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Exhibit 10.4
TAX SEPARATION AND ALLOCATION AGREEMENT
This Tax Separation and Allocation Agreement (the "Agreement") is made
as of _______________, 1998 by and among Cincinnati ▇▇▇▇ Inc., an Ohio
corporation ("CBI"), and Convergys Corporation, an Ohio corporation
("Convergys") (together with its subsidiaries existing immediately following the
Distribution, the "Convergys Group").
WHEREAS, CBI is the common parent of an Affiliated Group of
corporations engaged in separate and distinct lines of business, including
subsidiaries engaged in the telecommunication business and subsidiaries engaged
in information businesses that rely heavily on the latest technological
advances.
WHEREAS, CBI has formed Convergys as a holding company and transferred
to it all of the subsidiaries that comprise the Convergys Group.
WHEREAS, CBI intends to have Convergys issue slightly less than 20
percent of the shares of Convergys to the public leaving CBI as the owner of
more than 80 percent of the shares of Convergys.
WHEREAS, soon after such sale, CBI proposes to distribute to its
shareholders all of the shares of Convergys that it owns in a distribution that
is intended to be tax-free pursuant to the provisions of Section 355 of the
Code.
WHEREAS, CBI and Convergys have entered into a Distribution Agreement
(as defined below) providing for the distribution of all of the Convergys stock
owned by CBI to its shareholders in accordance with the Distribution Agreement;
and
WHEREAS, CBI and Convergys, for themselves and their respective Groups,
desire to set forth their agreement regarding the allocation between CBI and the
Convergys Group of all responsibilities, liabilities and benefits pertaining to
Taxes paid or payable by either of them for all Taxable periods.
NOW, THEREFORE, in consideration of their mutual promises, the parties
hereby agree as follows:
1. DEFINITIONS. As used in this Agreement:
a. "Affiliate" shall mean, with respect to any person, any other
person means any person, corporation, partnership or other entity
directly or indirectly controlling, controlled by or under common
control with such person.
b. "Affiliated Group" shall mean an affiliated group of corporations
within the meaning of Section 1504(a) of the Code for the taxable
period in question.
c. "Carryback or Carryforward Item" shall have the meaning set forth
in Section 2d.
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d. "CBI-Caused Taxes" means any liability for Taxes, including
interest and penalties, incurred by the CBI Group or the
Convergys Group arising from or attributable to any of the
transactions that are directly related to the Distribution
failing to qualify under Section 355 of the Code, but only if
such failure (i) was caused by an act that occurred after the
Distribution in which CBI or a member of the CBI Group
participated, or (ii) was otherwise attributable to one or more
of the representations contained in Section 5b or Section 5c
hereof failing to be true as of the date of this Agreement.
e. "CBI Group" shall mean, with respect to any taxable period, the
corporations that were members of the CBI Consolidated Group
during such period, exclusive of the corporations that are
included in the Convergys Group.
f. "Code" shall mean the Internal Revenue Code of 1986, as amended.
g. "Consolidated Group" shall mean those corporations that presently
are eligible to file certain tax returns on an affiliated or
consolidated basis with CBI as the common parent.
h. "Consolidated Return" shall mean the consolidated federal income
Tax return of CBI including the Convergys Group and all other
subsidiaries of CBI for the period commencing January 1, 1998
through and including the Distribution Date.
i. "Controlled Return" shall mean (a) the Consolidated Return, (b)
any Prior Period Consolidated Return and (c) any combined returns
with respect to 1998 and all prior years.
j. "Convergys-Caused Taxes" means any liability for Taxes, including
interest and penalties, incurred by the CBI Group or the
Convergys Group arising from or attributable to any of the
transactions that are directly related to the Distribution
failing to qualify under Section 355 of the Code, but only if
such failure (i) was caused by an act that occurred after the
Distribution in which Convergys or a member of the Convergys
Group participated, or (ii) was otherwise attributable to one or
more of the representations contained in Section 5a or Section 5c
hereof failing to be true as of the date of this Agreement.
k. "Convergys Group" shall have the meaning set forth in the first
paragraph of this Agreement.
l. "Convergys Tax Liability" shall mean, with respect to any
Consolidated Group in any Taxable Period, the Convergys Group's
share of the Tax liability of such Consolidated Group, computed
as if the relevant members of the Convergys Group were not and
never were part of such Consolidated Group, but rather, were a
separate Affiliated Group of corporations filing a similar group
Return (provided, however, any transaction with any member of the
CBI Group included in such Consolidated Group shall not be taken
into account until the first taxable
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period in which such transaction is required to be taken into
account for Tax purposes under applicable law). Such computation
shall be made (i) without regard to the income, deductions
(including the net operating loss and capital loss deductions)
and credits in any year of any member of the CBI Group, except to
the extent that a payment was made to any member of the CBI Group
with respect thereto, (ii) by taking account of any Tax Asset of
the Convergys Group, including net operating loss and capital
carryforwards and carrybacks and minimum Tax credits from earlier
years of the Convergys Group except to the extent that such
losses, carryforwards, carrybacks or credits have been used by
any member of the CBI Group, (iii) by applying the maximum
applicable statutory Tax rate in effect under applicable law
during the relevant year, and (iv) by reflecting the positions,
elections and accounting methods used by the Consolidated Group
preparing the relevant return for the Consolidated Group.
m. "Distribution" shall mean the distribution by CBI of all shares
of Convergys that are held by CBI to CBI's shareholders pursuant
to the Distribution Agreement.
n. "Distribution Agreement" shall mean the Plan of Reorganization
and Distribution Agreement dated _______________, 1998 between
CBI and Convergys.
o. "Distribution Date" shall mean the date on which the Distribution
shall be effected.
p. "Final Determination" shall mean the final resolution of
liability for any Tax for a taxable period, (i) by the Internal
Revenue Service Form 870 or Form 870-AD (or any successor forms
thereto), on the date of acceptance by or on behalf of the
taxpayer, or by comparable form under the laws of other
jurisdictions; except that a Form 870 or Form 870-AD or
comparable form that reserves (whether by its terms or by
operation of law) the right of the taxpayer to file a claim for
refund and/or the right of the taxing authority to assert a
further deficiency shall not constitute a Final Determination;
(ii) by decision, judgment, decree or other order by a court of
competent jurisdiction, which has become final and unappealable;
(iii) by a closing agreement or accepted offer in compromise
under Section 7121 or Section 7122 of the Code, or comparable
agreements under the laws of other jurisdictions; (iv) by any
allowance of a refund or credit in respect of an overpayment of
Tax, but only after the expiration of all periods during which
such refund may be recovered (including by way of offset) by the
Tax imposing jurisdiction; or (v) by any other final disposition,
including by reason of the expiration of the applicable statute
of limitations or by mutual agreement of the parties.
q. "Group" shall mean the Convergys Group and/or the CBI Group.
r. "Indemnitor" shall have the meaning set forth in Section 6dii.
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s. "Prior Period Consolidated Return" shall mean any consolidated
Tax Return of CBI filed, or to be filed, for taxable years prior
to the Consolidated Return year.
t. "Return" shall mean any tax return, statement, report, form,
election or claim (including all exhibits and schedules thereto)
required to be filed with a Taxing Authority with respect to any
Taxes.
u. "Tax" (and the correlative meaning, "Taxes," "Taxing," "Taxable")
shall mean any income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, franchise,
profits, license, withholding, payroll, employment,
environmental, excise, severance, stamp, transfer, recording
occupation, premium, property, value ad, winfall profit tax,
custom duty, or other tax of any kind whatsoever, together with
any interest and penalty, addition to tax or additional amount
imposed by any governmental authority (a "Taxing Authority")
responsible for the imposition of any such (domestic or foreign).
v. "Tax Administrators" shall mean the person designated by CBI as
having primary responsibility for tax matters for the CBI Group
and the person designated by Convergys as having primary
responsibility for tax matters for the Convergys Group, or such
other persons as may be mutually agreed upon by CBI and
Convergys.
w. "Tax Asset" shall mean any net operating loss, net capital loss,
tax credit, or any other loss, credit, or Tax attribute, which
could reduce any Tax.
x. "Tax Benefit" shall have the meaning set forth in Section 3d.
y. "Tax CPA" shall mean Coopers & ▇▇▇▇▇▇▇ or a comparable firm of
internationally recognized certified public accountants mutually
agreed upon by CBI and Convergys.
Any term used in this Agreement that is not defined in this Agreement
shall, to the extent the context requires, have the meaning assigned to
it in the Code or the applicable Treasury regulations thereunder (as
interpreted in administrative pronouncements and judicial decisions) or
in comparable provisions of applicable law.
2. ADMINISTRATIVE AND COMPLIANCE MATTERS.
a. TAX SHARING AGREEMENTS. Except for this Agreement and except as
provided in this Agreement, any and all existing Tax allocation
agreements or arrangements, written or unwritten, between any
member of the CBI Group and any member of the Convergys Group
shall terminate upon completion of the Distribution.
b. FILING OF RETURNS.
i. Consolidated and Prior Period Consolidated Returns. CBI
and Convergys will join, and will cause each of their
respective subsidiaries to join, in the
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Consolidated Return to the extent each is eligible to
join in such Return under the provisions of the Code or
the regulations thereunder. Each of the Groups will
prepare separate returns for members of such Groups. The
consolidation of those returns will be done under the
direction of the Tax Administrators, who will cause the
Consolidated Return to be timely prepared and filed. The
Tax Administrators shall make the Consolidated Return
available to the chief financial officers of CBI and
Convergys for their review prior to filing and shall
furnish them a copy of the return promptly after it is
filed. In addition, prior to filing such Return, the
consolidation will be reviewed by the Tax CPA whose costs
will be borne equally by CBI and Convergys. For each
Taxable period, the Tax liability of each member shall be
computed consistent with past practice and in accordance
with the terms of the Tax Allocation Agreement among the
members of the CBI Affiliated Group that was signed by
CBI on October 29, 1987 and by Cincinnati ▇▇▇▇
Information Systems Inc. on November 3, 1987.
ii. RETURN INFORMATION. CBI and Convergys agree that each
will cause their respective chief financial officers to
furnish to the Tax Administrators on a timely basis such
information, schedules, analyses and any other items as
may be necessary to prepare the Consolidated Return. Such
information, schedules, analyses and other items will be
prepared in a manner consistent with existing practice
and in accordance with the work plan scheduled to be
agreed upon by the Tax Administrators and the chief
financial officers of CBI and Convergys, acting
reasonably, as soon as practicable after the Distribution
Date.
iii. FILING PROCEDURES. The parties will execute and deliver
all documentation reasonably required (including powers
of attorney, if requested) to enable the Tax
Administrators to timely file, and to take all action
necessary or incidental to the filing of, the
Consolidated Return or any amendment of the Consolidated
Return or any prior period of the Consolidated Return.
CBI agrees that an officer of CBI will timely sign the
Consolidated Return (and any Prior Period Consolidated
Return which has not been filed as of the Distribution
Date) and any amendment of the Consolidated Return and
any Prior Period Consolidated Return after (a) receiving
written confirmation from the Tax Administrators that the
Tax Administrators have reviewed such return and
consulted with the Tax CPA and that it is in order for
filing, (b) such officer has reviewed such Consolidated
Return, and (c) any reasonable questions raised by such
officer in reviewing such return have been resolved
satisfactorily.
iv. COMBINED STATE TAX RETURNS. The Tax Administrators will
cause any combined state tax returns with respect to 1998
or any prior Tax year and any amendment of such returns
to be timely prepared, filed and paid, utilizing
procedures substantially similar to those provided in
Section 2
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and Section 3 of this Agreement with respect to the
Consolidated Return and Prior Period Consolidated
Returns.
v. OTHER TAX RETURNS. The parties and their respective
subsidiaries shall timely prepare and file Tax Returns
(other than Controlled Returns) in those jurisdictions in
which they are required to do so in a manner consistent
with past practice. Taxes for any Return filed by one of
the Companies pursuant to this section shall be paid or
caused to be paid by the party responsible under this
section for filing such return. The Tax Administrators
shall have the right to approve any Tax returns filed
pursuant to this section with regard to such filing.
c. TAX PAYMENTS.
i. INTERIM PAYMENTS. Following the Distribution Date, at the
request of the Tax Administrators, Convergys, on behalf
of the Convergys Group, shall make payment to CBI equal
to the excess of the estimated liability of the Convergys
Group for the Tax owing under the Consolidated Return (as
reasonably determined by the Tax Administrators and the
Tax CPA) over the prior payments made by such Group in
respect of such Tax. On or before March 15, 1999, an
interim Tax settlement payment shall be made to or by CBI
to the Convergys Group, as the case may be, equal to the
difference between the estimated liability of the
Convergys Group under the Consolidated Return and the
amounts previously paid by the Convergys Group with
respect to such Return. Such amounts will be reasonably
determined by the Tax Administrators and the Tax CPA.
ii. ADJUSTING PAYMENT. Based upon computations to be prepared
by the effected Group and approved by the Tax
Administrators and the Tax CPA, an adjusting payment
equal to the difference between amounts previously paid
with respect to estimated taxes for the Consolidated
Return shall be made by one Group to the other on or
before October 15, 1999 based on the Consolidated Return
as filed.
d. CARRYBACKS AND CARRYFORWARDS. If, for any Taxable period, a
member of the Convergys Group incurs a net operating loss, net
capital loss, unused general business tax credit or unused
foreign tax credit (a "Carryback or Carryforward Item"), that
may be carried back or carried forward to a Taxable year of the
CBI Group or the CBI Affiliated Group, CBI shall pay to
Convergys an amount equal to the amount by which the Tax
liability of the CBI Group is reduced by such Carryback or
Carryforward Item. Likewise, if, for any Taxable period, a
member of the CBI Group incurs Carryback or Carryforward Item
that may be carried back or carried forward to a Taxable year of
the CBI Affiliated Group, Convergys shall pay to CBI an amount
equal to the amount by which the Tax liability of the Convergys
Group is reduced by such Carryback or Carryforward Item.
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e. AGENCY. Convergys irrevocably designates the Tax Administrator
designated by CBI (and shall cause each member of the Convergys
Group to irrevocably designate such Tax Administrator) as its
agent and attorney-in-fact (and shall execute any necessary
powers of attorney) for the purpose of taking any and all
actions necessary or incidental to the filing of Returns for (i)
any period during which any member of the Convergys Group or any
predecessor qualified to file a consolidated, combined, unitary
or similar Return with any member of the CBI Group, and (ii) any
period ending on or before the Distribution Date. CBI shall keep
Convergys reasonably informed of, and shall reasonably consult
with Convergys with respect to, all actions to be taken on
behalf of any member of the Convergys Group. CBI and Convergys
will each furnish the other any and all information that the
other may reasonably request in order to carry out the
provisions of this Agreement to determine the amount of any Tax
liability.
3. INDEMNITIES.
a. CBI INDEMNITY. CBI and each member of the CBI Group jointly and
severally indemnify Convergys, its shareholders, and the members
of the Convergys Group that were members of a Consolidated Group
that included such Convergys Affiliate against and hold them
harmless from:
i. Any Tax liability of the CBI Group and any CBI-Caused Tax
Liability;
ii. Any liability or damage resulting from a breach by CBI or
any member of the CBI Group of any representation or
covenant made by CBI herein;
iii. Any Tax liability resulting from the Distribution and
attributable to any action of CBI or any member of the CBI
Group; and
iv. All liabilities, costs, expenses (including, without
limitation, reasonable expenses of investigation and
attorneys' fees and expenses), losses, damages,
assessments, settlements or judgments arising out of or
incident to the imposition, assessment or assertion of any
Tax liability or damage described in (i), (ii), or (iii),
including those incurred in the contest in good faith and
appropriate proceedings relating to the imposition,
assessment or assertion of any such Tax, liability or
damage.
b. CONVERGYS INDEMNITY. Convergys and each member of the Convergys
Group will jointly and severally indemnify CBI, its
shareholders, and the members of the CBI Group that were members
of a Consolidated Group that included such CBI Affiliate against
and hold them harmless from:
i. Any Convergys Tax Liability and Convergys-Caused Tax
Liability;
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ii. Any liability or damage resulting from a breach by
Convergys or any member of the CBI Convergys of any
representation or covenant made by Convergys herein;
iii. Any Tax liability resulting from the Distribution and
attributable to any action of Convergys or any member of
the Convergys Group; and
iv. All liabilities, costs, expenses (including, without
limitation, reasonable expenses of investigation and
attorneys' fees and expenses), losses, damages,
assessments, settlements or judgments arising out or
incident to the imposition, assessment or assertion of any
Tax liability or damage described in (i), (ii) or (iii)
including those incurred in the contest and good faith and
appropriate proceedings relating to the imposition,
assessment or assertion of any such Tax, liability or
damage.
c. DISCHARGE OF INDEMNITY. CBI, Convergys and the members of the
CBI Group and the Convergys Group, respectively, shall discharge
their obligations under Sections 3a and 3b, hereof,
respectively, by paying the relevant amount within thirty days
of demand therefor. The CBI Group shall be entitled to make such
a demand at any time after a member of the CBI Group makes a
payment or deposit in respect of a Tax for which any member of
the Convergys Group has an obligation under Section 3b. The
Convergys Group shall be entitled to make such a demand at any
time after a Final Determination of an obligation of any member
of the CBI Group under Section 3a. Any such demand shall include
a statement showing the amount due under Section 3a or Section
3b, as the case may be. If either Convergys, CBI or any member
of the Convergys Group or CBI Group disputes in good faith the
fact or the amount of its obligation, then no payment of the
amount of the dispute shall be required until any such good
faith dispute is resolved in accordance with Section 7 hereof;
provided, however, that any amount not paid within thirty days
of demand shall bear interest as provided in Section 6e.
d. TAX BENEFITS. If an indemnification obligation of any member of
the CBI Group or any member of the Convergys Group, as the case
may be, under this Section 3, arises in respect of an adjustment
that makes allowable to a member of the CBI Group or a member of
the Convergys Group, respectively, any deduction, amortization,
exclusion from income or other allowance (a "Tax Benefit") that
would not, but for such adjustment, be allowable, then any
payment by any member of the CBI Group or Convergys Group,
respectively, pursuant to this Section 3 shall be an amount
equal to (x) the amount otherwise due but for this subsection
3d, minus (y) the present value of the product of the Tax
Benefit multiplied (i) by the maximum applicable federal,
foreign or state, as the case may be, corporate tax rate in
effect at the time such Tax Benefit becomes allowable to a
member of the CBI Group or member of the Convergys Group (as the
case may be), or (ii) in the case of a Tax Credit, by 100%. The
present value of such product shall be determined by discounting
such product from the time
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that the Tax Benefit becomes allowable at a rate equal to the
applicable federal rate, as set forth from time to time in the
Internal Revenue Bulletin.
e. CALCULATION OF TAX. For purposes of this Section 3, in the case
of Taxes that are imposed on a periodic basis and are payable
for a Tax period that includes (but does not end on) the
Distribution Date, a portion of such Tax related to the portion
of such Tax period ending on the Distribution Date shall (i) in
the case of any Taxes other than Taxes based upon or related to
income, sales, gross receipts, wages, capital expenditures, or
expenses, be deemed to be the amount of such Tax for the entire
Tax period multiplied by a fraction the numerator of which is
the number of days in the Tax period ending on the Distribution
Date and the denominator of which is the number of days in the
entire Tax period, and (ii) in the case of any Tax based upon or
related to income, sales, gross receipts, wages, capital
expenditures or expenses, be deemed equal to the amount that
would be payable if the relevant Tax period ended on the
Distribution Date.
f. GUARANTEES. CBI or Convergys, as the case may be, shall
guarantee the obligations of each member of the CBI Group or the
Convergys Group, respectively, under this Agreement.
4. TAX DEFICIENCIES AND CLAIMS.
a. Except as otherwise provided in Section 4b, the Tax
Administrators shall control all audits, examinations and
proceedings with respect to Taxes with respect to any Controlled
Returns. The Tax Administrators shall have overall
responsibility for obtaining and coordinating all responses in
connection with any such proceedings with respect to any
Controlled Returns. To the extent that any such audit affects
one of the Groups, such Group shall prepare and submit such
responses in a manner consistent with prior practice, provided,
however, that the Tax Administrators shall have the right to
approve all such responses prior to their submission.
Adjustments affecting solely the Taxable income, loss or
deductions of, or Tax credits generated by any Group, may be
agreed upon or settled only upon approval of that Group, which
approval shall not be unreasonably withheld or delayed.
b. Any proposed or actual income Tax deficiencies or refund claims,
with respect to the Consolidated Return or any Prior Period
Consolidated Return that arises from the business activities of
a particular member and that do not otherwise affect any
Controlled Return, may be defended or prosecuted by that member
at its own cost and expense and with counsel and accountants of
its own selection. Each of the Tax Administrators may
participate in any such prosecution or defense at the expense of
the respective company employing the Tax Administrator. A member
may not compromise or settle any such tax deficiency or any
refund claim without the prior written consent of the Tax
Administrators, which consent shall not be unreasonably
withheld. Notwithstanding the foregoing, no member shall have a
right to an extension of the statute of limitations or to any
waiver of any other
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procedural safeguard without the prior written consent of the
Tax Administrators. The limitation expressed in the preceding
sentence applies, but is not limited to, the filing of a
petition in the United States Tax Court.
c. In connection with the defense of any audit of any Controlled
Return, except with regard to claims described in Section 4b,
above, the Tax Administrators may retain advisors and charge the
reasonable cost of their services to the appropriate Group or
Groups.
d. Refunds for any year will be allocated among the members in the
same manner as the Tax liability to which the refund relates was
allocated. If any member of the Convergys Group desires to file
a claim for refund with respect to a Taxable year for which it
was a member of the Consolidated Group, it shall prepare and
submit to CBI the claim for refund and a statement specifying
when the statute of limitations for filing the claim will
expire. The appropriate party to file such claim, under the
supervision of the Tax Administrators, will file the claim as
soon as practicable and will take such other action as may be
appropriate. Such member will reimburse CBI for all costs
incurred by CBI in complying with this section 4d.
5. REPRESENTATIONS AND COVENANTS.
a. CONVERGYS REPRESENTATIONS. Convergys, for itself and on behalf
of each member of the Convergys Group represents that, as of the
date hereof, and covenants that, on the Distribution Date, there
is no plan or intention (i) to liquidate Convergys or to merge
or consolidate Convergys, or any member of the Convergys Group
conducting an active trade or business relied upon in connection
with the restructuring or the Distribution, with any other
person subsequent to the Distribution, (ii) to sell, or
otherwise dispose of any asset, subsequent to the Distribution,
in a manner that would result in any increased Tax liability or
reduction of any Tax Asset of the CBI Group or any member
thereof, (iii) to take any action inconsistent with the
information or representations furnished to the Internal Revenue
Service or any other Tax Authority in connection with a request
for a private letter ruling (or any comparable pronouncement by
the Taxing Authority under applicable law) with respect to the
Distribution or the restructuring, (iv) to enter into any
negotiations, agreements, or arrangements with respect to
transactions or events (including stock issuances, pursuant to
the exercise of options or otherwise, capital contributions or
acquisitions, but not including the Distribution) which, if
treated as consummated before the proposed Distribution, would
result in CBI not having "control" of Convergys within the
meaning of Section 355(a)(1)(A) and Section 368(c) of the Code
at the time of the Distribution, (v) to make any change in
equity structure that would result in CBI not having such
"control" (except for the Distribution), (vi) to repurchase
stock of Convergys in a manner contrary to the requirements of
Revenue Procedure 96-30 or (vii) to take any action that
contravenes any agreement with a Taxing Authority to which any
member of the Convergys Group or the CBI Group is a party.
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b. CBI REPRESENTATIONS. CBI, for itself and on behalf of each
member of the CBI Group, represents that, as of the date hereof,
and covenants that, on the Distribution Date, there is no plan
or intention (i) to liquidate CBI or to merge or consolidate
CBI, or any member of the CBI Group conducting an active trade
or business relied upon in connection with the restructuring or
the Distribution, with any other person subsequent to the
Distribution, (ii) to sell, or otherwise dispose of any asset,
subsequent to the Distribution, in a manner that would result in
any increased Tax liability or reduction of any Tax Asset of the
Convergys Group or any member thereof, (iii) to take any action
inconsistent with the information or representations furnished
to the Internal Revenue Service or any other Tax Authority in
connection with a request for a private letter ruling (or any
comparable pronouncement by the Taxing Authority under
applicable law) with respect to the Distribution or the
restructuring, or (iv) to take any action that contravenes any
agreement with a Taxing Authority to which any member of the
Convergys Group or the CBI Group is a party.
c. CBI AND CONVERGYS REPRESENTATIONS. Each of CBI, Convergys and
the members of the CBI Group and the Convergys Group,
respectively, represent that, as of the date hereof, and
covenants that on the Distribution Date, neither Convergys, CBI
nor the members of the Convergys Group or CBI Group,
respectively, as applicable, is aware of any present plan or
intention by the current shareholders of CBI to sell, exchange,
transfer by gift, or otherwise dispose of any of their stock in,
or securities of, CBI or Convergys subsequent to the
Distribution. In making this representation, the parties hereto
recognize that the shares of CBI are, and the shares of
Convergys will be, listed on certain stock exchanges and regular
public trading of such shares can be expected.
6. COOPERATION.
a. ONGOING COOPERATION. CBI and Convergys will cooperate, and cause
each member and their respective Groups to cooperate, at such
time and to the extent reasonably requested by the other party
in connection with all matters subject to this Agreement. Such
cooperation will include, without limitation:
i. The retention and provision on reasonable request of any
and all information including books, records, documentation
or other information pertaining to Tax matters relating to
the Groups, any necessary explanations of information, and
access to personnel, until one year after the expiration of
the applicable statute of limitations (giving effect to any
extension, waiver, or mitigation thereof);
ii. The execution of any document that may be necessary or
helpful with any required Return or in connection with any
audit, proceeding, suit or action; and
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iii. The use of the party's best efforts to obtain any
documentation from a governmental authority or a third
party that may be necessary or helpful in connection with
the foregoing.
b. INFORMATION. CBI and Convergys shall keep each other fully
informed with respect to any material development relating to
the matters subject to this Agreement.
c. TAX ATTRIBUTES. CBI and Convergys shall promptly advise each
other with respect to any proposed Tax adjustments relating to a
Consolidated Group that are the subject of an audit or
investigation, or are the subject of any proceeding or
litigation, and it may affect any Tax liability or any Tax
attribution of CBI, Convergys, the CBI Group, the Convergys
Group or any member of the CBI Group or the Convergys Group.
d. AUDITS.
i. HANDLING OF AUDITS. Notwithstanding anything in this
Agreement to the contrary, the Tax Administrators shall be
kept apprised of all audits. CBI shall have full control
over all matters relating to any Return or any Tax
proceeding relating to any Tax matters of at least one
member of the CBI Group. Convergys shall have full control
over all matters relating to any Return or any Tax
Proceeding relating to any Tax matters of at least one
member of the Convergys Group. In the event that an audit
relates to any Tax matters of members from both the CBI
Group and the Convergys Group, oversight of such audit will
be handled by the Tax Administrators in consultation with
the chief financial officers of each of the respective
Groups.
ii. SETTLEMENTS. No settlement of any Tax proceeding relating
to any matter that would cause a payment obligation under
Sections 3a or 3b shall be accepted or entered into by or
on behalf of the party entitled to receive a payment under
Section 3a or 3b, whichever is applicable, unless a party
ultimately responsible for such payment under either
Section 3a or 3b, whichever is applicable (the
"Indemnitor"), consents thereto in writing, which consent
shall not be unreasonably withheld or delayed.
iii. NOTICE. The indemnified party agrees to give notice to the
Indemnitor of the assertion of any claim, or the
commencement of any suit, action or proceeding in respect
of which indemnity may be sought hereunder within thirty
days of such assertion or commencement, or such other time
that would allow the Indemnitor to timely respond to such
claim, suit, action or proceeding.
iv. OTHER ACTIONS. With respect to Returns relating to Taxes
solely attributable to the CBI Group or the Convergys
Group, as the case may be,
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CBI and the members of the CBI Group, or Convergys and the
members of the Convergys Group, as the case may be, shall
have full control over all matters relating to any Tax
proceedings in connection therewith.
e. PAYMENTS. All payments to be made under this Agreement shall be
made in immediately available funds. Except as otherwise
provided, all payments required to be made pursuant to this
Agreement will be due thirty days after the receipt of notice of
such payment or, where no notice is required, thirty days after
the fixing of liability or the resolution of a dispute. Any
payment that is not made when due shall bear interest at a rate
equal to the "prime rate" then in effect, as quoted in the Wall
Street Journal, plus 2%.
f. TAX RESERVES. In connection with the Distribution, the Tax
Administrators will oversee the allocation of the tax reserves
shown on the balance sheet of CBI immediately prior to the
Distribution Date among the members of the CBI Group and the
Convergys Group in a manner that accurately reflects both the
parties to whom the reserves should be allocated and the amount
of reserves that should be allocated to each of such parties.
7. DISPUTE RESOLUTION. In the event of a disagreement between the Tax
Administrators or between the CBI Group or the Convergys Group, all
computations or recomputations of any Tax liability, Tax rate or other
similar items, and all determinations of the amount of payments or
repayments will be reviewed by the Tax CPA, with the cost of such
review being shared equally by the disputing Groups. The decision of
the Tax CPA shall be binding on the parties.
8. COSTS AND EXPENSES. Except as expressly set forth in this Agreement,
each party will bear its own costs and expenses incurred pursuant to
this Agreement. Notwithstanding anything to the contrary in this
Agreement, CBI and Convergys will share equally the cost of the Tax CPA
connected with reviewing the Consolidated Return.
9. EFFECTIVENESS. This Agreement will become effective upon the
consummation of the Distribution. All rights and obligations arising
hereunder with respect to a pre-Distribution Tax period will survive
until they are fully effectuated or performed and, provided further,
notwithstanding anything in this Agreement to the contrary, this
Agreement will remain in effect and its provisions will survive for one
year after the full period of all applicable statutes of limitation
(giving effect any extension, waiver or mitigation thereof) and, with
respect to any claim hereunder initiated prior to the end of such
period, and until such claim has been satisfied or otherwise resolved.
10. MISCELLANEOUS.
a. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which will be deemed an
original, and which together will constitute one and the same
instrument.
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b. AMENDMENTS. This Agreement may be amended in writing duly
executed by all parties hereto.
c. GOVERNING LAW. This Agreement will be construed and enforced in
accordance with the laws of the State of Ohio.
d. BENEFICIARIES. This Agreement will be binding upon and inure to
the benefit of the parties hereto and their respective
successors and assigns, by merger, acquisition of assets or
otherwise. This Agreement is not intended to benefit any person
other than the parties hereto and such successors and assigns,
and no such other person will be a third-party beneficiary
hereof.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the _____ day of __________________, 1998.
CINCINNATI ▇▇▇▇ INC. CONVERGYS CORPORATION
By: By:
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