TAX SHARING AGREEMENT
THIS AGREEMENT is entered into by and between Equitable Life Insurance Company
of Iowa ("EQUITABLE"), USG Annuity & Life Company ("USG"), and Golden American
Life Insurance Company ("Golden")(USG and Golden referred to herein as "the
Subsidiary").
WITNESSETH:
WHEREAS, EQUITABLE and the Subsidiary are members of an affiliated group, as
that term is defined in Section 1504 of the Internal Revenue Code of 1986, as
amended (the "Code"), which expects to file a consolidated federal income tax
return for each taxable year during which the Subsidiary are includible
corporations qualified to so file; and
WHEREAS, it is desirable for the Subsidiary and EQUITABLE to enter into this Tax
Sharing Agreement ("Agreement") to provide for the manner of computation of the
amounts and timing of payments with regard thereto by EQUITABLE to the
Subsidiary and by the Subsidiary to EQUITABLE, and various related matters;
NOW, THEREFORE, in consideration of the agreements contained herein and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. AMOUNT OF PAYMENTS
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a. GENERAL - For each taxable year during which the Subsidiary is
included in a consolidated federal income tax return with EQUITABLE,
the Subsidiary will pay to EQUITABLE an amount equal to the regular
federal income tax liability (including any interest, penalties and
other additions to tax) that the Subsidiary would pay on its taxable
income if it were filing a separate, unconsolidated return, provided
that (i) Tax Assets (as defined herein) will be treated in accordance
with subsection (b) of this section, (ii) intercompany transactions
will be treated in accordance with income tax regulations governing
intercompany transactions in consolidated returns and subject to any
election which may be made by EQUITABLE with regard thereto; (iii) the
Subsidiary's payment will be increased to the extent that the
Subsidiary generates Other Taxes, as determined in accordance with
subsection (d) of this section; (iv) such computation will be made as
though the highest rate of tax specified in subsection (b) of Section
11 of the Code were the only rate set forth in that subsection, and
(v) such computation shall reflect the positions, elections and
accounting methods used by EQUITABLE in preparing the consolidated
federal income tax return for EQUITABLE and the Subsidiary.
b. TAX ASSETS - "Tax Asset" shall mean any net operating loss, net
capital loss, investment tax credit, foreign tax credit, charitable
deduction, dividends received deduction or any other deduction, credit
or tax attribute which could reduce taxes. Except as provided in
subsection (c) of this section, for each taxable year during which the
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Subsidiary is included in a consolidated federal income tax return
with EQUITABLE, EQUITABLE will pay to the Subsidiary an amount equal
to the tax benefit of the Subsidiary's Tax Assets generated in such
year. The valuation of the tax benefit attributable to the
Subsidiary's Tax Assets shall be made by EQUITABLE, and shall be
determined without regard to whether such Tax Assets are actually
utilized in the reduction of the consolidated federal income tax
liability for any consolidated taxable year.
c. Separate Return Years - To the extent any portion of a Tax Asset of
the affiliated group is carried back to a pre-consolidation separate
return year of the Subsidiary (whether by operation of law or at the
discretion of EQUITABLE) the Subsidiary shall not be entitled to
payment from EQUITABLE with respect thereto. This shall be the case
whether or not that the Subsidiary actually receives payment for the
benefit of such Tax Asset from the Internal Revenue Service ("IRS") or
from the parent of a former affiliated group.
d. Other Taxes - For any taxable year in which the affiliated group
incurs taxes (other than the alternative minimum tax) such as ITC
recapture, environmental tax, etc. ("Other Taxes"), such taxes, to the
extent directly allocable to particular members of the affiliated
group, will be paid by such members. To the extent such taxes are not
directly allocable to particular members of the affiliated group, such
taxes will be paid by EQUITABLE and/or the Subsidiary producing the
attributes that give rise to such taxes, in the proportion that such
attributes bear to the total amount of such attributes.
e. ALTERNATIVE MINIMUM TAX ("AMT") AND RELATED MINIMUM TAX CREDIT
("MTC")- For any taxable year in which the affiliated group incurs an
AMT or utilizes a MTC, the Subsidiary producing the attributes that
give rise to the AMT or MTC shall pay to, or receive from, EQUITABLE
such AMT or MTC amount respectively. The calculation of the AMT or MTC
shall be subject to a methodology determined by EQUITABLE in its sole
discretion, provided, however, that any method adopted by EQUITABLE
shall not be changed without prior notification to the Subsidiary. Any
payments required under this subsection are in addition to payments
required under the previous subsections.
f. Unless specifically approved in writing, all payments made pursuant to
this Agreement by the Subsidiary shall be made by the Subsidiary, and
not by any other company or business unit on behalf of the Subsidiary.
2. INSTALLMENT PAYMENTS
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a. DETERMINATION AND TIMING - During and following a taxable year in
which the Subsidiary is included in a consolidated federal income tax
return with EQUITABLE, it shall pay to EQUITABLE, or receive from
EQUITABLE, as the case may be, installment payments of the amount
determined pursuant to section 1 of this Agreement. Payments shall
take place on the dates, on the bases of calculations, and in amounts
that produce cumulative installments, as follows:
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DATE BASIS OF CALCULATION CUMULATIVE INSTALLMENT
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April 15 Prior year annual financial statement 25% of tax liability as determined in prior
year financial statements results updated for
known adjustments
June 15 March 31 three month financial statement 50% of tax liability as determined by current
financial statement annualized results
September 15 June 30 six month financial statement 75% of tax liability as determined by current
financial statement annualized results
December 15 September 30 nine month financial 100% of tax liability as determined by
statement current financial statement annualized results
March 15 Year-end annual financial statement 100% of tax liability as determined by actual
financial statements results for prior year
updated for known adjustments
Not earlier than September Final tax return 100% of tax liability for prior year
15 of the following year
The due dates, basis of calculation and cumulative installments set
forth above and made during a taxable year are intended to correspond
to the applicable percentages as set forth in Section
6655(e)(2)(B)(ii) of the Code. Should the Code be amended to alter
such provisions, it is hereby agreed by the parties to this Agreement
that the provisions will correspondingly change. EQUITABLE may revise
the schedule of installment payments set forth in this paragraph, and
may provide for annual rather than quarterly payments in cases where
amounts due fall below a certain threshold, although any such change
shall be prospective and shall not take effect prior to written notice
to the Subsidiary.
b. Estimated Taxes and Other Amounts - EQUITABLE shall pay required
installments of federal estimated taxes pursuant to Code section 6655,
and such other amounts with respect to taxes shown on the consolidated
return for the taxable year pursuant to any other applicable provision
of the Code ("tax payment"), to the IRS on behalf of itself and each
Subsidiary. EQUITABLE shall have the sole right to determine the
amount of each such tax payment with respect to the affiliated group's
tax liability for the taxable year.
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c. ADDITIONAL PAYMENTS BY SUBSIDIARY - Should the amount of any tax
payment made by EQUITABLE under this section exceed the sum of
installment payments made by the Subsidiary for any corresponding
installment date pursuant to section 2 of this Agreement, EQUITABLE
may, in its sole discretion, determine such Subsidiary's fair and
reasonable share of that excess, and notify such Subsidiary thereof
and such amount shall be paid over to EQUITABLE within 15 business
days of the date of notification by EQUITABLE. Should EQUITABLE make
any tax payment to the IRS on a date that does not correspond to the
installment dates pursuant to section 2, the Subsidiary will pay over
to EQUITABLE an amount which EQUITABLE may in its sole discretion,
determine to be due from the Subsidiary.
d. Penalty in Addition to Tax - If a penalty or an addition to tax for
underpayment of estimated taxes is imposed on the affiliated group
with respect to any required installment under section 6655 of the
Code, EQUITABLE shall, in its sole discretion, determine the amount of
the Subsidiary's share of such penalty or addition to tax, which
amount shall be paid over to EQUITABLE within 15 business days of the
date of notification by EQUITABLE.
3. ADJUSTED RETURNS - If any adjustments are made to the income, gains,
losses, deductions or credits of the affiliated group for a taxable year
during which the Subsidiary is a member, whether by reason of the filing of
an amended return, or a claim for refund with respect to such taxable year,
or an audit with respect to such taxable year by the IRS, the amounts due
under this Agreement for such taxable year shall be redetermined by taking
into account such adjustments. If, as a result of such redetermination, any
amounts due under this Agreement shall differ from the amounts previously
paid, then, except as provided in section 6 hereof, payment of such
difference shall be made by the Subsidiary to EQUITABLE or by EQUITABLE to
the Subsidiary, as the case may be, (a) in the case of an adjustment
resulting in a refund or credit, not later than thirty (30) days after the
date on which such refund is received or credit is allowed with respect to
such adjustment or (b) in the case of an adjustment resulting in the
assertion of a deficiency, not later than thirty (30) days after the
Subsidiary is notified of the deficiency. Any amounts due to or from a
Subsidiary under this section shall be determined with respect to such
refund or deficiency and any penalties, interest or other additions to tax
which may be imposed. EQUITABLE shall indemnify the Subsidiary in the event
the Internal Revenue Service levies upon the Subsidiary's assets for unpaid
taxes in excess of the amount required to be paid by the Subsidiary in
relation to a consolidated federal income tax return filed pursuant to this
Agreement.
4. PROCEDURAL MATTERS - EQUITABLE shall prepare and file the consolidated
federal income tax return and any other returns, documents or statements
required to be filed with the IRS with respect to the determination of the
federal income tax liability of the affiliated group. In its sole
discretion, EQUITABLE shall have the right with respect to any consolidated
federal income tax returns which it has filed or will file, (a) to
determine (i) the manner in which such returns, documents or statements
shall be prepared and filed, including, without limitation, the manner in
which any item of income, gain, loss, deduction or credit shall be
reported, (ii) whether any extensions may be requested and (iii) the
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elections that will be made by the Subsidiary, (b) to contest, compromise
or settle any adjustment or deficiency proposed, asserted or assessed as a
result of any audit of such returns by the IRS, (c) to file, prosecute,
compromise or settle any claim for refund and (d) to determine whether any
refunds to which the affiliated group may be entitled shall be paid by way
of refund or credited against the tax liability of the affiliated group.
Each Subsidiary hereby irrevocably appoints EQUITABLE as its agent and
attorney-in-fact to take such action (including the execution of documents)
as EQUITABLE may deem appropriate to effect the foregoing.
5. ADDITIONAL MEMBERS - If future subsidiaries are acquired or created and
they participate in the consolidated federal income tax filing, such
subsidiary shall join in and be bound by this Agreement. This section will
also apply to subsidiaries that are not eligible immediately to join the
affiliated group, when they become eligible to join the affiliated group.
6. COMPANIES LEAVING EQUITABLE GROUP - Except as specifically treated to the
contrary herein, the Subsidiary shall be treated as having withdrawn from
this Agreement when the Subsidiary ceases to be a member of the affiliated
group, or upon signing a letter of intent or a definitive agreement to sell
the Subsidiary. Notwithstanding any provision to the contrary in section 2
hereof, amounts payable to or receivable from EQUITABLE shall be recomputed
with respect to the Subsidiary, including an estimate of the remaining
taxes actually payable or receivable upon the filing of the consolidated
tax return for the year of withdrawal, as of the last day the Subsidiary is
a member of the affiliated group. Any amounts so computed as due to or from
EQUITABLE to or from an existing Subsidiary shall be paid prior to its
leaving the group, provided, however, that any deficiency or excess of
taxes determined on the basis of the tax return filed for the year of
withdrawal, and paid to or from EQUITABLE related to the tax liability of
the Subsidiary for the portion of the year of withdrawal during which it
had been a member of the affiliated group, shall be settled not later than
November 15 of the year following the year of the date of withdrawal, in
accordance with section 2 of this Agreement.
The extent to which EQUITABLE or such Subsidiary is entitled to any other
payments as a result of adjustments, as provided in section 3 hereof,
determined after the Subsidiary has left the affiliated group but affecting
any taxable year during which this Agreement was in effect with respect to
EQUITABLE and the Subsidiary, shall be provided for pursuant to a separate
written agreement between EQUITABLE and the Subsidiary, or its new owner,
or in the absence of such agreement, pursuant to the provision of section 3
hereof. Tax benefits arising from the Tax Assets of the Subsidiary carried
back to tax years during which the Subsidiary was a member of the
affiliated group shall not be refunded to the Subsidiary, unless
specifically provided for pursuant to a separate written agreement between
EQUITABLE and the Subsidiary, or its new owner.
In the case of any Tax Asset of the Subsidiary (i) that arose in a
consolidated taxable year during which it was a member of the affiliated
group, (ii) for which the Subsidiary was paid by EQUITABLE pursuant to
Section 1(b) of this Agreement, and (iii) which has not been utilized in
the reduction of the consolidated federal income tax liability of the
affiliated group for any consolidated taxable period ending on or before
the date that the Subsidiary leaves the group, the Subsidiary shall repay
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to EQUITABLE prior to the time it leaves the group the amount of the tax
benefit previously received with respect to the Tax Asset.
7. BOOKS AND RECORDS - The books, accounts and records of EQUITABLE and the
Subsidiary shall be maintained so as to provide clearly and accurately the
information required for the operation of this Agreement. Notwithstanding
termination of this Agreement, all materials including, but not limited to,
returns, supporting schedules, workpapers, correspondence and other
documents relating to the consolidated federal income tax return shall be
made available to EQUITABLE and/or the Subsidiary during regular business
hours. Records will be retained by EQUITABLE and by the Subsidiary, in a
manner satisfactory to EQUITABLE, adequate to comply with any audit request
by the IRS or appropriate State taxing authority, and, in any event to
comply with any record retention agreement entered into by EQUITABLE or the
Subsidiary with such taxing authority.
8. EARNINGS AND PROFITS - The earnings and profits of EQUITABLE and the
Subsidiary shall be determined during the period in which they are members
of the affiliated group filing a consolidated tax return by allocating the
consolidated tax liability in accordance with Income Tax Regulations
ss.ss.1.1552-1(a)(2) and 1.1502-33(d)(3).
9. ESCROW AGREEMENTS - The parties hereto agree that, to the extent required
by applicable law, they shall enter into and file with appropriate
jurisdictions any escrow agreements or similar contractual arrangements
with respect to the taxes covered by this Agreement. The terms of such
agreements shall, to the extent set forth therein, and with respect to the
parties thereto, prevail over the terms of this Agreement.
10. TERMINATION - This Agreement shall be terminated if EQUITABLE and the
Subsidiary agree in writing to such termination or if the affiliated group
fails to file a consolidated federal income tax return for any taxable
year.
11. ADMINISTRATION - This Agreement shall be administered by the Vice President
of Taxes of EQUITABLE or, in his/her absence, by any other officer of
EQUITABLE so designated by the Controller of EQUITABLE. Disputes between
EQUITABLE and the Subsidiary shall be resolved by the Vice President of
Taxes of EQUITABLE or other designated officer and the senior financial
officer of each Subsidiary involved in the dispute.
12. PERIOD COVERED - This Agreement shall be effective with respect to each
party thereto upon signing by such party, and shall supersede all previous
agreements between EQUITABLE and any Subsidiary with respect to the matters
contained herein and such previous agreement shall thereupon terminate. The
Agreement shall apply to the taxable year 2001, to all prior taxable years
which are open to adjustments as provided in section 3 hereof (to the
extent not subject to any separate tax sharing agreement) and to all
subsequent periods unless and until amended or terminated, as provided in
section 10 hereof.
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IN WITNESS WHEREOF, the parties herto have excuted this Tax Sharing Agreement.
Equitable Life Insurance Company of By: /s/ Xxxxx Xxxxxxx-Xxxxxxx
Iowa ----------------------------------------------------
Title: Secretary
USG Annuity & Life Company By /s/ Xxxxx Xxxxxxx-Xxxxxxx
----------------------------------------------------
Title: Secretary
Golden American Life Insurance Company By By /s/ Xxxxx Xxxxxxx-Xxxxxxx
----------------------------------------------------
Title: Secretary
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