Common use of DAC Tax Reimbursement Clause in Contracts

DAC Tax Reimbursement. (a) For purposes of this Agreement, the term "DAC Adjustment" is calculated as follows: First, for each taxable year with respect to each category of Policies, "the gross amount incurred by the reinsurer with respect to [this Agreement]" (as such phrase is defined in Treasury Regulations Section 1.848-2(f)(2)(i)(A) issued pursuant to Section 848 of the Code) for such category (but not including any DAC Adjustment incurred in such year) is multiplied by the applicable percentage set forth in Section 848(c)(1) of the Code for such category. The amount, if any, from the preceding sentence for a category of Policies is then reduced (below zero, if necessary) by the amortization allowed the Company under Section 848(a)(2) of the Code with respect to any such amount (without regard to any payment of any DAC Adjustment). The result for a category, whether positive or negative, is then multiplied by the quotient of: tr/(1-(tr x (l+Y))), where tr = the maximum applicable marginal corporate federal income tax percentage (as set forth in Section 11 of the Code) for the taxable year, and Y= the applicable percentage set forth in Section 848(c)(1) of the Code for such category of Policies. The aggregate amount of such calculations for all categories of Policies for a taxable year (whether positive or negative) is the DAC Adjustment for the year. (b) Within sixty (60) days of the end of the Company's taxable year, the Reinsurer shall calculate the DAC Adjustment for the year and submit such calculations to the Company for review. If, within thirty (30) days of the Company's receipt of such calculations, the Company shall not have objected in writing to such calculations, the calculations shall become final. If, within fifteen (15) days of any objection in writing to such calculations, the Company and the Reinsurer shall not have agreed in writing to such calculations (in which case the calculations shall become final)), any disputed aspects of the calculations shall be resolved by the Third Party Accountant within thirty (30) days of the submission of the dispute to the Third Party Accountant by the Company or the Reinsurer. In resolving such dispute the Third Party Accountant shall only consider those items or amounts as to which the parties have disagreed. The decision of the Third Party Accountant shall be final (and the resulting calculations shall be final), and the costs, expenses, and fees of the Third Party Accountant shall be borne equally by the Company and the Reinsurer. (c) If the amount of the DAC Adjustment for any taxable year of the Company is positive, the Reinsurer shall pay such amounts to the Company within fifteen (15) days of the date on which the calculations of the DAC Adjustment become final. If the amount of the DAC adjustment for any taxable year of the Company is negative, the Company shall pay such amount to the Reinsurer within fifteen (15) days of the date on which the calculations of the DAC Adjustment become final. (d) Notwithstanding any other provision of this Section 17.01, the term "gross amount incurred by the reinsurer with respect to [this Agreement]" shall not include all or any part of the Purchase Price (as defined in the Transfer Agreement). (e) In the event that Section 848 of the Code or the Treasury Regulations issued thereunder are amended after the date hereof and any change is made to the amortization period under Section 848(a)(2) of the Code, the capitalization percentages in Section 848(c)(l) of the Code, the definition of the term "gross amount incurred by the reinsurer with respect to the reinsurance agreement" in Section 1.848-2(f)(2)(i)(A) of the Treasury Regulations, or any other material element of the calculation of the DAC Adjustment, the Company and the Reinsurer shall cooperate in good faith to modify the definition of the term "DAC Adjustment" to reflect such change, consistent with the principles and assumptions originally used in defining that term in this Agreement.