TAX SHARING AGREEMENT
BY AND AMONG
AT&T CORP.,
LUCENT TECHNOLOGIES INC.
AND
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
DATED AS OF
FEBRUARY 1, 1996
AND AMENDED AND RESTATED AS OF MARCH 29, 1996
TABLE OF CONTENTS
ARTICLE I DEFINITIONS
1.1
ADJUSTMENT................................................... 1
1.2.
AGREEMENT.................................................... 1
1.3. AT&T TAX
ADJUSTMENT.......................................... 2
1.4. AT&T TAX
BENEFIT............................................. 2
1.5.
CONSOLIDATION................................................ 2
1.6. CONSOLIDATED
RETURN.......................................... 2
1.7. CONTROLLING
PARTY............................................ 2
1.8. CORRELATIVE
ADJUSTMENT....................................... 2
1.9. DISPUTED
ADJUSTMENT.......................................... 3
1.10. FINAL
DETERMINATION.......................................... 3
1.11. INDEPENDENT THIRD
PARTY...................................... 3
1.12. INDEMNIFIED
PARTY............................................ 4
1.13. INDEMNIFYING
PARTY........................................... 4
1.14. INITIAL
DETERMINATION........................................ 4
1.15. INTERESTED
PARTY............................................. 4
1.16. INTERESTED PARTY
NOTICE...................................... 4
1.17. NCR TAX
ADJUSTMENT........................................... 4
1.18. NCR TAX
BENEFIT.............................................. 4
1.19. LUCENT TAX
ADJUSTMENT........................................ 5
1.20. LUCENT TAX
BENEFIT........................................... 5
1.21. NON-LINE OF BUSINESS
ADJUSTMENT.............................. 5
1.22. RESTRUCTURING
ADJUSTMENT..................................... 5
1.23.
RETURN....................................................... 5
1.24. SEPARATE
RETURN.............................................. 6
1.25. SEPARATION
AGREEMENT......................................... 6
1.26. SIGNIFICANT
OBLIGATION....................................... 6
1.27.
TAX.......................................................... 6
1.28. TAX
ADJUSTMENTS.............................................. 6
1.29. TAX
BENEFITS................................................. 6
1.30. TAX
CONTEST.................................................. 6
1.31. TAXING
AUTHORITY............................................. 7
1.32. ULTIMATE
DETERMINATION....................................... 7
ARTICLE II TAX ADJUSTMENTS/BENEFITS
2.1. IN
GENERAL.................................................... 7
2.2. TAX ADJUSTMENTS AND
BENEFITS.................................. 8
2.3. RESTRUCTURING
ADJUSTMENTS..................................... 9
2.4. NON-LINE OF BUSINESS
ADJUSTMENTS.............................. 11
ARTICLE III TAX CONTESTS
3.1. NOTIFICATION OF TAX
CONTESTS.................................. 14
3.2. TAX CONTEST SETTLEMENT
RIGHTS................................. 14
3.3. TAX CONTEST
PARTICIPATION..................................... 15
3.4. TAX CONTEST
WAIVER............................................ 16
3.5. TAX CONTEST DISPUTE
RESOLUTION................................ 17
ARTICLE IV PROCEDURE AND PAYMENT
4.1.
PROCEDURE..................................................... 20
4.2.
PAYMENT....................................................... 21
4.3.
INTEREST...................................................... 21
ARTICLE V OTHER TAX MATTERS
5.1. TAX POLICIES AND PROCEDURES DURING CONSOLIDATION
............. 22
5.2.
COOPERATION................................................... 23
5.3. FILING OF
RETURNS............................................. 23
ARTICLE VI MISCELLANEOUS
6.1. GOVERNING
LAW................................................. 24
6.2.
AFFILIATES.................................................... 24
6.3. INCORPORATION OF SEPARATION AGREEMENT PROVISIONS
............. 24
6.4.
NOTICES....................................................... 24
6.5. CONFLICTING OR INCONSISTENT
PROVISIONS........................ 25
6.6.
DURATION...................................................... 25
6.7.
AMENDMENT..................................................... 25
6.8. TAX ALLOCATION
AGREEMENTS..................................... 26
TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT, dated as of February 1, 1996, is
by and among AT&T, Lucent and NCR. Capitalized terms used herein shall have the
respective meanings assigned to them in the Separation Agreement unless
otherwise defined in Article I hereof.
WHEREAS, AT&T, Lucent and NCR have executed the Separation
Agreement pursuant to which AT&T's existing businesses will be separated into
three independent businesses; and
WHEREAS, it is appropriate and desirable to set forth the
principles and responsibilities of the parties to this Agreement regarding
future Adjustments with respect to Taxes, Tax Contests and other related Tax
matters.
NOW, THEREFORE, the parties, intending to be
legally bound,
agree as follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement the following terms shall
have the following meanings:
1.1. ADJUSTMENT means the deemed increase or
decrease in a
Tax, determined on an issue-by-issue or
transaction-by-transaction basis, as
appropriate, and using the assumptions set forth in the next sentence, resulting
from an adjustment made or proposed by a Taxing Authority with respect to any
amount reflected or required to be reflected on any Return relating to such Tax.
For purposes of determining such deemed increase or decrease in a Tax, the
following assumptions will be used: (a) in the case of any income Tax, the
highest marginal Tax rate or, in the case of any other Tax, the highest
applicable Tax rate, in each case in effect with respect to that Tax for the
Taxable period or any portion of the Taxable period to which the adjustment
relates; and (b) such determination shall be made without regard to whether any
actual increase or decrease in such Tax will in fact be realized with respect to
the Return to which such adjustment relates.
1.2. AGREEMENT means this Tax Sharing Agreement,
including any
schedules, exhibits and appendices attached hereto.
1.3. AT&T TAX ADJUSTMENT means, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with respect
to each Tax, the net increase in each such Tax equal to the sum of all
Adjustments made pursuant to a Final Determination with respect to each such Tax
for each such Taxable period or portion of a Taxable period that are clearly
attributable to the AT&T Services Business; provided, however, that any
Adjustment comprising a Restructuring Adjustment shall not be considered in
determining the amount of any AT&T Tax Adjustment.
1.4. AT&T TAX BENEFIT means, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with respect
to each Tax, the net decrease in each such Tax equal to the sum of all
Adjustments made pursuant to a Final Determination with respect to each such Tax
for each such Taxable period or portion of a Taxable period that are clearly
attributable to the AT&T Services Business; provided, however, that any
Adjustment comprising a Restructuring Adjustment shall not be considered in
determining the amount of any AT&T Tax Benefit.
1.5. CONSOLIDATION means, as appropriate, any Taxable period
or any portion of a Taxable period during which (a) one or more members of the
Lucent Group are members of an AT&T Consolidated Return; or (b) one or more
members of the NCR Group are members of an AT&T Consolidated Return.
1.6. CONSOLIDATED RETURN means, as appropriate, (a) for any
Taxable period or any portion of a Taxable period ending or deemed to end on or
prior to the Distribution Date, any consolidated or combined Return that
includes one or more members of the AT&T Group and/or one or more members of the
Lucent Group; and (b) for any Taxable period, or any portion of a Taxable
period, beginning or deemed to begin after the Distribution Date and ending or
deemed to end on or prior to the date of the NCR Distribution, any consolidated
or combined Return that includes one or more members of the AT&T Services Group
and/or one or more members of the NCR Group.
1.7. CONTROLLING PARTY means AT&T or any other member of the
AT&T Services Group, Lucent or any other member of the Lucent Group or NCR or
any other member of the NCR Group, as the case may be, that filed or, if no such
Return has been filed, was required to file, a Return that is the subject of any
Tax Contest, or any successor and/or assign of any of the foregoing; provided,
however, that in the case of any Consolidated Return, the Person that actually
filed such Consolidated Return (or any successor and/or assign of such Person)
will be the Controlling Party.
1.8. CORRELATIVE ADJUSTMENT means, in the case of an
Adjustment comprising either a Restructuring Adjustment or Non-Line of Business
Adjustment, the net present value of any future increases or decreases in a Tax
that would be realized,
using the assumptions set forth in the next sentence, by either AT&T or any
other member of the AT&T Services Group, Lucent or any other member of the
Lucent Group or NCR or any other member of the NCR Group, as the case may be, in
one or more Taxable periods (or any portion of a Taxable period) but only if
such increases or decreases (a) will take effect or begin to take effect in the
Taxable period or portion of a Taxable period immediately following the Taxable
period or portion of a Taxable period in which the Restructuring Adjustment or
Non-Line of Business Adjustment to such Tax was made; and (b) are a direct
result of such an Adjustment to that Tax in the immediately preceding Taxable
period or portion of such Taxable period. For purposes of determining the net
present value of any such future increases or decreases in a Tax, the following
assumptions will be used: (i) a discount rate equal to the sum of the Prime Rate
as of the date of the Final Determination relating to such Restructuring
Adjustment or Non-Line of Business Adjustment plus 3.5%; (ii) in the case of any
income Tax, the highest marginal Tax rate or, in the case of any other Tax, the
highest applicable Tax rate, in each case in effect with respect to that Tax for
the Taxable period, or portion of the Taxable period, in which the Restructuring
Adjustment or Non-Line of Business Adjustment was made; (iii) the depreciation,
amortization or credit rate or lives, if applicable, in effect for the Taxable
period, or portion of the Taxable period, in which the Restructuring Adjustment
or Non- Line of Business Adjustment was made; and (iv) such determination shall
be made without regard to whether any actual increases or decreases in such Tax
will in fact be realized with respect to the future Returns to which such
Correlative Adjustment relates.
1.9. DISPUTED ADJUSTMENT has the meaning set
forth in Section
3.4(b) hereof.
1.10. FINAL DETERMINATION means (a) a decision, judgment,
decree or other order by any court of competent jurisdiction, which has become
final and is either no longer subject to appeal or for which a determination not
to appeal has been made; (b) a closing agreement made under Section 7121 of the
Code or any comparable foreign, state, local, municipal or other Taxing statute;
(c) a final disposition by any Taxing Authority of a claim for refund; or (d)
any other written agreement relating to an Adjustment between any Taxing
Authority and any Controlling Party the execution of which is final and
prohibits such Taxing Authority or the Controlling Party from seeking any
further legal or administrative remedies with respect to such Adjustment.
1.11. INDEPENDENT THIRD PARTY means a
nationally recognized
law firm or any of the following accounting firms or their
successors: ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & Co.; Ernst & Young; KPMG Peat Marwick & Main;
Deloitte & Touche;
Coopers & ▇▇▇▇▇▇▇; and Price Waterhouse & Co.
1.12. INDEMNIFIED PARTY has the meaning set
forth in Section
4.1 hereof.
1.13. INDEMNIFYING PARTY has the meaning set
forth in Section
4.1 hereof.
1.14. INITIAL DETERMINATION has the meaning set
forth in
Section 3.5(b)(i) hereof.
1.15. INTERESTED PARTY means AT&T or any other member of the
AT&T Services Group, Lucent or any other member of the Lucent Group or NCR or
any other member of the NCR Group (including any successor and/or assign of any
of each of the foregoing), as the case may be, to the extent (a) such Person is
not the Controlling Party with respect to a Tax Contest; and (b) such Person (i)
may be liable for, or required to make, any indemnity payment, reimbursement or
other payment pursuant to the provisions of this Agreement with respect to such
Tax Contest; or (ii) may be entitled to receive any indemnity payment,
reimbursement or other payment pursuant to the provisions of this Agreement with
respect to such Tax Contest; provided, however, that in no event shall a member
of either the AT&T Services Group, the Lucent Group or the NCR Group, as the
case may be, be an Interested Party in a Tax Contest in which another member of
its Group is the Controlling Party with respect to the Tax Contest.
1.16. INTERESTED PARTY NOTICE has the meaning
set forth in
Section 3.4(b) hereof.
1.17. NCR TAX ADJUSTMENT means, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with respect
to each Tax, the net increase in each such Tax equal to the sum of all
Adjustments made pursuant to a Final Determination with respect to each such Tax
for each such Taxable period or portion of a Taxable period that are clearly
attributable to the NCR Business; provided, however, that any Adjustment
comprising a Restructuring Adjustment shall not be considered in determining the
amount of any NCR Tax Adjustment.
1.18. NCR TAX BENEFIT means, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with respect
to each Tax, the net decrease in each such Tax equal to the sum of all
Adjustments made pursuant to a Final Determination with respect to each such Tax
for each such Taxable period or portion of a Taxable period that are clearly
attributable to the NCR Business; provided, however, that any Adjustment
comprising a Restructuring Adjustment shall not be considered in determining the
amount of any NCR Tax Benefit.
1.19. LUCENT TAX ADJUSTMENT means, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with respect
to each Tax, the net increase in each such Tax equal to the sum of all
Adjustments made pursuant to a Final Determination with respect to each such Tax
for each such Taxable period or portion of a Taxable period that are clearly
attributable to either the Lucent Assets or the Lucent Business; provided,
however, that any Adjustment comprising a Restructuring Adjustment shall not be
considered in determining the amount of any Lucent Tax Adjustment.
1.20. LUCENT TAX BENEFIT means, with respect to any Taxable
period or portion of a Taxable period, and as computed separately with respect
to each Tax, the net decrease in each such Tax equal to the sum of all
Adjustments made pursuant to a Final Determination with respect to each such Tax
for each such Taxable period or portion of a Taxable period that are clearly
attributable to either the Lucent Assets or the Lucent Business; provided,
however, that any Adjustment comprising a Restructuring Adjustment shall not be
considered in determining the amount of any Lucent Tax Benefit.
1.21. NON-LINE OF BUSINESS ADJUSTMENT means, with respect to
any Taxable period or portion of a Taxable period, and as computed separately
with respect to each Tax, the net increase or decrease in each such Tax, as the
case may be, equal to the sum of all Adjustments made pursuant to a Final
Determination with respect to each such Tax for each such Taxable period or
portion of a Taxable period other than (a) any Restructuring Adjustments and any
Correlative Adjustment attributable to such Restructuring Adjustments; (b) any
Tax Adjustments; and (c) any Tax Benefits.
1.22. RESTRUCTURING ADJUSTMENT means, with respect to any
Taxable period or portion of a Taxable period, and as computed separately with
respect to each Tax, the net increase or decrease in each such Tax, as the case
may be, equal to the sum of all Adjustments made pursuant to a Final
Determination with respect to each such Tax for each Taxable period or portion
of a Taxable period that are attributable to, or as a result of, any
transactions undertaken to effectuate the separation of AT&T's existing
businesses into three independent businesses as contemplated under the
Separation Agreement including, but not limited to, any transactions undertaken
pursuant to or relating to the Separation, the IPO, the Distribution, the
Non-U.S. Plan, the merger of RMC with and into AT&T and the NCR Distribution.
1.23. RETURN means any return, report, form or similar
statement or document (including, without limitation, any related or supporting
information or schedule attached thereto and any information return, claim for
refund, amended return and declaration of estimated tax) that has been or is
required to be filed with any Taxing Authority or that has been or is required
to be furnished to any Taxing
Authority in connection with the determination, assessment or
collection of any
Taxes or the administration of any laws, regulations or
administrative
requirements relating to any Taxes.
1.24. SEPARATE RETURN means any Return other
than a
Consolidated Return.
1.25. SEPARATION AGREEMENT means the Separation
and
Distribution Agreement, dated the date hereof, by and among AT&T
Corp., Lucent
Technologies Inc. and ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇.
1.26. SIGNIFICANT OBLIGATION means, in the case of an
Interested Party, and with respect to any Adjustment comprising either a
Restructuring Adjustment or Non- Line of Business Adjustment, either (a) a
Shared Percentage that is greater than or equal to 30%; or (b) an obligation to
make or right to receive any indemnity payment, reimbursement or other payment
with respect to any such Adjustment (including the effect of a Correlative
Adjustment relating thereto) pursuant to the terms of this Agreement that (i) in
the case of any federal income Tax is greater than $5 million, and (ii) in the
case of any other Tax is greater than $1 million.
1.27. TAX (and, with correlative meanings, "Taxes" and
"Taxable") means, without limitation, and as determined on a
jurisdiction-by-jurisdiction basis, each foreign or U.S. federal, state, local
or municipal income, alternative or add-on minimum, gross receipts, sales, use,
ad valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property or any other
tax, custom, tariff, impost, levy, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or
penalty, addition to tax or additional amount related thereto, imposed by any
Taxing Authority.
1.28. TAX ADJUSTMENTS means any AT&T Tax Adjustment, any NCR
Tax Adjustment or any Lucent Tax Adjustment, as the case may be.
1.29. TAX BENEFITS means any AT&T Tax Benefit, any NCR Tax
Benefit or any Lucent Tax Benefit, as the case may be.
1.30. TAX CONTEST means, without limitation, any audit,
examination, claim, suit, action or other proceeding relating to Taxes in which
an Adjustment to Taxes may be proposed, collected or assessed and in respect of
which an indemnity payment, reimbursement or other payment may be sought under
this Agreement.
1.31. TAXING AUTHORITY means any 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 other imposition of Taxes.
1.32. ULTIMATE DETERMINATION has the meaning set
forth in
Section 3.5(b)(iii) hereof.
ARTICLE II
TAX ADJUSTMENTS/BENEFITS
2.1 IN GENERAL. (a) In determining Lucent's liability and/or
obligation to make, or Lucent's right to receive, any indemnity payment,
reimbursement or other payment in respect of any Tax under this Agreement, any
Taxable period or portion of a Taxable period that includes the Distribution
Date shall be deemed to include and end on such Distribution Date and Lucent
shall have no liability and/or obligation to make, or right to receive, any
indemnity payment, reimbursement or other payment in respect of any Tax under
this Agreement with respect to any Taxable period or portion of a Taxable period
that begins or is deemed to begin after the Distribution Date.
(b) In determining NCR's liability and/or obligation to make,
or NCR's right to receive, any indemnity payment, reimbursement or other payment
in respect of any Tax under this Agreement, any Taxable period or portion of a
Taxable period that includes the date of the NCR Distribution shall be deemed to
include and end on such date and NCR shall have no liability and/or obligation
to make, or right to receive, any indemnity payment, reimbursement or other
payment under this Agreement in respect of any Tax with respect to any Taxable
period or portion of a Taxable period that begins or is deemed to begin after
the date of the NCR Distribution.
(c) Any Adjustment relating to or arising out of the
employment of employees or former employees the Liabilities with respect to
which are assumed by Lucent pursuant to Section 2.1(a) of the Employee Benefits
Agreement shall be deemed to be Adjustments that are clearly attributable to the
Lucent Business and shall be deemed to comprise a Lucent Tax Adjustment or
Lucent Tax Benefit, as the case may be. All other Adjustments relating to or
arising out of the employment of employees or former employees shall be deemed
to be Adjustments that are clearly attributable to the AT&T Services Business
and shall be deemed to comprise an AT&T Tax Adjustment or AT&T Tax Benefit, as
the case may be, except to the extent that such Adjustments arise out of or
relate to the employment of such individuals by NCR, in which case they shall
be deemed to be Adjustments that are clearly attributable to the NCR Business
and shall be deemed to comprise a NCR Tax Adjustment or NCR Tax Benefit, as the
case may be.
2.2. TAX ADJUSTMENTS AND BENEFITS. (a) Lucent shall be liable
for, and shall indemnify and hold harmless, subject to Section 3.4 and Section
3.5 hereof, any member of the AT&T Services Group and/or the NCR Group, as
appropriate, against any and all Lucent Tax Adjustments for any Taxable period
or portion of a Taxable period ending or deemed to end on or before the
Distribution Date, in each case with respect to any Return of any member of the
Lucent Group, the AT&T Services Group or the NCR Group. Lucent shall be entitled
to receive, and shall be paid, subject to Section 3.4 and Section 3.5 hereof,
(i) by AT&T, the amount of any Lucent Tax Benefits for any Taxable period or
portion of a Taxable period ending or deemed to end on or before the
Distribution Date with respect to any Return of any member of the AT&T Services
Group; and/or (ii) by NCR, the amount of any Lucent Tax Benefits for any Taxable
period or portion of a Taxable period ending or deemed to end on or before the
Distribution Date with respect to any Return of any member of the NCR Group.
(b) AT&T shall be liable for, and shall indemnify and hold
harmless, as appropriate, and subject to Section 3.4 and Section 3.5 hereof, (i)
any member of the Lucent Group against any and all AT&T Tax Adjustments for any
Taxable period or portion of a Taxable period ending or deemed to end on or
before the Distribution Date; and/or (ii) any member of the NCR Group against
any and all AT&T Tax Adjustments for any Taxable period or portion of a Taxable
period ending or deemed to end on or before the date of the NCR Distribution, in
each case with respect to any Return of any member of the Lucent Group, the AT&T
Services Group or the NCR Group. AT&T shall be entitled to receive, and shall be
paid, subject to Section 3.4 and Section 3.5 hereof, (i) by Lucent, the amount
of any AT&T Tax Benefits for any Taxable period or portion of a Taxable period
ending or deemed to end on or before the Distribution Date with respect to any
Return of any member of the Lucent Group; and/or (ii) by NCR, the amount of any
AT&T Tax Benefits for any Taxable period or any portion of a Taxable period
ending or deemed to end on or before the date of the NCR Distribution with
respect to any Return of any member of the NCR Group.
(c) NCR shall be liable for, and shall indemnify
and hold
harmless, as appropriate, and subject to Section 3.4 and Section
3.5 hereof, (i)
any member of the AT&T Services Group against any and all NCR Tax
Adjustments
for any Taxable period or portion of a Taxable period ending or
deemed to end on
or before the date of the NCR Distribution; and (ii) any member of
the Lucent
Group against any and all NCR Tax Adjustments for any Taxable
period or portion
of a Taxable period ending or deemed to end on or before the
Distribution Date,
in each case with respect to any Return of any member of the
Lucent Group, the
AT&T Services Group or the NCR Group. NCR
shall be entitled to receive, and shall be paid, subject to Section 3.4 and
Section 3.5 hereof, (i) by AT&T, the amount of any NCR Tax Benefits for any
Taxable period or portion of a Taxable period ending or deemed to end on the
date of the NCR Distribution with respect to any Return of any member of the
AT&T Services Group; and/or (ii) by Lucent, the amount of any NCR Tax Benefits
for any Taxable period or portion of a Taxable period ending or deemed to end on
the Distribution Date with respect to any Return of any member of the Lucent
Group.
2.3. RESTRUCTURING ADJUSTMENTS. (a) Lucent shall be liable
for, and shall indemnify and hold harmless, as appropriate, any member of the
AT&T Services Group and/or the NCR Group against Lucent's share, as determined
in Section 2.3(d) below, of any Restructuring Adjustment the amount of which
increases a Tax for any Taxable period or portion of a Taxable period ending or
deemed to end on or before the Distribution Date, in each case with respect to
any Return of any member of the Lucent Group, the AT&T Services Group or the NCR
Group. Lucent shall be entitled to receive, and shall be paid (i) by AT&T,
Lucent's share, as determined in Section 2.3(d) below, of any Restructuring
Adjustment the amount of which decreases a Tax for any Taxable period or portion
of a Taxable period ending or deemed to end on or before the Distribution Date
with respect to any Return of any member of the AT&T Services Group; and/or (ii)
by NCR, Lucent's share, as determined in Section 2.3(d) below, of any
Restructuring Adjustment the amount of which decreases a Tax for any Taxable
period or portion of a Taxable period ending or deemed to end on or before the
Distribution Date with respect to any Return of any member of the NCR Group.
(b) AT&T shall be liable for, and shall indemnify and hold
harmless, as appropriate, (i) any member of the Lucent Group against AT&T's
share, as determined in Section 2.3(d) below, of any Restructuring Adjustment
the amount of which increases a Tax for any Taxable period or portion of a
Taxable period ending or deemed to end on or before the Distribution Date; and
(ii) any member of the NCR Group against AT&T's share, as determined in Section
2.3(d) below, of any Restructuring Adjustment the amount of which increases a
Tax for any Taxable period or portion of a Taxable period ending or deemed to
end on or before the date of the NCR Distribution, in each case with respect to
any Return of any member of the Lucent Group, the AT&T Services Group or the NCR
Group. AT&T shall be entitled to receive, and shall be paid (i) by Lucent,
AT&T's share, as determined in Section 2.3(d) below, of any Restructuring
Adjustment the amount of which decreases a Tax for any Taxable period or portion
of a Taxable period ending or deemed to end on or before the Distribution Date
with respect to any Return of any member of the Lucent Group; and/or (ii) by
NCR, AT&T's share, as determined in Section 2.3(d) below, of any Restructuring
Adjustment the amount of which decreases a Tax for any Taxable period or portion
of a Taxable period ending or
deemed to end on or before the date of the NCR Distribution with
respect to any
Return of any member of the NCR Group.
(c) NCR shall be liable for, and shall indemnify and hold
harmless, as appropriate, (i) any member of the Lucent Group against NCR's
share, as determined in Section 2.3(d) below, of any Restructuring Adjustment
the amount of which increases a Tax for any Taxable period or portion of a
Taxable period ending or deemed to end on or before the Distribution Date; and
(ii) any member of the AT&T Services Group against NCR's share, as determined in
Section 2.3(d) below, of any Restructuring Adjustment the amount of which
increases a Tax for any Taxable period or portion of a Taxable period ending or
deemed to end on or before the date of the NCR Distribution, in each case with
respect to any Return of any member of the Lucent Group, the AT&T Services Group
or the NCR Group. NCR shall be entitled to receive, and shall be paid (i) by
Lucent, NCR's share, as determined in Section 2.3(d) below, of any Restructuring
Adjustment the amount of which decreases a Tax for any Taxable period or portion
of a Taxable period ending or deemed to end on or before the Distribution Date
with respect to any Return of any member of the Lucent Group; and/or (ii) by
AT&T, NCR's share, as determined in Section 2.3(d) below, of any Restructuring
Adjustment the amount of which decreases a Tax for any Taxable period or portion
of a Taxable period ending or deemed to end on or before the date of the NCR
Distribution with respect to any Return of any member of the AT&T Services
Group.
(d) AT&T, Lucent and NCR shall share the amount of any
Restructuring Adjustment if, and to the extent, each such party is liable for
and/or has an obligation to make, or has the right to receive, as the case may
be, any indemnity payment, reimbursement or other payment with respect to such
Restructuring Adjustment under this Agreement, in proportion to the Shared AT&T
Percentage, the Shared Lucent Percentage and the Shared NCR Percentage,
respectively; provided, however, that in the event that there is any Correlative
Adjustment with respect to any such Restructuring Adjustment, then AT&T, Lucent
and NCR shall share such Restructuring Adjustment in the following manner in
order to ensure that the party or parties that will bear the burden or inure to
the benefit of the Correlative Adjustment in the future will share the
Restructuring Adjustment in proportion to each of their respective Shared
Percentages after giving effect to such Correlative Adjustment:
(i) first, the amount of any such Restructuring Adjustment
shall be increased or decreased, as appropriate, by the amount of the
Correlative Adjustment, the net amount resulting from such increase or decrease
being hereinafter referred to as the "Net Restructuring Adjustment" for purposes
of this Section 2.3(d);
(ii) second, the Net Restructuring Adjustment shall be
allocated among AT&T, Lucent and NCR in proportion to the Shared AT&T
Percentage, the Shared Lucent Percentage and the Shared
NCR Percentage,
respectively, to the extent each such party is liable for and/or has an
obligation to make, or has the right to receive, as the case may be, any
indemnity payment, reimbursement or other payment with respect to such
Restructuring Adjustment under this Agreement; and
(iii) finally, with respect to a party to which a Correlative
Adjustment is attributable, that party's share of the Net Restructuring
Adjustment as allocated pursuant to paragraph (ii) of this Section 2.3(d) will
be increased or decreased, as appropriate, by the amount, if any, of the
Correlative Adjustment that is attributable to such party in order to arrive at
such party's share of the Restructuring Adjustment.
Notwithstanding any other provision of this Agreement or the Separation
Agreement to the contrary, in the case of any Adjustment comprising a
Restructuring Adjustment that relates to the Distribution and arises as a result
of the acquisition of all or a portion of the Lucent stock and/or its assets by
any means whatsoever by any Person other than an Affiliate of Lucent following
such Distribution, then the Shared Lucent Percentage with respect to such
Adjustment shall be 100% and each of the Shared AT&T Percentage and the Shared
NCR Percentage shall be 0%.
(e) Following the determination of a party's share of a
Restructuring Adjustment pursuant to Section 2.3(d) above, and subject to
Section 3.4 and 3.5 hereof, the Controlling Party that controls the Tax Contest
to which such Restructuring Adjustment relates shall (i) be entitled to
reimbursement from AT&T, Lucent and/or NCR, as the case may be, for each of
their respective shares, if any, of any Restructuring Adjustment the amount of
which increases a Tax; and (ii) reimburse AT&T, Lucent or NCR, as the case may
be, for each of their respective shares, if any, of any Restructuring Adjustment
the amount of which decreases a Tax.
2.4. NON-LINE OF BUSINESS ADJUSTMENTS. (a) Lucent shall be
liable for, and shall indemnify and hold harmless, as appropriate, any member of
the AT&T Services Group and/or the NCR Group against Lucent's share, as
determined in Section 2.4(d) below, of any Non-Line of Business Adjustment the
amount of which increases a Tax for any Taxable period or portion of a Taxable
period ending or deemed to end on or before the Distribution Date, in each case
with respect to any Return of any member of the Lucent Group, the AT&T Services
Group or the NCR Group. Lucent shall be entitled to receive, and shall be paid
(i) by AT&T, Lucent's share, as determined in Section 2.4(d) below, of any
Non-Line of Business Adjustment the amount of which decreases a Tax for any
Taxable period or portion of a Taxable period ending or deemed to end on or
before the Distribution Date with respect to any Return of any member of the
AT&T Services Group; and/or (ii) by NCR, Lucent's share, as determined in
Section 2.4(d) below, of any Non-Line of Business Adjustment the amount of which
decreases a Tax for any Taxable period or portion of a Taxable period ending or
deemed to end on or before the Distribution Date with respect to any Return of
any member of the NCR Group.
(b) AT&T shall be liable for, and shall indemnify and hold
harmless, as appropriate, (i) any member of the Lucent Group against AT&T's
share, as determined in Section 2.4(d) below, of any Non-Line of Business
Adjustment the amount of which increases a Tax for any Taxable period or portion
of a Taxable period ending or deemed to end on or before the Distribution Date;
and (ii) any member of the NCR Group against AT&T's share, as determined in
Section 2.4(d) below, of any Non-Line of Business Adjustment the amount of which
increases a Tax for any Taxable period or portion of a Taxable period ending or
deemed to end on or before the date of the NCR Distribution, in each case with
respect to any Return of any member of the Lucent Group, the AT&T Services Group
or the NCR Group. AT&T shall be entitled to receive, and shall be paid (i) by
Lucent, AT&T's share, as determined in Section 2.4(d) below, of any Non-Line of
Business Adjustment the amount of which decreases a Tax for any Taxable period
or portion of a Taxable period ending or deemed to end on or before the
Distribution Date with respect to any Return of any member of the Lucent Group;
and/or (ii) by NCR, AT&T's share, as determined in Section 2.4(d) below, of any
Non-Line of Business Adjustment the amount of which decreases a Tax for any
Taxable period or portion of a Taxable period ending or deemed to end on or
before the date of the NCR Distribution with respect to any Return of any member
of the NCR Group.
(c) NCR shall be liable for, and shall indemnify and hold
harmless, as appropriate, (i) any member of the Lucent Group against NCR's
share, as determined in Section 2.4(d) below, of any Non-Line of Business
Adjustment the amount of which increases a Tax for any Taxable period or portion
of a Taxable period ending or deemed to end on or before the Distribution Date;
and (ii) any member of the AT&T Services Group against NCR's share, as
determined in Section 2.4(d) below, of any Non-Line of Business Adjustment the
amount of which increases a Tax for any Taxable period or portion of a Taxable
period ending or deemed to end on or before the date of the NCR Distribution, in
each case with respect to any Return of any member of the Lucent Group, the AT&T
Services Group or the NCR Group. NCR shall be entitled to receive, and shall be
paid (i) by Lucent, NCR's share, as determined in Section 2.4(d) below, of any
Non-Line of Business Adjustment the amount of which decreases a Tax for any
Taxable period or portion of a Taxable period ending or deemed to end on or
before the Distribution Date with respect to any Return of any member of the
Lucent Group; and/or (ii) by AT&T, NCR's share, as determined in Section 2.4(d)
below, of any Non-Line of Business Adjustment the amount of which decreases a
Tax for any Taxable
period or portion of a Taxable period ending or deemed to end on or before the
date of the NCR Distribution with respect to any Return of any member of the
AT&T Services Group.
(d) AT&T, Lucent and NCR shall share the amount of any
Non-Line of Business Adjustment if, and to the extent, each such party is liable
for and/or has an obligation to make, or has the right to receive, as the case
may be, any indemnity payment, reimbursement or other payment with respect to
such Non-Line of Business Adjustment under this Agreement, in proportion to the
Shared AT&T Percentage, the Shared Lucent Percentage and the Shared NCR
Percentage, respectively; provided, however, that in the event that there is any
Correlative Adjustment with respect to any such Non-Line of Business Adjustment,
then AT&T, Lucent and NCR shall share such Non-Line of Business Adjustment in
the following manner in order to ensure that the party or parties that will bear
the burden or inure to the benefit of the Correlative Adjustment in the future
will share the Non-Line of Business Adjustment in proportion to each of their
respective Shared Percentages after giving effect to such Correlative
Adjustment:
(i) first, the amount of any such Non-Line of Business
Adjustment shall be increased or decreased, as appropriate, by the amount of the
Correlative Adjustment, the net amount resulting from such increase or decrease
being hereinafter referred to as the "Net Non-Line of Business Adjustment" for
purposes of this Section 2.4(d);
(ii) second, the Net Non-Line of Business Adjustment shall be
allocated among AT&T, Lucent and NCR in proportion to the Shared AT&T
Percentage, the Shared Lucent Percentage and the Shared
NCR Percentage,
respectively, to the extent each such party is liable for and/or has an
obligation to make, or has the right to receive, as the case may be, any
indemnity payment, reimbursement or other payment with respect to such Non-Line
of Business Adjustment under this Agreement; and
(iii) finally, with respect to a party to which a Correlative
Adjustment is attributable, that party's share of the Net Non-Line of Business
Adjustment as allocated pursuant to paragraph (ii) of this Section 2.4(d) will
be increased or decreased, as appropriate, by the amount, if any, of the
Correlative Adjustment that is attributable to such party in order to arrive at
such party's share of the Non-Line of Business Adjustment.
(e) Following the determination of a party's share of a
Non-Line of Business Adjustment pursuant to Section 2.4(d) above, and subject to
Section 3.4 and 3.5 hereof, the Controlling Party that controls the Tax Contest
to which such Non-Line of Business Adjustment relates shall (i) be entitled to
reimbursement from AT&T, Lucent
and/or NCR, as the case may be, for each of their respective shares, if any, of
any Non-Line of Business Adjustment the amount of which increases a Tax; and
(ii) reimburse AT&T, Lucent or NCR, as the case may be, for each of their
respective shares, if any, of any Non-Line of Business Adjustment the amount of
which decreases a Tax.
ARTICLE III
TAX CONTESTS
3.1. NOTIFICATION OF TAX CONTESTS. The Controlling Party shall
promptly notify all Interested Parties of (a) the commencement of any Tax
Contest pursuant to which such Interested Parties may be required to make or
entitled to receive an indemnity payment, reimbursement or other payment under
this Agreement; and (b) as required and specified in Section 3.4 hereof, any
Final Determination made with respect to any Tax Contest pursuant to which such
Interested Parties may be required to make or entitled to receive any indemnity
payment, reimbursement or other payment under this Agreement. The failure of a
Controlling Party to promptly notify any Interested Party as specified in the
preceding sentence shall not relieve any such Interested Party of any liability
and/or obligation which it may have to the Controlling Party under this
Agreement except to the extent that the Interested Party was prejudiced by such
failure, and in no event shall such failure relieve the Interested Party from
any other liability or obligation which it may have to such Controlling Party.
3.2. TAX CONTEST SETTLEMENT RIGHTS. The Controlling Party
shall have the sole right to contest, litigate, compromise and settle any
Adjustment that is made or proposed in a Tax Contest without obtaining the prior
consent of any Interested Party; provided, however, that, unless waived by the
parties in writing, the Controlling Party shall, in connection with any proposed
or assessed Adjustment in a Tax Contest for which an Interested Party may be
required to make or entitled to receive an indemnity payment, reimbursement or
other payment under this Agreement (a) keep all such Interested Parties informed
in a timely manner of all actions taken or proposed to be taken by the
Controlling Party; and (b) provide all such Interested Parties with copies of
any correspondence or filings submitted to any Taxing Authority or judicial
authority, in each case in connection with any contest, litigation, compromise
or settlement relating to any such Adjustment in a Tax Contest. The failure of a
Controlling Party to take any action as specified in the preceding sentence with
respect to an Interested Party shall not relieve any such Interested Party of
any liability and/or obligation which it may have to the Controlling Party under
this Agreement except to the extent that the Interested Party was prejudiced by
such failure, and in no event shall such failure relieve the Interested Party
from any other liability or obligation which it may have to such Controlling
Party. The Controlling Party may, in its sole discretion, take into account any
suggestions made by
an Interested Party with respect to any such contest, litigation, compromise or
settlement of any Adjustment in a Tax Contest. All costs of any Tax Contest are
to be borne by the Controlling Party; provided, however, that (x) any costs
related to an Interested Party's attendance at any meeting with a Taxing
Authority or hearing or proceeding before any judicial authority pursuant to
Section 3.3 hereof, and (y) the costs of any legal or other representatives
retained by an Interested Party in connection with any Tax Contest that is
subject to the provisions of this Agreement, shall be borne by such Interested
Party.
3.3. TAX CONTEST PARTICIPATION. (a) Unless waived by the
parties in writing, the Controlling Party shall provide an Interested Party with
written notice reasonably in advance of, and such Interested Party shall have
the right to attend, any formally scheduled meetings with Taxing Authorities or
hearings or proceedings before any judicial authorities in connection with any
contest, litigation, compromise or settlement of any proposed or assessed
Adjustment comprising any Tax Adjustment or Tax Benefit that is the subject of
any Tax Contest pursuant to which such Interested Party may be required to make
or entitled to receive an indemnity payment, reimbursement or other payment
under this Agreement. In addition, unless waived by the parties in writing, the
Controlling Party shall provide each such Interested Party with draft copies of
any correspondence or filings to be submitted to any Taxing Authority or
judicial authority with respect to such Adjustments for such Interested Party's
review and comment. The Controlling Party shall provide such draft copies
reasonably in advance of the date that they are to be submitted to the Taxing
Authority or judicial authority and the Interested Party shall provide its
comments, if any, with respect thereto within in a reasonable time before such
submission. The failure of a Controlling Party to provide any notice,
correspondence or filing as specified in this Section 3.3(a) to an Interested
Party shall not relieve any such Interested Party of any liability and/or
obligation which it may have to the Controlling Party under this Agreement
except to the extent that the Interested Party was prejudiced by such failure,
and in no event shall such failure relieve the Interested Party from any other
liability or obligation which it may have to such Controlling Party.
(b) Unless waived by the parties in writing, the Controlling
Party shall provide an Interested Party with written notice reasonably in
advance of, and such Interested Party shall have the right to attend, any
formally scheduled meetings with Taxing Authorities or hearings or proceedings
before any judicial authorities in connection with any contest, litigation,
compromise or settlement of any proposed or assessed Adjustment comprising any
Restructuring Adjustment or Non-Line of Business Adjustment that is the subject
of any Tax Contest pursuant to which such Interested Party may be required to
make or entitled to receive an indemnity payment, reimbursement or other payment
under this Agreement, but only if the Interested Party bears, or in the good
faith judgment of the Controlling Party, may bear, a Significant Obligation with
respect to such Adjustment; provided, however, that the Controlling Party may,
in its sole
discretion, permit an Interested Party that does not bear, or potentially bear,
such a Significant Obligation with respect to such an Adjustment comprising a
Restructuring Adjustment or Non-Line of Business Adjustment to attend any such
meetings, hearings or proceedings that relate to such Adjustment. In addition,
unless waived by the parties in writing, the Controlling Party shall provide
each such Interested Party with draft copies of any correspondence or filings to
be submitted to any Taxing Authority or judicial authority with respect to such
Adjustments for such Interested Party's review and comment. The Controlling
Party shall provide such draft copies reasonably in advance of the date that
they are to be submitted to the Taxing Authority or judicial authority and the
Interested Party shall provide its comments, if any, with respect thereto within
in a reasonable time before such submission. The failure of a Controlling Party
to provide any notice, correspondence or filing as specified in this Section
3.3(b) to an Interested Party shall not relieve any such Interested Party of any
liability and/or obligation which it may have to the Controlling Party under
this Agreement except to the extent that the Interested Party was prejudiced by
such failure, and in no event shall such failure relieve the Interested Party
from any other liability or obligation which it may have to such Controlling
Party.
3.4. TAX CONTEST WAIVER. (a) The
Controlling Party shall
promptly provide written notice, sent postage prepaid by United States mail,
certified mail, return receipt requested, to all Interested Parties in a Tax
Contest (i) that a Final Determination has been made with respect to such Tax
Contest; and (ii) enumerating the amount of the Interested Party's share of each
Adjustment reflected in such Final Determination of the Tax Contest for which
such Interested Party may be required to make or entitled to receive an
indemnity payment, reimbursement or other payment under this Agreement.
(b) Within ninety (90) days after an Interested Party receives
the notice described in Section 3.4(a) hereof from the Controlling Party, such
Interested Party shall execute a written statement giving notice to the
Controlling Party (i) that the Interested Party agrees with each Adjustment (and
its share thereof) enumerated in the notice described in Section 3.4(a) hereof
except with respect to those Adjustments (and/or its shares thereof) that, in
the good faith judgment of the Interested Party, it disagrees with and has
specifically enumerated its disagreement with, including the amount of such
disagreement, in the statement (each such disagreed Adjustment (and/or share
thereof) hereinafter referred to as a "Disputed Adjustment"); and (ii) that the
Interested Party thereby waives it right to a determination by an Independent
Third Party pursuant to the provisions of Section 3.5 hereof with respect to all
Adjustments to which it agrees with its share (this statement hereinafter
referred to as the "Interested Party Notice"). The failure of an Interested
Party to provide the Interested Party Notice to the Controlling Party within the
ninety (90) day period specified in the preceding sentence shall be deemed to
indicate that such Interested Party agrees with its share of all Adjustments
enumerated in the notice described in Section 3.4(a) hereof and that such
Interested Party waives it right to a determination by an Independent Third
Party with respect to all such Adjustments (and its shares thereof) pursuant to
Section 3.5 hereof.
(c) During the ninety (90) day period immediately following
the Controlling Party's receipt of the Interested Party Notice described in
Section 3.4(b) above, the Controlling Party and the Interested Party shall in
good ▇▇▇▇▇ ▇▇▇▇▇▇ with each other to resolve any disagreement over each Disputed
Adjustment that was specifically enumerated in such Interested Party Notice. At
the end of the ninety (90) day period specified in the preceding sentence,
unless otherwise extended in writing by the mutual consent of the parties, the
Interested Party shall be deemed to agree with all Disputed Adjustments that
were specifically enumerated in the Interested Party Notice and waive its right
to a determination by an Independent Third Party pursuant to Section 3.5 hereof
with respect to all such Disputed Adjustments unless, and to the extent, that at
any time during such ninety (90) day (or extended) period, either the
Controlling Party or the Interested Party has given the other party written
notice that it is seeking a determination by an Independent Third Party pursuant
to Section 3.5 hereof regarding the propriety of any such Disputed Adjustment.
(d) Notwithstanding anything in this Agreement to the
contrary, an Interested Party that does not have a Significant Obligation with
respect to an Adjustment comprising either a Restructuring Adjustment or
Non-Line of Business Adjustment has no right to a determination by an
Independent Third Party under section 3.5 hereof with respect to any such
Adjustment comprising a Restructuring Adjustment or Non-Line of Business
Adjustment.
3.5. TAX CONTEST DISPUTE RESOLUTION. (a) In the event that
either a Controlling Party or an Interested Party has given the other party
written notice as required in Section 3.4(c) hereof that it is seeking a
determination by an Independent Third Party pursuant to this Section 3.5 with
respect to any Disputed Adjustment that was enumerated in an Interested Party
Notice, then the parties shall, within ten (10) days after a party has received
such notice, jointly select an Independent Third Party to make such
determination. In the event that the parties cannot jointly agree on an
Independent Third Party to make such determination within such ten (10) day
period, then the Controlling Party and the Interested Party shall each
immediately select an Independent Third Party and the Independent Third Parties
so selected by the parties shall jointly select, within ten (10) days of their
selection, another Independent Third Party to make such determination.
(b) In making its determination as to the propriety of any
Disputed Adjustment, the Independent Third Party selected pursuant to Section
3.5(a) above shall assume that the Interested Party is not required or entitled
under applicable law to be a
member of any Consolidated Return. In addition, the Independent Third Party
shall make its determination according to the following procedure:
(i) The Independent Third Party shall first analyze each
Disputed Adjustment for which a determination is sought pursuant to this Section
3.5 on a stand alone basis to determine whether the actual outcome reached with
respect to such Disputed Adjustment as reflected in the Final Determination of
the Tax Contest was fair and appropriate taking into account the following
exclusive criteria: (A) the facts relating to such Adjustment; (B) the
applicable law, if any, with respect to such Adjustment; (C) the position of the
applicable Taxing Authority with respect to compromise, settlement or litigation
of such Adjustment; (D) the strength of the factual and legal arguments made by
the Controlling Party in reaching the outcome with respect to such Adjustment as
reflected in the Final Determination of the Tax Contest; and (E) the strength of
the factual and legal arguments being made by the Interested Party for the
alternative outcome being asserted by such Interested Party (including the
availability of facts, information and documentation to support such alternative
outcome). Based on this analysis, the Independent Third Party shall determine
what is the fair and appropriate outcome (hereinafter referred to as the
"Initial Determination") with respect to each such Disputed Adjustment.
(ii) The Interested Party shall not be entitled to
modification of its share of a Disputed Adjustment under this Section 3.5 if, as
the case may be, either (A) the amount that would be paid by the Interested
Party under the Initial Determination with respect to such Disputed Adjustment
is 80% or more than the amount that would be paid by the Interested Party with
respect to such Disputed Adjustment under the actual outcome reached with
respect to such Disputed Adjustment; or (B) the amount that would be received by
the Interested Party under the Initial Determination with respect to such
Disputed Adjustment is 120% or less than the amount that the Interested Party
would receive with respect to such Disputed Adjustment under the actual outcome
reached with respected to such Disputed Adjustment. The Independent Third Party
will provide notice to the Controlling Party and the Interested Party in the
event the Interested Party is not entitled to modification of its share of the
Disputed Adjustment pursuant to this paragraph (ii).
(iii) If the modification of an Interested Party's share of a
Disputed Adjustment under this Section 3.5 is not prohibited pursuant to
paragraph (ii) above, then the Independent Third Party shall determine what is
the fair and appropriate outcome (hereinafter referred to as the "Ultimate
Determination") to the Interested Party with respect to such Disputed Adjustment
in the context of the entire Tax Contest as it relates to the Interested Party.
In making this determination, the Independent Third Party shall consider the
Disputed Adjustment as if it were raised in an independent audit of the
Interested Party by the appropriate Taxing Authority and the Independent Third
Party shall take into account and give appropriate weight in its sole discretion
to the following exclusive criteria: (A) the strength of the legal and factual
support for other potential, non-frivolous Adjustments with respect to matters
that were actually raised and contested by the applicable Taxing Authority in
the Tax Contest for which the Interested Party could have been liable under this
Agreement but which were eliminated or reduced as a result of the Controlling
Party agreeing to the Disputed Adjustment as reflected in the Final
Determination of the Tax Contest; (B) the effect of the actual outcome reached
with respect to the Disputed Adjustment on other Taxable periods and on other
positions taken or proposed to be taken in Returns filed or proposed to be filed
by the Interested Party; (C) the realistic possibility of avoiding examination
of potential, non-frivolous issues for which the Interested Party could be
liable under this Agreement and that were contemporaneously identified in
writings by the party or parties during the course of the Tax Contest but which
had not been raised and contested by the applicable Taxing Authority in the Tax
Contest; and (D) the benefits to the Interested Party in reaching a Final
Determination, and the strategy and rationale with respect to the Interested
Party's Disputed Adjustment that the Controlling Party had for agreeing to such
Disputed Adjustment in reaching the Final Determination, in each case that were
contemporaneously identified in writings by the party or parties during the
course of the Tax Contest.
(iv) The Interested Party shall only be entitled to
modification of its share of a Disputed Adjustment under this Section 3.5 if, as
the case may be, either (A) the amount that would be paid by the Interested
Party under the Ultimate Determination with respect to such Disputed Adjustment
is less than 80% of the amount that would be paid by the Interested Party with
respect to such Disputed Adjustment under the actual outcome reached with
respect to such Disputed Adjustment; or (B) the amount that would be received by
the Interested Party under the Ultimate Determination with respect to such
Disputed Adjustment is more than 120% of the amount that the Interested Party
would receive with respect to such Disputed Adjustment under the actual outcome
reached with respected to such Disputed Adjustment. If an Interested Party is
entitled to modification of its share of any Disputed Adjustment under the
preceding sentence, the amount the Interested Party is entitled to receive, or
is required to pay, as the case may be, with respect to such Disputed Adjustment
shall be equal to the amount of the Ultimate Determination of such Disputed
Adjustment. The Independent Third Party will provide notice to the Controlling
Party and the Interested Party stating whether the Interested Party is entitled
to modification of its share of the Disputed Adjustment pursuant to this
paragraph (iv) and, if the Interested Party is entitled to such modification,
the amount as determined in the preceding sentence that the Interested Party is
entitled to receive from, or required to pay to, the Controlling Party with
respect to such Disputed Adjustment.
(c) Any determination made or notice given by an Independent
Third Party pursuant to this Section 3.5 shall be (i) in writing; (ii) made
within sixty (60) days following the selection of the Independent Third Party as
set forth in Section 3.5(a) of this Agreement unless such period is otherwise
extended by the mutual consent of the parties; and (iii) final and binding upon
the parties. The costs of any Independent Third Party retained pursuant to this
Section 3.5 shall be shared equally by the parties. The Controlling Party and
the Interested Party shall provide the Independent Third Party jointly selected
pursuant to Section 3.5(a) hereof with such information or documentation as may
be appropriate or necessary in order for such Independent Third Party to make
the determination requested of it. Upon issuance of an Independent Third Party's
notice under Section 3.5(b)(ii) or Section 3.5(b)(iv) hereof, the Controlling
Party or the Interested Party, as the case may be, shall pay as specified in
Article IV of this Agreement, the amount, if any, of the Disputed Adjustment to
the appropriate party.
ARTICLE IV
PROCEDURE AND PAYMENT
4.1. PROCEDURE. (a) If an Interested Party has any liability
and/or obligation to make, or the right to receive, any indemnity payment,
reimbursement or other payment with respect to an Adjustment under this
Agreement for which it does not have a right to a determination by an Interested
Third Party under Section 3.5 hereof, then the amount of such Adjustment shall
be immediately due and payable upon receipt by the Interested Party of a notice
of Final Determination of a Tax Contest as required and specified in Section
3.4(a) hereof.
(b) If after (i) notice of a Final Determination of a Tax
Contest as required and specified in Section 3.4(a) hereof has been given by a
Controlling Party to an Interested Party; and (ii) the Interested Party
receiving such notice has either:
(A) failed to provide the Interested Party Notice specified in
Section 3.4(b) hereof within the ninety (90) day period set forth in Section
3.4(b);
(B) provided the Interested Party Notice specified in Section
3.4(b) hereof within the ninety (90) day period specified in Section 3.4(b)
agreeing to all Adjustments (and the Interested Party's share of all such
Adjustments) and waiving the right to an Independent Third Party determination
pursuant to Section 3.5 hereof with respect to all such Adjustments (and the
Interested Party's share of such Adjustments);
(C) provided the Interested Party Notice specified in Section
3.4(b) hereof within the ninety (90) day period specified in Section 3.4(b)
agreeing with some, but not
all, Adjustments (and the Interested Party's share of such agreed Adjustments)
and waiving the right to an Independent Third Party Determination pursuant to
Section 3.5 hereof with respect to all such agreed Adjustments (and the
Interested Party's share of such Adjustments); or
(D) provided the Interested Party Notice specified in Section
3.4(b) hereof within the ninety (90) day period specified in Section 3.4(b)
specifically enumerating the Disputed Adjustments to which it does not agree and
for which the notice specified in either Section 3.5(b)(ii) or Section
3.5(b)(iv) hereof relating to any such Disputed Adjustment has been given by an
independent Third Party;
then the amount of any Adjustment agreed to or deemed to be agreed to by the
Interested Party, or for which an Independent Third Party notice has been given
pursuant to either Section 3.5(b)(ii) or Section 3.5(b)(iv) hereof, as set forth
in each of clause (A), (B, (C) or (D) above, shall be immediately due and
payable.
(c) Any Person entitled to any indemnification, reimbursement
or other payment under this Agreement with respect to the amount of any
Adjustment that has become immediately due and payable under this Section 4.1
(the "Indemnified Party") shall notify in writing the Person against whom such
indemnification, reimbursement or other payment is sought (the "Indemnifying
Party") of its right to and the amount of such indemnification, reimbursement or
other payment; provided, however, that the failure to notify the Indemnifying
Party shall not relieve the Indemnifying Party from any liability and/or
obligation which it may have to an Indemnified Party on account of the
provisions contained in this Agreement except to the extent that the
Indemnifying Party was prejudiced by such failure, and in no event shall such
failure relieve the Indemnifying Party from any other liability or obligation
which it may have to such Indemnified Party. The Indemnifying Party shall make
such indemnity payment, reimbursement or other payment to the Indemnified Party
within thirty (30) days of the receipt of the written notice specified in the
preceding sentence.
4.2. PAYMENT. Any indemnity payment,
reimbursement or other
payment required to be made pursuant to this Agreement by an
Indemnifying Party
to an Indemnified Party shall be made, at the option of the
Indemnifying Party,
by (a) certified check payable to the order of the Indemnified Party; or (b)
wire transfer of immediately available funds to such bank and/or other account
of the Indemnified Party as from time to time the Indemnified Party shall have
directed the Indemnifying Party, in writing.
4.3. INTEREST. Any indemnity payment,
reimbursement or other
payment required to be made by an Interested Party pursuant to
this Agreement
shall bear interest at the Prime Rate plus 2%, per annum, from the
date such
Interested Party
receives the notice of Final Determination made with respect to a Tax Contest as
provided in Section 3.4(a) hereof. Any indemnity payment, reimbursement or other
payment required to be made by a Controlling Party to an Interested Party
pursuant to this Agreement shall bear interest at the Prime Rate plus 2%, per
annum, from a date thirty (30) days after the date of a Final Determination made
with respect to a Tax Contest.
ARTICLE V
OTHER TAX MATTERS
5.1. TAX POLICIES AND PROCEDURES DURING
CONSOLIDATION. It is
understood and agreed that during Consolidation:
(a) Members of the Lucent Group and members of the NCR Group,
respectively, shall each adopt and follow the Tax policies and procedures that
have been established by AT&T and communicated to Lucent and NCR unless, AT&T
shall otherwise consent, as provided herein. In the event that a member of the
Lucent Group and/or the NCR Group desires to adopt and follow a Tax policy or
procedure that is different from that established by AT&T, Lucent and/or NCR, as
the case may be, shall, in writing, (i) request AT&T's consent to do so; and
(ii) provide AT&T with the reasons for the request to adopt and follow such
different Tax policy or procedure. If AT&T determines in its good faith judgment
that it would be reasonable and appropriate from the perspective of the AT&T
Services Group for such member of the Lucent Group and/or the NCR Group to adopt
and follow such different Tax policy or procedure, AT&T shall provide its
written consent thereto.
(b) AT&T shall provide to Lucent and NCR timely written notice
of any material proposed change in established Tax policies or procedures.
(c) AT&T shall establish all Return positions and make all Tax
elections relating to a Consolidated Return. Members of the Lucent Group and
members of the NCR Group shall take such Consolidated Return positions and make
such Tax elections relating to a Consolidated Return as may be taken or made by
AT&T, or as reasonably requested by AT&T to be taken or made by any member of
the Lucent Group and/or any member of the NCR Group, as the case may be, unless
AT&T shall otherwise consent, as provided herein. In the event that Lucent
and/or NCR determines that it would be reasonable and appropriate for any member
of the Lucent Group or any member of the NCR Group, respectively, to take
positions or make elections relating to a Consolidated Return that are different
from those taken or made by AT&T (or reasonably requested by AT&T of any member
of the Lucent Group or any member of the NCR Group), Lucent and/or NCR, as the
case may be, shall, in writing,
(i) request AT&T's consent to do so; and (ii) provide AT&T with the reasons for
the request to take such different positions or make such different elections.
If AT&T determines in its good faith judgment that it would be reasonable and
appropriate from the perspective of the AT&T Services Group for such member of
the Lucent Group and/or the NCR Group to take such different positions or make
such different elections, AT&T shall provide its written consent thereto.
5.2. COOPERATION. Except as otherwise provided in this
Agreement, and without limiting the provisions contained in Article VIII of the
Separation Agreement which are incorporated herein by reference pursuant to
Section 6.3(a) hereof, each member of the AT&T Services Group, the Lucent Group
and/or the NCR Group, as the case may be, shall, at their own expense, cooperate
with each other in the filing of, or any Tax Contest relating to, any Return and
any other matters relating to Taxes and, in connection therewith, shall (i)
maintain appropriate books and records for any and all Taxable periods or any
portion of a Taxable period that may be required by AT&T's record retention
policies; (ii) provide to each other such information as may be necessary or
useful in the filing of, or any Tax Contest relating to, any such Return; (iii)
execute and deliver such consents, elections, powers of attorney and other
documents that may be required or appropriate for the proper filing of any such
Return or in conjunction with any Tax Contest relating to any such Return; and
(iv) make available for responding to inquiries of any other party or any Taxing
Authority, appropriate employees and officers of and advisors retained by any
member of the AT&T Services Group, the Lucent Group, or the NCR Group, as the
case may be.
5.3. FILING OF RETURNS. The Person that would be the
Controlling Party with respect to any Tax Contest relating to a Return for which
any indemnity payment, reimbursement or other payment may be sought under this
Agreement shall (a) prepare and file, or cause to be prepared and filed, any
such Return within the time prescribed for filing such Return (including all
extensions of time for filing); and (b) shall timely pay, or cause to be timely
paid, the amount of any Tax shown to be due and owing on any such Return;
provided, however, that in the case of Taxes which are Liabilities of Lucent
pursuant to Section 2.3(a)(ii) of the Separation Agreement, if AT&T or any other
member of the AT&T Group is required pursuant to this Agreement to file such
Return and pay the Taxes shown as due thereon, Lucent will pay to AT&T, in
advance of the date on which AT&T must pay such Taxes, an amount equal to the
amount of such Taxes which are Liabilities of Lucent. Such Person shall bear all
costs associated with preparing and filing, or causing to be prepared and filed,
any such Return. Except as provided in Section 5.1(c) hereof (relating to
Consolidated Returns), such Person shall establish all Return positions and make
all Tax elections relating to such Returns.
ARTICLE VI
MISCELLANEOUS
6.1. GOVERNING LAW. To the extent not preempted by any
applicable foreign or U.S. federal, state, or local Tax law, this Agreement
shall be governed by and construed and interpreted in accordance with the laws
of the State of New York, irrespective of the choice of laws principles of the
State of New York, as to all matters, including matters of validity,
construction, effect, performance and remedies.
6.2. 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 Affiliate of such party;
provided, however, that for purposes of the foregoing, no Person shall be
considered an Affiliate of a party if such Person is a member of another party's
Group.
6.3. INCORPORATION OF SEPARATION AGREEMENT PROVISIONS. The
following provisions of the Separation Agreement are hereby incorporated herein
by reference, and unless otherwise expressly specified herein, such provisions
shall apply as if they are fully set forth herein (references in this Section
6.3 to an "Article" shall mean Articles of the Separation Agreement):
(a) Article VIII (relating to Exchange of
Information and
Confidentiality); and
(b) Article XII (relating to Miscellaneous
Provisions, except as otherwise specified herein).
6.4. NOTICES. Except for any notice or other communication
required to be given by a Controlling Party under this Agreement, AT&T, Lucent
and NCR (or any other Person delegated in writing by each of the foregoing)
shall serve as the single point of contact to receive or give any notice or
other communication required or permitted to be given to any member of each of
their respective Groups under this Agreement. Unless specifically provided
otherwise in this Agreement, all notices or other communications under this
Agreement shall be in writing and shall deemed to be duly given when (a)
delivered in person; or (b) sent by facsimile; or (c) deposited in the United
States mail, postage prepaid and sent certified mail, return receipt requested;
or (d) deposited in private express mail, postage prepaid, addressed as follows:
If to any member of the AT&T Services Group, to:
AT&T Corp.
▇▇▇ ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Vice President - Taxes and Tax Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to any member of the Lucent Group, to:
Lucent Technologies Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Vice President - Taxes and Tax Counsel
Facsimile:
If to any member of the NCR Group, to:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: Assistant Vice President & Director,
Corporate Taxes
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may, by written notice to the other parties, change the address to
which such notices are to be given.
6.5. CONFLICTING OR INCONSISTENT PROVISIONS. In the event that
any provision or term of this Agreement conflicts or is inconsistent with any
provision or term of any other agreement between or among AT&T or any other
member of the AT&T Group, Lucent or any other member of the Lucent Group and/or
NCR or any other member of the NCR Group, as the case may be, which is in effect
on or prior to the date hereof, the provision or term of this Agreement shall
control and apply and the provision or term of any other agreement shall, to the
extent of such conflict or inconsistency, be inoperative and inapplicable.
6.6. DURATION. Notwithstanding anything in this
Agreement or
the Separation Agreement to the contrary, the provisions of this
Agreement shall
survive for the full period of all applicable statutes of
limitations (giving
effect to any waiver, mitigation or extension thereof).
6.7. AMENDMENT. Without limiting the provisions
contained in
Article XII of the Separation Agreement which are incorporated
herein by
reference pursuant to Section 6.3(b) hereof:
(a) The parties agree that any waiver, amendment, supplement
or modification of this Agreement that solely relates to and affects only two of
the three parties hereto shall not require the consent of the third party
hereto. Without limiting the foregoing, effective immediately on notice to
Lucent, without any further action required by any member of the Lucent Group,
AT&T may assume any Liability of any member of the NCR Group and all members of
the NCR Group shall thereupon automatically be released therefrom.
(b) The parties acknowledge that the provisions of this
Agreement may not fully reflect all of their respective concerns with respect to
state and local Taxes. Consequently, the parties will cooperate in determining
whether to amend or supplement this Agreement no later than February 29, 1996.
To the extent no such amendment or supplement is executed on or prior to
February 29, 1996, the provisions of this Agreement shall remain in full force
and effect.
6.8. TAX ALLOCATION AGREEMENTS. Lucent hereby assumes and
agrees faithfully to perform and fulfill all obligations and other Liabilities
of any member of the Lucent Group under the Federal Tax Allocation Agreement and
the State and Local Income Tax Allocation Agreement, in accordance with each of
their respective terms.
IN WITNESS WHEREOF, the parties hereto have caused this Tax
Sharing Agreement to be executed by their duly authorized
representatives.
AT&T CORP.
By: /s/
---------------------
Name:
Title:
LUCENT TECHNOLOGIES INC.
By: /s/
---------------------
Name:
Title:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
By: /s/
---------------------
Name:
Title:
