TAX SHARING AGREEMENT
THIS AGREEMENT is entered into by and between ReliaStar Life Insurance Company
("ReliaStar") ReliaStar Life Insurance Company of New York (the "Subsidiary"),
and ReliaStar Financial Corp. ReliaStar Financial Corp. is the parent
corporation of ReliaStar and joins in this agreement as a signatory and not as a
participant in the tax sharing arrangement between ReliaStar and the Subsidiary.
WITNESSETH:
WHEREAS, ReliaStar and the Subsidiaries 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 consists of ReliaStar, the Subsidiary, and certain
other subsidiaries of ReliaStar, and which expects to file a consolidated
federal income tax return for each taxable year during which the Subsidiaries
are includible corporations qualified to so file; and
WHEREAS, it is desirable for the Subsidiaries and ReliaStar 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 ReliaStar to the
Subsidiaries and by the Subsidiaries to ReliaStar, 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 a Subsidiary is included
in a consolidated federal income tax return with ReliaStar, the
Subsidiary will pay to ReliaStar an amount equal to the regular
federal income tax liability (including any interest, penalties and
other additions to tax) that such 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 ReliaStar with regard thereto; (iii) the
Subsidiary's payment will be increased to the extent that such
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 ReliaStar in preparing the consolidated
federal income tax return for ReliaStar and its Subsidiaries.
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It is the intention of the parties that the tax charge to the
Subsidiary under this agreement shall not be more than it would have
paid if it had filed on a separate return basis. The Subsidiary shall
be "paid" for any foreign tax credits, investment credits, losses or
any loss carry over ("collectively herein referred to as credits)
generated by it, to the extent actually used in the consolidated
return. Payment shall be equal to the "savings" generated by its
credits. All payments shall be recorded on the Subsidiary's books as
contributed surplus. Once the Subsidiary is "paid" for its credits, it
cannot use such credits in the calculation of its tax liability under
the separate return basis. Any of the Subsidiary's credits which are
not used in the consolidated return and for which it has not been paid
shall be retained by the Subsidiary for possible future use.
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, including carryovers and carrybacks of such
attributes, which could reduce taxes. Except as provided in subsection
(c) of this section, for each taxable year during which a Subsidiary
is included in a consolidated federal income tax return with
ReliaStar, ReliaStar will pay to the Subsidiary an amount equal to the
tax benefit of the Subsidiary's Tax Assets to the extent such Tax
Assets are utilized in the reduction of the consolidated federal
income tax liability of the ReliaStar group. The extent to which Tax
Assets are actually utilized will be determined in accordance with
Income Tax Regulations Sections 1.1552-1(a)(2) and 1.1502-33(d)(3).
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 a Subsidiary (whether by operation of law or at the
discretion of ReliaStar) the Subsidiary shall not be entitled to
payment from ReliaStar with respect thereto. This shall be the case
whether or not that 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 the Subsidiary, will be paid by the
Subsidiary. To the extent such taxes are not directly allocable to the
Subsidiary, such taxes will be paid by the Subsidiary in proportion
that its share of such attributes giving rise to the tax liability
bears to the affiliate group's 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 Subsidiaries shall pay to, or receive from,
ReliaStar such AMT or MTC amount respectively to the extent it
produces the attributes giving rise to the AMT or MTC. The calculation
of the AMT or MTC shall be subject to a methodology determined by
ReliaStar in its sole discretion, provided, however, that any method
adopted by ReliaStar shall not be changed without prior notification
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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 a Subsidiary shall be made by that Subsidiary, and
not by any other company or business unit on behalf of such
Subsidiary.
2. INSTALLMENT PAYMENTS
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a. DETERMINATION AND TIMING - During and following a taxable year in
which a Subsidiary is included in a consolidated federal income tax
return with ReliaStar, it shall pay to ReliaStar, or receive from
ReliaStar, as the case may be, installment payments of the amount
determined pursuant to section 1 of this Agreement. All settlements
under the Agreement shall be made within 30 days of the filing of the
applicable estimated or actual consolidated federal corporate income
tax return with the Internal Revenue Services, except where a refund
is due ReliaStar, in which case, it may defer payment to the
Subsidiary within 30 days of receipt of such refund. All settlements
shall be in cash or securities eligible as investments for such
domestic insurer, at market value.
b. ESTIMATED TAXES AND OTHER AMOUNTS - ReliaStar 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 the
Subsidiary.
c. ADDITIONAL PAYMENTS BY SUBSIDIARY - Should the amount of any tax
payment made by ReliaStar under this section exceed the sum of
installment payments made for any corresponding installment date
pursuant to section 2 of this Agreement, ReliaStar may determine the
fair and reasonable share of that excess, and notify such Subsidiary
thereof and such amount shall be paid over to ReliaStar within 15
business days of the date of notification by ReliaStar.
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, ReliaStar 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 ReliaStar within 30 business days of the
date of notification by ReliaStar.
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 a 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
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paid, then, except as provided in section 6 hereof, payment of such
difference shall be made by the Subsidiary to ReliaStar or by ReliaStar 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.
4. PROCEDURAL MATTERS - ReliaStar 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, ReliaStar 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
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.
The Subsidiary hereby irrevocably appoints ReliaStar as its agent and
attorney-in-fact to take such action (including the execution of documents)
as ReliaStar may deem appropriate to effect the foregoing.
5. THE SUBSIDIARY LEAVING THE RELIASTAR GROUP - Except as specifically treated
to the contrary herein, the Subsidiary shall be treated as having withdrawn
from this Agreement when it 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 ReliaStar shall be recomputed
with respect to the withdrawing 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 such
Subsidiary is a member of the affiliated group. Any amounts so computed as
due to or from ReliaStar to or from the 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 ReliaStar related to the tax liability of
the withdrawing Subsidiary for the portion of the year of withdrawal during
which it had been a member of the affiliated group, shall be settled in
accordance with the provisions of section 2 of this Agreement.
The extent to which ReliaStar or such Subsidiary is entitled to any other
payments as a result of adjustments, as provided in section 3 hereof,
determined after such Subsidiary has left the affiliated group but
affecting any taxable year during which this Agreement was in effect with
respect to ReliaStar and the Subsidiary, shall be provided for pursuant to
a separate written agreement between ReliaStar and the Subsidiary, or its
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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 ReliaStar and the Subsidiary, or its new owner.
6. BOOKS AND RECORDS - The books, accounts and records of ReliaStar 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 ReliaStar and/or the Subsidiary during regular business
hours. Records will be retained by ReliaStar and by the Subsidiary, in a
manner satisfactory to ReliaStar, 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 ReliaStar or the
Subsidiary with such taxing authority.
7. EARNINGS AND PROFITS - The earnings and profits of ReliaStar 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).
8. ESCROW AGREEMENTS - To help assure the Subsidiary's enforceable right to
recoup federal income taxes in the event of future net losses an escrow
account consisting of assets eligible as an investment for the Subsidiary
shall be established and maintained by ReliaStar in an amount equal to the
excess, if any, of the amount paid by the Subsidiary to ReliaStar for
federal income taxes over the actual payment made by ReliaStar to the
Internal Revenue Service on behalf of the consolidated group. Escrow assets
may be released to ReliaStar from the escrow account at such time as the
permissible period for loss carrybacks has elapsed. The escrow agreement
contemplated in this paragraph shall not establish prior to a taxable year
in which federal taxes paid by the Subsidiary exceed the actual tax payment
made by ReliaStar on behalf of the consolidated group.
9. TERMINATION - This Agreement shall be terminated if ReliaStar 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, or if the Subsidiary ceases to be a member in the affiliated group
for any reason.
10. ADMINISTRATION - This Agreement shall be administered by the Vice President
of Taxes of ReliaStar or, in his/her absence, by any other officer of
ReliaStar so designated by the Controller of ReliaStar.
11. 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 ReliaStar and any Subsidiary with respect to the matters
contained herein and such previous agreement shall thereupon terminate. The
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Agreement shall apply to the taxable year 2001 and to all subsequent
periods unless and until amended or terminated, as provided in section 9
hereof.
12. ASSIGNABILITY - This agreement shall not be assignable by either ReliaStar
or the Subsidiary without the prior written consent of the other party.
13. ARBITRATION OF DISPUTES - Any dispute that arises under this Agreement will
be settled by arbitration in accordance with the applicable rules and
procedures of the American Arbitration Association then in effect. Any
decision rendered in accordance with those rules and procedures will be
enforceable in any court of competent jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have executed this Tax Sharing Agreement.
ReliaStar Life Insurance Company By /s/ Xxxx X. Xxxx
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Title: Assistant Corporate Secretary
Date: August 2, 2002
ReliaStar Life Insurance Company of By /s/ Xxxxxxx X. Xxxxxxxxxx
New York ---------------------------------------
Title: Executive Vice President
Date: July 22, 2002
ReliaStar Financial Corp. By /s/ Xxxxx Xxxxxxx-Xxxxxxx
---------------------------------------
Title: Corporate Secretary
Date: July 17, 2002
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