EXHIBIT 10
AMENDED AND RESTATED
TAX SHARING AGREEMENT
BY AND AMONG
FORD MOTOR COMPANY
AND ITS AFFILIATES
AND
ASSOCIATES FIRST CAPITAL CORPORATION
AND ITS AFFILIATES
Dated February 19, 1998
AMENDED AND RESTATED TAX SHARING AGREEMENT
THIS AMENDED AND RESTATED TAX SHARING AGREEMENT (this
"Agreement") dated as of February 19, 1998, by and among Ford Motor
Company ("Ford"), a Delaware corporation and each Ford Affiliate (as
defined below), and Associates First Capital Corporation ("Associates"),
a Delaware corporation and currently an indirect, controlled subsidiary
of Ford, and each Associates Affiliate (as defined below) is entered
into in connection with the Spinoff (as defined below).
RECITALS
WHEREAS, the Ford Board of Directors has determined that it
is appropriate and desirable to distribute, subject to certain
conditions, to its common shareholders all of Ford's interest in
Associates' common stock on the Spinoff Date, as defined below (the
"Public Distribution"); and
WHEREAS, in order to consummate the Public Distribution, it
is necessary and desirable for Ford FSG, Inc. ("FFSG"), a Delaware
corporation and currently the direct parent of Associates, to make a non
pro rata distribution of all of its interest in Associates' common stock
to Ford in exchange for a portion of the FFSG stock held by Ford having
an equivalent value (the "Internal Distribution"); and
WHEREAS, the Public Distribution and the Internal
Distribution are intended to qualify as tax free distributions under
Section 355 of the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, it is appropriate and desirable to set forth the
principles and responsibilities of the parties to this Agreement
regarding the allocation of Tax (as defined below) and other related
liabilities and adjustments with respect to Taxes, Tax contests and
other related Tax matters; and
WHEREAS, to that end, the parties to this Agreement wish to
amend and restate the Tax Sharing Agreement, dated May 6, 1996, between
Ford and Associates and their practices with respect to Tax matters
prior to January 1, 1996.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
Section 1. Definitions
"After Tax Amount" means any additional amount necessary to
reflect the hypothetical Tax consequences of the receipt or accrual of
any payment required to be made under this Agreement (including payment
of an additional amount or amounts hereunder and the effect of the
deductions available for interest paid or accrued and for Taxes such as
state and local income Taxes), determined by using the highest marginal
corporate Tax rate (or rates, in the case of an item that affects more
than one Tax) for the relevant taxable period (or portion thereof).
"Associates Affiliate" means any corporation or other entity
directly or indirectly controlled by Associates.
"Associates Group" means the affiliated group of
corporations as defined in Section 1504(a) of the Code, or similar group
of entities as defined under corresponding provisions of the laws of
other jurisdictions, of which Associates would be the common parent if
it were not a subsidiary of Ford, and any corporation or other entity
which may be, may have been or may become a member of such group from
time to time.
"Associates Group Combined Tax Liability" means, with
respect to any taxable period, the Associates Group's liability for
Non-Federal Combined Taxes as determined under Section 3.4 of this
Agreement.
"Associates Group Federal Income Tax Liability" means, with
respect to any taxable period, the Associates Group's liability for
Federal Income Taxes as determined under Section 3.3 of this Agreement.
"Audit" includes any audit, assessment of Taxes, other
examination by any Tax Authority, proceeding, or appeal of such a
proceeding relating to Taxes, whether administrative or judicial.
"Carryback Period" has the meaning set forth in Section 5.2
of this Agreement.
"Combined Group" means a group of corporations or other
entities that files a Combined Return.
"Combined Return" means any Tax Return with respect to
Non-Federal Taxes filed on a consolidated, combined (including nexus
combination, worldwide combination, domestic combination, line of
business combination or any other form of combination) or unitary basis
wherein Associates or one or more Associates Affiliates join in the
filing of such Tax Return (for any taxable period or portion thereof)
with Ford or one or more Ford Affiliates.
"Consolidated Group" means an affiliated group of
corporations within the meaning of Section 1504(a) of the Code that
files a Consolidated Return.
"Consolidated Return" means any Tax Return with respect to
Federal Income Taxes filed on a consolidated basis wherein Associates or
one or more Associates Affiliates join in the filing of such Tax Return
(for any taxable period or portion thereof) with Ford or one or more
Ford Affiliates.
"Consolidated Return Year" means any taxable year for which
a Consolidated Return is filed.
"Creditable Foreign Tax" means any foreign Tax paid, accrued
or deemed paid by members of the Associates Group that could be
allowable as a credit under Section 901 of the Code.
"Determination" has the meaning set forth in Section 8.5(a)
of this Agreement.
"Disputed Item" has the meaning set forth in Section 8.1(a)
of this Agreement.
"Estimated Tax Installment Date" means the installments due
dates prescribed in Section 6655 of the Code (presently April 15, June
15, September 15 and December 15).
"Federal Income Tax" means any Tax imposed under Subtitle A
of the Code (including the Taxes imposed by Sections 11, 55, 59A, and
1201(a) of the Code), and any interest, additions to Tax or penalties
applicable or related thereto, and any other income-based United States
federal Tax which is hereinafter imposed upon corporations.
"Federal Tax" means any Tax imposed or required to be
withheld by any Tax Authority of the United States.
"Final Determination" means any of (a) the final resolution
of any Tax (or other matter) for a taxable period, including related
interest or penalties, that, under applicable law, is not subject to
further appeal, review or modification through proceedings or otherwise,
including (1) by the expiration of a statute of limitations or a period
for the filing of claims for refunds, amending Tax Returns, appealing
from adverse determinations, or recovering any refund (including by
offset), (2) by a decision, judgment, decree, or other order by a court
of competent jurisdiction, which has become final and unappealable, (3)
by a closing agreement or an accepted offer in compromise under Section
7121 or 7122 of the Code, or comparable agreements under laws of other
jurisdictions, (4) by execution of an Internal Revenue Service Form 870
or 870AD, or by a comparable form under the laws of other jurisdictions
(excluding, however, with respect to a particular Tax Item for a
particular taxable period any such form that reserves (whether by its
terms or by operation of law) the right of the taxpayer to file a claim
for refund and/or the right of the Tax Authority to assert a further
deficiency with respect to such Tax Item for such period), or (5) by any
allowance of a refund or credit, but only after the expiration of all
periods during which such refund or credit may be recovered (including
by way of offset), or (b) the payment of Tax by any member of the
Consolidated Group or Combined Group with respect to any Tax Item
disallowed or adjusted by a Tax Authority provided that Ford determines
that no action should be taken to recoup such payment.
"Final Notice of Disagreement" has the meaning set forth in
Section 8.3(a) of this Agreement.
"Ford Affiliate" means any corporation or other entity
directly or indirectly controlled by Ford, but excluding Associates or
any Associates Affiliate.
"Ford Group" means the affiliated group of corporations as
defined in Section 1504(a) of the Code, or similar group of entities as
defined under corresponding provisions of the laws of other
jurisdictions, of which Ford is the common parent, and any corporation
or other entity which may be, may have been or may become a member of
such group from time to time, but excluding any member of the Associates
Group.
"Foreign Tax Amount" has the meaning set forth in Section
3.5(a) of this Agreement.
"Income Taxes" means (a) any Tax based upon, measured by, or
calculated with respect to (1) net income or profits (including any
capital gains Tax, minimum Tax and any Tax on items of Tax preference
and the Michigan Single Business Tax, but not including sales, use, real
or personal property, gross or net receipts, transfer or similar Taxes)
or (2) multiple bases if one or more of the bases upon which such Tax
may be based, measured by, or calculated with respect to, is described
in clause (1) above, or (b) any U.S. state or local franchise Tax.
"Indemnifying Party" has the meaning set forth in Section
8.1(a) of this Agreement.
"Indemnified Party" has the meaning set forth in Section
8.1(b) of this Agreement.
"Independent Third Party" means a nationally recognized tax
attorney that is a member of a nationally recognized law firm which firm
is independent of both parties.
"Initial Notice of Disagreement" has the meaning set forth
in Section 8.1(b) of this Agreement.
"Initial Private Letter Ruling" means the private letter
ruling issued to Ford in response to the request filed with the Service
on October 24, 1997.
"Interest Accrual Period" has the meaning set forth in
Section 6.4 of this Agreement.
"Non-Federal Combined Tax" means any Non-Federal Tax with
respect to which a Combined Return is filed.
"Non-Federal Separate Tax" means any Non-Federal Tax other
than a Non-Federal Combined Tax.
"Non-Federal Tax" means any Tax other than a Federal Tax.
"Payment Period" has the meaning set forth in Section 6.4 of
this Agreement.
"Post-Spinoff Period" means a taxable period beginning after
the Spinoff Date.
"Pre-Spinoff Period" means a taxable period beginning on or
before the Spinoff Date.
"Privilege" means any privilege that may be asserted under
applicable law including, any privilege arising under or relating to the
attorney-client relationship (including the attorney-client and work
product privileges), the accountant-client privilege, and any privilege
relating to internal evaluation processes.
"Pro Forma Associates Group Combined Return" means a pro
forma Non-Federal Combined Tax return or other schedule prepared
pursuant to Section 3.4(b) of this Agreement.
"Pro Forma Associates Group Consolidated Return" means a pro
forma consolidated Federal Income Tax return or other schedule prepared
pursuant to Section 3.3 of this Agreement.
"Redetermination Amount" means, with respect to any Tax for
any taxable period, the amount determined under Section 4.8 of this
Agreement.
"Restructuring Tax" means any Tax imposed upon Ford or a
Ford Affiliate and reasonable professional fees that are attributable
to, or result from, the failure of the Spinoff to qualify under Section
355 of the Code (including any Tax attributable to the application of
Section 355(e) or Section 355(f) of the Code to the Spinoff) or
corresponding provisions of the laws of other jurisdictions. Each Tax
referred to in the preceding sentence shall be determined using the
highest marginal corporate Tax rate for the relevant taxable period (or
any portion thereof). For the avoidance of doubt, Restructuring Tax
does not include an amount described in this paragraph that is imposed
upon a shareholder of Ford in its capacity as a shareholder of Ford.
"Ruling Documents" means (a) the request for a ruling under
Section 355 and various other sections of the Code, filed with the
Service on October 24, 1997, together with any supplemental filings or
ruling requests or other materials subsequently submitted on behalf of
Ford, its subsidiaries and shareholders to the Service, the appendices
and exhibits thereto, and any rulings issued by the Service to Ford (or
any Ford Affiliate) in connection with the Spinoff or (b) any similar
filings submitted to, or rulings issued by, any other Tax Authority in
connection with the Spinoff.
"Separate Return" means any Tax Return with respect to
Non-Federal Separate Taxes filed by Ford, Associates, or any of their
respective affiliates.
"Service" means the Internal Revenue Service.
"Spinoff" means the Internal Distribution and/or the Public
Distribution.
"Spinoff Date" means the close of business on the date on
which the Public Distribution is effected.
"Straddle Period" means a Pre-Spinoff Period ending after
the Spinoff Date.
"Supplemental Ruling" means (a) any ruling issued by the
Service in connection with the Spinoff other than the Initial Private
Letter Ruling or (b) any similar ruling issued by any other Tax
Authority after the Spinoff Date addressing the application of a
provision of the laws of another jurisdiction to the Internal
Distribution or the Public Distribution.
"Supplemental Ruling Documents" has the meaning set forth in
Section 5.1(d) of this Agreement.
"Tax" means any charges, fees, levies, imposts, duties, or
other assessments of a similar nature, including income, alternative or
add-on minimum, gross receipts, profits, lease, service, service use,
wage, wage withholding, employment, workers compensation, business
occupation, occupation, premiums, environmental, estimated, excise,
employment, sales, use, transfer, license, payroll, franchise,
severance, stamp, occupation, windfall profits, withholding, social
security, unemployment, disability, ad valorem, estimated, highway use,
commercial rent, capital stock, paid up capital, recording,
registration, property, real property gains, value added, business
license, custom duties, or other tax or governmental fee of any kind
whatsoever, imposed or required to be withheld by any Tax Authority
including any interest, additions to tax, or penalties applicable or
related thereto.
"Tax Asset" means any Tax Item that could reduce a Tax,
including a net operating loss, net capital loss, investment tax credit,
foreign tax credit, charitable deduction or credit related to
alternative minimum tax.
"Tax Authority" means governmental authority or any
subdivision, agency, commission or authority thereof or any
quasi-governmental or private body having jurisdiction over the assessment,
determination, collection or imposition of any Tax (including the
Service).
"Tax Item" means any item of income, gain, loss, deduction
or credit, or other attribute that may have the effect of increasing or
decreasing any Tax.
"Tax Return" means any return, report, certificate, form or
similar statement or document (including, any related or supporting
information or schedule attached thereto and any information return,
amended tax return, claim for refund or declaration of estimated tax)
required to be supplied to, or filed with, a Tax Authority in connection
with the determination, assessment or collection of any Tax or the
administration of any laws, regulations or administrative requirements
relating to any Tax.
Section 2. Preparation and Filing of Tax Returns
2.1 In General. (a) Ford shall have the sole and
exclusive responsibility for the preparation and filing of the following
Tax Returns for any Pre-Spinoff Period: (1) all Consolidated Returns
and (2) all Combined Returns.
(b) Except as provided in Section 2.1(a) of this
Agreement, Associates shall have the sole and exclusive responsibility
for the preparation and filing of all Tax Returns for Associates and any
Associates Affiliate (or which relate to their businesses, assets or
activities) which are required to be filed for any Pre-Spinoff Period
and any Post-Spinoff Period.
2.2 Manner of Filing Tax Returns. (a) All Tax Returns
filed after the date of this Agreement by Ford, any Ford Affiliate,
Associates or any Associates Affiliate shall be (1) prepared in a manner
that is consistent with (I) the Ruling Documents and (ii) Sections 5.3
and 5.6 of this Agreement, and (2) filed on a timely basis (including
extensions) by the party responsible for such filing under Section 2.1
of this Agreement.
(b) Ford and Associates, for itself and the
Associates Affiliates, agree to file all Tax Returns for any Pre-Spinoff
Period, and to take all other actions in a manner consistent with the
position that Associates and the Associates Affiliates are part of any
Consolidated Group and any Combined Group for all days through and
including the Spinoff Date.
Except as otherwise provided in this Section 2.2,
Ford shall have the exclusive right, in its sole discretion, with
respect to any Tax Return described in Section 2.1(a) of this Agreement
to determine (1) the manner in which such Tax Return shall be prepared
and filed, including the elections, methods of accounting, positions,
conventions and principles of taxation to be used and the manner in
which any Tax Item shall be reported, (2) whether any extensions may be
requested, (3) the elections that will be made by Ford, any Ford
Affiliate, Associates, and Associates Affiliate in such Tax Return, (4)
whether any amended Tax Returns shall be filed, (5) whether any claims
for refund shall be made, (6) whether any refunds shall be paid by way
of refund or credited against any liability for the related Tax, and (7)
whether to retain outside specialists to prepare such Tax Return, whom
to retain for such purpose and the scope of any such retainer. Nothing
in this Section 2.2 shall limit the rights of Associates under Section
7.6 of this Agreement.
(d) In the event that a Tax Item is includable in a
Tax Return described in Section 2.1(a) of this Agreement and also in a
Tax Return described in Section 2.1(b) of this Agreement that is filed
after the date of this Agreement, Associates or the Associates Affiliate
preparing, or causing the preparation of, such Tax Return under Section
2.1(b) of this Agreement shall conform the treatment of such Tax Item in
such Tax Return described in Section 2.1(b) of this Agreement to the
treatment of such Tax Item in the applicable Tax Return described in
Section 2.1(a) of this Agreement.
(e) Any Tax Return described in (1) Section 2.1(a) of
this Agreement (but only with respect to Tax Items of Associates or an
Associates Affiliate) or (2) Section 2.1(b) of this Agreement, in either
case which Tax Return is filed after the date of this Agreement, shall
be prepared on a basis consistent with the elections, methods of
accounting, positions, conventions and principles of taxation and the
manner in which any Tax Item or other information is reported as
reflected on the most recently filed Tax Returns involving similar
matters. The preceding sentence shall not apply (1) to the extent
otherwise required by Section 2.2(a)(1) of this Agreement or (2) if (I)
Associates obtains Ford's prior written consent (which consent shall not
be unreasonably withheld), (ii) there has been a controlling change in
law or circumstances, or (iii) the failure to be consistent will not
result in an increased Tax liability to, or reduction in a Tax Asset of,
Ford or any Ford Affiliate with respect to a Pre-Spinoff Period, not
fully compensated by Associates. For purposes of this Section 2.2(e), a
controlling change in law or circumstances includes, with respect to
Post-Spinoff Periods (but not Pre-Spinoff Periods), permission to change
a method of accounting granted by the relevant Tax Authority.
(f) (1) Ford shall provide Associates a draft copy
of the portion of the Consolidated Return for the Consolidated Return
Year ending on December 31, 1997 and on December 31, 1998 to the extent
that it relates to Associates or any Associates Affiliate, together with
all related Tax accounting work papers, not later than ten (10) days
before the date Ford intends to file such Consolidated Return with the
Service.
(2) Beginning on May 1, 1998, Ford shall make
available to Associates a draft schedule for each member of the
Associates Group reflecting the computation of such member's taxable
income that will be used in preparing the Consolidated Return for the
Consolidated Return Year ending on December 31, 1997, together with all
related Tax accounting work papers, as soon as practicable after each
such draft schedule is prepared. Beginning on May 1, 1999, Ford shall
make available to Associates a draft schedule for each member of the
Associates Group reflecting the computation of such member's taxable
income that will be used in preparing the Consolidated Return for the
Consolidated Return Year ending on December 31, 1998, together with all
related Tax accounting work papers, as soon as practicable after each
such draft schedule is prepared.
(3) Ford shall consider, in its sole discretion,
all reasonable suggestions made by Associates to Ford regarding the
draft provided under Section 2.2(f)(1) of this Agreement not later than
five (5) days before the date Ford intends to file the applicable
Consolidated Return with the Service.
(g) Ford shall make its employees reasonably
available, to the extent consistent with Ford's process for preparing a
Consolidated Return or a Combined Return, at mutually convenient times
during normal business hours to discuss information pertinent to
Associates or any Associates Affiliate contained in such Consolidated
Return or Combined Return prior to the date on which Ford intends to
file such Consolidated Return or Combined Return.
2.3 Agent. Associates hereby irrevocably designates, and
agrees to cause each Associates Affiliate to so designate, Ford as its
sole and exclusive agent and attorney-in-fact to take such action
(including execution of documents) as Ford, in its sole discretion, may
deem appropriate in any and all matters (including Audits) relating to
any Tax Return described in Section 2.1(a) of this Agreement. Nothing
in this Section 2.3 shall limit the rights of Associates elsewhere under
this Agreement.
2.4 Provision of Tax Return Information. (a)
Associates shall provide Ford all documents and information, and
make available employees and officers of Associates as Ford
reasonably requests to prepare any Tax Return described in Section
2.1(a) of this Agreement. Without limiting the foregoing, in this
regard, Associates agrees to provide (1) the information set forth
in Appendix A to this Agreement, on or before the dates set forth
therein, with respect to the Consolidated Return for 1997, (2) the
information set forth in Appendix B to this Agreement, on or before
the dates set forth therein, with respect to Combined Returns for
1997, (3) information substantially identical to that set forth in
Appendix A to this Agreement with respect to the Consolidated Return
for 1998, on or before the date that is 90 days after the Spinoff
Date, and (4) information substantially identical to the information
set forth in Appendix B to this Agreement with respect to Combined
Returns for 1998, on or before the date that is 150 days after the
Spinoff Date.
(b) In the case of any Tax Return for a Pre-Spinoff Period
described in Section 2.1(a) of this Agreement that is
filed after the date of this Agreement, Ford shall provide
Associates access to and allow Associates to copy that portion of
each such Tax Return to the extent it relates to Associates or any
Associates Affiliate, together with all related Tax accounting work
papers, not later than thirty (30) days after the date of filing of
such Tax Return.
In the case of any Tax Return in Ford's
possession that was filed before the date of this Agreement,
including those relating to periods ending before January 1, 1990,
Ford shall use reasonable efforts to provide Associates access to
and allow Associates to copy that portion of each such Tax Return to
the extent that it relates to Associates or any Associates
Affiliate, together with all related Tax accounting work papers, as
soon as reasonably practicable after the date of this Agreement, but
in no event later than the later of fifteen (15) days after the
Spinoff Date or June 30, 1998.
(d) After the date of this Agreement, Ford shall
afford Associates access to employees of Ford on a mutually
convenient basis during normal business hours to the extent such
access may reasonably be required by Associates to prepare any Tax
Return described in Section 2.1(b) of this Agreement or to contest
any Audit of any such Tax Return.
(e) Notwithstanding any other provision of this
Agreement, no member of the Ford Group shall be required to provide
Associates or any Associates Affiliate access to or copies of (1)
any information that relates to any member of the Ford Group, (2)
any information as to which any member of the Ford Group is entitled
to assert the protection of any Privilege, or (3) any information as
to which any member of the Ford Group is subject to an obligation to
maintain the confidentiality of such information. Ford shall use
reasonable efforts to separate any such information from any other
information to which Associates is entitled to access or to which
Associates is entitled to copy under this Agreement, to the extent
consistent with preserving its rights under this Section 2.4(e).
Section 3. Tax Sharing
3.1 Associates Liability for Federal Income Taxes and
Non-Federal Combined Taxes. For each Pre-Spinoff Period, Associates
shall be liable for and pay to Ford an amount equal to the sum of
the Associates Group Federal Income Tax Liability and the Associates
Group Combined Tax Liability for such taxable period. With respect
to taxable periods ending on or before December 31, 1996, the
parties hereby acknowledge and agree that the only amounts that
remain to be paid, if any, are Redetermination Amounts under Section
4.8 of this Agreement.
3.2 Ford Liability for Foreign Tax Amount. For each
Pre-Spinoff Period beginning after December 31, 1995, Ford shall be
liable for and pay to Associates an amount equal to the Foreign Tax
Amount for such taxable period.
3.3 Associates Group Federal Income Tax Liability.
With respect to each Pre-Spinoff Period beginning after December 31,
1995, the Associates Group Federal Income Tax Liability shall be the
Associates Group's liability for Federal Income Taxes for such
taxable period, as determined on a Pro Forma Associates Group
Consolidated Return prepared:
(a) on the basis of the Consolidated Return for
such period, determined by including only Tax Items of members of
the Associates Group which are included in the Consolidated Return;
(b) excluding Creditable Foreign Taxes; and
applying the highest marginal corporate Tax rate
in effect for such taxable period (or any portion thereof).
3.4 Associates Group Combined Tax Liability. (a) In
General. With respect to any Pre-Spinoff Period beginning after
December 31, 1995, the Associates Group Combined Tax Liability shall
be the sum for such taxable period of the Associates Group's
liability for each Non-Federal Combined Tax as determined on a Pro
Forma Associates Group Combined Return.
(b) Pro Forma Associates Group Combined Return.
For each Pre-Spinoff Period, Ford shall prepare or cause to be
prepared a Pro Forma Associates Group Combined Return for each Non-Federal
Combined Tax by reference to:
(1) the taxable income (or loss) of those
members of the Associates Group which are included in the Combined
Return for such Tax for such taxable period determined:
(I) in the case of those members of
the Associates Group which are included in the Consolidated Return
for such taxable period, from the Pro Forma Associates Group
Consolidated Return for such taxable period; or
(ii) in the case of those members of
the Associates Group which are not included in the Consolidated
Return for such taxable period, in a manner consistent with Section
3.3(a) of this Agreement;
(2) net operating loss carryforwards (but
not carry backs) of such entities;
(3) material adjustments of such entities
necessary to reflect the laws of the applicable jurisdiction (e.g.,
if applicable, to exclude "Subpart F income" and "gross-up");
(4) apportionment factors determined by
taking into account only such entities; and
(5) the highest marginal corporate Tax rate
in effect for such Tax for such taxable period (or portion thereof).
Additional Operating Rules. The following
additional provisions shall apply in determining the Associates
Group Combined Tax Liability:
(1) Ford shall not pay Associates for, and
Associates Group Combined Tax Liability shall not be reduced by
reason of, any Tax Asset relating to any Non-Federal Combined Tax,
including any net operating loss carrybacks or carryovers, not
otherwise taken into account under Section 3.4(b) of this Agreement;
and
(2) the liability of Associates and the
Associates Affiliates with respect to unemployment and similar Taxes
for which a Combined Return is filed shall be the lesser of (I) the
liability for such Taxes of Associates and the Associates Affiliates
which are included in the Combined Return determined utilizing the
Tax rate applicable to the Combined Return and (ii) the liability
for such Taxes of Associates and the Associates Affiliates which are
included in the Combined Return determined as if such entities were
not and never were part of the Combined Group, but rather were a
separate group filing a combined unemployment Tax Return.
3.5 Computation of Foreign Tax Amounts. (a) In
General. With respect to each Pre-Spinoff Period beginning after
December 31, 1995, the Foreign Tax Amount shall be the amount of
actual Tax savings (adjusted to reflect cumulative savings), if any,
realized for such taxable period by the Consolidated Group (taking
into account carrybacks and carryforwards to and from such taxable
period) with respect to Creditable Foreign Taxes. Determinations
under this Section 3.5 shall be made without regard to the
alternative minimum tax.
(b) Amount. (1) General Rule. The amount of any
such Tax savings for a taxable period shall be determined either (I)
by comparing (A) the Consolidated Group's foreign tax credit
computed by taking into account the Associates Group to (B) the
Consolidated Group's foreign tax credit computed without taking into
account the Associates Group, or (ii) if a deduction is claimed for
Creditable Foreign Taxes, by comparing (A) the Consolidated Group's
liability for Federal Income Taxes computed by taking into account
such Creditable Foreign Taxes to (B) the Consolidated Group's
liability for Federal Income Taxes computed without taking into
account such Creditable Foreign Taxes.
(2) Limitations. In no event shall the
amount determined under Section 3.5(b)(l)(I) of this Agreement for a
taxable period exceed the amount of Creditable Foreign Taxes taken
into account during such period. In addition, the amount of
Creditable Foreign Taxes taken into account during a taxable period
shall be reduced, as Ford determines may be appropriate, to the
extent such Creditable Foreign Taxes have been reflected in Ford's
consolidated financial statements for periods prior to May 6, 1996.
3.6 Cooperation. Ford shall make its employees
reasonably available to Associates to explain each Pro Forma
Associates Group Consolidated Return prepared after the date of this
Agreement pursuant to Section 3.3 of this Agreement and each Pro
Forma Associates Group Combined Return prepared after the date of
this Agreement pursuant to Section 3.4 of this Agreement, and Ford
shall consider, in its sole discretion, all reasonable suggestions
made by Associates to Ford regarding such Pro Forma Associates Group
Consolidated Returns and Pro Forma Associates Group Combined
Returns.
Section 4. Payment of Taxes and Tax Sharing Amounts
4.1 Federal Income Taxes. Ford shall pay to the
Service all Federal Income Taxes, if any, of any Consolidated Group
due and payable for all Pre-Spinoff Periods.
4.2 Non-Federal Combined Taxes. Ford shall pay to
the appropriate Tax Authorities all Non-Federal Combined Taxes, if
any, of any Combined Group due and payable for all Pre-Spinoff
Periods.
4.3 Non-Federal Separate Taxes. Associates shall pay
(or cause to be paid) to the appropriate Tax Authorities all Non-Federal
Separate Taxes, if any, that relate to the Associates Group
and any Associates Affiliate.
4.4 Other Federal Taxes. The parties shall each pay
or cause to be paid to the appropriate Tax Authorities all of their
respective Federal Taxes (excluding Federal Income Taxes for Pre-Spinoff
Periods, which are governed by Section 4.1 of this
Agreement), if any.
4.5 Tax Sharing Installment Payments. (a) Federal
Income Taxes. Not later than five (5) business days prior to each
Estimated Tax Installment Date with respect to any Pre-Spinoff
Period, the parties shall, consistent with past practices, determine
under the principles of Section 6655 of the Code the estimated
amount of the related installment of the Associates Group Federal
Income Tax Liability. Associates shall pay to Ford not later than
such Estimated Tax Installment Date the amount thus determined.
(b) Non-Federal Combined Taxes. Not later than
November 15 of the calendar year following any Pre-Spinoff Period,
Ford shall deliver to Associates an estimate of the Associates Group
Combined Tax Liability for such period determined by using the
previous taxable period's apportionment factors. Associates shall
pay to Ford, not later than ten (10) business days after the date of
delivery of such estimate, the amount thus determined.
4.6 Tax Sharing True-up Payments. (a) Federal
Income Taxes. Not later than thirty (30) business days after a
Consolidated Return is filed with respect to any Pre-Spinoff Period,
Ford shall deliver to Associates a Pro Forma Associates Group
Consolidated Return reflecting the Associates Group Federal Income
Tax Liability. Not later than five (5) business days after the date
of delivery, Associates shall pay to Ford, or Ford shall pay to
Associates, as appropriate, an amount equal to the difference, if
any, between the Associates Group Federal Income Tax Liability for
the taxable Pre-Spinoff Period and the aggregate amount paid by
Associates with respect to such period under Section 4.5(a) of this
Agreement.
(b) Non-Federal Combined Taxes. Not later than
November 15 of the calendar year following any Pre-Spinoff Period,
Ford shall deliver to Associates a schedule based upon the Pro Forma
Associates Group Combined Returns for such Pre-Spinoff Period
reflecting the Associates Group Combined Tax Liability for such
Pre-Spinoff Period. Not later than ten (10) business days after the
date of delivery, Associates shall pay to Ford, or Ford shall pay to
Associates, as appropriate, an amount equal to the difference, if
any, between the Associates Group Combined Tax Liability for the
Pre-Spinoff Period and the amount paid by Associates with respect to
such period under Section 4.5(b) of this Agreement.
4.7 Payments of Foreign Tax Amounts. Not later than
thirty (30) business days after the Consolidated Return is filed for
the Consolidated Return Year ending December 31, 1998, Ford shall
deliver to Associates a schedule setting forth the Foreign Tax
Amount for such taxable period. Not later than five (5) business
days after the date the schedule is delivered, Ford shall pay
Associates such Foreign Tax Amount.
4.8 Redetermination Amounts. (a) In General. (1)
In the event of a redetermination of any Tax Item of any member of a
Consolidated Group or Combined Group, as a result of a Final
Determination or any settlement or compromise with any Tax
Authority, Associates shall pay Ford or Ford shall pay Associates,
as the case may be, a Redetermination Amount for each Tax and
taxable period affected by such redetermination.
(2) Provided that Associates complies with
the covenant described in this Section 4.8(a)(2), the Foreign Tax
Amount for a Consolidated Return Year ending December 31, 1996 or
December 31, 1997 shall be adjusted only by reason of a
redetermination reducing the amount of available Creditable Foreign
Taxes (e.g., based upon the non-existence of, or failure to
substantiate, such Creditable Foreign Taxes, or because the foreign
Tax is not of a type allowable as a credit under the Code). In such
case, the Redetermination Amount attributable to such
redetermination shall equal the amount of such reduction in
Creditable Foreign Taxes plus interest thereon under Section
4.8(b)(3)(I). Associates hereby agrees that it shall use its best
efforts to provide Ford with such information and documentation as
Ford may reasonably request for the purpose of meeting any
applicable burden of proof as to the availability and amount of
Creditable Foreign Taxes for the Consolidated Return Years ending
December 31, 1996 and December 31, 1997.
(3) In no event shall a Redetermination
Amount be based upon a redetermination of Creditable Foreign Taxes
or Foreign Tax Amount for taxable periods beginning on or before
December 31, 1995.
(b) Computation. A Redetermination Amount for a
Tax for a taxable period shall be the sum of:
(1) for taxable periods beginning after
December 31, 1995, the difference, if any, between:
(I) the net amount of all amounts
previously determined under Section 3 of this Agreement for such Tax
for such taxable period; and
(ii) the net amount of all amounts
that would have been determined under Section 3 of this Agreement
for such Tax for such taxable period taking such redetermination
into account; and
(2) for taxable periods beginning on or
before December 31, 1995, the sum of the net amounts of (I) the
amount obtained by applying the highest marginal corporate Tax rate
(taking into account the effect of deductions for state and local
taxes) for such Tax for such taxable period to the adjustments of
income, gain, loss or deduction of members of the Associates Group
for such Tax for such taxable period; and (ii) an amount equal to
any increase or decrease in credits of members of the Associates
Group, absorbed for such taxable period by members of the Associates
Group; and
(3) interest on the amount determined under
Section 4.8(b)(1) or 4.8(b)(2) of this Agreement (as the case may
be), compounded daily,
(I) in the case of a payment by
Associates, from the last date prescribed for payment (without
interest or penalty) of such Tax (under the principles of Section
6601 of the Code or corresponding provisions of the laws of the
relevant jurisdiction) for such taxable period until the date that
is five (5) days after the day that Ford delivers the schedule
described in Section 4.8 of this Agreement, calculated, for a
redetermination affecting Federal Income Taxes, at the rate
determined under Section 6621(a)(2) of the Code (and under Section
6621 of the Code to the extent applied to the Consolidated Return
for such taxable period) and, for a redetermination affecting other
Taxes, at the applicable rate, if any, under corresponding
provisions of the laws of the relevant jurisdiction, and
(ii) in the case of a payment by Ford,
from the point at which interest would begin to accrue under the
principles of Section 6611 of the Code (or corresponding provisions
of the laws of the relevant jurisdiction) until the date that is
five (5) days after the day that Ford delivers the schedule
described in Section 4.8 of this Agreement, calculated, for a
redetermination affecting Federal Income Taxes, at the rate
determined under Section 6621(a)(1) of the Code, and, for a
redetermination affecting other Taxes, at the applicable rate, if
any, under corresponding provisions of the laws of the relevant
jurisdiction.
(1) Payment. Ford shall deliver to Associates a
schedule reflecting the computation of any Redetermination Amount.
The inclusion in such schedule of any interest under Section 6621
of the Code shall be deemed to be a representation by Ford that
interest at such rate applied to the Consolidated Return for the
relevant taxable period. Not later than five (5) days after the
date such schedule is delivered, Associates shall pay Ford, or Ford
shall pay Associates, as the case may be, such Redetermination
Amount.
(2) Cash Deposits. Associates, in its sole
discretion, may make a cash deposit to Ford with respect to a
particular Tax for a particular taxable period that is the subject
of an Audit if (I) Associates contemporaneously specifies in writing
to Ford (A) that such cash is a cash deposit described in this
Section 4.8(c)(2), (B) the Tax and taxable period to which such cash
deposit relates, and (ii) the relevant Tax Authority has established
a procedure under which interest on a portion of an underpayment may
cease to accrue if the taxpayer makes a cash deposit equal to the
amount of such portion. If Associates makes a cash deposit under
this Section 4.8(c)(2), interest under Section 4.8(b)(3)(I) of this
Agreement shall accrue through the later of (I) the date that Ford
receives such cash deposit and (ii) the earliest subsequent date as
of which, under the procedures established by the relevant Tax
Authority, Ford could cause interest to cease to accrue on the
underlying deficiency (or portion thereof) by depositing an amount
equal to such cash deposit. Interest under Section 4.8(b)(3)(I) of
this Agreement shall accrue after such date only upon the excess, if
any, of (I) the sum of the amount determined under Section 4.8(b)(1)
or 4.8(b)(2) of this Agreement (as the case may be) plus the amount
of interest determined under the preceding sentence, over (ii) such
cash deposit. Associates hereby acknowledges that nothing in this
Agreement shall limit Ford's ability to disclose the existence of a
cash deposit to the relevant Tax Authority if Ford elects to make a
corresponding deposit with the relevant Tax Authority. Associates
shall not be entitled to a return of a cash deposit prior to a Final
Determination of the Tax with respect to which it made such deposit.
To the extent that the cash deposit exceeds the Redetermination
Amount for the applicable Tax and taxable period as reflected in the
schedule delivered by Ford under Section 4.8(c)(1) of this
Agreement, which schedule shall take account of such cash deposit,
Ford shall deliver such excess to Associates not later than five (5)
days after the date such schedule is delivered.
4.9 Payment of Taxes for Post-Spinoff Periods.
Except as otherwise provided in this Agreement, Ford shall pay or
cause to be paid all Taxes and shall be entitled to receive and
retain all refunds of Taxes with respect to Tax Returns relating to
Post-Spinoff Periods for which Ford has filing responsibility under
this Agreement. Except as otherwise provided in this Agreement,
Associates shall pay or cause to be paid all Taxes and shall be
entitled to receive and retain all refunds of Taxes with respect to
Tax Returns relating to Post-Spinoff Periods for which Associates
has filing responsibility under this Agreement.
Section 5. Deconsolidation
5.1 Spinoff Related Items. (a) Restrictions on
Certain Post-Distribution Actions. (1) Associates Restrictions.
Associates agrees that it will not take or fail to take, or permit
any Associates Affiliate to take or fail to take, any action where
such action or failure to act would be inconsistent with any
information or representation in the Ruling Documents.
(2) Ford Restrictions. Ford agrees that it
will not take or fail to take, or permit any Ford Affiliate to take
or fail to take, any action where such action or failure to act
would be inconsistent with any information or representation in the
Ruling Documents.
(b) Liability for Undertaking Certain Actions.
(1) Associates Liability. Associates and each Associates Affiliate
shall be responsible for one hundred percent (100%) of any
Restructuring Taxes that are attributable to, or result from, any
act or failure to act described in Section 5.1(a)(1) of this
Agreement by Associates or any Associates Affiliate. Associates and
each Associates Affiliate shall jointly and severally indemnify
Ford, each Ford Affiliate and their directors, officers and
employees and hold them harmless from and against any such
Restructuring Taxes.
(2) Ford Liability. Ford and each Ford
Affiliate shall be responsible for one hundred percent (100%) of any
Restructuring Taxes that are attributable to, or result from, any
act or failure to act described in Section 5.1(a)(2) of this
Agreement by Ford or any Ford Affiliate. Ford and each Ford
Affiliate shall jointly and severally indemnify Associates, each
Associates Affiliate and their directors, officers and employees and
hold them harmless from and against any such Restructuring Tax.
Information. Ford has provided Associates with
copies of the Ruling Documents submitted on or prior to the date
hereof, and shall provide Associates with copies of any additional
Ruling Documents prepared after the date hereof prior to the
submission of such Ruling Documents to a Tax Authority, provided,
however, that Ford shall not be required to provide any information
to Associates concerning Class B stockholders of Ford as Ford shall
reasonably determine.
(d) Supplemental Rulings. (1) In General. Ford
agrees that at the reasonable request of Associates, Ford shall
cooperate with Associates and use its reasonable best efforts to
seek to obtain, as expeditiously as possible, a Supplemental Ruling
or other guidance from the Service or any other Tax Authority for
the purpose of confirming (I) the continuing validity of (A) the
Initial Private Letter Ruling, (B) any similar ruling issued by any
Tax Authority addressing the application of a provision of the laws
of another jurisdiction to the Internal Distribution or the Public
Distribution and/or any Supplemental Rulings issued previously,
and (ii) compliance on the part of Associates or an Associates
Affiliate with its obligations under Section 5.1(a)(1) of this
Agreement. However, Ford shall not be obligated to seek a
Supplemental Ruling unless it reasonably believes that the Service
or other Tax Authority would issue such a ruling. Further, in no
event shall Ford file any Supplemental Ruling unless Associates
represents that (1) it has read the request for the Supplemental
Ruling and any materials, appendices and exhibits submitted or filed
therewith (the "Supplemental Ruling Documents") and (2) all
information (other than information which is provided by and
external expert) and representations, if any, relating to Associates
and any Associates Affiliate contained in the Supplemental Ruling
Documents are true, correct and complete in all material respects.
Associates shall reimburse Ford for all reasonable costs and
expenses incurred by Ford in obtaining a Supplemental Ruling
requested by Associates. Associates hereby agrees that Ford shall
have sole and exclusive control over the process of obtaining a
Supplemental Ruling, and that only Ford shall apply for a
Supplemental Ruling. Associates further agrees that it shall not
seek any guidance from the Service or any other Tax Authority
concerning the Spinoff except as set forth in this Section 5.1(d).
(2) Participation Rights. If Ford
determines to obtain a Supplemental Ruling or other guidance after
the date of this Agreement: (I) Ford shall keep Associates informed
in a timely manner of all material actions taken or proposed to be
taken by Ford in connection therewith; (ii) Ford shall (A)
reasonably in advance of the submission of any such Supplemental
Ruling Documents, provide Associates with a draft copy thereof, (B)
reasonably consider Associates' comments on such draft copy, and
provide Associates with a final copy (in each case, omitting only
information concerning Class B stockholders of Ford as Ford shall
reasonably determine); and (iii) Ford shall provide Associates with
notice reasonably in advance of, and Associates shall have the right
to attend, any formally scheduled meetings with the Tax Authority
(subject to the approval of the Tax Authority) that relate to such
Supplemental Ruling.
(e) Liability of Associates for Certain
Acquisitions. Associates and each Associates Affiliate shall be
responsible for one hundred percent (100%) of any Restructuring
Taxes that are attributable to, or result from, the acquisition of
stock or assets of Associates or an Associates Affiliate by any
person or persons. Associates and each Associates Affiliate shall
jointly and severally indemnify Ford, each Ford Affiliate and their
directors, officers and employees and hold them harmless from and
against any such Restructuring Taxes.
(f) Liability for Breach of Representation. Each
of Ford and Associates hereby represents that (1) it has read the
Ruling Documents submitted on or prior to the date hereof, (2) all
information contained in such Ruling Documents that concerns or
relates to such party or any affiliate of such party, other than
information which is provided by an external expert, is true,
correct and complete in all material respects, and (3) except to the
extent that such party shall have notified the other party in
writing to the contrary and with reasonable specificity prior to the
Spinoff Date, all such information that concerns or relates to such
party or any affiliate of such party, other than information which
is provided by an external expert, is and will be true, correct and
complete in all material respects as of the Spinoff Date.
Associates acknowledges that Ford shall require, prior to the
Spinoff, an executed addendum to this Agreement in which Associates
will agree that the term "Ruling Documents," whenever used in this
Agreement, includes all filings or ruling requests or other
materials, appendices and exhibits submitted after the date hereof
to the Service or any Tax Authority in connection with the Spinoff
and provided by Ford to Associates under Section 5.1 of this
Agreement. If any Tax Authority withdraws any portion of a ruling
or Supplemental Ruling issued to Ford in connection with the Spinoff
because of a breach by Associates or any Associates Affiliate of a
representation made in this Section 5.1, Associates and each
Associates Affiliate shall be responsible for one hundred percent
(100%) of any Restructuring Taxes. In such event, Associates and
each Associates Affiliate shall jointly and severally indemnify
Ford, each Ford Affiliate and their directors, officers and
employees and hold them harmless from and against any Restructuring
Taxes. If any Tax Authority withdraws any portion of a ruling or
Supplemental Ruling issued to Ford in connection with the Spinoff
because of a breach by Ford or any Ford Affiliate of a
representation made in this Section 5.1, Ford and each Ford
Affiliate shall be responsible for one hundred percent (100%) of any
Restructuring Taxes. In such event, Ford and each Ford Affiliate
shall jointly and severally indemnify Associates, each Associates
Affiliate and their directors, officers and employees and hold them
harmless from and against any Restructuring Taxes.
(g) Payment. Associates shall make or cause to be
made all payments for which it or any Associates Affiliate may be
liable under this Section 5.1. Such payments shall be made to Ford
or to the appropriate Tax Authority as specified by Ford no later
than five (5) days after delivery by Ford to Associates of written
notice of a payment by or liability of Ford (or a Ford Affiliate or
a director, officer or employee) based on a Final Determination,
together with a computation of the amounts due.
5.2 Carrybacks. Ford agrees to pay to Associates the
actual Federal Income Tax benefit received by the Ford Group from
the use in any Pre-Spinoff Period (the "Carryback Period") of a
carryback of any Tax Asset of the Associates Group from a Post-Spinoff
Period. The Federal Income Tax benefit of a carryback of a
Tax Asset shall be considered equal to the lesser of: (a) either
(1) the increase in the amount Ford would have paid Associates or
(2) the decrease in the amount Associates would have paid Ford had
the amount of such Tax Asset applied to the Carryback Period arisen
in such Carryback Period, whichever is greater, or (b) the amount
of the reduction in Federal Income Taxes imposed on the Consolidated
Group for the Carryback Period resulting solely from the carryback
of such Tax Asset. Ford shall pay Associates such Federal Income
Tax benefit not later than sixty (60) days after Ford realizes the
economic benefit of the carryback, including interest calculated
pursuant to the principles of Section 4.8(b)(3)(ii) of this
Agreement, of such Tax Asset of the Associates Group. If subsequent
to the payment by Ford to Associates of the Federal Income Tax
benefit of a carryback of a Tax Asset of the Associates Group, there
shall be a Final Determination which results (a) in a disallowance
or a reduction of the Tax Asset so carried back or (b) a reduction
in the amount of such Federal Income Tax benefit, Associates shall
repay to Ford, not later than sixty (60) days after such event any
amount which would not have been payable to Associates pursuant to
this Section 5.2 had the amount of the benefit been determined in
light of these events. Associates shall indemnify Ford and hold it
harmless from and against any interest, addition to Tax or penalty
payable by any member of the Ford Group as a result of any such
event. Any such amount shall be paid by Associates to Ford not
later than sixty (60) days after the payment by Ford or any member
of the Consolidated Group of any such interest, addition to Tax, or
penalty. Nothing in this Section 5.2 shall require Ford to file an
amended Tax Return or claim for refund of Federal Income Taxes.
Nothing in this Agreement is intended to limit the ability of
Associates and the Associates Affiliates to implement Tax planning
strategies designed to reduce or eliminate any carryback of any Tax
Assets of the Associates Group from any Post-Spinoff Period to any
Pre-Spinoff Period.
5.3 Allocation of Tax Items. All Tax computations
for (a) any Pre-Spinoff Periods ending on the Spinoff Date, (b) the
immediately following taxable period of Associates or an Associates
Affiliate and any Straddle Period, shall be made pursuant to the
principles of Section 1.1502-76(b) of the Treasury regulations or of
a corresponding provision under the laws of other jurisdictions, as
determined by Ford and taking into account such elections thereunder
as Ford, in its sole discretion, shall make.
5.4 Information for Shareholders. Ford shall provide
each shareholder that receives stock of Associates pursuant to the
Public Distribution with the information necessary for such
shareholder to comply with the requirements of Section 355 of the
Code and the Treasury regulations thereunder with respect to
statements that such shareholders must file with their Federal
Income Tax Returns demonstrating the applicability of Section 355 of
the Code to the Public Distribution.
5.5 Continuing Covenants. Ford and Associates agree
(a) not to take, or to cause their respective affiliates to take,
any action reasonably expected to result in an increased Tax
liability to the other, a reduction in a Tax Asset of the other or
an increased liability to the other under this Agreement and (b) to
take (or cause their respective affiliates to take) any action
reasonably requested by the other that would reasonably be expected
to result in a Tax benefit or avoid a Tax cost to the other,
provided that such action does not result in any additional cost not
fully compensated for by the requesting party. The parties hereby
acknowledge that the preceding sentence is not intended to limit,
and therefore shall not apply to, the rights of the parties with
respect to matters otherwise covered by this Agreement.
5.6 Allocation of Tax Assets. (a) In General.
Ford, exercising reasonable judgment, shall determine the allocation
of any Tax Assets among Ford, each Ford Affiliate, Associates and
each Associates Affiliate that is occasioned by the Spinoff. The
parties hereby agree that in the absence of controlling legal
authority, Tax Assets shall be allocated to the entity that, in
Ford's reasonable judgment, incurred the cost or burden associated
with the creation of such Tax Asset. The parties hereby acknowledge
that Ford and the Ford Affiliates have incurred the entire cost or
burden associated with the creation of all federal and state minimum
tax credits and research tax credits, and that all such credits
shall be allocated to Ford and the Ford Affiliates. The parties
further acknowledge that with the payments pursuant to Section 9 of
this Agreement, Ford will have fully reimbursed Associates for all
Creditable Foreign Taxes and, accordingly, that no foreign tax
credits shall be allocated to Associates or any Associates
Affiliate.
(b) Reimbursement. If a minimum tax credit,
foreign tax credit or research tax credit is allocated under law
(including an allocation resulting from a Final Determination) to
Associates or any Associates Affiliate, Associates shall pay to Ford
the amount of such minimum tax credit, foreign tax credit or
research tax credit.
Information and Payment. Ford shall deliver to
Associates a schedule that sets forth any minimum tax credits,
foreign tax credits or research tax credits for which Associates is
required to reimburse Ford pursuant to Section 5.6(b) of this
Agreement. Associates hereby agrees to pay Ford an amount equal to
the amount of such credits within five (5) days after delivery of
such schedule.
Section 6. Additional Obligations
6.1 Provision of Information. Associates, shall, and
shall cause each Associates Affiliate to, (a) furnish to Ford in a
timely manner such information and documents as Ford may reasonably
request for purposes of (1) preparing any Tax Return for which Ford
has filing responsibility under this Agreement, (2) contesting or
defending any Audit, and (3) making any determination or computation
necessary or appropriate under this Agreement, (b) make its
employees available to provide explanations of documents and other
materials and such other information as Ford may reasonably request
in connection with any of the foregoing, cooperate in any Audit of
any Consolidated Return or Combined Return, (d) retain and provide
on demand books, records, documentation or other information
relating to any Tax Return until the later of (1) the expiration of
the applicable statute of limitations (giving effect to any
extension, waiver, or mitigation thereof) and (2) in the event any
claim is made under this Agreement for which such information is
relevant, until a Final Determination with respect to such claim,
and (e) take such action as Ford may reasonably deem appropriate in
connection therewith. Without limiting the generality of the
foregoing, Associates hereby agrees that it shall use its reasonable
best efforts to provide Ford with such information and documentation
as Ford may reasonably request for the purpose of meeting any
applicable burden of proof as to the availability and amount of
Creditable Foreign Taxes for Pre-Spinoff Periods ending on or before
December 31, 1995.
6.2 Indemnification. (a) Failure to Pay. Ford and
each Ford Affiliate shall jointly and severally indemnify
Associates, each Associates Affiliate and their respective
directors, officers and employees, and hold them harmless from and
against any loss, cost, damage or expense, including reasonable
attorneys' fees and costs, that is attributable to, or results from
the failure of Ford, any Ford Affiliate or any director, officer or
employee to make any payment required to be made under this
Agreement. Associates and each Associates Affiliate shall jointly
and severally indemnify Ford, each Ford Affiliate and their
respective directors, officers and employees, and hold them harmless
from and against any loss, cost, damage or expense, including
reasonable attorneys' fees and costs, that is attributable to, or
results from, the failure of Associates, any Associates Affiliate or
any director, officer or employee to make any payment required to be
made under this Agreement.
(b) Inaccurate or Incomplete Information. Ford
and each Ford Affiliate shall jointly and severally indemnify
Associates, each Associates Affiliate and their respective
directors, officers and employees, and hold them harmless from and
against any cost, fine, penalty, or other expense of any kind
attributable to the negligence of Ford or any Ford Affiliate in
supplying Associates or any Associates Affiliate with inaccurate or
incomplete information, in connection with the preparation of any
Tax Return. Associates and each Associates Affiliate shall jointly
and severally indemnify Ford, each Ford Affiliate and their
respective directors, officers and employees, and hold them harmless
from and against any cost, fine, penalty, or other expenses of any
kind attributable to the negligence of Associates or any Associates
Affiliate in supplying Ford or any Ford Affiliate with inaccurate or
incomplete information, in connection with the preparation of any
Tax Return.
6.3 Treatment of Payments; After Tax Amounts. For
Tax purposes, the parties agree to treat any payments (other than
payments of interest pursuant to Section 6.4 of this Agreement and
After Tax Amounts) pursuant to this Agreement as relating back to
the last taxable period beginning on or before the Spinoff and,
accordingly, as not includable in income. If pursuant to a Final
Determination it is determined that the receipt or accrual of any
payment made under this Agreement (other than payments of interest
pursuant to Section 6.4 of this Agreement) is subject to any Tax,
the party making such payment shall be liable for (a) the After Tax
Amount with respect to such payment and (b) interest at the rate
described in Section 6.4 of this Agreement on the amount of such Tax
from the date such Tax accrues through the date of payment of such
After Tax Amount. A party making a demand for a payment pursuant to
this Agreement and for a payment of an After Tax Amount with respect
to such payment shall separately specify and compute such After Tax
Amount. However, a party may choose not to specify an After Tax
Amount in a demand for payment pursuant to this Agreement without
thereby being deemed to have waived its right subsequently to demand
an After Tax Amount with respect to such payment.
6.4 Interest. Payments pursuant to this Agreement
that are not made within the period prescribed in this Agreement or,
if no period is prescribed, within thirty (30) days after demand for
payment is made (the "Payment Period") shall bear interest for the
period from and including the date immediately following the last
date of the Payment Period through and including the date of payment
(the "Interest Accrual Period") at a per annum rate equal to
Associates' weighted average interest rate for debt capital for each
year, or part thereof, included in the Interest Accrual Period plus
50 basis points. Such interest will be payable at the same time as
the payment to which it relates and shall be calculated on the basis
of a year of 365 days and the actual number of days for which due.
Section 7. Audits
7.1 In General. (a) Ford shall have the exclusive
right, in its sole discretion, to control, contest, and represent
the interests of Ford, any Ford Affiliate, Associates or any
Associates Affiliate in any Audit relating to any Tax Return
described in Section 2.1(a) of this Agreement and to resolve, settle
or agree to any deficiency, claim or adjustment proposed, asserted
or assessed in connection with or as a result of any such Audit.
Ford's rights shall extend to any matter pertaining to the
management and control of an Audit, including execution of waivers,
choice of forum, scheduling of conferences and the resolution of any
Tax Item. Without limiting the generality of the foregoing, Ford
shall contest, in accordance with the remaining provisions of this
Section 7, any deficiency, claim or adjustment that, if sustained,
would result in (1) a Redetermination Amount resulting solely from a
redetermination of a Tax Item of a member of the Associates Group or
(2) Restructuring Taxes for which Associates could be responsible
under this Agreement.
(b) Associates shall have the exclusive right, in
its sole discretion, to control, contest, and represent the
interests of Associates or any Associates Affiliate in any Audit
relating to any Tax Return described in Section 2.1(b) of this
Agreement and to resolve, settle, or agree to any deficiency, claim
or adjustment proposed, asserted or assessed in connection with or
as a result of any such Audit.
After the Spinoff Date, Ford and Associates
shall cooperate in order to transfer to Associates the exclusive
right to control, contest and represent the interests of Associates
or any Associates Affiliate in any Audit and to resolve, settle, or
agree to any deficiency, claim or adjustment proposed, asserted or
assessed in connection with or as a result of any such Audit in each
case relating to (1) all Tax Returns of Associates and the
Associates Affiliates relating to U.S. state and local Income Tax
and capital Tax (excluding any Combined Return), (2) all Tax Returns
of the Associates Affiliates listed in Appendix C to this Agreement
relating to Canadian federal income Tax, large corporations Tax, and
GST and to Canadian provincial income Tax, capital Tax, retail sales
Tax, property Tax and business Tax, and (3) all Tax Returns of the
Associates Affiliates listed in Appendix D to this Agreement
relating to Puerto Rican income Tax.
7.2 Notice. If after the Spinoff Date Ford or any
member of the Ford Group receives written notice of, or relating to,
an Audit from a Tax Authority that asserts, proposes or recommends a
deficiency, claim or adjustment that, if sustained, would result in
(1) a Redetermination Amount resulting solely from a redetermination
of a Tax Item of a member of the Associates Group or (2) any
Restructuring Taxes for which Associates could be responsible under
this Agreement, Ford shall notify Associates in writing of such
deficiency, claim or adjustment within ten (10) days of its receipt.
If Associates or any member of the Associates Group receives written
notice of or relating to an Audit from a Tax Authority with respect
to a Tax Return described in Section 2.1(a) of this Agreement,
Associates shall provide a copy of such notice to Ford within ten
(10) days of receiving such notice of such Audit, but in no case
later than thirty (30) days before a response is required to be
provided to the relevant Tax Authority.
7.3 Participation Rights. (a) If a Tax Authority
asserts, proposes or recommends a deficiency, claim or adjustment
that, if sustained, would result in (1) a Redetermination Amount
resulting solely from a redetermination of a Tax Item of a member of
the Associates Group or (2) Restructuring Taxes for which Associates
could be responsible under this Agreement:
(l) Ford shall keep Associates informed in a
timely manner of all material actions taken or proposed to be taken
by Ford in connection with such deficiency, claim or adjustment;
(2) in the case of any material
correspondence or filing submitted to the Tax Authority or any
judicial authority that relates to the merits of such deficiency,
claim or adjustment, Ford shall (I) reasonably in advance of such
submission, but subject to applicable time constraints imposed by
such Tax Authority or judicial authority, provide Associates with a
draft copy of the portion of such correspondence or filing that
relates solely to such deficiency, claim or adjustment, (ii)
reasonably consider, subject to applicable time constraints imposed
by such Tax Authority or judicial authority, Associates' comments on
such draft copy of such correspondence or filing, and (iii) provide
Associates with a final copy of the portion of such correspondence
or filing that relates solely to such deficiency, claim or
adjustment; and
(3) Ford shall provide Associates with
notice reasonably in advance of, and Associates shall have the right
to attend, any meetings with the Tax Authority (including meetings
with examiners) scheduled at least 24 hours in advance or hearings
or proceedings before any judicial authority to the extent they
relate to such deficiency, claim or adjustment.
(b) If Ford is reasonably satisfied that it will
not adversely affect the exercise of any of Ford's rights described
in Section 7.1(a) of this Agreement, Ford shall accept any
suggestions made by Associates with respect to the resolution or
settlement of, or agreement to, any deficiency, claim or adjustment
proposed, asserted or assessed in connection with or as a result of
any Audit that, if sustained, would result in (1) a Redetermination
Amount resulting solely from a redetermination of a Tax Item of a
member of the Associates Group or (2) any Restructuring Taxes (to
which Section 7.8 of this Agreement does not apply) for which
Associates could be responsible under this Agreement.
At Ford's reasonable request, Associates shall
assume responsibility for (1) presenting the merits with respect to
(I) any deficiency, claim or adjustment that, if sustained, would
result in a Redetermination Amount resulting from a redetermination
of a Tax Item of a member of the Associates Group, or (ii) subject
to Section 7.6 of this Agreement, any affirmative claim relating to
a Tax Item of a member of the Associates Group, or (2) resolving,
settling or agreeing to any such deficiency, claim or adjustment.
Any such request by Ford shall be subject to Associates' continued
compliance with the conditions of Section 7.4 of this Agreement and
to such other conditions as Ford reasonably determines to be
appropriate to preserve Ford's rights described in Section 7.1(a) of
this Agreement.
7.4 Limitations. (a) In General. Ford shall have
no obligation to contest, or to continue to contest, any deficiency,
claim or adjustment and Associates shall have no rights to
participate under Section 7.3 of this Agreement unless:
(1) within thirty (30) days of a reasonable
request by Ford, Associates shall deliver to Ford a written opinion
from a law firm, which opinion and law firm are reasonably
satisfactory to Ford, to the effect that there is a reasonable basis
(within the meaning of ABA Opinion No. 85-352) for contesting such
deficiency, claim or adjustment;
(2) Associates shall have agreed to be bound
by a Final Determination of such deficiency, claim or adjustment;
(3) Associates shall have agreed to pay, and
shall be currently paying, all reasonable out of pocket costs and
expenses incurred by Ford and any Ford Affiliate to contest such
deficiency, claim or assessment including reasonable outside
attorney's, accountants' and investigatory fees and disbursements;
(4) Associates shall have advanced to Ford,
on an interest-free basis (and with no additional net after-tax cost
to Ford), the amount of Tax in controversy (but not in excess of the
amounts actually expended by Ford) to the extent necessary for the
contest to proceed in the forum selected by Ford, in its sole
discretion;
(5) Associates shall have provided to Ford
all documents and information, and to have made available employees
and officers of Associates, as may be necessary, useful or
reasonably required by Ford in contesting such deficiency, claim or
adjustment; and
(6) the contest of such deficiency, claim or
adjustment shall involve no material danger of the sale, forfeiture
or loss of, or the creation of any lien on, any asset of Ford or any
Ford Affiliate (except if Associates shall have adequately bonded
such lien or otherwise made provision to protect the interests of
Ford or such Ford Affiliate in a manner reasonably satisfactory to
Ford).
(b) Settlement. Ford may, in its sole discretion,
resolve, settle or agree to any deficiency, claim or adjustment
proposed, asserted or assessed in connection with any Audit of any
Tax Return described in Section 2.1(a) of this Agreement
notwithstanding that such resolution, settlement or agreement would
result in (1) a Redetermination Amount resulting solely from a
redetermination of a Tax Item of a member of the Associates Group or
(2) any Restructuring Taxes (to which Section 7.8 of this Agreement
does not apply) for which Associates could be responsible under this
Agreement:
(1) provided Associates has been afforded a
reasonable opportunity to have the merits of such deficiency, claim
or adjustment presented to the relevant Tax Authority and provided
further, that Ford shall contest, or continue to contest such
deficiency, claim or adjustment to the highest administrative level
to which Ford is otherwise pursuing a contest with respect to
another deficiency, claim or adjustment relating to such Tax for
such taxable period; and
(2) unless, within thirty (30) days of a
reasonable request by Ford, Associates shall deliver to Ford a
written opinion from a law firm, which opinion and law firm are
reasonably acceptable to Ford, to the effect that Associates'
position with respect to such deficiency, claim or adjustment is
supported by substantial authority.
Appeals. Ford shall have no obligation to
appeal a determination of any Tax Authority that, if sustained,
would result in (1) a Redetermination Amount resulting solely from
a redetermination of a Tax Item of a member of the Associates Group
or (2) any Restructuring Taxes (to which Section 7.8 of this
Agreement does not apply) for which Associates could be responsible
under this Agreement, in any judicial forum unless within sixty (60)
days of a request by Ford, Associates shall deliver to Ford a
written opinion from a law firm, which opinion and law firm are
reasonably satisfactory to Ford, to the effect that it is more
likely than not that such determination will be reversed or
substantially modified upon appeal in a manner favorable to
Associates. In no event shall Ford have any obligation to appeal to
or seek review by the Supreme Court of the United States.
(d) Waiver. Notwithstanding any other provision
of this Section 7.4, Ford may resolve, settle, or agree to any
deficiency, claim or adjustment for any taxable period that, if
sustained, would result in (1) a Redetermination Amount resulting
solely from a redetermination of a Tax Item of a member of the
Associates Group or (2) any Restructuring Taxes for which Associates
could be responsible under this Agreement if Ford notifies
Associates in writing that it waives the payment by Associates for
such taxable period of any amount that would not be payable by
Associates under this Agreement but for such deficiency, claim or
adjustment (but not including amounts described in Section 7.4(a)(3)
of this Agreement that relate to the conduct to date of the
contest). In such event, Ford shall promptly reimburse Associates
for all amounts previously advanced by Associates to Ford in
connection with such deficiency, claim or adjustment under Section
7.4(a)(4) of this Agreement. No waiver by Ford under this Section
7.4(d) with respect to any deficiency, claim or adjustment relating
to any single Tax Item, position, issue or transaction or relating
to any single Tax for any one taxable period shall operate as a
waiver with respect to any other deficiency, claim or adjustment.
7.5 Failure to Notify, Etc. The failure of Ford
promptly to notify Associates of any matter relating to a particular
Tax for a taxable period or to take any action specified in Section
7.3 of this Agreement shall not relieve Associates of any liability
and/or obligation which it may have to Ford or any Ford Affiliate
under this Agreement with respect to such Tax for such taxable
period except to the extent that Associates' rights hereunder are
materially prejudiced by such failure and in no event shall such
failure relieve Associates of any other liability and/or obligation
which it may have to Ford or any Ford Affiliate.
7.6 Affirmative Claims. (a) In General. Subject to
the principles of Sections 6.1, 7.3 and 7.4 of this Agreement, Ford
shall assert any affirmative claim relating to a Tax Item of a
member of the Associates Group to the relevant Tax Authority
provided that (1) Associates agrees in advance to provide full
compensation to Ford for any cost or detriment to Ford or a Ford
Affiliate that would result from successfully asserting such claim,
and (2) Associates reasonably requests that such claim be asserted
within the applicable time period set forth in Section 7.6(b) or
7.6 of this Agreement. Ford may, in its sole discretion, assert
any affirmative claim that does not satisfy the foregoing conditions
or that is not described in Section 7.6(b) or 7.6 of this
Agreement.
(b) Consolidated Return Years. Associates shall
request that Ford assert any affirmative claims for Consolidated
Return Years ending on or after December 31, 1989 and ending on or
before December 31, 1994 no later than June 30, 1998, but in no
event shall Associates be required to provide such claims earlier
than ninety (90) days after the date Associates shall have been
provided access to the Consolidated Returns for such Consolidated
Return Years. Associates shall request that Ford assert any
affirmative claims for subsequent Consolidated Return Years no later
than the date that is one hundred eighty (180) days after the date
on which Ford delivers written notice to Associates that an
examination of the Consolidated Return for the applicable
Consolidated Return Year is to begin.
Combined Returns. Associates shall request that
Ford assert any affirmative claims for a Pre-Spinoff Period for
which a Combined Return has been filed no later than the date that
is one hundred eighty (180) days (but subject to applicable time
constraints imposed by the Tax Authority) after the date on which
Ford delivers written notice to Associates (which notice shall be
provided as soon as is reasonably practicable after the Spinoff
Date) that an examination of the Combined Return for the applicable
Pre-Spinoff Period has begun or is to begin, provided that either
(I) such examination has begun no earlier than January 1, 1998 or
(ii) in the case of a Combined Return for which an examination began
earlier than January 1, 1998, provided Ford is reasonably satisfied
that such assertion will not adversely affect the exercise of any of
Ford's rights described in Section 7.1(a) of this Agreement.
7.7 Remedies. Associates hereby agrees that
Associate's sole and exclusive remedy for a breach by Ford of Ford's
obligations to Associates with respect to a deficiency, claim or
adjustment relating to the redetermination of a Tax Item of a member
of the Associates Group for a taxable period shall be a reduction in
the amount that would otherwise be payable by Associates for such
taxable period or an increase in amount that would otherwise be
payable by Ford for such taxable period, in either case because of
the breach. Associates further agrees that no claim against Ford
and no defense to Associates' liabilities to Ford under this
Agreement shall arise from the resolution by Ford of any deficiency,
claim or adjustment relating to the redetermination of any Tax Item
of Ford or a Ford Affiliate.
7.8 Restructuring Taxes. Notwithstanding Sections
7.1(a), 7.3 and 7.4 of this Agreement, if (a) a Tax Authority
asserts, proposes or recommends a deficiency, claim or adjustment
that, if sustained, would result in Restructuring Taxes for which
Associates could be responsible under this Agreement, and (b)
Associates acknowledges in writing to Ford that, as between
Associates and Ford, Associates and each Associates Affiliate shall
be responsible for one hundred percent (100%) of any such
Restructuring Taxes that are determined pursuant to a Final
Determination, then (1) Ford shall take all actions requested by
Associates to contest such deficiency, claim or adjustment,
including administrative and judicial proceedings; (2) Associates
shall have the right to fully participate with respect to such
deficiency, claim or adjustment and related proceedings and Ford
shall accept all reasonable suggestions by Associates in connection
with the management and substance of such proceedings, and (3) in no
event shall Ford settle or compromise any such deficiency, claim or
adjustment without the written consent of Associates.
7.9 Effective Date. Except as otherwise provided in
this Section 7, the provisions of this Section 7 (other than the
first two sentences of Section 7.1(a) of this Agreement and Section
7.1(b) of this Agreement) shall not apply (a) in the case of Audits
relating to a Consolidated Return, before the Spinoff Date, and (b)
in the case of Audits relating to a Combined Return, before the date
that is sixty (60) days after the Spinoff Date.
Section 8. Dispute Resolution
8.1 Initial Notice of Disagreement. (a) The party
(the "Indemnifying Party") receiving a schedule or other notice
regarding a payment required pursuant to this Agreement (such as a
Redetermination Amount, or After Tax Amount) shall have thirty (30)
days from the delivery of such schedule or other notice to register
its disagreement with all or a portion of such payment (each such
disagreement a "Disputed Item").
(b) The Indemnifying Party shall register its
disagreement by delivering to the other party (the "Indemnified
Party") within such thirty (30) day period a written notice (an
"Initial Notice of Disagreement") that (1) specifically enumerates
each Disputed Item, (2) describes the grounds for the Indemnifying
Party's disagreement with each Disputed Item, and (3) states the
amount in dispute (or a good faith estimate thereof) with respect to
each Disputed Item.
The failure of the Indemnifying Party within the
thirty (30) day period described in Section 8.1(b) to deliver an
Initial Notice of Disagreement, that satisfies the requirements of
Section 8.1(b), with respect to all or a portion of the payment
described in Section 8.1(a) shall be deemed to constitute (1) an
acceptance and acknowledgment by such party of its liability for
such payment or portion thereof and (2) a waiver by such party of
its right to a Determination by an Independent Third Party pursuant
to Section 8.5 of this Agreement with respect to such payment or
portion thereof.
8.2 Negotiation. During the sixty (60) day period
immediately following delivery of an Initial Notice of Disagreement,
the Indemnifying Party and the Indemnified Party shall in good faith
attempt to resolve their disagreements over each Disputed Item
enumerated in the Initial Notice of Disagreement.
8.3 Final Notice of Disagreement. (a) The
Indemnifying Party shall have seventy (70) days from the delivery of
an Initial Notice of Disagreement to register its continued
disagreement with any Disputed Item and to elect to seek a
Determination by an Independent Third Party with respect to such
Disputed Item pursuant to Section 8.5 of this Agreement. The
Indemnifying Party shall do so by delivering to the Indemnified
Party within such seventy (70) day period a written notice (a "Final
Notice of Disagreement") that (1) specifically enumerates each
Disputed Item with respect to which it elects to seek a
Determination by an Independent Third Party, (2) describes the
grounds for the Indemnifying Party's continued disagreement with
each such Disputed Item, and (3) states the amount in dispute (or a
good faith estimate thereof) with respect to each such Disputed
Item.
(b) The failure of the Indemnifying Party within
the seventy (70) day period described in Section 8.3(a) to deliver a
Final Notice of Disagreement, that satisfies the requirements of
Section 8.3(a), with respect to all or a portion of the payment
described in Section 8.1 shall be deemed to constitute (1) an
acceptance and acknowledgment by such party of its liability for
such payment or portion thereof and (2) a waiver by such party of
its right to a Determination by an Independent Third Party pursuant
to Section 8.5 of this Agreement with respect to such Disputed Item.
Any dispute, controversy, or claim relating to
or arising out of a Disputed Item contained in a Notice of Final
Disagreement shall be finally settled by arbitration before an
Independent Third Party pursuant to the provisions of this Section
8.
8.4 Selection of Independent Third Party. If the
Indemnifying Party delivers a Final Notice of Disagreement to the
Indemnified Party, the parties shall, within ten (10) days after
such delivery, jointly select an Independent Third Party to make a
Determination with respect to each Disputed Item enumerated in the
Final Notice of Disagreement. If the parties cannot jointly agree
on an Independent Third Party to make such Determination within such
ten (10) day period, either party may apply to the American
Arbitration Association ("AAA") for the sole purpose of having the
AAA select an Independent Third Party from a list of no fewer than
two (2) and no more than five (5) potential Independent Third
Parties which list is acceptable to Skadden, Arps, Slate, ▇▇▇▇▇▇▇ &
▇▇▇▇ LLP (on behalf of Ford) and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ (on
behalf of Associates). If the two firms fail to approve a list
within fifteen (15) days of the application of either party to the
AAA, the Independent Third Party shall be selected by the AAA.
8.5 Determination by Independent Third Party. (a)
The Independent Third Party shall determine the appropriate outcome
based upon this Agreement (the "Determination") with respect to each
Disputed Item. The Independent Third Party shall have ninety (90)
days from the date that he or she is selected pursuant to Section
8.4 of this Agreement in which to make such Determinations, unless
the Indemnifying Party and the Indemnified Party mutually agree upon
an extension of such period or the Independent Third Party, in its
discretion, determines that an extension of such period is warranted
by exceptional circumstances. The Indemnifying Party and the
Indemnified Party shall provide the Independent Third Party with
such information or documentation as the Independent Third Party
deems in its discretion to be necessary for it to make the
Determinations requested of it. Any Determination by the
Independent Third Party (as well as any allocation of costs and
expenses pursuant to Section 8.5(b) of this Agreement) shall be in
writing, shall be delivered to the Indemnifying Party and the
Indemnified Party, and shall be final and binding upon them and
enforced as an arbitration award under the United States Arbitration
Act, 9 U.S.C. Sections 1-16. The parties explicitly waive any right to
seek any judicial review of the substance of the Determination of
the Independent Third Party. The Independent Third Party shall be
entitled to use, at the sole cost and expense of the Indemnifying
Party and the Indemnified Party, whatever resources it deems
necessary, including accounting and technical services. Any
proceedings relating to the Determination shall take place in New
York City.
(b) The Indemnifying Party and the Indemnified
Party shall be jointly and severally liable to the Independent Third
Party for all costs and expenses associated with retaining the
Independent Third Party. As between themselves, except as otherwise
provided in this Section 8.5(b), the Indemnifying Party and the
Indemnified Party shall share equally the costs and expenses
associated with retaining an Independent Third Party. Where a
Determination with respect to a Disputed Item is not less than
eighty percent (80%) of the amount claimed to be due from the
Indemnifying Party, the Independent Third Party may, in its
discretion, allocate to the Indemnifying Party more than fifty
percent (50%) of the costs and expenses associated with such
Determination. Where a Determination with respect to a Disputed
Item is less than fifty percent (50%) of the amount claimed to be
due from the Indemnifying Party, the Independent Third Party may, in
its discretion, allocate to the Indemnified Party more than fifty
percent (50%) of the costs and expenses associated with such
Determination.
Section 9. Pre-Spinoff Payments
9.1 Pre-Spinoff Payments. (a) Associates shall pay
Ford $80 million on or before the day immediately preceding the
Spinoff Date in full settlement of all claims for the amounts
arising under the last sentence of Section 3.5(b)(2) of this
Agreement. In consideration for such payment, Ford irrevocably
waives any remaining claims that it may have against Associates or
any Associates Affiliate with respect to the subject matter of the
foregoing provision (i.e., any deferred tax item), without regard to
whether the claim arises under the express provisions of any
agreement or otherwise under law or equity.
(b) Ford shall pay Associates $57.6 million on or
before the day immediately preceding the Spinoff Date in full
settlement of all claims with respect to the Foreign Tax Amounts for
the 1996 and 1997 taxable periods. In consideration for such
payment, except as provided in Section 4.8 of this Agreement, each
of Ford and Associates irrevocably waive any remaining rights that
it may have against the other with respect to any Foreign Tax Amount
for the 1996 or 1997 taxable period, without regard to whether such
claim arises under the express provisions of any agreement or
otherwise under law or equity. Nothing in this Section 9.1(b) shall
limit Ford's obligation under Section 5.2 of this Agreement to pay
Associates with respect to a carryback of any Tax Asset of the
Associates Group from a Post-Spinoff Period. Nothing in this
Section 9.1(b) shall limit Associates' obligation under Section 5.6
of this Agreement to pay Ford with respect to any foreign tax
credits allocated to Associates or any Associates Affiliate.
The payment obligations of Ford and Associates
under this Section 9.1 shall be satisfied by Associates making a net
payment to Ford in the amount of $22.4 million on or before the day
immediately preceding the Spinoff Date.
Section 10. Miscellaneous
10.1 Effectiveness. This Agreement shall become
effective upon execution by both parties hereto.
10.2 Notices. Any notice, request, instruction or
other document to be given or delivered under this Agreement by any
party to another party shall be in writing and shall be deemed to
have been duly given or delivered when (1) delivered in person, (2)
sent by facsimile, (3) deposited in the United States mail, postage
prepaid and sent certified mail, return receipt requested, or (4)
delivered to Federal Express or similar service for overnight
delivery to the address of the party set forth below.
If to Ford or any Ford Affiliate, to:
Ford Motor Company
▇▇▇▇▇ ▇▇▇▇ II ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Vice President-Chief Tax Officer
If to Associates or any Associates Affiliate to:
Associates First Capital Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Mailing Address:
▇.▇. ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
A copy of any notice, request, instruction or other document to be
given to Ford shall also be (1) delivered in person, (2) sent by
facsimile, (3) deposited in the United States mail, postage prepaid
and sent certified mail, return receipt requested, or (4) delivered
to Federal Express or similar service for overnight delivery to the
persons set forth below:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
A copy of any notice, request, instruction or other document to be
given to Associates shall also be (1) delivered in person, (2) sent
by facsimile, (3) deposited in the United States mail, postage
prepaid and sent certified mail, return receipt requested, or (4)
delivered to Federal Express or similar service for overnight
delivery to the person set forth below:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may, by written notice to the other parties, change the
address or the party to which any notice, request, instruction or
other document (or any copy thereof) is to be delivered.
10.3 Changes in Law. Any reference to a provision of
the Code or a law of another jurisdiction shall include a reference
to any applicable successor provision or law.
10.4 Confidentiality. Each party shall hold and
cause its directors, officers, employees, advisors and consultants
to hold in strict confidence, unless compelled to disclose by
judicial or administrative process or, in the opinion of its
counsel, by other requirements of law, all information (other than
any such information relating solely to the business or affairs of
such party) concerning the other parties hereto furnished it by such
other party or its representatives pursuant to this Agreement
(except to the extent that such information can be shown to have
been (1) previously known by the party to which it was furnished,
(2) in the public domain through no fault of such party, or (3)
later lawfully acquired from other sources not under a duty of
confidentiality by the party to which it was furnished), and each
party shall not release or disclose such information to any other
person, except its directors, officers, employees, auditors,
attorneys, financial advisors, bankers and other consultants who
shall be advised of and agree to be bound by the provisions of this
Section 10.4. Each party shall be deemed to have satisfied its
obligation to hold confidential information concerning or supplied
by the other party if it exercises the same care as it takes to
preserve confidentiality for its own similar information.
10.5 Successors. This Agreement shall be binding on
and inure to the benefit of any successor, by merger, acquisition of
assets or otherwise, to any of the parties hereto, to the same
extent as if such successor had been an original party.
10.6 Affiliates. Each of the parties hereto shall
cause to be performed, and hereby guarantees the performance of, all
actions, agreements and obligations set forth herein to be performed
by any of such party's affiliates; provided, however, that (a) if an
Associates Affiliate ceases to be an Associates Affiliate as a
result of a transfer of its stock or other ownership interests to a
third party in exchange for consideration in an amount approximately
equal to the fair market value of the stock or other ownership
interests transferred and such consideration is not distributed
outside of the Associates Group to the shareholders of Associates
then Ford shall, upon request, execute a release of such Associates
Affiliate from its obligations under this Agreement upon such
transfer provided that such Associates Affiliate shall have executed
a release of any rights it may have against Ford or any Ford
Affiliate by reason of this Agreement, and (b) if a Ford Affiliate
ceases to be a Ford Affiliate as a result of a transfer of its stock
or other ownership interests to a third party in exchange for
consideration in an amount approximately equal to the fair market
value of the stock or other ownership interests transferred and such
consideration is not distributed outside of the Ford Group to the
shareholders of Ford then Associates shall, upon request, execute a
release of such Ford Affiliate from its obligations under this
Agreement upon such transfer provided that such Ford Affiliate shall
have executed a release of any rights it may have against Associates
or any Associates Affiliate by reason of this Agreement.
10.7 Authorization, Etc. Each of the parties hereto
hereby represents and warrants that it has the power and authority
to execute, deliver and perform this Agreement, that this Agreement
has been duly authorized by all necessary corporate action on the
part of such party, that this Agreement constitutes a legal, valid
and binding obligation of each such party and that the execution,
delivery and performance of this Agreement by such party does not
contravene or conflict with any provision of law or of its charter
or bylaws or any agreement, instrument or order binding on such
party.
10.8 Entire Agreement. This Agreement contains the
entire agreement among the parties hereto with respect to the
subject matter hereof and amends and restates all prior Tax sharing
agreements between Ford or any Ford Affiliate and Associates and
such prior tax sharing agreements shall have no further force and
effect.
10.9 Section Captions. Section captions used in this
Agreement are for convenience and reference only and shall not
affect the construction of this Agreement.
10.10 Governing Law. This Agreement shall be
governed by and construed in accordance with laws of the State of
New York without giving effect to laws and principles relating to
conflicts of law.
10.11 Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same Agreement.
10.12 Severability. If any term, provision,
covenant, or restriction of this Agreement is held by a court of
competent jurisdiction (or an arbitrator or arbitration panel) to be
invalid, void, or unenforceable, the remainder of the terms,
provisions, covenants, and restrictions set forth herein shall
remain in full force and effect, and shall in no way be affected,
impaired, or invalidated. It is hereby stipulated and declared to
be the intention of the parties that they would have executed the
remaining terms, provisions, covenants, and restrictions without
including any of such which may be hereafter declared invalid, void,
or unenforceable. In the event that any such term, provision,
covenant or restriction is held to be invalid, void or
unenforceable, the parties hereto shall use their best efforts to
find and employ an alternate means to achieve the same or
substantially the same result as that contemplated by such terms,
provisions, covenant, or restriction.
10.13 No Third Party Beneficiaries. This Agreement
is solely for the benefit of Ford, the Ford Affiliates, Associates
and the Associates Affiliates. This Agreement should not be deemed
to confer upon third parties any remedy, claim, liability,
reimbursement, cause of action or other rights in excess of those
existing without this Agreement.
10.14 Waivers, Etc. No failure or delay on the part
of the parties in exercising any power or right hereunder shall
operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such right or power, preclude any
other or further exercise thereof or the exercise of any other right
or power. No modification or waiver of any provision of this
Agreement nor consent to any departure by the parties therefrom
shall in any event be effective unless the same shall be in writing,
and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given.
10.15 Setoff. All payments to be made by any party
under this Agreement shall be made without setoff, counterclaim, or
withholding, all of which are expressly waived.
10.16 Change of Law. If, due to any change in
applicable law or regulations or their interpretation by any court
of law or other governing body having jurisdiction subsequent to the
date of this Agreement, performance of any provision of this
Agreement or any transaction contemplated thereby shall become
impracticable or impossible, the parties hereto shall use their
commercially reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that
contemplated by such provision.
10.17 Agreement as to Jurisdiction. Each of the
parties hereto irrevocably agrees that the United States District
Court for the Southern District of New York has exclusive and sole
jurisdiction of any suit, action or other proceeding arising out of
this Agreement or any transaction contemplated hereby, and consents
to the same. In the event that the United States District Court for
the Southern District of New York determines an absence of Federal
jurisdiction, each of the parties hereto irrevocably agrees that the
Supreme Court of the State of New York, County of New York has
exclusive and sole jurisdiction of any suit, action or other
proceeding arising out of this Agreement or any transaction
contemplated hereby, and consents to the same. Each of the parties
separately agree not to commence any action, suit or proceeding
relating thereto except in such courts. With respect to any matters
to which it has submitted to jurisdiction as set forth in the
preceding sentences, each of the parties further agrees to waive
all objections to such proceedings they may have based on inadequate
service of process providing that service of any process, summons,
notice or document is hand delivered or sent by U.S. registered mail
to such party's respective address set forth in Section 10.2 of this
Agreement. Each of the parties irrevocably and unconditionally
waives any objection to the laying of venue of any action, suit or
proceeding arising out of this Agreement or the transactions
contemplated hereby in (a) the United States District Court for the
Southern District of New York or (b) the Supreme Court of the State
of New York, County of New York, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such
court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum. Notwithstanding
anything else to the contrary contained in this Section 10.17, any
dispute, controversy, or claim relating to or arising out of a
Disputed Item shall be settled by the Independent Third Party
pursuant to the provisions of Section 8 of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by a duly authorized officer as of the date
first above written.
FORD MOTOR COMPANY
on behalf of itself and its affiliates
By
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Vice President - Chief Tax Officer
ASSOCIATES FIRST CAPITAL CORPORATION
on behalf of itself and its affiliates
By
Name: ▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Executive Vice President and
Chief Financial Officer
