax basis of any asset of any Genworth Company (or any interest deduction)
resulting from any payments made under Section 9(b)(2) or (3) for any
Taxable Year will not be taken into account; (iii) any change in the tax
basis of any asset of any Genworth Company resulting from any compensation paid
as described in Section 9(a)(1)(ii) in any Taxable Year will not be taken into
account; and (iv) in respect of Florida or Illinois income Tax Returns
of any Genworth Company that is an insurance company, the actual income Tax
liability for any Taxable Year will be decreased in an amount equal to any
actual reduction in Florida or Illinois premium, retaliatory, or similar Tax
liability that such Genworth Company obtains at any time as a result of its
actual income Tax liability for such Taxable Year, and (v) in respect of any
Florida or Illinois income Tax Returns
36
of Genworth
Companies that are not insurance companies, the actual income Tax liability
will be deemed to be equal to zero.
(4) If
(i)
the cumulative amount of the projected Tax Benefit Payments shown on
Schedule B (without taking into account any increase or decrease pursuant
to Section 9(c)) to and including any Schedule B Date, exceeds (ii) the
cumulative amount of the actual Tax Benefit Payments made by Genworth (less the
cumulative amount of any actual negative Tax Benefit Payments made by GEFAHI)
as of such date (determined without regard to any payment made pursuant to this
Section 9(a)(4) on such date), then Genworth may, in its sole and absolute
discretion, make additional Tax Benefit Payments equal to all or any portion of
such excess on such date.
(b) (1)
For purposes of Section 9(a)(3), the net Tax
benefit for any Taxable Year resulting from the items shown on Schedule D will
be equal to the excess (if any) of (i) the Tax liability that would have been
shown on each Tax Return for such Taxable Year determined without regard to any
item shown in Schedule D (and without regard to any hypothetical assumption
described in Section 9(a)(1)(i)), over (ii) the sum of (x) the actual Tax liability
shown on such Tax Return (determined as provided in Section 9(a)(3) without regard
to subdivision (i) thereof), and (y) the costs reasonably incurred by
Genworth in realizing such net Tax benefit.
(2) If,
for any Taxable Year ending on or prior to the Final Date, the amount
determined under Section 9(b)(1)(i) exceeds the amount determined under Section
9(b)(1)(ii), then Genworth will pay an amount equal to 50 percent of such excess
to GEFAHI.
37
(3) If,
for any Taxable Year ending on or prior to the Final Date, the amount
determined under Section 9(b)(1)(ii) exceeds the amount determined under
Section 9(b)(1)(i), then GEFAHI will pay an amount equal to 50 percent of such
excess to Genworth.
(4) Any
payment made pursuant to this Section 9(b) will not be considered a “Tax
Benefit Payment” or a “negative Tax Benefit Payment” for any purpose of this
Agreement. Any such payment will be
made in immediately available funds within 30 days after such Tax Return is
filed and will be treated as an adjustment to the consideration paid for the
Genworth Assets pursuant to Section 2 of the Master Agreement; provided,
however, that a portion of any such payment equal to the excess of (i)
the amount of such payment, over (ii) the present value of such payment
(determined as of the Closing Date by using the Section 12 Rate as the discount
rate), or such larger portion as may be required by Section 483, Section 1274,
or any other provision of the Code, will be treated as interest.
(c) (1)
If (i) the cumulative amount of the projected
Tax Benefit Payments shown on Schedule B (taking into account any increase
or decrease pursuant to this Section 9(c)) to and including any Schedule B Date
exceeds (ii) the
sum of (A)
the cumulative amount of the actual Tax Benefit Payments made by Genworth
pursuant to Section 9(a) and Section 9(d) (less the cumulative amount of any
actual negative Tax Benefit Payments made by GEFAHI pursuant to Section 9(a))
as of such date, plus (B) the amount of any additional Tax
Benefit Payments made by Genworth pursuant to Section 9(a)(4) on or before such
date, then the amount shown on Schedule B for the next Schedule B Date will be
increased by an amount equal to interest on such excess at the rate specified
in Section 12, compounded on a daily basis, from (but not including) the
Schedule B Date for which such excess has been determined to (and including)
the
38
next
subsequent Schedule B Date. Any such
increase in the amount shown in Schedule B will not be taken into account for
purposes of the last sentence of Section 8(b).
(2) If
(i)
the amount specified in Section 9(c)(1)(ii) as of any Schedule B Date exceeds (ii)
the amount specified in Section 9(c)(1)(i) for such date, then the amount shown
on Schedule B for the next Schedule B Date will be decreased by an amount equal
to interest on such excess at the rate specified in Section 12, compounded on a
daily basis from (but not including) the Schedule B Date for which such excess
has been determined to and including the next subsequent Schedule B Date. Any such decrease in the amount shown in
Schedule B will not be taken into account for purposes of the last sentence of
Section 8(b).
(3)
(i) Genworth will maintain (subject to review,
adjustment, and approval by GE, which approval will not be unreasonably
withheld) a running balance of the aggregate net increase or decrease in the
amount shown on Schedule B pursuant to this Section 9(c).
(ii) If
there is an aggregate net increase in the amount shown on Schedule B pursuant
to this Section 9(c) as of any Schedule B Date (determined without regard to
any payment made by Genworth to GEFAHI on such Schedule B Date pursuant to this
Section 9(c)(3)(ii)), then Genworth may, in its sole and absolute discretion,
make an additional payment to GEFAHI on such Schedule B Date in an amount equal
to all or any portion of such aggregate net increase, and the amount shown on
Schedule B for such Schedule B Date will be decreased by the amount of such
payment. Any such decrease in the
amount shown on Schedule B will not be taken into account for purposes of the
last sentence of Section 8(b).
39
(iii)
Genworth will pay to GEFAHI an amount equal to
any aggregate net increase in the amount shown on Schedule B pursuant to this
Section 9(c) as of the Final Date, or GEFAHI will pay Genworth an amount equal
to any aggregate net decrease in the amount shown on Schedule B pursuant to
this Section 9(c) as of the Final Date.
Any such payment will be made in immediately available funds within
30 days after such Final Date and will be made together with interest at
the Section 12 Rate from (but not including) the Final Date to (and including)
the date on which such payment is made.
(iv) If
Section 9(d)(1) applies in respect of an Acceleration Event, then Genworth
will make a payment to GEFAHI equal to any aggregate net increase in the amount
shown on Schedule B pursuant to Section 9(c) as of the last Schedule B Date on
or prior to the date of the Acceleration Event, or GEFAHI will make a payment
to Genworth equal to any aggregate net decrease in the amount shown on Schedule
B pursuant to Section 9(c) as of such date.
Any such payment will be made by Genworth to GEFAHI (or by GEFAHI to
Genworth) in immediately available funds on or before the first Schedule B Date
subsequent to the Acceleration Event.
(v) If
Section 9(d)(2) or (3) applies in respect of an Acceleration Event, then
Genworth will make a payment to GEFAHI equal to the Acceleration Fraction
multiplied by any aggregate net increase in the amount shown on Schedule B pursuant
to Section 9(c) as of the last Schedule B Date on or prior to the date of the
Acceleration Event, or GEFAHI will make a payment to Genworth equal to the Acceleration
Fraction multiplied by any aggregate net decrease in the amount shown on
Schedule B pursuant to Section 9(c) as of such date. Any such payment will be made by Genworth to GEFAHI (or by GEFAHI
to Genworth) in immediately available funds on or before the first Schedule B
Date subsequent to the Acceleration Event, and the
40
amount shown
on Schedule B for such Schedule B Date will be decreased by the amount of such
payment. Any such decrease in the
amount shown on Schedule B will not be taken into account for purposes of the
last sentence of Section 8(b).
(vi) Any
payment made pursuant to this Section 9(c)(3) will not be considered a “Tax
Benefit Payment” for any purpose of this Agreement. Any such payment will be treated as a payment with respect to the
debt instrument described in Section 9(f).
(d)
(1) Subject
to Section 9(d)(5), if there is an Acceleration Event of Genworth, then
Genworth will make a Tax Benefit Payment to GEFAHI equal to the total present
value of all amounts shown on Schedule B (determined without regard to any
increase or decrease pursuant to Section 9(c)) for each Schedule B Date
subsequent to the date of the Acceleration Event.
(2) Subject
to Section 9(d)(5), if there is an Acceleration Event of any Genworth Company
other than Genworth, then (except as provided in Section 9(d)(3)) Genworth will
make a Tax Benefit Payment to GEFAHI equal to the product of (i) the
amount determined pursuant to Section 9(d)(1), and (ii) a fraction (the
“Acceleration Fraction”) whose numerator is equal the present value of all
amounts shown on Schedule B (determined without regard to any increase or
decrease pursuant to Section 9(c)) attributable to such Genworth Company for
each Schedule B Date subsequent to the date of the Acceleration Event, and
whose denominator is equal to the total present value of all amounts shown on
Schedule B (determined without regard to any increase or decrease pursuant
to Section 9(c)) for all such subsequent Schedule B Dates.
41
(3) If
there is an Acceleration Event of any Genworth Company other than Genworth,
then Section 9(d)(2) will not apply if all of the following conditions are
satisfied prior to the first Schedule B Date subsequent to such
Acceleration Event: (i) Genworth
notifies GE in writing that it has irrevocably elected to have this Section
9(d)(3) apply; (ii) such Genworth Company (or any Person that has
acquired Control of such Genworth Company) agrees in writing to become
obligated to pay the Acceleration Fraction of all amounts shown on
Schedule B (determined without regard to any increase or decrease under Section
9(c)) for each Schedule B Date subsequent to the Acceleration Date; (iii) such
agreement is in form and substance reasonably satisfactory to GE; and (iv) no
credit rating of such Genworth Company (or other Person becoming obligated
pursuant to Section 9(d)(3)(ii)) is less than the corresponding credit
rating of Genworth at the time of such Acceleration Event, or the credit
standing of such Genworth Company (or other Person) is otherwise acceptable to
GE.
(4) If
there has been an Acceleration Event of any Genworth Company, then (for all
purposes of this Agreement) the Taxable Year of such Genworth Company will be
deemed to end on the date of such Acceleration Event, and, if the payment
described in Section 9(d)(1) or 9(d)(2) is made or the conditions of Section
9(d)(3) are satisfied, Section 9(a)(1) will not apply to any Tax Return filed
by such Genworth Company for any Taxable Year beginning after the date of such
Acceleration Event. For purposes of
this Section 9(d), present value will be determined as of the date of the
Acceleration Event by using the interest rate specified in Section 12,
compounded on a daily basis, as the discount rate. Any
Tax Benefit Payment (or negative Tax Benefit Payment) pursuant to this
Section 9(d) will be made by Genworth to GEFAHI
42
(or by GEFAHI
to Genworth) in immediately available funds on or before the first Schedule B
Date subsequent to such Acceleration Event.
(5) The
payments described in Sections 9(d)(1) and 9(d)(2) shall not be made without
approval of the domiciliary state insurance regulatory authorities of each of
the U.S. insurance subsidiaries of Genworth, which approvals shall be within
the sole discretion of such regulatory authorities. Genworth shall use its reasonable best efforts to obtain such
regulatory approvals.
(e) If
as of the Final Date (1) the cumulative amount of all projected
Tax Benefit Payments shown on Schedule B (without taking into account any
increase or decrease pursuant to Section 9(c)) exceeds (2) the cumulative amount of
the actual Tax Benefit Payments made by Genworth pursuant to Section 9(a)
and (d) (less the cumulative amount of the actual negative Tax Benefit Payments
made by GEFAHI pursuant to Section 9(a) and (d)), then Genworth will make
a Tax Benefit Payment equal to the amount of such excess to GEFAHI; provided,
however, that if the amount determined under clause (2) of this Section
9(e) exceeds the amount determined under clause (1) of this
Section 9(e), then GEFAHI will make a negative Tax Benefit Payment equal
to the amount of such excess to Genworth.
Any such Tax Benefit Payment will be made by Genworth to GEFAHI (or by
GEFAHI to Genworth) in immediately available funds within 30 days after
such Final Date and will be made together with interest at the Section 12 Rate
from (but not including) the last Schedule B Date to (and including) the date
on which such Tax Benefit Payment is made.
43
(f) The
Tax Benefit Payments to be made pursuant to this Section 9, together with any
other payments to be made by Genworth pursuant to Section 9(c), will be treated
for income tax purposes, including on Schedule A and Schedule B
(without duplication), as a debt instrument described in Treas. Reg.
§ 1.1272-1(c)(2) issued to GEFAHI as part of the consideration paid for
the Genworth Assets pursuant to Section 2 of the Master Agreement. Such debt instrument will be treated as
bearing interest at the Section 12 Rate, or at such greater rate as may be
required by Section 1274 or any other provision of the Code.
(g) For
each Taxable Year beginning after the Closing Date and prior to the Final Date,
the Chief Financial Officer of Genworth will provide to GEFAHI a certification
to the effect that all computations made pursuant to this Agreement have been
made without regard to any transaction a significant purpose of which is to
reduce or defer any amount payable by Genworth pursuant to this Section 9. If the Chief Financial Officer of Genworth
determines that it is necessary to adjust any computations made pursuant to
this Agreement in order to provide the certification required by the preceding
sentence, then such Chief Financial Officer will be permitted to make such
adjustments in a manner reasonably acceptable to GE.
44
SECTION
10. Subordination. Notwithstanding any other provision of this
Agreement to the contrary, any Tax Benefit Payment (together with any interest
thereon or other Schedule B amount due) required to be made by Genworth to
GEFAHI pursuant to Section 9 of this Agreement will rank subordinate and junior
in right of payment to any principal, interest, or other amounts due and
payable in respect of any debt or other liabilities of Genworth (collectively,
the “Outstanding Obligations”).
Accordingly, in the event that Genworth has insufficient funds on the
date any Tax Benefit Payment (together with any interest thereon or other Schedule B
amount due) is required to be made hereunder to pay in full both (a) the
Outstanding Obligations due and payable on such date and (b) the Tax Benefit
Payment due and payable on such date (together with any interest thereon or
other Schedule B amount due), Genworth may forego payment of such Tax
Benefit Payment (together with any interest thereon or other Schedule B
amount due) on such date, but only to the extent necessary to pay in full the
Outstanding Obligations due and payable on such date; provided, however,
that the amount of any Tax Benefit Payment (together with any interest thereon
or other Schedule B amount due) foregone pursuant to this sentence will
carry over and be payable by Genworth to GEFAHI (together with any interest
thereon) at such time as, and to the extent that, Genworth’s available funds
exceed the amount necessary to pay in full its Outstanding Obligations due and
payable at such time.
45
SECTION
11. Other
Tax Sharing Agreements.
All rights and obligations of GE and its Affiliates (with respect to the
Genworth Companies) and of the Genworth Companies (with respect to GE and its
Affiliates) to make or receive any Tax sharing payments (other than pursuant to
this Agreement) will terminate immediately prior to Closing; provided, however,
that notwithstanding Section 7(a)(1), (a) the GECA Tax Allocation Agreement
will remain in effect as to UFLIC pursuant to Section 5 of such Agreement for
each Taxable Year in which UFLIC was included in the GECA Affiliated Group, (b) the
GEFAHI Tax Allocation Agreement will remain in effect as to each Genworth
Company that was a party thereto pursuant to Section 5 of such Agreement for
each Taxable Year in which such Genworth Company was included in the GE
Affiliated Group, (c) the GECC Tax Allocation Agreement
will remain in effect as to each Genworth Company that was a party thereto pursuant
to Section VII of such Agreement for each Taxable Year in which such
Genworth Company was included in the GE Affiliated Group; and provided, further,
that the amount payable by or to any Genworth Company pursuant to the GECA Tax
Allocation Agreement, the GEFAHI Tax Allocation Agreement, or the GECC Tax
Allocation Agreement will be determined without taking into account any
Transaction Taxes (determined for purposes of this proviso without
regard to Section 3(a)(2)(ii)(A) and (B)).
46
SECTION
12. Interest. In the event that any payment required to be
made under this Agreement is made after the date on which such payment is due,
interest will accrue on the amount of such payment from (but not including) the
due date of such payment to (and including) the date such payment is actually
made at [specify rate equal to Genworth’s cost funds at Closing determined with
reference to compounding on a daily basis], compounded on a daily basis; provided,
however, that no interest will accrue pursuant to this Section 12 to the
extent that such interest would be duplicative of interest payable under Section
9(b).
47
SECTION
13. Adjustments. (a) If any adjustment (other than any adjustment
to which Section 5(b) applies) is made to any income, deduction, gain, loss, credit,
or other item, as the result of any amended return, audit, or otherwise, and
the amount of any payment required under this Agreement would have been
different if such adjustment had been made at the time the amount of such
payment was determined, then GE or GEFAHI will make a payment to Genworth equal
to the amount of any such difference that was detrimental to Genworth or its
Affiliates (or Genworth will pay GE or GEFAHI the amount of any such difference
that was detrimental to GE or GEFAHI or its Affiliates). Any such payment (an “Adjustment Payment”)
will be made within 30 days after such adjustment becomes final together with
interest at the Section 12 Rate from (but not including) the date of the
original payment to (and including) the date such payment is actually made; provided,
however, that in the case of any such adjustment for any Taxable Year
that results from the carryback of any net operating loss or other Tax
Attribute from any subsequent Taxable Year, such Adjustment Payment will be made
together with interest at the Section 12 Rate from (but not including) the date
on which the relevant Tax Return is filed for such subsequent Taxable Year to
(and including) the date such payment is actually made. Any Adjustment Payment (exclusive of interest)
which represents an adjustment to a prior Tax Benefit Payment or negative Tax
Benefit Payment will be treated as a Tax Benefit Payment or negative Tax
Benefit Payment, as the case may be.
(b) If
GE makes a Life/Non-Life Election for any Taxable Year beginning on or prior to
January 1, 2004, then GEFAHI will pay to Genworth an amount equal to (1) the
excess (if any) of the actual net aggregate Tax liability incurred by the
Genworth Companies for such Taxable Year and each subsequent Taxable Year ending
on or before the Final Date, over (2) the
48
amount of such
aggregate net Tax liability incurred by the Genworth Companies determined as if
such Life/Non-Life Election had not been made; provided, however,
that if the amount determined under subparagraph (2) exceeds the amount
determined under subparagraph (1), then Genworth will make a payment equal to
the amount of such excess to GEFAHI.
Any amount payable under this Section 13(b) in respect of any
Taxable Year will be made in immediately available funds within 30 days
after the date on which the Genworth federal income tax return is filed for
such Taxable Year.
(c) If
(1)
the amount determined with respect to any Genworth Company under Section 3(a)(2)(i)(B)
exceeds (2)
the amount determined with respect to such Genworth Company under Section
3(a)(2)(i)(A), then Genworth will pay an amount equal to such excess to
GE. Any amount payable under this Section
13(c) will be made in immediately available funds within 30 days after the date
on which the Genworth federal income tax is filed for the Taxable Year in which
the Closing occurs.
(d) If
(1)
the amount determined under Section 1(j)(2), exceeds (2) the amount determined under
Section 1(j)(1), then Genworth will pay an amount equal to such excess to
GE. Any amount payable under this
Section 13(d) will be made in immediately available funds within 30 days after
the date on which the Brookfield federal income Tax return is filed for the
Taxable Year ending December 31, 2003.
(e) If
(1)
any Genworth Company recognizes any loss on a Transaction, and (2)
the loss is deferred under Section 267(f) of the Code (other than any such loss
to which GE or any Affiliate of GE (other than any Genworth Company) succeeds
under Section 381 of the
49
Code), then
Genworth will pay an amount equal to 35% of such loss to GE. Any amount payable under this Section 13(e)
will be made in immediately available funds within 30 days after the date on
which the Genworth federal income Tax return is filed for the Taxable Year in
which such Transaction occurs. For the
avoidance of doubt, this Section 13(e) will not apply to any loss recognized
pursuant to a Reinsurance Transaction.
(f) Any
amount paid pursuant to Section 13(b), (c), (d), or (e) will be treated as an
adjustment to the consideration paid for the Genworth Assets pursuant to
Section 2 of the Master Agreement; provided, however, that a
portion of any such payment equal to the excess of (1) the amount of such
payment, over (2) the present value of such payment (determined as of the
Closing Date by using the Section 12 Rate as the discount rate), or such larger
portion as may be required by Section 483, Section 1274, or any other provision
of the Code, will be treated as interest.
50
SECTION
14. No
Duplicative Payments. No
duplicative payment of interest or any other amount will be required under this
Agreement.
51
SECTION
15. Tax
Cooperation. (a) Under this Agreement and
the Transition Services Agreement, GE and Genworth will furnish or cause to be
furnished to each other, upon request, as promptly as practicable, such
information and assistance relating to the Genworth Companies and the Genworth
Business (including access to books and records) as is reasonably necessary for
the filing of all Tax Returns, the making of any election related to Taxes, the
preparation for any audit by any Taxing Authority, and the prosecution or
defense of any claim, suit or proceeding relating to any Taxes or Tax
Return. GE and Genworth will cooperate
with each other in the conduct of any audit or other proceeding related to Taxes
and all other Tax matters relating to the Genworth Companies and the Genworth
Business, and each will execute and deliver such powers of attorney and other
documents as are necessary to carry out the intent of this Agreement. The party requesting cooperation under this
Section 15 will reimburse the other party for any actual out-of-pocket expenses
incurred in furnishing such cooperation, except that the amount of
reimbursement for any services governed by the Transition Services Agreement
for the time period specified therein shall be determined by that
agreement. All Tax records relating to
the Genworth Business will be retained for at least seven (7) years after such
records are created.
(b) Pursuant
to the Transition Services Agreement, for the time period specified therein,
the GE Parties will provide to Genworth and GNA certain tax consulting, tax
compliance, tax related-software, and other tax-related services (the “GE Tax
Services”) as set forth in Schedule A of the Transition Services Agreement. Further, for the time period specified in
the Transition Services Agreement and as set forth in Schedule B of the
Transition Services Agreement, Genworth and GNA will provide to the GE Parties
certain tax-related services (the “Genworth
52
Tax
Services”). This Agreement incorporates
the provisions of the Transition Services Agreement relating to the GE Tax
Services and the Genworth Tax Services.
Any dispute relating to the performance of the GE Tax Services and the
Genworth Tax Services or the fees payable for such services will be governed by
the provisions of the Transition Services Agreement.
(c) Unless
there has previously been a Final Determination to the contrary, neither
Genworth nor any of its Affiliates will take any position with respect to Taxes
(including on any Tax Return or in connection with any Tax controversy) for any
Taxable Year that is inconsistent with (1) any allocation shown on the Final
Allocation Schedule, (2) any election made pursuant to
Section 8, or (3) the treatment of any payment made pursuant to Section
9 as provided in this Agreement; provided, however, that Genworth
will not be required to take any position if (A) Genworth obtains, at
its sole cost and expense, an opinion of nationally recognized tax counsel
mutually acceptable to Genworth and GE, to the effect that there is no
“substantial authority,” within the meaning of Section 6662 of the Code, for
such position, and (B) such opinion is reasonably
satisfactory in form and substance to GE.
(d) GE
and Genworth will promptly provide to the other a copy of any written
communication from or with the IRS or any other Taxing Authority that relates
in any respect to the treatment of the Acquisition or any related transaction
(including any communication that relates to the allocation shown on the Final
Allocation Schedule).
53
SECTION
16. Resolution
of Disputes. If any
dispute arises between the parties hereto with respect to this Agreement, then,
except as provided in Section 15(b), such dispute will be finally resolved by
arbitration in which the sole arbitrator will be a person or firm chosen
mutually by GE and Genworth. If GE and
Genworth are unable to agree on such a person or firm, then each will designate
one person and the two persons so designated will choose a third person or firm
that will be the sole arbitrator. The parties expressly waive
and forego any right to (a) punitive, exemplary,
statutorily-enhanced, or similar damages in excess of compensatory damages, and
(b)
trial by jury. The parties agree to use commercially
reasonable efforts to resolve any arbitration within 30 days of the initiation
of arbitration. Any arbitration
proceeding will take place in New York, New York unless the parties mutually
agree to another location. The parties
agree that no appeal will lie from the arbitration award, that they will not
challenge the award for any reason in any court, and that the arbitration award
will have the force and effect of a judgment as if a court having jurisdiction
thereof has entered judgment on the award.
The arbitration will be governed by the Federal Arbitration Act, 9
U.S.C. §§ 1-16. The parties expressly
agree that this dispute resolution procedure governs disputes arising under
this Agreement and that it supersedes dispute resolution provisions contained
in any other Transaction Documents, including the Master Agreement.
54
SECTION
17. Survival. Except to the extent inconsistent with
applicable law, the indemnity and payment obligations set forth in this
Agreement will survive until the date which is six months after the date of expiration
of the applicable statute of limitations (including any extensions
thereof). The right to indemnification
with respect to claims of which notice was given prior to the expiration of the
applicable survival period will survive such expiration until such claim is
finally resolved and any obligations with respect thereto are fully satisfied.
55
SECTION
18. Amendment. No provision of this Agreement may be
waived, amended or modified except by a written instrument signed by the GE
Parties and Genworth.
56
SECTION
19. Transfer
and Similar Taxes. All
stock transfer, real estate transfer, documentary, stamp, recording, ad
valorem, and other similar Taxes arising out of, in connection with or
attributable to the Transactions and incurred by any of the parties thereto
will be borne and paid by GE. Genworth
will use its reasonable best efforts to secure, and to cause its Affiliates to
secure, any available exemptions from any such Taxes and to cooperate with GE
in providing any information and documentation that may be necessary to obtain
such exemptions.
57
SECTION
20. Additional
Provisions. Provisions
of the Master Agreement that apply (mutatis mutandis) to this
Agreement include only Sections 8.1 (Corporate Power; Fiduciary Duty); 8.2
(Governing Law); 8.3 (Survival of Covenants); 8.5 (Notices); 8.6 (Severability);
8.7 (Entire Agreement); 8.8 (Assignment; No Third-Party Beneficiaries); 8.9
(Public Announcements); 8.10 (Amendment); 8.11 (Rules of Construction); and
8.12 (Counterparts).
58
IN WITNESS
WHEREOF, this Agreement has been duly executed on the day and year first above
written.
|
GENERAL ELECTRIC COMPANY
|
GENERAL ELECTRIC CAPITAL
CORPORATION
|
|
|
|
|
By:
|
|
|
By:
|
|
|
|
|
Name:
|
|
|
Name:
|
|
|
|
Title:
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
GEI, INC.
|
GE FINANCIAL
ASSURANCE
HOLDINGS, INC.
|
|
|
|
|
|
|
|
By:
|
|
|
By:
|
|
|
|
|
Name:
|
|
|
Name:
|
|
|
|
Title:
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GENWORTH FINANCIAL, INC.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
Name:
|
|
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
Annex A
ELECTION STATEMENT
This Election
Statement is made this day of
, 2003, among
,
a
corporation (the “Ceding Company”), and
,
a
corporation (“Reinsurer”).
Unless
otherwise indicated, all capitalized terms used herein shall have the same
meaning as in the [Assumption/Indemnity] Reinsurance Agreement by and between
the Ceding Company and Reinsurer dated as of
,
2003 (the “Reinsurance Agreement”).
1. The
Ceding Company and Reinsurer hereby make a joint election under Treasury
Regulation § 1.848-2(g)(8) (the “Joint Election”) with respect to the
Reinsurance Agreement.
2. The
Ceding Company and Reinsurer hereby agree to include this Election Statement as
an Addendum to the Reinsurance Agreement.
3. The
Ceding Company and Reinsurer hereby agree that the party with net positive
consideration for the Reinsurance Agreement for each Taxable Year will capitalize
specified policy acquisition expenses with respect to the Reinsurance Agreement
without regard to the general deductions limitation of Section 848(c)(1) of the
Code.
4. The
Ceding Company and Reinsurer hereby agree to exchange all necessary information
pertaining to the amount of net consideration under the Reinsurance Agreement
each year to ensure consistency.
5. The
Ceding Company will submit a schedule to Reinsurer by
[ ]
of each year, of its calculation of the net consideration for the preceding
calendar year. This schedule of
calculations will be accompanied by a statement signed by one of the Ceding
Company’s officers stating that such net consideration will be reported on any
United States federal income Tax Return filed with respect to the Ceding
Company for the preceding calendar year.
6. Reinsurer
may contest such calculation by providing an alternative calculation to the
Ceding Company by
[ ]. If Reinsurer does not so notify the Ceding
Company the net consideration as determined by the Ceding Company will be
reported on any United States federal income Tax Returns filed with respect to
the Ceding Company or Reinsurer for the preceding calendar year.
7. If
Reinsurer contests the Ceding Company’s calculation of the net consideration,
the parties will act in good faith to reach an agreement as to the correct
amount by [date]. If the Ceding Company
and Reinsurer reach agreement on an amount of the net consideration, such
amount shall be reported on any United States federal income Tax Returns filed
with respect to the Ceding Company or Reinsurer for the previous calendar year.
8. The
Ceding Company and Reinsurer hereby agree that the first Taxable Year for which
the Joint Election is effective is the Taxable Year ending [December 31, 2004].
9. Reinsurer
represents and warrants that it is subject to United States taxation within the
meaning of Treasury Regulation Section 1.848-2(h).
A-2
IN WITNESS
WHEREOF, this Election Statement has been duly executed on the day and year
first above written.
|
|
[CEDING
COMPANY]
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
Name:
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
[REINSURER]
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
Name:
|
|
|
|
|
Title:
|
|
A-3
Annex
B
ELECTION STATEMENT
This Election
Statement is made this day of
, 2004 between GE Financial Assurance
Holdings, Inc., a Delaware corporation (“GEFAHI”), and
,
a corporation
(the “Company”).
WHEREAS,
pursuant to the Master Agreement dated as of
,
2003 among the General Electric Company, a New York corporation (“GE”), General
Electric Capital Corporation, a Delaware corporation (“GECC”), GEI, Inc., a
Delaware corporation (“GEI”), GE Financial Assurance Holdings, Inc., a Delaware
corporation (“GEFAHI”, and collectively with GE, GEI, and GECC, the “GE
Parties”), and Genworth Financial, Inc., a Delaware corporation (“Genworth”)
(the “Master Agreement”), Genworth has agreed, on the terms and subject to the
conditions set forth in the Master Agreement, to acquire (the “Acquisition”),
directly or indirectly, all the outstanding shares of stock of certain
subsidiaries of GE (such subsidiaries, together with Genworth, the “Genworth
Companies”) in a transaction that will constitute (as to certain of such
Genworth Companies) a qualified stock purchase within the meaning of Section
338(d)(3) of the Code.
WHEREAS,
pursuant to the Tax Matters Agreement dated as of
among the GE Parties and Genworth (the “GE-Genworth TMA”), GE and Genworth have
agreed to make
a Section 338(h)(10) election with respect to the Company in connection with
the Acquisition (the “Section 338 Election”).
WHEREAS, in
accordance with the Section 338 Election, the Company as of the Closing Date
(“Old Company”) was treated as if it transferred all of its assets and
liabilities, including its insurance contracts, to a new Company and then liquidated.
WHEREAS, pursuant
to the GE-Genworth TMA, GE and Genworth have agreed to treat the deemed
transfer of insurance contracts pursuant to the Section 338 Election as a
deemed assumption reinsurance transaction (the “Deemed Reinsurance
Transaction”) for federal income tax purposes in accordance with proposed
Treas. Reg. § 1.338-11.
WHEREAS,
GEFAHI, on behalf of Old Company, and Company wish to make an election under
Treas. Reg. § 1.848-2(g) requiring the Company to capitalize specified
policy acquisition expenses with respect to the Deemed Reinsurance Transaction
without regard to the general deductions limitation (the “Section 848
Election”).
WHEREAS, there
is no actual reinsurance agreement in which the Section 848 Election may be
made with respect to the Deemed Reinsurance Transaction, and the parties to
this Election Statement intend that, with respect to the Deemed Reinsurance
Transaction, this Election Statement be included as an addendum to the
transaction documents in accordance with Treas. Reg. § 1.848-2(g)(8)(ii).
B-2
NOW THEREFORE,
in consideration of the foregoing and of the mutual promises, covenants, and
conditions contained in the Election Statement, the parties to this Election
Statement agree as follows:
1. Unless
otherwise indicated, all capitalized terms used herein shall have the same
meaning as in the GE-Genworth TMA.
2. GEFAHI,
as successor in interest to Old Company, and the Company hereby make a joint
election under Treasury Regulation § 1.848-2(g)(8) (the “Joint Election”)
with respect to the Deemed Reinsurance Agreement.
3. GEFAHI
and the Company hereby agree that the Company will capitalize specified policy
acquisition expenses with respect to the Deemed Reinsurance Transaction without
regard to the general deductions limitation of Section 848(c)(1) of the Code.
4. GEFAHI
and the Company hereby agree to exchange all necessary information pertaining
to the amount of net consideration with respect to the Deemed Reinsurance Transaction
to ensure consistency.
5. GEFAHI
and the Company hereby agree that the first Taxable Year for which the Joint
Election is effective is the Taxable Year ending on the Closing Date.
6. The
Company represents and warrants that it is subject to United States taxation
within the meaning of Treas. Reg. § 1.848-2(h).
B-3
IN WITNESS WHEREOF, this Election Statement
has been duly executed on the day and year first above written.
|
|
GE FINANCIAL
ASSURANCE HOLDINGS, INC.
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
Name:
|
|
|
|
|
Title:
|
|
|
|
|
|
|
|
|
|
[THE
COMPANY]
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
Name:
|
|
|
|
|
Title:
|
|
B-4