Outsourcing Services Separation Agreement

Exhibit 10.6


OUTSOURCING SERVICES SEPARATION AGREEMENT


OUTSOURCING SERVICES SEPARATION AGREEMENT, dated as of , 2004 (this " Agreement" ), among GE Capital International Services (" GECIS" ), a corporation duly formed and existing under the laws of India with a place of business at AIFACS Building, 1 Rafi Marg, Delhi-110001 and a Corporate office at GE Towers, Sector Road, Sector 53, DLF City, Phase 5, Gurgaon, Haryana, and a wholly-owned subsidiary of General Electric Capital Corporation, a Delaware corporation (" GECC" ), GECC, General Electric Company (" GE" ) and Genworth Financial, Inc., a Delaware corporation.


W I T N E S S E T H:


WHEREAS, GE and GECC have determined to consolidate the Genworth business, including Genworth and certain of its Affiliates (collectively, unless the context otherwise requires, " Genworth" ), into a separate corporate structure with Genworth acting as the parent entity for the Genworth business, and have further determined to divest a controlling interest in the stock of Genworth (the " Separation" ) and, as part of such divestiture, to conduct an initial public offering of the common stock of Genworth (the " IPO" );


WHEREAS, GECIS and certain of its Affiliates (collectively, unless the context otherwise requires, " GECIS" ) and Genworth and certain of its predecessors are parties to a series of Master Outsourcing Agreements and related Project Specific Agreements (the " PSAs" ) and certain other service agreements (collectively, the " MOAs" ) calling for the provision of certain services by GECIS to Genworth; and


WHEREAS, in anticipation of the proposed Separation, GECIS and Genworth have determined that it is appropriate to amend the terms of the MOAs as set forth in this Agreement.


NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereby agree as follows:


1. Agreement to Amend MOAs . The parties agree to amend and/or restate, or cause to be amended and/or restated, each of the MOAs to reflect the modifications set forth in the attached Exhibits A , B and C , with such changes therein as may be necessary to appropriately reflect any unique provisions of any MOA (such changes to be negotiated and agreed upon in good faith in a commercially reasonable manner) or as may be necessary to obtain all necessary approvals of the amended and restated MOAs by governmental agencies, effective as of the Closing Date of the IPO or such later date as the parties may agree upon in writing. The parties will agree upon the definitive forms of such amendments and/or restatements prior to the Closing Date and the effectiveness of such amendments and restatements shall be contingent upon (i) delivery of the Firm Public Offering Shares to the Underwriters against payment therefor and (ii) receipt by Genworth of all necessary approvals of such amended and restated MOAs by all governmental agencies. GECIS will cooperate with Genworth as it may reasonably request in obtaining all such approvals. In the event of any conflict between the provisions of such amended and restated MOAs and any effective PSAs relating to such MOAs, the parties will negotiate in good faith to resolve such conflicts in a commercially reasonable manner. If the parties are unable to resolve such conflicts, the provisions of the amended and/or restated MOA shall control. The provisions of Exhibit A , B and C are intended to be in addition to the provisions of each MOA, provided, that in the event of any conflict between the provisions of such Exhibits and any MOA, the provisions of such Exhibits shall control. Unless otherwise expressly agreed by the parties to an MOA, matters arising prior to the effective date of any amended and restated MOA will be governed by the provisions of the MOA in effect prior to such amendment and restatement.


2. Carve-Out Option . Commencing with the Closing Date, and until the termination or, expiration of all of the MOAs, Genworth, or its designee, shall have the option, exercisable upon the occurrence of any one of the Carve-Out Conditions (as defined in Exhibit B ), to require GECIS or its Affiliates, as applicable, to transfer or cause to be transferred to Genworth or its designee, the Resources (as defined in Exhibit B ) employed by GECIS or such Affiliates to provide the services


CONFIDENTIAL TREATMENT REQUESTED


CONFIDENTIAL TREATMENT REQUESTED: INFORMATION FOR WHICH CONFIDENTIAL TREATEMENT HAS BEEN REQUESTED IS OMITTEED AND IS NOTED WITH " **" .

AN UNREDACTED VERSION OF THIS DOCUMENT HAS BEEN FILED

SEPARATELY WITH THE SECURITIES AND

EXCHANGE COMMISSION.


to Genworth and any other entity receiving services from GECIS on the terms and conditions set forth on Exhibit B . The exercise of such option shall, in each case, be subject to the receipt by Genworth and its Affiliates or its designee and GECIS and its Affiliates of all necessary approvals of governmental agencies. GECIS will cooperate with Genworth and its designees as they may reasonably request in obtaining all such approvals. No acquiror of a business operation divested by Genworth shall be entitled to exercise the Carve-Out Option.


3. Waiver of Change of Control Provisions . GECIS agrees that the transactions contemplated by the Separation and the IPO shall not be deemed to constitute a " change of control" for purposes of Section 6.3 of the MOAs (which addresses the acquisition by a party other than GE of more than fifty percent of the voting control or assets of a party to an MOA) , or any similar provision of the MOAs and PSAs, and irrevocably waives any rights it may have to terminate or modify the terms of any MOA or PSA as a result of such transactions. 4. Entire Agreement . Except as otherwise expressly provided in this Agreement, this Agreement (including the Exhibits attached hereto) constitutes the entire agreement of the parties hereto with respect to the subject matter of this Agreement and supersedes all prior agreements and undertakings, both written and oral, between or on behalf of the parties hereto with respect to the subject matter of this Agreement. 5. Severability . If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced under any Law or as a matter of public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties to this Agreement shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement be consummated as originally contemplated to the greatest extent possible. 6. Assignment; No Third-Party Beneficiaries . This Agreement shall not be assigned by any party hereto without the prior written consent of the other parties hereto. This Agreement is for the sole benefit of the parties to this Agreement and their permitted successors and assigns and, except for beneficiaries of the indemnities set forth in Exhibit A , nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 7. Amendment . No provision of this Agreement may be amended or modified except by a written instrument signed by all the parties to such agreement. No waiver by any party of any provision hereof shall be effective unless explicitly set forth in writing and executed by the party so waiving. The waiver by either party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other subsequent breach. 8. Rules of Construction . Interpretation of this Agreement shall be governed by the following rules of construction: (a) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (b) references to the terms Article, Section, paragraph, Exhibit and Schedule are references to the Articles, Sections, paragraphs, Exhibits and Schedules to this Agreement unless otherwise specified, (c) the word " including" and words of similar import shall mean " including, without limitation," (d) provisions shall apply, when appropriate, to successive events and transactions, (e) the table of contents and headings contained herein are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement and (f) this Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted. 9. Dispute Resolution . Any dispute, controversy or claim arising out of or relating to the transactions contemplated by this Agreement, or the validity, interpretation, breach or termination of any provision of this Agreement shall be resolved in accordance with the dispute resolution mechanism described in Exhibit C . 10. Counterparts . This Agreement may be executed in one or more counterparts, and by the different parties to each such agreement in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile shall be as effective as delivery of a manually executed counterpart of any such Agreement.

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11. Governing Law . This Agreement shall be governed by and construed and interpreted in accordance with the Laws of the State of New York irrespective of the choice of laws principles of the State of New York other than Section 5-1401 of the General Obligations Law of the State of New York. [The remainder of this page is intentionally left blank]


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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the date first written above by their respective duly authorized officers.


GENERAL ELECTRIC COMPANY


By:


Name:


Title:


GE CAPITAL INTERNATIONAL SERVICES


By:


Name:


Title:


GENERAL ELECTRIC CAPITAL CORPORATION


By:


Name:


Title:


GENWORTH FINANCIAL, INC.


By:


Name:


Title:


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EXHIBIT A

Amendments to MOAs


Each of the outstanding MOAs shall be amended as set forth in Section 1 of this Agreement to provide as follows:


Item


Term

Services:


BCP/DRP Plans:


ullet GECIS shall maintain Business Continuity and Disaster Recovery Plans (" BCP/DRP" ) for " Mission Critical" operations within the Genworth processes


ullet Genworth shall identify the operations to be earmarked as " Mission Critical" . Genworth and GECIS shall mutually agree on the BCP/DRP plan, including such plan during an event of force majeure, and implementation; provided, however, the specific requirements to be satisfied by the plan shall be solely determined by Genworth.


ullet BCP/DRP shall be provided in accordance with the pricing mechanism described below.


Changing location:


Except as provided in the BCP/DRP, GECIS shall not change or move the original location for the performance of the Services, without the prior written consent of Genworth.


Divestitures:


If Genworth divests any business operation (other than pursuant to a transaction that would constitute a Change of Control), GECIS will provide the services provided under any MOA or PSA to such operation if such operation (i) used the services prior to being divested, (ii) after being divested uses either essentially the same services as before being divested, or Genworth or the acquiring entity compensates GECIS to modify its systems or processes used to perform and provide the services as necessary to accommodate the use of the services as reasonably requested by the acquiring entity, (iii) the acquiror of such operation agrees to be subject to the provisions of the MOA and related PSAs, and (iv) Genworth is not in payment default at the time of the request, but, in that case, GECIS must provide support if paid in advance. At Genworth' s option, GECIS and such acquiror shall enter into a separate MOA and PSA providing for the provision of the services, which agreements shall be on substantially the same terms and conditions as are set forth in the applicable MOA and PSA, with such changes therein as the parties may agree upon. GECIS shall charge for the continuing performance and delivery of such services based on the then existing charging methodologies and may charge Genworth or the acquiring entity for the reasonable implementation and set-up fees relating to the extension of the services to such entity. GECIS and the acquiring entity will negotiate in good faith for up to 120 days following the divestiture to agree upon alternative terms and conditions that will apply to the provision of the services to such entity by GECIS. If they are unable to so agree, at the request of the acquiring entity, GECIS shall be required to provide the services to such acquiring entity until the earlier of (i) the last day of the 12th month following such 120-day negotiation period and (ii) the termination date of the applicable MOA and related PSAs, provided , that if GECIS is requested to provide such services for less than 12 months following the end of such 120-day negotiation period, such acquiring entity or Genworth shall bear all costs actually incurred by GECIS as a result of such reduction in volume, provided , further , that GECIS shall use commercially reasonable efforts to mitigate such costs. Such services shall be provided by GECIS regardless of whether the acquiring entity is a competitor of GE or any of its affiliates. GECIS shall provide Services Transfer Assistance as reasonably requested by the acquiror, solely at the acquiror' s cost, for the period during which GECIS is required to provide Services to such acquiror.


Item


Term


If GECIS executes a definitive agreement to divest any or part of any business operation relating to the services provided to Genworth other than the Genworth India operations operating on a stand alone basis (i.e. the operations responsible for providing core services exclusively relating to Long Term Care, Life Insurance, Group Insurance, Annuities, Retirement Plans and Mortgage Insurance to Genworth, but excluding, inter alia, accounting, help desk, software solutions e-learning and other knowledge-based operations)(a " GECIS Divestiture" ), GECIS will provide no less than 30 days' prior written notice of the expected closing date of the GECIS Divestiture to Genworth, which notice will include the identity of the acquiror and any affiliate which would provide services to Genworth and a description of the material terms of the transaction applicable to the services being transferred to the acquiror. GECIS will provide Genworth with such further information regarding the divestiture and the acquiror as Genworth may reasonably request. GECIS may take no action with respect to the proposed Genworth Divestiture (in which case the GECIS Divestiture may proceed without Genworth' s consent) or, within 30 days of receipt of such notice from GECIS, Genworth may at its option (i) exercise the Carve-Out Option only with respect to the Resources relating to such services which are being or have been divested to the acquiring entity at the lesser of book value or the value of the divested operations relating to Genworth implied by the consideration to be paid by the acquiror and/or (ii) terminate such PSAs and require GECIS and/or the acquiror to provide Services Transfer Assistance for a period not exceeding 14 months from the date of receipt of notice by GECIS from Genworth. Notwithstanding any other provision of this Exhibit A , GECIS shall be responsible for all transition costs incurred by Genworth relating to its exercise of the Carve-Out Option or its termination of the PSAs and transition of the services in-house or to a new provider. Any transfer of the PSAs pursuant to this paragraph shall be subject to the receipt by Genworth of all necessary regulatory approvals. For the avoidance of doubt, any transfer by GECIS of the Genworth India operations operating on a stand-alone basis shall be subject to the limitations described under " Assignment and Subcontracting," below.


Specific Performance:


Save as provided in the " Force Majeure" section of each MOA (it being understood that force majeure will not relieve GECIS of its responsibility to provide BC/DR services), GECIS shall not voluntarily refuse to provide all or any portion of the Services in violation or breach of the terms of the Agreement or any PSA. GECIS shall be relieved from its obligation to perform any Services and its obligation to pay any service credit under a PSA to the extent it is unable to perform any Services or to perform in accordance with any applicable service level as a result of Genworth' s failure to perform its obligations under such PSA. Notwithstanding the dispute resolution provisions set forth in Exhibit C, if GECIS breaches this covenant, Genworth shall be entitled to apply to a competent court for specific performance by GECIS of its obligations under the applicable MOAs and PSAs.


Compliance:


GECIS will perform the services in compliance with each applicable statute, law, regulation, order, stock exchange rule or generally accepted, statutory or regulatory accounting or actuarial principle specified in any PSA or otherwise by Genworth, in each case as applicable to the business processes of Genworth performed by GECIS as part of the Services, just as if Genworth performed the services itself.


Pricing:


Definitions:


" Baseline Charges" shall be GECIS' charges for the services as of the Closing Date as set forth in each of the existing PSAs. " Base Costs" shall be GECIS' actual direct cost of providing the services reasonably and equitably determined to be attributable to Genworth by GECIS for each year. The elements of GECIS' direct cost are described in the attached Annex 1 , and shall take into account productivity gains or losses.


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Item


Term

Determination of Base Cost; Scheduled Reductions in Charges; Limitations on Base Cost Increases:


GECIS charges to Genworth for the services shall be adjusted annually to reflect changes in GECIS' Base Cost and to reflect scheduled discounts from the Baseline Charges pursuant to the following formula:

New Charges = Baseline Charges * Discount Factor * Cost Factor.

For the periods indicated, the Discount Factor shall be as follows:


Period


Discount Factor


from the Closing Date through the first anniversary of the to the Trigger Date (as defined below)


**


from the first anniversary of the Trigger Date through the second anniversary of the Trigger Date


**


from the second anniversary of the Trigger Date through the third anniversary of the Trigger Date


**


" Trigger Date" means the first date on which GE and certain Affiliates of GE cease to beneficially own more than fifty percent (50%) of the outstanding Genworth Common Stock, calculated as described in the Master Agreement, dated as of , 2004, between the Parties.


The Cost Factor shall be calculated as follows:


Y(n) Base Cost/Y(0) Base Cost


where Y(n) Base Cost is determined pursuant to the following paragraph for each year, Y(n-1) Base Cost is the Base Cost for the preceding year and Y(0) Base Cost is the Base Cost as agreed by the parties for the first year of the Initial Term, provided , that Y(n) Base Cost shall not exceed **% of Y(n-1) Base Cost in any year.


Base Cost for the initial year shall be as agreed by the parties prior to the Closing Date.


Prior to the commencement of each contract year, the parties will negotiate in good faith to agree upon the elements of Base Costs and the rates to be charged to Genworth for such elements during such year (excluding the cost of hedging foreign currency exchange risks, which shall be charged to Genworth on a pass-through basis).


The parties will reflect their agreement on such matters in a written document to be executed by each of them and GECIS' charges for the services in such year shall not exceed the agreed amounts. Any amendment or addition to such elements or rates must be approved by Genworth in advance in writing.


If the parties are unable to agree upon such matters, the Cost Factor for the applicable year shall be calculated using Base Cost as determined by GECIS in accordance with the definition of Base Costs, provided , that Base Cost for any year shall not exceed **% of Base Cost for the immediately preceding year. If Base Costs for any year during the Initial Term exceed **% of Base Costs for the immediately preceding year, Genworth may terminate that PSA upon six months written notice to GECIS and shall not be liable for any costs incurred by GECIS as a result of such termination.


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Item


Term

Renewal :


At least 18 months prior to the expiration of the Initial Term, GECIS will propose revised methods for calculating costs and charges to Genworth under the Baseline Cost methodology, as described below under " Expiration of the Agreements." The applicable charges proposed by GECIS for the first and second years of the renewal term shall be determined as provided above, but shall reflect Discount Factors of ** and **, respectively, provided , that such charges shall be at least as favorable to Genworth as GECIS charges for similar services provided to any other customer of GECIS. If the parties are unable to agree on revised costs, Genworth may elect to exercise the Carve-Out option upon expiration of the MOAs and PSAs as described under " Expiration of the Agreements."


Volume Reduction:


Genworth shall provide GECIS with no less than nine months' notice in advance if the annualized resources used by GECIS to perform the services for Genworth under all of the MOAs in the aggregate reduces to less than 75% of the amount of such resources (" Trigger Volume" ) used as of the date Genworth first gives notice of such reduction to GECIS. In such an event, GECIS shall bear all costs relating to such reduction in volume to the extent stated in such nine-month notice.


If Genworth does not provide nine-months' advance notice of such a reduction, Genworth shall bear any facilities occupancy, technology and telecommunications costs incurred by GECIS resulting from such reduction, provided , that GECIS shall use commercially reasonable efforts to mitigate such costs.


Taxes:


GECIS fees for the Services shall be inclusive of any sales, use, gross receipts or value added, withholding, ad valorem and other taxes based on or measured by GECIS cost in acquiring equipment, materials, supplies or services used by GECIS in providing the Services. Further, each party shall bear sole responsibility for any real or personal property taxes on any property it owns or leases, for franchises or similar taxes on its business, for employment taxes on its employees, for intangible taxes on property it owns or licenses and for taxes on its net income. If a sales, use, privilege, value added, excise, services and/or similar tax (" Taxes" ) is assessed with respect to GECIS fees to Genworth for the provision of the Services, Genworth shall be responsible for and pay the amount of any such tax to GECIS or as the law otherwise requires, in addition to GECIS fees. Genworth may report and (as appropriate) pay any Taxes directly if Genworth provides GECIS with a direct pay or exemption certificate.GECIS' s invoices shall separately state the amounts of any Taxes GECIS is proposing to collect from Genworth. GECIS shall promptly notify Genworth of any claim for Taxes asserted by any applicable taxing authorities. Notwithstanding the above, Genworth' s liability for such Taxes is conditioned upon GECIS providing Genworth notification within twenty (20) business days of receiving any proposed assessment of any additional Taxes, interest or penalty due by GECIS. GECIS shall coordinate with Genworth the response to and settlement of, any such claim. Genworth shall be entitled to receive and to retain any refund of Taxes paid to GECIS pursuant to this Agreement.


Productivity; Planning:


ullet GECIS shall make commercially reasonable efforts to increase productivity and efficiency in performing the Services and shall endeavor to reduce Baseline Cost annually, depending on the overall reduction in the cost of operations.


ullet The parties will participate in an annual budgeting process as part of determining Baseline Cost that will address improvements in GECIS productivity and efficiency in performing the services and dedicate appropriate resources to execute the budgeted improvements.


ullet To support GECIS' demand planning, each quarter, Genworth shall provide GECIS a good faith estimate of its requirements for GECIS' services for the following 12 months.


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Item


Term

Performance Standards:


Audits:


GECIS shall prepare such reports relating to its performance of the Services as are reasonably requested by Genworth. GECIS shall maintain a complete audit trail for all financial and non-financial transactions resulting from or arising in connection with the Agreements in such manner as is required under the GEFA Records Management Policies and Indian and US GAAP, all as may be amended from time to time. GECIS will maintain such audit trail for such periods of time as may be specified in the GEFA Records Management Policies or, if no such period is specified, for such period as the parties may agree upon. GECIS shall provide to Genworth, its auditors (including internal audit staff and external auditors), inspectors, regulators, customers and other representatives as Genworth may from time to time designate in writing, access at all reasonable times to any facility or part of a facility at which either GECIS or any of its permitted subcontractors is providing the Services, to GECIS personnel, to GECIS' s systems, policies and procedures relating to the Services, and to data and records relating to the Services. For the purpose of performing audits and inspections of either GECIS or any of its subcontractors with respect to any aspect of GECIS' s or such subcontractor' s performance of the Services or any other matter relevant to this Agreement, including, without limitation the determination and calculation of all elements of Baseline Cost and all other elements of the pricing mechanism described above. GECIS shall reasonably cooperate with Genworth in the performance of these audits, including installing and operating audit software. If Genworth requires GECIS to conduct any special audit other than that mentioned herein and if the same results in increased cost to GECIS, GECIS shall be entitled to pass on such extra costs to Genworth through a special invoice, but only to the extent approved by Genworth in advance.


GECIS shall provide Genworth such other reports and certifications relating to the services under the MOAs and PSAs as Genworth may reasonably request, including all reports and sub-certifications by GECIS necessary for officers of Genworth to make the certifications required under the Sarbanes-Oxley Act of 2002 and all related and other rules and regulations and all related applicable stock exchange listing requirements.


Genworth Commitment:


In addition to all other " Genworth Commitments" referred to in the MOAs, Genworth shall provide all GECIS employees, dedicated to Genworth operations, with training or training materials relating to business processes and regulatory matters uniquely related to the Genworth business and reasonably required by such resources to meet Performance Standards. Any non-performance or failure to meet Performance Standards by GECIS due ...