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TAX ALLOCATION AND
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TAX SHARING AGREEMENT
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THIS AGREEMENT, entered into as of the 12th day of June, 1997, by and among
General American Mutual Holding Company ("GAMHC"), a Missouri corporation,
Conning Corporation ("Conning Corp."), a Missouri corporation, Conning, Inc.,
("Conning"), a Delaware corporation, Conning & Company ("Company"), a
Connecticut corporation, and Conning Asset Management Company ("CAM"), a
Missouri corporation.
WITNESSETH THAT:
Whereas, GAMHC is the common parent corporation and a member of an affiliated
group of corporations which files a consolidated Federal income tax return
(such affiliated group of corporations being hereinafter collectively
referred to as the "GAMHC Group");
Whereas, effective as of the day and year first above written, Conning Corp.,
Conning, Company, and CAM became eligible members of the GAMHC Group;
Whereas, the parties wish to preserve to the extent possible the economic
benefits and detriments which would accrue to a member of the GAMHC Group
resulting from its filing separate income tax returns;
Whereas, the parties desire to set forth in writing their mutual agreement
with and acceptance and ratification of a method for making intercompany
allocations of income tax liability and resulting earnings and profits
adjustments among the members of the GAMHC Group during the time period
Conning Corp., Conning, Company, and CAM are members of such group;
Whereas, Conning Corp. is contemplating issuing stock through a public
offering, which could result in Conning Corp., Conning, Company, and CAM
being ineligible for consolidation with the GAMHC Group thereafter; and
Whereas, the parties desire to set forth in writing their agreement as to the
manner in which the consolidated liability of the GAMHC Group for the period
during which Conning Corp., Conning, Company, and CAM are members of the
group, and any changes in such liability, will be handled after Conning
Corp., Conning, Company, and CAM leave the GAMHC Group, and other matters
related to such departure.
NOW, THEREFORE, in consideration of the promises and of the mutual covenants
herein contained, the parties agree as follows:
1. Definitions:
(a) The "Conning Group" means Conning Corp., Conning, Company, CAM,
and any corporation with which any of them files a consolidated
Federal income tax return after the Consolidation Period.
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(b) The "GAXCON Group" means GAMHC and any corporation with which
GAMHC files a consolidated Federal income tax return during or after
the Consolidation Period, exclusive of members of the Conning Group.
(c) The "Consolidation Period" with respect to each member of the
GAXCON Group and Conning Group shall consist of those taxable years
or periods of each such member which are reported in the GAMHC
consolidated Federal income tax return or returns in which Conning
Corp., Conning, Company, and CAM are included as members of the GAMHC
Group.
2. The Federal income tax liability of each member of the GAMHC Group
during the Consolidation Period will be determined as if each such member
filed a separate income tax return directly with the Internal Revenue
Service, except as modified herein.
3. The tax liability so computed, including liability for estimated taxes,
will be remitted by each member to GAMHC in the same amounts and on the same
dates (minus five working days) as the member would have been obligated to
make payment to the Internal Revenue Service had it filed directly with the
Internal Revenue Service. For this purpose any applications for extensions of
time to file or elections as to payments made by GAMHC shall be considered as
having been made by each of the members.
4. GAMHC, upon receipt of such payments, will make the required payment of
the consolidated income tax liability to the Internal Revenue Service.
5. During the Consolidation Period, each member will pay to GAMHC the
amount of any tax assessed by the Internal Revenue Service, upon audit, which
is attributable to such member at such time as the assessment is agreed to or
final, or is paid by GAMHC to the Internal Revenue Service, with applicable
interest and penalties.
6. During the Consolidation Period, refunds arising upon audit by the
Internal Revenue Service, or upon the filing of an amended return or claim
for refund or otherwise, which reduce the tax liability of a member, will be
paid by GAMHC to the member upon receipt, with any interest received.
7. During the Consolidation Period, GAMHC will pay members for any losses
or credits of such member used by the GAMHC Group in computing the GAMHC
Group's tax liability on the consolidated Federal income tax return filed by
GAMHC. Payment shall be made in such amounts, and at such times, as the GAMHC
Group realizes a tax benefit from such losses or credits calculated as
provided in Section 8 of this Agreement. Any tax losses or credits are to be
utilized first by the member generating the losses or credits to reduce the
tax liability of such member to the same extent as if such member filed a
separate Federal income tax return and, to the extent not utilized by such
member, the losses or credits will be available for use by the GAMHC Group.
8. During the Consolidation Period, the consolidated Federal income tax
liability shall be allocated among the members of the GAMHC Group in
accordance with the provisions of Section 1552(a)(2) of the Internal Revenue
Code of 1986, as amended, and Treasury Reg. Sec.1.1502-33(d)(3)(i), the
additional allocation percentage under the latter section to be One Hundred
Percent (100%). In general terms, allowing for various adjustments pursuant
to the
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cited sections, this method provides that the tax liability for the entire
consolidated group will be allocated among the members in proportion to the
tax liability which each member would have had if calculated separately from
the group. If one member's resulting liability is reduced by using a second
member's tax losses or other tax attributes, then the first member's share of
consolidated tax liability is increased by the amount of such savings, and
the savings are paid to the second member as compensation for the use of its
tax losses or other tax attributes. If a determination is made that some
other method of allocation of tax liability is required by law, then such
required allocation method shall be used in lieu of the method described
above.
9. During the Consolidation Period, any state or local tax returns made on
a consolidated or combined basis among some or all members of the GAMHC Group
shall be governed by principles similar to those reflected by this Agreement,
to the extent appropriate under the tax laws of the jurisdictions involved.
10. Notwithstanding the fact that Conning Corp., Conning, Company, and CAM,
as a result of a public offering of the stock of Conning Corp. or upon the
occurrence of some other event, become ineligible to file a consolidated
Federal income tax return with GAMHC, the consolidated tax liability of each
member of the GAMHC Group for the Consolidation Period shall be determined in
accordance with Sections 1 through 9 as set forth above, and all subsequent
activity in relation to that liability, including but not limited to payment
of taxes, refunds and adjustments, shall be governed in accordance therewith.
11. After the Consolidation Period, any change in tax liabilities for the
Consolidation Period, due to audit adjustments or otherwise, shall be treated
in the same manner as the initial determination of tax liability. Any
interest or penalties assessed by a tax authority in conjunction with any
such adjustment shall be borne by the member or members whose tax attributes
are adjusted. Likewise, any interest paid by a tax authority in conjunction
with any favorable adjustment shall be paid to the member or members whose
tax attributes are the source of such interest payment.
12. Except as otherwise provided herein, any attorneys fees or other costs
incurred by GAMHC in the course of defending, against any tax authority, tax
positions taken in GAMHC's consolidated income tax return or returns for the
Consolidation Period shall be borne by GAMHC; and GAMHC shall have total
discretion and control regarding the defense, compromise or concession of all
such positions.
13. (a) Notwithstanding the preceding paragraph, if GAMHC desires to
settle any proposed adjustment, and if such settlement would increase
the tax liability of a member of the Conning Group by more than
$50,000 for any tax year in the Consolidation Period, then GAMHC
shall first furnish a notice to Conning Corp. (the "Settlement
Notice"). The Settlement Notice shall provide an explanation of the
proposed adjustment and the reasons GAMHC has decided to settle. It
shall also include the terms of the proposed settlement, and a
computation of the estimated resulting increase in the share of
consolidated tax liability.
(b) Conning Corp. shall notify GAMHC in writing of the member's
approval or disapproval of the proposed settlement (the "Settlement
Response"). In order to effectively disapprove of the settlement, the
Settlement Response must:
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(i) be sent within thirty days after Conning Corp. receives the
Settlement Notice;
(ii) contain an agreement by Conning Corp. to bear and promptly
pay all expenses incurred by GAMHC in the continuing defense of
the proposed adjustment; and
(iii) be accompanied by an opinion of independent tax counsel, or
of a tax partner of an independent nationally recognized
accounting firm, that there is a reasonable basis to conclude
that the affected Conning Group member would prevail on the
merits or obtain a more favorable settlement than proposed by
GAMHC.
If the Settlement Response approves of the proposed settlement, or if
Conning Corp. fails to provide a Settlement Response which meets the
requirements of an effective disapproval, then Conning Corp. shall be
deemed to have conclusively and irrevocably consented to the
settlement proposed in the Settlement Notice.
(c) If Conning Corp. provides a Settlement Response which effectively
disapproves of the proposed settlement, and if continuing to resist
the proposed adjustment would not require GAMHC to take a position
inconsistent with positions taken on other material issues in defense
of the consolidated return, then GAMHC shall not enter the proposed
settlement, but shall continue to defend against the proposed
adjustment, at Conning Corp.'s expense. In that event, Conning Corp.
may also participate in such defense, including reviewing GAMHC's
proposed arguments against the proposed adjustment and suggesting
additional arguments.
GAMHC may bill Conning Corp. at monthly or greater intervals for all
expenses incurred in such representation, and such bills shall be
payable upon receipt.
14. If a member of the Conning Group generates a net operating loss ("NOL")
for a period subsequent to the Consolidation Period, and if Conning Corp.
requests that GAMHC file an amended tax return for the Consolidation Period
utilizing such NOL, then GAMHC shall file such amended return, and shall pay
any amounts realized from the NOL to the affected Conning Group member in
accordance with the provisions of the Sections 1 through 9 set forth above.
Conning Corp. shall reimburse GAMHC for all costs resulting from such
request, including the cost of filing the return and defending such tax
position. Likewise, if it is subsequently determined that the refund was
improper, Conning Corp. shall pay GAMHC the amount due the IRS, including any
interest and penalties.
15. GAMHC shall indemnify and hold harmless each member of the Conning
Group, on an after-tax basis, against the tax liability of any member of the
GAXCON Group, and against the cost of enforcing GAMHC's obligations under
this Agreement.
16. Conning Corp., Conning, Company, and CAM shall jointly and severally
indemnify and hold harmless each member of the GAXCON Group, on an after-tax
basis, against the tax liability of any member of the Conning Group, and
against the cost of enforcing the obligations of Conning Corp., Conning,
Company, and CAM under this Agreement.
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17. To the extent that an indemnification against tax liability is made
pursuant to this Agreement, the indemnifying party shall be entitled to any
refund of the tax indemnified against, and any interest paid as a part of
such refund. Nothing in this Agreement shall affect any indemnification
obligation of General American Life Insurance Company under Section 3.9 of
the Contribution Agreement dated July 24, 1995, between Conning Corp. and
General American Life Insurance Company, among others.
18. If a party is required by this Agreement to indemnify or reimburse a
member of the Conning Group or the GAXCON Group for any purpose, including
the defense of tax positions, such amounts shall include a reasonable
allocation for work performed in-house, in addition to reimbursement for
out-of-pocket expenses. Such allocation of in-house expenses shall be made in
the same manner as the method then used by GAMHC in allocating personnel time
and other expenses among various areas of the company and shall be fair and
reasonable to both parties. If an amount is due, pursuant to this Agreement,
from a party to this Agreement to a member of the Conning Group or the GAXCON
Group, and if such payment is not made within thirty days of its due date,
the party shall also pay interest from the due date to the date paid, at the
short term Applicable Federal Interest Rate in effect on the due date.
19. This Agreement shall be effective as of the day and year first above
written.
20. Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall be ineffective only in such jurisdiction, and only to
the extent of such prohibition or unenforceability, without invalidating the
remaining provisions hereof.
21. This Agreement shall be governed by and construed in accordance with
the laws of the State of Missouri.
22. Except as otherwise provided herein, each party shall bear its own
costs and expenses incurred pursuant to this Agreement.
23. No failure or delay of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise thereof preclude any other or further exercise thereof or
the exercise of any other right, power or privilege.
24. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be any original, but all of which together shall
constitute one and the same instrument.
25. No party may assign or otherwise transfer any of its rights or
obligations under this Agreement without the consent of the other parties
hereto.
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IN WITNESS WHEREOF, the parties have caused their duly authorized
representatives to execute this Agreement in duplicate originals as of the
day and year first above written.
GENERAL AMERICAN MUTUAL
HOLDING COMPANY
By: /s/ Kent P. Zimmerman
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Kent P. Zimmerman
Assistant Treasurer
CONNING CORPORATION
By: /s/ Leonard M. Rubenstein
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Leonard M. Rubenstein
Chairman & Chief Executive Officer
CONNING, INC.
By: /s/ Fred M. Schpero
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Fred M. Schpero
Secretary
CONNING & COMPANY
By: /s/ Fred M. Schpero
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Fred M. Schpero
Senior Vice President, Secretary
& Chief Financial Officer
CONNING ASSET MANAGEMENT COMPANY
By: /s/ Leonard M. Rubenstein
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Leonard M. Rubenstein
Chairman & Chief Executive Officer
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