Exhibit 10.1
TAX SHARING AND INDEMNIFICATION AGREEMENT
BY
NATIONAL DATA CORPORATION
AND
GLOBAL PAYMENTS INC.
TABLE OF CONTENTS
PAGE
ARTICLE I Definition of Terms 2
ARTICLE II Allocation of Income Tax Liabilities 6
ARTICLE III Preparation and Filing of Tax Returns 8
ARTICLE IV Refunds, Carrybacks, and Tax Benefits 10
ARTICLE V Tax Payments and Intercompany Billings 13
ARTICLE VI Assistance and Cooperation 16
ARTICLE VII Tax Records 17
ARTICLE VIII Tax Contests 17
ARTICLE IX No Inconsistent Actions 18
ARTICLE X Survival of Obligations 19
ARTICLE XI Employee Matters 19
ARTICLE XII Treatment of Payments; Tax Gross Up 19
ARTICLE XIII Disagreements 20
ARTICLE XIV Late Payments 20
ARTICLE XV Expenses 20
ARTICLE XVI General Provisions 21
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TAX SHARING AND INDEMNIFICATION AGREEMENT
This Agreement is entered into as of January 31, 2001 by National Data
Corporation, a Delaware corporation ("NDC"), and Global Payments Inc., a Georgia
corporation ("Newco"). Capitalized terms used in this Agreement are defined
herein. Unless otherwise indicated, all "Section" references in this Agreement
are to sections of this Agreement.
RECITALS
WHEREAS, NDC is the common parent of an Affiliated Group that currently
files consolidated income tax returns and that is engaged in the Health
Information Services Business and the eCommerce Business;
WHEREAS, the board of directors of NDC has determined that it would be in
the best interests of NDC and its stockholders to separate the eCommerce
Business from the Health Information Services Business;
WHEREAS, NDC has caused Newco to be incorporated under the laws of the
State of Georgia to effect such separation;
WHEREAS, NDC and Newco have entered into the Distribution Agreement and the
Ancillary Agreements (other than this Agreement), pursuant to which NDC has
contributed and transferred to Newco, and Newco has received and assumed, (i)
the stock of the NDC eCommerce Subsidiaries, (ii) an 0.85% general partnership
interest in GPS Holding Limited Partnership; and (iii) the intellectual property
used in the conduct of the eCommerce Business (the "Contributions");
WHEREAS, NDC and Newco intend that the Contributions in exchange for Newco
Common Stock qualify as tax-free transactions under Section 368(a)(1)(D) of the
Code;
WHEREAS, NDC currently owns all of the issued and outstanding Newco Common
Stock;
WHEREAS, NDC contemplates that, immediately after the Contributions and
pursuant to the terms of the Distribution Agreement, NDC will distribute to the
holders of NDC Common Stock by means of a pro rata distribution all of the
shares of Newco Common Stock owned by NDC (the "Distribution");
WHEREAS, NDC and Newco intend that the Distribution will be tax-free to NDC
and its stockholders under Section 355 of the Code;
WHEREAS, as a result of the Distribution, Newco will cease to be a member
of the Affiliated Group of which NDC is the common parent, effective as of the
Distribution Date; and
WHEREAS, the Companies desire to provide for and agree upon the allocation
of liabilities between the parties for Taxes arising prior to, as a result of,
and subsequent to the Distribution, and to provide for and agree upon other
matters relating to Taxes.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants, and agreements herein contained, and for other good and
valuable consideration, the receipt
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and sufficiency of which are hereby acknowledged, and intending to be legally
bound hereby, the parties hereby agree as follows:
ARTICLE I
Definition of Terms
For purposes of this Agreement (including the recitals hereof), the
following terms have the following meanings:
"ACCOUNTING CUTOFF DATE" means, with respect to Newco, any date as of the
end of which there is a closing of its financial accounting records.
"ACCOUNTING FIRM" shall have the meaning provided in Article XIII.
"ADJUSTMENT REQUEST" means any formal or informal claim or request filed
with any Taxing Authority, or with any administrative agency or court, for the
adjustment, refund, or credit of Taxes, including (i) any amended Tax Return
claiming adjustment to the Taxes as reported on the Tax Return, or if
applicable, as previously adjusted, or (ii) any claim for refund or credit of
Taxes previously paid.
"AFFILIATE" means any entity that directly or indirectly is "controlled" by
the person or entity in question. "Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a person, whether through ownership of voting securities, by
contract or otherwise. Except as otherwise provided herein, the term Affiliate
shall refer to Affiliates of a person as determined immediately after the
Distribution.
"AFFILIATED GROUP" means an affiliated group of corporations within the
meaning of Section 1504(a) of the Code (determined without regard to the
exceptions contained in Section 1504(b) of the Code) for the taxable period in
question.
"AGREEMENT" means this Tax Sharing and Indemnification Agreement.
"ANCILLARY AGREEMENTS" has the meaning set forth in the Distribution
Agreement.
"CARRYBACK" or "CARRYFORWARD" means any net operating loss, net capital
loss, excess tax credit, foreign tax credit, or other similar Tax Item that may
or must be carried from one Tax Period to another Tax Period under the Code or
other applicable Tax Law.
"CODE" means the United States Internal Revenue Code of 1986, as amended
from time to time, or any successor law.
"COMPANY" means NDC or Newco.
"CONSOLIDATED INCOME TAX RETURN" OR "COMBINED INCOME TAX RETURN" means any
Tax Return relating to Income Tax that is computed by reference to the assets
and activities of members of both the NDC Group and the Newco Group.
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"CONTRIBUTION DATE" means the date on which the Contributions are made by
NDC to Newco.
"DCL " means a dual consolidated loss as defined in Section 1503(d) of the
Code and the DCL Regulations.
"DCL Regulations" means Treasury Regulation Section 1.1503-2A, Treasury
Regulation Section 1.1503-2, or any successor regulation as in effect from time
to time.
"DISTRIBUTION" means the distribution to holders of NDC Common Stock of all
of the outstanding shares of Newco Common Stock.
"DISTRIBUTION AGREEMENT" means the Distribution Agreement by and between
NDC and Newco, dated January 31, 2001.
"DISTRIBUTION DATE" has the meaning set forth in the Distribution
Agreement.
"eCOMMERCE BUSINESS" has the meaning set forth in the Distribution
Agreement.
"FEDERAL INCOME TAX" means any Income Tax imposed by the United States
government.
"FOREIGN INCOME TAX" means any Income Tax imposed by any foreign country or
any possession of the United States or by any political subdivision of any
foreign country or United States possession.
"GROUP" means the NDC Group or the Newco Group, as the context requires.
"HEALTH INFORMATION SERVICES BUSINESS" has the meaning set forth in the
Distribution Agreement.
"INCOME TAX" means all Taxes (i) based upon, measured by, or calculated
with respect to, net income or net receipts, proceeds or profits or (ii) based
upon, measured by, or calculated with respect to multiple bases (including, but
not limited to, corporate franchise and occupation Taxes) if such Tax may be
based upon, measured by, or calculated with respect to one or more bases
described in clause (i) above.
"INTERNAL REVENUE SERVICE" OR "IRS" means the United States Internal
Revenue Service or the United States Department of the Treasury, as the context
requires.
"IRS PRIVATE LETTER RULING" means the private letter ruling issued by the
IRS in response to the letter filed by NDC requesting a ruling from the IRS
regarding certain tax consequences of the Transactions.
"NDC COMMON STOCK" means the outstanding shares of common stock, $0.125 par
value, of NDC.
"NDC eCOMMERCE SUBSIDIARIES" means National Data Payment Systems, Inc.,
Global Payment Holding Company, NDC Holdings (UK) Ltd., and Merchant Services
USA, Inc.
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"NDC FEDERAL CONSOLIDATED RETURN" means any United States Federal
Consolidated Income Tax Return for the Affiliated Group that includes NDC as the
common parent.
"NDC GROUP"' means, for each taxable period, the Affiliated Group of which
NDC or any successor of NDC is the common parent; provided, however, the NDC
Group shall not include the Newco Group.
"NEWCO COMMON STOCK" means the outstanding shares of no par common stock of
Newco.
"NEWCO GROUP" means (i) with respect to any Pre-Distribution Period, the
NDC eCommerce Subsidiaries and their respective subsidiaries, and (ii) with
respect to any Post-Distribution Periods, the Affiliated Group of which Newco or
any successor of Newco is the common parent.
"NEWCO FEDERAL CONSOLIDATED RETURN" means any United States Federal Tax
Return or Returns with respect to any Post-Distribution Periods filed by Newco
alone or by the Affiliated Group that includes Newco as the common parent.
"OTHER TAX" means any Tax that is not an Income Tax.
"PAYMENT DATE" means (i) with respect to any NDC Federal Consolidated
Return, the due date for any required installment of estimated taxes determined
under Section 6655 of the Code, the due date (determined without regard to
extensions) for filing the return determined under Section 6072 of the Code, and
the date the return is filed, and (ii) with respect to any Consolidated or
Combined State Income Tax Return, the corresponding dates determined under the
applicable Tax Law.
"POST-DISTRIBUTION PERIOD" means any Tax Period beginning after the
Distribution Date, and, in the case of any Straddle Period, the portion of such
Straddle Period beginning the day after the Distribution Date.
"PRE-DISTRIBUTION PERIOD" means any Tax Period ending on or before the
Distribution Date, and, in the case of any Straddle Period, the portion of such
Straddle Period ending on the Distribution Date.
"PRIME RATE" means the prime rate of interest as published in the "Money
Rates" column of The Wall Street Journal, Eastern Edition; in the event that
more than one such rate is reported, the "Prime rate" shall equal the average of
such rates. Use of the term "Prime Rate" shall mean a per annum rate, simple
interest.
"RESPONSIBLE COMPANY" means, with respect to any Tax Return, the Company
having responsibility for preparing and filing such Tax Return under this
Agreement.
"RESTRUCTURING TAX" means the Taxes described in Section 2.4(a).
"SEPARATE COMPANY TAX" means any Tax computed by reference to the assets
and activities of a member or members of a single Group.
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"SECTION 355(e) EVENT" means an event described in Section 2.4(b).
"STRADDLE PERIOD" means any Tax Period that begins on or before and ends
after the Distribution Date.
"STATE INCOME TAX" means any Income Tax imposed by any State of the United
States or by any political subdivision of any such State.
"TAINTING ACT" shall have the meaning provided in Article IX.
"TAX" or "TAXES" means all forms of taxation, whenever created or imposed,
whether domestic or foreign, or whether imposed by a Taxing Authority, and
without limiting the generality of the foregoing shall include any net income,
gross income, gross receipts, profits, capital stock, franchise, payroll,
withholding, social security, unemployment, employment, workers compensation,
disability, property, ad valorem, stamp, excise, severance, occupation, premium,
service, sales, use, license, lease, transfer, recording, import, export, value
added, alternative or add-on minimum, estimated, or other similar tax (including
any fee, assessment, or other charge in the nature of or in lieu of any tax)
imposed by any Taxing Authority, together with any interest, penalties,
additions to tax, or additional amounts imposed by any such Taxing Authority.
"TAXING AUTHORITY" means, with respect to any Tax, the nation, locality,
municipality, government, state, federation, or any political subdivision
thereof that imposes such Tax, and the agency (if any) charged with the
collection of such Tax for such entity or subdivision.
"TAX BENEFIT" means any refund of, credit against, or other reduction in
otherwise required Tax payments (including any reduction in estimated tax
payments) and any interest in respect of the foregoing, net of the effect on
otherwise required Tax payment of any associated or corresponding item of income
or gain, or other increase in otherwise required Tax payments.
"TAX CONTEST" means an audit, review, examination, dispute, suit, action,
litigation, or any other administrative or judicial proceeding by or against the
IRS or any other Taxing Authority with the purpose or effect of redetermining
Taxes of any of the Companies or their Affiliates (including any administrative
or judicial review of any claim for refund).
"TAX ITEM" means, with respect to any Income Tax, any item of income, gain,
loss, deduction, or credit, recapture of credit or any other item that increases
or decreases Taxes paid or payable.
"TAX LAW" means the law of any governmental entity or political subdivision
thereof relating to any Tax.
"TAX PERIOD"' means, with respect to any Tax, the period for which the Tax
is reported as provided under the Code or other applicable Tax Law.
"TAX RECORDS" means Tax Returns, Tax Return workpapers, documentation
relating to any Tax Contests, and any other books of account or records required
to be maintained under the Code or other applicable Tax Laws or under any record
retention agreement with any Taxing Authority.
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"TAX RETURN" means any report of Taxes due, any claims for refund of Taxes
paid, any information return with respect to Taxes, or any other similar report,
statement, declaration, or document required to be filed under the Code or other
Tax Law, including any attachments, exhibits, or other materials submitted with
any of the foregoing, and including any amendments or supplements to any of the
foregoing.
"TRANSACTIONS" means the Contributions and the Distribution as contemplated
by the Distribution Agreement.
"TREASURY REGULATIONS" means the regulations promulgated from time to time
under the Code as in effect for the relevant Tax Period.
"TRIGGERING EVENT" means any one or more events specified in Treasury
Regulation Section 1.1503-2(g)(2)(iii)(A) or Treasury Regulation 1.1503-
2A(d)(4), the occurrence of which would require the recapture of DCLs, plus
applicable interest, into income as provided in the DCL Regulations.
SECTION II
Allocation of Income Tax Liabilities
Section 2.1. Federal, State, and Foreign Income Tax. Except as otherwise
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provided in this Agreement, Federal, State, and Foreign Income Tax liability
shall be allocated as follows:
(a) Pre-Distribution Periods. For each Pre-Distribution Period
ending prior to June 1, 1993, Federal, State, and Foreign Income Tax expense was
appropriately recorded on the separate company books for each member of the
Newco Group. For each Pre-Distribution Period beginning after May 31, 1993,
Newco's liability for any Federal, State, and Foreign Income Tax shall be
determined under the "Book-Tax Method." Under this method, Newco's liability for
Federal, State, and Foreign Income Tax is computed by applying each year's
overall effective Income Tax rate derived for the Newco Group to that year's
book income of each member of such group. Such method is followed for each Pre-
Distribution Period beginning after May 31, 1993. To the extent there is a net
Tax expense, Newco shall be liable for and shall pay NDC an amount equal to such
expense. To the extent there is a Tax benefit, NDC shall be liable for and shall
pay Newco an amount equal to such benefit. NDC shall be liable for all Federal,
State, and Foreign Income Tax for the Pre-Distribution Periods other than
amounts for which Newco is liable pursuant to this Section 2.1(a). NDC and Newco
previously have agreed to the amount of Newco's liability for Federal, State and
Foreign Income Tax for the Pre-Distribution Periods ending on or before May 31,
2000, under the Book-Tax Method. Such agreed Tax liability shall not be altered
except as a result of adjustments resulting from the audit of the Tax Returns
relating to such tax periods.
(b) Post-Distribution Periods. Newco shall be responsible for
all Federal, State, and Foreign Income Tax imposed on members of the Newco Group
with respect to all Post-Distribution Periods. NDC shall be responsible for all
Federal, State, and Foreign Income Tax imposed on members of the NDC Group with
respect to all Post-Distribution Periods.
Section 2.2. [Reserved]
Section 2.3. Other Taxes. Except as otherwise provided in this
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Agreement, Newco shall be liable to and pay the applicable Taxing Authority any
Other Tax that is imposed on any member of the
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Newco Group and NDC shall be liable to and pay the applicable Taxing Authority
any Other Tax that is imposed on any member of the NDC Group.
Section 2.4. Transaction Taxes.
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(a) General. Except as otherwise provided in this Section 2.4,
NDC shall be responsible for and pay any and all liability for Taxes resulting
from the Transactions. This shall include but shall not be limited to (i) any
sales and use, gross receipts, or other transfer Taxes imposed on the transfers
occurring pursuant to the Transactions together with any Tax resulting from any
income or gain recognized under Treasury Regulation Sections 1.1502-13 or
1.1502-19 (or any corresponding provisions of other applicable Tax Laws) as a
result of the Transactions, and (ii) except as otherwise provided in Section
2.4(b), any Tax resulting from any income or gain recognized as a result of any
of the Transactions failing to qualify for tax-free treatment under Sections
351, 355, 361, 368, or other provisions of the Code (as contemplated in the IRS
Private Letter Ruling) or corresponding provisions of other applicable Tax Laws.
(b) Inconsistent Acts and Events. NDC or Newco, as the case may
be, shall be liable for, and shall indemnify and hold harmless the members of
the other Group from and against any liability for, any Restructuring Tax
(described in Sections 2.4(a) above) to the extent arising from (i) any breach
by such indemnifying party of the representations or covenants under Article IX,
(ii) any Tainting Act performed by such indemnifying party, (iii) the inaccuracy
of any factual statements or representations made by such indemnifying party in
connection with the IRS Private Letter Ruling, but only to the extent such
inaccuracy arises from facts in existence prior to the Distribution Date, or
(iv) any Section 355(e) Event with respect to the indemnifying party. A Section
355(e) Event with respect to an entity occurs if one or more persons acquire
directly or indirectly stock of such entity representing a 50% or greater
interest in such entity within the meaning of Section 355(e) of the Code.
Section 2.5. Calculation of Tax Liability.
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(a) [Reserved]
(b) The principles of Treasury Regulation Section 1.1502-76(b)
as reasonably interpreted and applied by the Companies shall apply in
determining whether a Tax Item is attributable to a Tax Period provided that (i)
no election shall be made under Treasury Regulation Section 1.1502-76(b)(2)(ii)
(relating to ratable allocation of a year's item), and (ii) if the Distribution
Date is not an Accounting Cutoff Date, the provisions of Treasury Regulation
Section 1.1502-76(b)(2)(iii) will be applied to ratably allocate the items
(other than extraordinary items) for the month that includes the Distribution
Date.
(c) In determining the apportionment of Tax Items between Pre-
Distribution Periods and Post-Distribution Periods, any Tax Items relating to
the Transactions shall be treated as an extraordinary item described in Treasury
Regulation Section 1.1502-76(b)(2)(ii)(C) and shall be allocated to Pre-
Distribution Periods, and any Taxes related to such items shall be treated under
Treasury Regulation Section 1.1502-76(b)(2)(iv) as relating to such
extraordinary item and shall be allocated to Pre-Distribution Periods.
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Section 2.6. Tax Payments and Intercompany Billings. After the
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Distribution Date, each Company shall pay the Taxes allocated to it by this
Article II either to the applicable Taxing Authority or to the other Company in
accordance with Article V.
ARTICLE III
Preparation and Filing of Tax Returns
Section 3.1. General. Except as otherwise provided in this Article III,
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Income Tax Returns shall be prepared and filed when due (including extensions)
by the person obligated to file such Tax Returns under the Code or applicable
Tax Law. The Companies shall provide, and shall cause their Affiliates to
provide, assistance and cooperation with one another in accordance with Article
VI with respect to the preparation and filing of Tax Returns, including
providing information required to be provided in Article VI.
Section 3.2. Pre-Distribution Period and Straddle Period Tax Returns. All
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Income Tax Returns required to be filed for Pre-Distribution Periods or Straddle
Periods, shall be:
(i) prepared and filed by NDC, in the case of any Consolidated
or Combined Income Tax Return; and
(ii) prepared and filed, or caused to be prepared and filed, by
the Company to which such Tax Return relates in all other cases.
Newco shall, for each Tax Period or portion thereof for which Newco or a member
of the Newco Group is included in a Tax Return described in clause (i) of the
preceding sentence, provide NDC with (A) a true and correct pro forma Tax Return
for the Newco Group together with an accompanying computation of Tax liability
of the Group prepared in accordance with the Book-Tax Method, (B) separate pro
forma Tax Returns for each member of the Newco Group together with accompanying
computations of the separate Tax Return Tax liabilities of each member of the
Group, and (C) a reconciliation of book income to Federal taxable income for
each member of the Newco Group. Newco hereby agrees to use its best efforts to
provide NDC with such returns and computations no later than the first day of
the sixth month following the end of the period to which such returns and
computations relate, but in any event shall provide such returns and
computations to NDC no later than the fifteenth day of the sixth month following
the end of the period to which such returns and computations relate. Newco, in
preparing the above mentioned pro forma Tax Returns for its Group, shall not
consider or give effect to any (i) net operating loss carryover or carryback,
(ii) capital loss carryover or carryback, (iii) excess charitable deduction
carryover, (iv) excess tax carryover or carryback, or (v) other similar
carryback or carryback item.
Section 3.3. Post-Distribution Period Tax Returns. Except as otherwise
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provided in Section 3.2 with respect to Straddle Period Tax Returns:
(i) All Tax Returns related to Newco or the Newco Group for
Post-Distribution Periods shall be prepared and filed (or caused to be prepared
and filed) by Newco; and
(ii) All Tax Returns related to NDC or the NDC Group for Post-
Distribution Periods shall be prepared and filed (or caused to be prepared and
filed) by NDC.
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Section 3.4. Tax Accounting Practices.
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(a) General Rule. Except as otherwise provided in this Section
3.4, any Income Tax Return for any Pre-Distribution Period or any Straddle
Period, and any Income Tax Return for any Post-Distribution Period to the extent
items reported on such Tax Return might reasonably affect items reported on any
Tax Return for any Pre-Distribution Period or any Straddle Period, shall be
prepared in accordance with past Tax accounting practices used with respect to
the Tax Returns in question (unless such past practices are no longer
permissible under the Code or other applicable Tax Law), and to the extent any
items are not covered by past practices (or in the event such past practices are
not longer permissible under the Code or other applicable Tax Law), in
accordance with reasonable Tax accounting practice selected by the Responsible
Company.
(b) Reporting of Transaction Tax Items. The tax treatment
reported on any Tax Return of Tax Items relating to the Transaction shall be
consistent with the treatment of such item in the IRS Private Letter Ruling. To
the extent there is a Tax Item relating to the Transactions that is not covered
by the IRS Private Letter Ruling, the tax treatment of such Tax Items on a Tax
Return shall be determined by the Responsible Company with respect to such Tax
Return, provided (i) there is a reasonable basis for such tax treatment and (ii)
such tax treatment is not inconsistent with the tax treatment contemplated in
the IRS Private Letter Ruling. Such Tax Return shall be submitted for review
pursuant to Section 3.5(a), and any dispute regarding such proper tax treatment
shall be referred for resolution pursuant to Article XIII sufficiently in
advance of the filing date of such Tax Return (including extensions) to permit
timely filing of the return.
Section 3.5. Right to Review Tax Returns.
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(a) General. The Responsible Company with respect to any Tax
Return shall make such Tax Return and related Tax Records available for review
by the other Company, if requested, to the extent (i) such Tax Return relates to
Taxes for which the requesting party may be liable, (ii) such Tax Return relates
to Taxes for which the requesting party may be liable in whole or in part for
any additional Taxes owing as a result of adjustments to the amount of Taxes
reported on such Tax Return, (iii) such Tax Return relates to Taxes for which
the requesting party may have a claim for Tax Benefits under this Agreement, or
(iv) the requesting party reasonably determines that it must inspect such Tax
Return to confirm compliance with the terms of this Agreement. The Responsible
Company shall use its reasonable best efforts to make such Tax Return and Tax
Records available for review as required under this paragraph sufficiently in
advance of the due date for filing such Tax Returns to provide the requesting
party with a meaningful opportunity to analyze and comment on such Tax Returns
and have such Tax Returns modified before filing, taking into account the person
responsible for payment of the Tax (if any) reported on such Tax Return and the
materiality of the amount of Tax liability with respect to such Tax Return. The
Companies shall attempt in good faith to resolve any issues arising out of the
review of such Tax Returns or Tax Records.
(b) Execution of Returns Prepared by Other Party. In the case of
any Tax Return that is required to be prepared and filed by one Company under
this Agreement and that is required by law to be signed by another Company (or
by its authorized representative), the Company that is legally required to sign
such Tax Return shall not be required to sign such Tax Return under this
Agreement if there is no reasonable basis for the tax treatment of any material
items reported on the Tax Return. Any such Tax Return shall be supplied by the
Company responsible for its preparation and filing to the Company responsible
for its signing at least five days prior to the due date of such Tax Return
(including
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applicable extensions) and such signing Company shall deliver an executed copy
of such Tax Return to the filing Company at least two days prior to the due date
of such Tax Return (including applicable extensions).
ARTICLE IV
Refunds, Carrybacks, and Tax Benefits
Section 4.1. [Reserved]
Section 4.2. Claims for Refund, Carrybacks, and Self-Audit Adjustments
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("Adjustment Requests").
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(a) Consent Required for Adjustment Requests Related to
Consolidated or Combined Income Tax Returns. Except as provided in paragraph (b)
below, each of the Companies hereby agrees that, unless the other Company
consents in writing, which consent shall not be unreasonably delayed or
withheld, no Adjustment Request shall be filed with respect to any Consolidated
or Combined Tax Return that included the Newco Group for a Pre-Distribution
Period and affects the Newco Group Tax liability. Any Adjustment Request which
the Companies consent to make under this Section 4.2 shall be prepared and filed
by the Responsible Company under Sections 3.2 and 3.3 for the Tax Return to be
adjusted. The Company requesting the Adjustment Request shall provide to the
Responsible Company all information required for the preparation and filing of
such Adjustment Request in such form and detail as reasonably requested by the
Responsible Company.
(b) ExcePtion for Adjustment Requests Related to Audit
Adjustments. Each Company shall be entitled, without the consent of the other
Company, to require NDC to file an Adjustment Request to take into account any
net operating loss, net capital loss, deduction, credit, or other adjustment
attributable to such Company or any member of its Group corresponding to any
adjustment resulting from any audit by the Internal Revenue Service or other
Taxing Authority with respect to Consolidated or Combined Income Tax Returns for
any Pre-Distribution Period. In addition, NDC shall be entitled to require Newco
to file a corresponding Adjustment Request with respect to Separate Company
Taxes for any Pre-Distribution Periods.
(c) Other Adjustment Requests Permitted. Nothing in this Section
4.2 shall prevent any Company or its Affiliates from filing any Adjustment
Request with respect to Tax Returns that are not Consolidated or Combined Income
Tax Returns or with respect to any other Taxes; provided, however, that neither
Company shall file an amended Tax Return with respect to Separate Company or
Other Taxes for which the other Company is liable under this Agreement without
the written consent of such other Company (which consent shall not be
unreasonably withheld). If any refund or credit is obtained as a result of any
such Adjustment Request (or otherwise), the parties shall recalculate the
amounts that would have been paid under this Agreement based on the changes
resulting in such refund or credit, and shall make such payments between them as
necessary to place each in the position it would have been in had the payments
made under this Agreement originally been made based on such changes.
(d) Payment of Refunds and other Tax Benefits. Except as set
forth in Section 4.2(e), any refunds or other Tax Benefits received by either
Company (or any of its Affiliates) as a result of any Adjustment Request that
are for the account of the other Company (or member of such other Company's
Group) shall be paid by the Company receiving (or whose Affiliate received) such
refund or Tax Benefit to such other Company in accordance with Article V.
Notwithstanding any other provision
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set forth in this Section 4.2, NDC is entitled to receive the full amount of any
refund resulting from the claims for refund previously filed with the IRS for
the May 1987 through May 1990 Tax Periods to obtain an investment tax credit
under Section 204(a)(7) of the Tax Reform Act of 1986 (Pub. L. No. 99-514, 100
Stat. 2085) and now docketed in the United States Court of Federal Claims, Nos.
97-23T and 97-580T ("ITC Refund"). In the event that the ITC Refund results in a
recapture of depreciation deductions previously claimed on a NDC Federal
Consolidated Return prior to the Distribution Date, the effect of such
reductions shall be borne by NDC notwithstanding any other provision contained
in this Agreement.
(e) Ordering of and Payment for Carrybacks.
(i) In the event that a member of the NDC Group, on the
one hand, and a member of the Newco Group, on the other hand, are each entitled
to carryback a Tax Item to a Pre-Distribution Period, the respective Tax Items
shall be used under the rules of applicable Tax Law (which shall be, in the case
of Carrybacks to such Tax Periods of the Affiliated Group of which NDC is the
common parent, the rules contained in Treasury Regulation Section 1.1502-21).
(ii) Any Tax refund or other Tax Benefit resulting from the
Carryback of any member of one Group (the "Carryback Group") of any Tax Item
arising after the Distribution Date to a Pre-Distribution Period shall be for
the account of the Carryback Group (and in the event Newco Group is the
Carryback Group, then upon receipt of the Tax refund or other Tax Benefit NDC
shall pay to Newco the amount of such Tax refund or other Tax Benefit);
provided, however, that if at the time of the use of the Carryback Items of a
member of the Carryback Group, a member of the other Group (the "Other Group")
possesses Carryback Tax Items which, but for the ordering rule set forth in (i)
above, would have been available to be used (the "Other Group Carryback") in
lieu of the Carryback Group's Tax Items, then (but only to the extent of the
Other Group Carryback) the Carryback Group shall not be entitled to payment of
the amount of such Tax refund or Tax Benefit until the earlier of (x) the date
on which a member of the Other Group claims the Other Group Carryback on a Tax
Return or (y) the date on which a member of the Carryback Group would have been
able to use the Carryback had it not been claimed with respect to the Pre-
Distribution Period Tax Return.
(iii) In the event the Carryback of Tax Items of a member of
the NDC Group, or the Newco Group, as the case may be, does not result in a Tax
refund, due to an offsetting Tax adjustment to a member of the Other Group, then
the Other Group shall promptly pay the amount of any decrease in Tax liability
resulting from the Carryback claim; provided, however, that in the event the
Other Group possesses Carryback Item which, but for the ordering rules set forth
in (i) above would have been available to be used in lieu of the Carryback
Group's Items, then (but only to the extent of the Other Group Carryback), the
other Group shall not be required to pay the amount of such decrease in Tax
liability to the Carryback Group until the earlier of (x) the date on which a
member of the Other Group claims the Other Group Carryback on a Tax Return or
(y) the date on which a member of the Carryback Group would have been able to
utilize the Carryback had it not been claimed with respect to the Pre-
Distribution Period Tax Return.
Section 4.3. Adjustment of Tax Items. In the event that the Carryback of
-----------------------
Tax Items of one Group, or a Tax adjustment attributable to such Group under the
terms of this Agreement, results in the disallowance or limitation of Tax Items
claimed on the Tax Return as filed, the Carryback Group shall be responsible for
any increase in Tax liability resulting from the disallowance or limitation of
Tax attributes; provided, however, that in the event the disallowance or
limitation of Tax attributes results in
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a Tax Benefit resulting from the use of such Tax attributes in another Tax
Period, such Tax Benefit shall be deemed to be for the account of the Carryback
Group for such purposes of this Agreement.
Section 4.4. Adjustments on Audit. If, upon examination by any Taxing
--------------------
Authority of any Tax Return including a member of the NDC Group or Newco Group
for any Tax Period, any item of deduction, credit or expense is disallowed for
which NDC is or may be liable for Taxes hereunder (or an item of income is
required to be recognized on a Tax Return which was not reported on such Tax
Return), in either such case resulting in a Tax detriment suffered by the NDC
Group, and such disallowance (or recognition) results in a Tax Benefit to the
Newco Group (with respect to that Tax Period or another Tax Period), then Newco
shall pay to NDC the amount of such Tax Benefit that is realized in the form of
an actual reduction in Tax (which shall be computed by comparing the Tax which
would have been owed by Newco but for the item giving rise to the Tax Benefit
with the Tax owed by Newco taking such item into account) provided, however,
that in no case will the amount that Newco is required to pay to NDC with
respect to such Tax Benefit exceed the corresponding Tax detriment to NDC
(reduced by payments previously made by Newco to NDC with respect to such Tax
Benefit). Any payment required to be made hereunder shall be made in accordance
with Section 5.10. The provisions of this Section 4.4 shall apply in the same
manner where an item of deduction, credit, or expense is disallowed for which
Newco is or may be liable for Taxes hereunder (or any item of income is required
to be recognized on a Tax Return which was not reported on such Tax Return) as
where the NDC Group suffers such a detriment. For avoidance of doubt, any
payment required to be made by NDC to the Newco Group under this Section 4.4
shall, to the extent applicable, be deemed as an offset to amounts owing by
Newco to NDC under Section 2.1 hereof.
Section 4.5 DCLs.
----
(a) Prior Use of DCLs. Each of the Companies acknowledge that
NDC used the existing DCLs of NDC Holdings (UK) Ltd. and Global Payment Systems
LLC (both of which are members of the Newco Group) during the taxable years
ended May 31, 1989, through May 31, 1996, and May 31, 1998, through May 31,
2000, in accordance with the DCL Regulations.
(b) Triggering Events. Each of the Companies acknowledge that a
Triggering Event requires the recapture of DCLs but for compliance with Treasury
Regulation Section 1.1503-2(g)(2)(iv)(B)(2) and other applicable DCL
Regulations. Each of the Companies acknowledge that the Distribution will
constitute a Triggering Event and that other transactions if consummated prior
to the Distribution also may constitute a Triggering Event.
(c) Closing Agreement. To avoid such recapture, each of the
Companies shall enter into a Closing Agreement with the Internal Revenue Service
with respect to the DCLs of NDC Holdings (UK) Ltd. and Global Payment Systems
LLC as required under Treasury Regulation Section 1.1503-2(g)(2)(iv)(B)(2)(i)
and to satisfy all other requirements of the DCL Regulations prior to the filing
of the Federal Income Tax Returns applicable to the year in which the Triggering
Event occurred. In addition, each of the Companies shall fully cooperate (and
cause their respective Affiliates to cooperate) with each other and with each
other's agents (including accounting firms and legal counsel), as provided in
Article VI, to obtain such a Closing Agreement and to satisfy all other
requirements of the DCL Regulations.
(d) Covenants Regarding Future Periods. Newco shall not use any
of the existing DCLs of NDC Holdings (UK) Ltd. and Global Payment Systems LLC
(both of which are members of the Newco Group) to offset income taxable in the
United Kingdom. In the event that Newco so uses the
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existing DCLs and causes recapture of the DCLs, Newco shall be solely liable for
all Taxes and interest generated by such action.
ARTICLE V
Tax Payments and Intercompany Billings
Section 5.1. Payment of Taxes With Respect to NDC Federal Consolidated
---------------------------------------------------------
Returns. In the case of any NDC Federal Consolidated Return:
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(a) Computation and Payment of Tax Due. At least ten business
days prior to any Payment Date, NDC shall compute the amount of Tax required to
be paid to the Internal Revenue Service (taking into account the requirements of
Section 3.4 relating to consistent accounting practices) with respect to such
Tax Return on such Payment Date and shall notify Newco in writing of the amount
of Tax required to be paid on such Payment Date. NDC will pay such amount to the
Internal Revenue Service on or before such Payment Date.
(b) Computation and Payment of Newco Liability With Respect to
Tax Due. Within 30 days following any Payment Date, Newco will pay to NDC the
excess (if any) of:
(i) the amount of liability determined as of such Payment
Date with respect to the applicable Tax Period allocable to Newco in a manner
consistent with the provisions of Section 2.1, over
(ii) the amount equal to the cumulative net payments with
respect to such Tax Return prior to such Payment Date made by Newco or members
of its Group.
If the amount in clause (ii) above is greater than the amount in clause (i)
above as of any Payment Date, then NDC shall pay such excess to Newco within 30
days following the Payment Date.
(c) Interest on Intergroup Tax Allocation Payments. In the case
of any payments to NDC required under paragraph (b) of this Section 5.1, Newco
also shall pay to NDC an amount of interest computed at the Prime Rate on the
amount of the payment required based on the number of days from the applicable
Payment Date until the date of Newco's subsequent payment. In the case of any
payments by NDC required under paragraph (b) of this Section 5.1, NDC also shall
pay to Newco an amount of interest computed at the Prime Rate on the amount of
the payment required based on the number of days from the applicable Payment
Date until the date of NDC's subsequent payment of such amount to Newco.
Section 5.2. Payment of Federal Income Tax Related to Adjustments.
----------------------------------------------------
(a) Adjustments Resulting in Underpayments. NDC shall pay to the
Internal Revenue Service when due any additional Federal Income Tax required to
be paid as a result of any adjustment to the Tax liability with respect to any
NDC Federal Consolidated Return. Newco shall pay to NDC an amount that is
attributable to a permanent Tax Item and that is allocable to Newco under
Section 2.1 within 30 days from the later of (i) the date the additional Tax was
paid by NDC or (ii) the date of receipt by Newco of a written notice and demand
from NDC for payment of the amount due, accompanied by evidence of payment and a
statement detailing the Taxes paid and describing in reasonable detail the
particulars relating thereto. Any payments required under this Section 5.2(a)
shall
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include interest computed at the Prime Rate based on the number of days from the
date the additional Tax was paid by NDC to the date of the payment under this
Section 5.2(a).
(b) Adjustments Resulting in Overpayments. Within 30 days of
receipt by NDC of any Tax Benefit resulting from any adjustment to the Tax
liability with respect to any NDC Federal Consolidated Return, NDC shall pay to
Newco its share of any such Tax Benefit that is attributable to a permanent Tax
Item, as determined in accordance with the principles of Section 2.1 and Article
IV. Any payments required under this Section 5.2(b) shall include interest
computed at the Prime Rate based on the number of days from the date the Tax
Benefit was received by NDC to the date of payment to Newco under this Section
5.2(b).
Section 5.3. Payment of State Income Tax Relating to Pre-Distribution
--------------------------------------------------------
Periods.
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(a) Computation and Payment of Tax Due. At least three business
days prior to any Payment Date for any Tax Return with respect to any State
Income Tax relating to a Pre-Distribution Period, the Responsible Company shall
compute the amount of Tax required to be paid to the applicable Taxing Authority
(taking into account the requirements of Section 3.4 relating to consistent
accounting practices) with respect to such Tax Return on such Payment Date and:
(i) If such Tax Return is with respect to a Consolidated or
Combined State Income Tax, the Responsible Company shall, if NDC is not the
Responsible Company with respect to such Tax Return, notify NDC in writing of
the amount of Tax required to be paid on such Payment Date. NDC will pay such
amount to such Taxing Authority on or before such Payment Date.
(ii) If such Tax Return is with respect to a Separate
Company Tax, the Responsible Company shall, if it is not the Company liable for
the Tax reported on such Tax Return, notify the Company liable for such Tax in
writing of the amount of Tax required to be paid on such Payment Date. The
Company liable for such Tax will pay such amount to such Taxing Authority on or
before such Payment Date.
(b) Computation and Payment of Newco Liability With Respect to
Tax Due. Within 30 days following the due date (including extensions) for filing
any Tax Return for any Consolidated or Combined State Income Tax (excluding any
Tax Return with respect to payment of estimated Taxes or Taxes due with a
request for extension of time to file) relating to a Pre-Distribution Period,
Newco shall pay to NDC the Tax liability allocable to Newco as determined by NDC
under the provisions of Section 2.1 and Article IV, plus interest computed at
the Prime Rate on the amount of the payment based on the number of days from the
due date (including extensions) to the date of payment by Newco to NDC.
Section 5.4. Payment of State Income Taxes Related to Adjustments.
----------------------------------------------------
(a) Adjustments Resulting in Underpayments. NDC shall pay to the
applicable Taxing Authority when due any additional State Income Tax required to
be paid as a result of any adjustment to the Tax liability with respect to any
Tax Return for any Consolidated or Combined State Income Tax for any Pre-
Distribution Period. Newco shall pay to NDC its respective share of any such
additional Tax payment that is attributable to a permanent Tax Item determined
in accordance with Section 2.1 and Article IV within 30 days from the later of
(i) the date the additional Tax was paid by NDC or (ii) the date of receipt by
Newco of a written notice and demand from NDC for payment of the amount due,
accompanied by evidence of payment and a statement detailing the Taxes paid and
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describing in reasonable detail the particulars relating thereto. Newco also
shall pay to NDC interest on its respective share of such Tax computed at the
Prime Rate based on the number of days from the date the additional Tax was paid
by NDC to the date of its payment to NDC under this Section 5.4(a).
(b) Adjustments Resulting in Overpayments. Within 30 days of
receipt by NDC of any Tax Benefit resulting from any adjustment to the Tax
liability with respect to any Tax Return for any Consolidated or Combined State
Income Tax for any Pre-Distribution Period, NDC shall pay to Newco its share of
any such Tax Benefit that is attributable to a permanent Tax Item, as determined
in accordance with the principles of Section 2.1 and Article IV. Any payments
required under this Section 5.4(b) shall include interest computed at the Prime
Rate based on the number of days from the date the Tax Benefit was received by
NDC to the date of payment under this Section 5.4(b).
Section 5.5. Payment of Separate Company Taxes and Other Taxes. Each
-------------------------------------------------
Company shall pay, or shall cause to be paid, to the applicable Taxing Authority
when due all Separate Company Taxes and Other Taxes owed by such Company or a
member of such Company's Group.
Section 5.6. Indemnification Payments. If any Company (the "payor") is
------------------------
required to pay to a Taxing Authority a Tax that another Company (the
"responsible party") is required to pay to such Taxing Authority under this
Agreement, the responsible party shall reimburse the payor within 30 days of
delivery by the payor to the responsible party of an invoice for the amount due,
accompanied by evidence of payment and a statement detailing the Taxes paid and
describing in reasonable detail the particulars relating thereto. The
reimbursement shall include interest on the Tax payment computed at the Prime
Rate based on the number of days from the date of the payment to the Taxing
Authority to the date of reimbursement under this Section 5.6.
Section 5.7. [Reserved]
Section 5.8. Payment of Refunds and Other Tax Benefits.
-----------------------------------------
(a) Except as otherwise provided in this Agreement, if a member
of one Group receives a Tax refund or other Tax Benefit with respect to Taxes
for which a member of the other Group is liable hereunder, the Company receiving
such Tax refund shall make a payment to the Company who is liable for such Taxes
hereunder within 30 days following the receipt of the Tax refund in an amount
equal to such Tax refund, plus interest on such amount computed at the Prime
Rate based on the number of days from the date of receipt of the Tax refund to
the date of payment under this Section 5.8. Notwithstanding any other provision
set forth in Section 5.8, NDC is entitled to receive the full amount of the ITC
Refund as defined in Section 4.2(d) and shall bear the effect of any recapture
of depreciation deductions resulting from such refund.
(b) In the event one Group is reimbursed for its payment of a
Tax liability of the other Group, the amount of such reimbursement shall be
computed net of any Tax Benefit realized by the reimbursed Group as the result
of payment of the other Group's Tax liability.
Section 5.9. Payment for Carrybacks. Each Company shall pay the other
----------------------
Company for Carrybacks in accordance with Section 4.2(e). Any such payment
shall include interest at the Prime Rate based on the number of days from the
date the Company is required to make the payment under Section 4.2(e) to the
date the Company actually makes the payment.
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Section 5.10. Payment for Adjustments on Audit. Any payment required under
--------------------------------
Section 4.4 shall be made within 30 days of the due date (including any
extensions) of the Tax Return on which the Tax Benefit described in that section
is claimed. Such payment shall include interest computed at the Prime Rate based
on the number of days from such due date to the date the payment is made.
Section 5.11. Interest Netting. Each of the NDC Group and the Newco Group
----------------
shall be entitled to avail itself of the benefits of the interest netting
provisions contained in Revenue Procedures 99-43 and 2000-26 and any subsequent
published guidance with respect to federal income tax refunds and deficiencies
for which it is liable under this Agreement. If one of the Groups has a net
overpayment of income tax for one or more years after application of any
underpayments of that Group from other years, and the other Group has a net
underpayment of income for one or more years after application of any
overpayments of that Group from other years, then the interest netting provision
shall be applied to offset such net overpayment against such net underpayment to
the maximum extent possible in order to realize the benefits of the interest
netting provisions. The interest-savings resulting from any offset of a net
overpayment of one Group against a net underpayment of the other Group shall be
shared equally between the NDC Group and the Newco Group.
ARTICLE VI
Assistance and Cooperation
Section 6.1. General. Each of the Companies shall cooperate (and cause
-------
their respective Affiliates to cooperate) with each other and with each other's
agents, including accounting firms and legal counsel, in connection with Tax
matters relating to the Companies and their Affiliates including (i) preparation
and filing of Tax Returns, (ii) determining the liability for and amount of any
Taxes due (including estimated Taxes) or the right to and amount of any refund
of Taxes, (iii) examinations of Tax Returns, (iv) any administrative or judicial
proceeding in respect of Taxes assessed or proposed to be assessed and (v)
complying with the DCL Regulations to avoid any recapture of the DCLs of NDC
Holdings (UK) Ltd. and Global Payment Systems LLC. Such cooperation shall
include making all information and documents in their possession relating to the
other Companies and their Affiliates available to such other Companies as
provided in Article VII. Each of the Companies also shall make available to
each other, as reasonably requested and available, personnel (including
officers, directors, employees, and agents of the Companies or their respective
Affiliates) responsible for preparing, maintaining, and interpreting information
and documents relevant to Taxes, and personnel reasonably required as witnesses
or for purposes of providing information or documents in connection with any
administrative or judicial proceedings relating to Taxes. Any information or
documents provided under this Article VI shall be kept confidential by the
Company receiving the information or documents, except as may otherwise be
necessary in connection with the filing of Tax Returns or in connection with any
administrative or judicial proceedings relating to Taxes.
Section 6.2. Income Tax Return Information. Each Company will provide to
-----------------------------
each other Company information and documents relating to their respective Groups
required by the other Companies to prepare Tax Returns. The Responsible Company
shall determine a reasonable compliance schedule for such purpose in accordance
with past practices. Any additional information or documents the Responsible
Company requires to prepare such Tax Returns will be provided in accordance with
past practices, if any, or as the Responsible Company reasonably requests and in
sufficient time for the Responsible Company to file such Tax Returns timely.
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ARTICLE VII
Tax Records
Section 7.1. Retention of Tax Records. Except as provided in Section
------------------------
7.2, each Company shall preserve and keep all Tax Records exclusively relating
to the assets and activities of their respective Groups for Pre-Distribution Tax
Periods, and NDC shall preserve and keep all other Tax Records relating to Taxes
of the Groups for Pre-Distribution Tax Periods, for so long as the contents
thereof may become material in the administration of any matter under the Code
or other applicable Tax Law, but in any event until the later of (i) the
expiration of any applicable statutes of limitation, as extended, and (ii) seven
years after the Distribution Date. If, prior to the expiration of the
applicable statute of limitation and such seven-year period, a Company
reasonably determines that any Tax Records that it is required to preserve and
keep under this Article VII are no longer material in the administration of any
matter under the Code or other applicable Tax Law, such Company may dispose of
such records upon 90 days prior written notice to the other Company. Such
notice shall include a list of the records to be disposed of describing in
reasonable detail each file, book, or other record accumulation being disposed.
The notified Company shall have the opportunity, at its cost and expense, to
copy or remove, within such 90-day period, all or any part of such Tax Records.
Section 7.2. State Income Tax Returns. Tax Returns with respect to State
------------------------
Income Taxes and workpapers prepared in connection with preparing such Tax
Returns shall be preserved and kept, in accordance with the guidelines of
Section 7.1, by the Company responsible for preparing and filing the applicable
Tax Return.
Section 7.3. Access to Tax Records. The Companies and their respective
---------------------
Affiliates shall make available to each other for inspection and copying during
normal business hours upon reasonable notice all Tax Records in their possession
to the extent reasonably requested by the other Company in connection with the
preparation of Tax Returns, audits, litigation, or the resolution of items under
this Agreement.
ARTICLE VIII
Tax Contests
Section 8.1. Notice. Each of the parties shall provide prompt notice to
------
the other party of any pending or threatened Tax audit, assessment, or
proceeding or other Tax Contest of which it becomes aware related to Taxes for
Tax Periods for which it is indemnified by the other party hereunder. Such
notice shall contain factual information (to the extent known) describing any
asserted Tax liability in reasonable detail and shall be accompanied by copies
of any notice and other documents received from any Taxing Authority in respect
of any such matters. If an indemnified party has knowledge of an asserted Tax
liability with respect to a matter for which it is to be indemnified hereunder
and such party fails to give the indemnifying party prompt notice of such
asserted Tax liability, then (i) if the indemnifying party is precluded from
contesting the asserted Tax liability in any forum as a result of the failure to
give prompt notice, the indemnifying party shall have no obligation to indemnify
the indemnified party for any Taxes arising out of such asserted Tax liability,
and (ii) if the indemnifying party is not precluded from contesting the asserted
Tax liability in any forum, but such failure to give prompt notice results in a
monetary detriment to the indemnifying party, then any amount which the
indemnifying party is otherwise required to pay the indemnified party pursuant
to this Agreement shall be reduced by the amount of such detriment.
-17-
Section 8.2. Control of Tax Contests. Each Company shall have full
-----------------------
responsibility and discretion in handling, settling, or contesting any Tax
Contest involving a Tax for which it is liable pursuant to Article II of this
Agreement. If a Tax Contest proceeding involves both (a) one or more issues for
which NDC is liable under this Agreement and (b) one or more issues for which
Newco is liable under this Agreement, then NDC and Newco shall cooperate with
each other to allow each party to conduct the Tax Contest with respect to those
issues for which such party is liable. Furthermore, NDC may participate in any
Tax Contest with respect to Restructuring Taxes regardless of whether it has
liability or indemnification obligations with respect to such Taxes under this
Agreement.
ARTICLE IX
No Inconsistent Actions
Section 9.1 Each of the Companies covenants and agrees that it will not
take any action, and it will cause its Affiliates to refrain from taking any
action, which may be inconsistent with the Tax treatment of the Transactions as
contemplated in the IRS Private Letter Ruling (any such action is referred to in
this Article IX as a "Tainting Act"), unless (i) the Company or Affiliate
thereof proposing such Tainting Act (the "Requesting Party") either (A) obtains
a ruling with respect to the Tainting Act from the Internal Revenue Service or
other applicable Taxing Authority that is reasonably satisfactory to the other
Company (the "Requested Party") (except that the Requesting Party shall not
submit any such ruling request if a Requested Party determines in good faith
that filing such request might have a materially adverse effect upon such
Requested Party), or (B) obtains an unqualified opinion reasonably acceptable to
each Requested Party of independent nationally recognized tax counsel acceptable
to each Requested Party, on a basis of assumed facts and representations
consistent with the facts at the time of such action, that such Tainting Act
will not affect the Tax treatment of the Transactions as contemplated in the IRS
Private Letter Ruling, and (ii) each Requested Party consents in writing to such
Tainting Act, which consent shall not be unreasonably withheld. Without limiting
the foregoing:
(a) Specified Actions. During the two year period following the
Distribution Date, unless clause (i) and (ii) of the preceding paragraph are
satisfied with respect to the applicable action, no Company or its Affiliate
will (A) liquidate or merge with or into any other corporation (other than a
merger which results in the outstanding stock of such Company or its Affiliates
immediately before the merger continuing to represent at least fifty-five (55)
percent of the outstanding voting stock and non-voting stock of the merged
corporations after the transaction); (B) issue more than thirty-five (35)
percent, by vote or value, of its capital stock in one or more transactions; (C)
redeem, purchase, or otherwise reacquire its capital stock in one or more
transactions, except to the extent such redemption, purchase, or reacquisition
meets the requirements of Section 4.05(1)(b) of Revenue Procedure 96-30, 1996-1
C.B. 696; (D) sell, exchange, distribute, or otherwise dispose of, other than in
the ordinary course of business, more than forty (40) percent of the assets
constituting the trades or businesses relied upon in the IRS Private Letter
Ruling to satisfy Section 355(b) of the Code; (E) discontinue or cause to be
discontinued the active conduct of the trades or businesses relied upon in the
IRS Private Letter Ruling to satisfy Section 355(b) of the Code; or (F) engage
in any Section 355(e) Event, as defined in Section 2.4(b) of this Agreement.
(b) No Inconsistent Plan or Intent. Each of the Companies
represents and warrants that neither it nor any of its Affiliates has any plan
or intent to take any action which is inconsistent with any factual statements
or representations in the IRS Private Letter Ruling.
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(c) Section 355(e) Covenant. Without in any manner limiting
Section 9.1(a) or (b) immediately above, each of NDC and Newco covenants and
agrees that, during the two-year periods ending on and beginning on the
Distribution Date, unless clause (a) or (b) of Section 9.1 of this Agreement is
satisfied with respect to the applicable action, it will not enter into any
negotiations, agreements, or arrangements with respect to transactions or events
(including stock issuances, option grants, capital contributions, or
acquisitions), which may cause the Distribution to be treated as part of a plan
pursuant to which one or more persons acquire directly or indirectly NDC or
Newco stock, as the case may be, representing a "50 percent or greater interest"
within the meaning of Section 355(e)(4) of the Code.
(d) Amended or Supplemental Rulings. Each of the Companies
covenants and agrees that it will not file, and it will cause its Affiliates to
refrain from filing, any amendment or supplement to the IRS Private Letter
Ruling request with respect to the Transactions subsequent to the Distribution
Date without the consent of the other Companies, which consent shall not be
unreasonably withheld.
Section 9.2 Notwithstanding anything to the contrary in this Agreement,
each Company shall be solely liable for, and shall indemnify and hold harmless
the other Company from any Restructuring Tax resulting from a Tainting Act by
such first Company or its Affiliates, regardless of whether clause (a) or (b) of
Section 9.1 was satisfied with respect to such Tainting Act.
ARTICLE X
Survival of Obligations
The representations, warranties, covenants, and agreements set forth in
this Agreement shall be unconditional and absolute and shall remain in effect
without limitation as to time.
ARTICLE XI
Employee Matters
Each of the Companies agrees to utilize, or cause its Affiliates to
utilize, the alternate procedure set forth in Section 5 of Revenue Procedure 96-
60, 1996-2 C.B. 399, with respect to wage reporting.
ARTICLE XII
Treatment of Payments; Tax Gross Up
Section 12.1. Treatment of Tax Indemnity and Tax Benefit Payments. In the
---------------------------------------------------
absence of any change in Tax treatment under the Code or other applicable Tax
Law, any Tax indemnity payments or Tax Benefit payments made by a Company under
Article V shall be reported for Tax purposes by the payor and the recipient as
distributions or capital contributions, as appropriate, occurring immediately
before the Distribution on the Distribution Date.
Section 12.2. Tax Gross Up. If, notwithstanding the manner in which Tax
------------
indemnity payments and Tax Benefit payments were reported, there is an
adjustment to the Tax liability of a Company as a result of its receipt of a
payment pursuant to this Agreement, such payment shall be appropriately adjusted
so that the amount of such payment, reduced by the amount of all Income Taxes
payable with respect to the receipt thereof (but taking into account all
correlative Tax Benefits resulting from the
-19-
payment of such Income Taxes), shall equal the amount of the payment which the
Company receiving such payment would otherwise be entitled to receive pursuant
to this Agreement.
Section 12.3. Interest Under This Agreement. Anything herein to the
-----------------------------
contrary notwithstanding, to the extent one Company ("indemnitor") makes a
payment of interest to another Company ("indemnitee") under this Agreement with
respect to the period from the date that the indemnitee made a payment of Tax to
a Taxing Authority to the date that the indemnitor reimbursed the indemnitee for
such Tax payment, or with respect to the period from the date that the
indemnitor received a Tax Benefit to the date indemnitor paid the indemnitee
with respect to such Tax Benefit, the interest payment shall be treated as
interest expense to the indemnitor (deductible to the extent provided by law)
and as interest income by the indemnitee (includible in income to the extent
provided by law). The amount of the payment shall not be adjusted under Section
12.2 to take into account any associated Tax Benefit to the indemnitor or
increase in Tax to the indemnitee.
ARTICLE XIII
Disagreements
If after good faith negotiations the parties cannot agree on the
application of this Agreement to any matter, then the matter will be referred to
an accounting firm acceptable to each of the parties (the "Accounting Firm");
provided that such firm cannot then be acting as the internal or external
accountants for either party. The Accounting Firm shall furnish written notice
to the parties of its resolution of any such disagreement as soon as practical,
but in any event no later than 45 days after its acceptance of the matter for
resolution. Any such resolution by the Accounting Firm will be conclusive and
binding on all parties to this Agreement. In accordance with Article XV, each
party shall pay its own fees and expenses (including the fees and expenses of
its representatives) incurred in connection with the referral of the matter to
the Accounting Firm. All fees and expenses of the Accounting Firm in connection
with such referral shall be shared equally by the parties affected by the
matter.
ARTICLE XIV
Late Payments
Any amount owed by one party to another party under this Agreement which is
not paid when due shall bear interest at the Prime Rate plus two percent,
compounded on each March 31, June 30, September 30, and December 31, from the
due date of the payment to the date paid. To the extent interest required to be
paid under this Article XIV duplicates interest required to be paid under any
other provision of this Agreement, interest shall be computed at the higher of
the interest rate provided under this Article XIV or the interest rate provided
under such other provision.
ARTICLE XV
Expenses
Except as provided in Article XIII, each Company and its Affiliates shall
bear their own expenses incurred in connection with preparation of Tax Returns,
Tax Contests, and other matters related to Taxes under the provisions of this
Agreement.
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ARTICLE XVI
General Provisions
Section 16.1. Notices. All notices and other communications hereunder
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shall be in writing and shall be delivered in person, by telecopy, by express or
overnight mail delivered by a nationally recognized air courier (delivery
charges prepaid), or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties as follows:
(a) If to NDC, to:
National Data Corporation
National Data Plaza
Atlanta, Georgia 30329
Attention: General Counsel
(b) If to Newco, to:
Global Payments Inc.
4 Corporate Boulevard, N.E.
Atlanta, Georgia 30329
Attention: General Counsel
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Any notice or communication delivered in person shall be deemed effective on
delivery or when delivery is refused. Any notice or communication sent by
telecopy or by air courier shall be deemed effective on the first business day
at the place at which such notice or communication is received following the day
on which such notice or communication was sent.
Section 16.2. Counterparts. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same agreement. The Agreement may be
delivered by facsimile transmission of a signed copy thereof.
Section 16.3. Binding Effect; Assignment. This Agreement and all of the
--------------------------
provisions hereof shall be binding upon the parties hereto and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Except with respect to a merger of either party, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either party hereto without the prior written consent of the other
party, which consent shall not 'be unreasonably withheld or delayed; provided,
however, that NDC and Newco may assign their respective rights, interests,
duties, liabilities, and obligations under this Agreement to any of their
respective subsidiaries, but such assignment shall not relieve NDC or Newco, as
the assignee, of its obligations hereunder.
Section 16.4. Dispute Resolution. Resolution of any and all disputes
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arising from or in connection with this Agreement, whether based on contract,
tort, or otherwise (collectively, "Disputes"), shall be exclusively governed by
and settled in accordance with the provisions of Article XIII and this Section
16.4. The parties hereto shall use all commercially reasonable efforts to settle
all Disputes
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without resorting to mediation, arbitration, litigation, or other third party
dispute resolution mechanisms. If any Dispute remains unsettled, the parties
hereby agree to mediate such Dispute using a mediator reasonably acceptable to
all parties involved in such Dispute. If the parties are unable to resolve such
dispute through mediation, each party will be free to commence proceedings for
the resolution thereof. No party shall be entitled to consequential, special,
exemplary, or punitive damages.
Section 16.5. Severability. Any provision of this Agreement which is
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prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 16.6. Waiver. The observance of any term of this Agreement may be
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waived (either generally or in a particular instance and either retroactively or
prospectively) by the party entitled to enforce such term, but such waiver shall
be effective only if it is in writing signed by the party against which such
waiver is to be asserted. Unless otherwise expressly provided in this
Agreement, no delay or omission on the part of any party in exercising any right
or privilege under this Agreement shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any right or privilege under this
Agreement operate as a waiver of any other right or privilege under this
Agreement nor shall any single or partial exercise of any right or privilege
preclude any other or further exercise thereof or the exercise of any other
right or privilege under this Agreement. No failure by either party to take any
action or assert any right or privilege hereunder shall be deemed to be a waiver
of such right or privilege in the event of the continuation or repetition of the
circumstances giving rise to such right unless expressly waived in writing by
the party against whom the existence of such waiver is asserted.
Section 16.7. Amendment. This Agreement may not be amended or modified in
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any respect except by a written agreement signed by both of the parties hereto.
Section 16.8. Authority. Each of the parties hereto represents to the
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other that (i) it has the corporate power and authority to execute, deliver and
perform this Agreement, (ii) the execution, delivery, and performance of this
Agreement by it hits been duly authorized by all necessary corporate action,
(iii) it has duly and validly executed and delivered this Agreement, and (iv)
this Agreement is a legal, valid, and binding obligation, enforceable against it
in accordance with its term subject to applicable bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting creditors' rights
generally and general equity principles.
Section 16.9. Interpretation. The headings contained in this Agreement
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and in the table of contents to this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
When a reference is made in this Agreement to an Article or a Section, such
reference shall be to an Article or Section of this Agreement unless otherwise
indicated.
Section 16.10. Effective Time. This Agreement shall become effective upon
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the closing of the Distribution.
[Signatures on Next Page]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by the respective officers as of the date set forth above.
NATIONAL DATA CORPORATION
By: /s/ Randolph L. M. Hutto
------------------------
Name: Randolph L. M. Hutto
Title: Chief Financial Officer
GLOBAL PAYMENTS INC.
By: /s/ Paul R. Garcia
----------------------------
Name: Paul R. Garcia
Title: Chief Executive Officer
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