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EXHIBIT 10.2
TAX SHARING AND INDEMNIFICATION AGREEMENT
THIS TAX
SHARING AND INDEMNIFICATION AGREEMENT ("Agreement") is
entered into as of June 30, 2001, by and between Equifax Inc., a
Georgia
corporation ("Equifax"), and Certegy Inc., a Georgia corporation
("Certegy").
WHEREAS,
Equifax is the common parent and Certegy is currently a
member of an "affiliated group," as that term is defined in section
1504 of the
Code (such term and certain capitalized terms being defined in
Section 1.1),
that currently files consolidated federal income tax returns;
and
WHEREAS,
Certegy is a holding company and a wholly-owned subsidiary of
Equifax; and
WHEREAS,
pursuant to that certain Distribution Agreement Plan of
Reorganization and Distribution dated as of even date with this
Agreement (the
"Distribution Agreement") and subject to the terms and conditions
thereof,
Equifax will transfer and assign or cause members of the Equifax
Group to
transfer and assign to Certegy certain assets and businesses
associated with the
Payment Services Business and the stock of certain corporations
that conduct the
Payment Services Business; and
WHEREAS,
prior to the Contribution, Equifax and certain Equifax
Affiliates will undertake the Foreign Restructuring to separate the
Payment
Services Business from Equifax in foreign jurisdictions; and
WHEREAS,
pursuant to the Distribution Agreement and subject to the
terms and conditions thereof, after the Contribution, Equifax will
distribute to
its shareholders on a pro rata basis all of the issued and
outstanding stock of
Certegy; and
WHEREAS, the
parties intend that the Contribution and the Distribution
qualify as a tax-free reorganization and distribution under section
368(a)(1)(D)
and section 355 of the Code;
WHEREAS, in
contemplation of the Distribution, the Equifax Group and
the Certegy Group desire to set forth their rights and obligations
with respect
to foreign, federal, state and local taxes due for periods both
before and after
the Distribution and with respect to certain tax and other
liabilities that
might be arise in connection with the Distribution;
NOW
THEREFORE, in consideration of the foregoing premises and the
mutual agreements and covenants contained in this Agreement and
other good and
valuable consideration the receipt and sufficiency of which are
hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 For
purposes of this Agreement, the following definitions shall
apply:
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(a) "2000
Certegy Tax Liabilities" has the meaning ascribed to such
term in Section 5.5.
(b) "2001
Certegy Estimated Tax Liabilities" has the meaning ascribed
to such term in Section 5.6.
(c)
"Additional Restructuring Tax" means any Restructuring Tax
other
than any Contemplated Restructuring Taxes.
(d)
"Affiliated Group" means an affiliated group of corporations
within the meaning of section 1504(a) (determined without regard to
the
exceptions contained in section 1504(b)) of the Code for the
taxable period in
question.
(e) "Certegy
Group" means (i) with respect to any period prior to the
Distribution Date, Certegy, Payment Services, any other entity
directly or
indirectly conducting the Payment Services Business, and each of
such entities'
wholly-owned subsidiaries; provided that the Certegy Group shall
not include
Light Signatures, Inc., High Integrity Systems, LLC, or any other
entity owned
by Equifax after giving effect to the Separation and the
Distribution, and (ii)
with respect to any period on or after the Distribution Date, (A)
the Affiliated
Group of which Certegy or any successor of Certegy is the common
parent; and (B)
any entity in which any member of such Affiliated Group owns some
or all of the
equity.
(f) "Certegy
Issue" means any issue raised by any Tax Authority, which
issue results in (i) proposed Restructuring Taxes for which Certegy
could be
liable pursuant to Section 2.3 hereof, or (ii) proposed Taxes for
which Certegy
could be liable pursuant to Section 2.2 hereof.
(g) "Certegy
Tainting Act" means (i) any breach by any member of the
Certegy Group of any written representation or covenant relating to
the Certegy
Group made in any Ruling Document, or (ii) any action or actions of
or involving
any member of the Certegy Group, or any omission or omissions of
any such Person
(whether or not such action or omission is permitted pursuant to
this
Agreement), of an action or actions available to it, after the
Distribution
Date, if such breach, action or omission described in (i) or (ii)
contributes to
a Final Determination imposing any Additional Restructuring Tax on
any member of
the Equifax Group or the Certegy Group.
(h) "Code"
means the Internal Revenue Code of 1986, as amended from
time to time.
(i)
"Consolidated Returns" means the consolidated United States
federal income tax returns of the Affiliated Group of which Equifax
is the
common parent for consolidated return years beginning before the
Distribution
Date and any consolidated, combined or similar state income tax
returns of any
members of the Equifax Group for taxable years beginning before the
Distribution
Date (including, in each case, any amendments thereto).
(j)
"Contemplated Restructuring Tax" means any Restructuring Tax
set
forth on Exhibit B to this Agreement.
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(k)
"Contribution" has the meaning ascribed to such term in the
Distribution Agreement.
(l)
"Distribution" has the meaning ascribed to such term in the
Distribution Agreement.
(m)
"Distribution Agreement" has the meaning ascribed to such term
in
the recitals to this Agreement.
(n)
"Distribution Date" has the meaning ascribed to such term in
the
Distribution Agreement.
(o)
"Effective Time" has the meaning ascribed to such term in the
Distribution Agreement.
(p) "Equifax
Affiliate" means any member of the Equifax Affiliated
Group.
(q) "Equifax
Group" means, for each taxable period, (i) the Affiliated
Group of which Equifax or any successor of Equifax is the common
parent; and
(ii) any entity in which any member of the Affiliated Group
described in clause
(i) above owns some or all of the equity, provided, however, that
the Equifax
Group shall not include any member of the Certegy Group.
(r) "Equifax
Issue" means any issue raised by any Tax Authority, which
issue results in (i) proposed Restructuring Taxes (whether or not
it is alleged
that a member of the Equifax Group is at fault or is partially at
fault), or
(ii) proposed Taxes for which Equifax could be liable pursuant to
Section 2.1
hereof.
(s) "Equifax
Tainting Act" means (i) any breach by any member of the
Equifax Group of any written representation or covenant relating to
the Equifax
Group made in any Ruling Document, or (ii) any action or actions of
or involving
any member of the Equifax Group or any omission or omissions of any
such Person
of an action or actions available to it (whether or not such action
or omission
is permitted pursuant to this Agreement), after the Distribution
Date, if such
breach, action or omission described in (i) or (ii) contributes to
a Final
Determination imposing any Additional Restructuring Tax on any
member of the
Equifax Group or the Certegy Group.
(t)
"Expenses" means out-of-pocket expenses and shall not include
any
overhead or indirect costs.
(u) "Final
Determination" means the final resolution of liability for
any Tax for a taxable period (i) by IRS Form 870 or 870-AD (or any
successor
forms thereto), on the date of acceptance by or on behalf of the
IRS, or by a
comparable form under the laws of other jurisdictions, except that
a Form 870 or
870-AD, successor form, or comparable form that reserves the right
of the
taxpayer to file a claim for refund and/or the right of the Tax
Authority to
assert a further deficiency shall not constitute a Final
Determination; (ii) by
a decision, judgment, decree, or other order by a court of
competent
jurisdiction which has become final and unappealable; (iii) by a
closing
agreement or offer in compromise under section 7121 or 7122 of the
Code or any
subsequently enacted corresponding provisions of the Code, or
comparable
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agreements under the laws of other jurisdictions; (iv) by an
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 by reason of the expiration of the applicable statute
of
limitations.
(v) "Foreign
Restructuring" means the transactions undertaken prior to
the Contribution to separate the Payment Services Business from the
other
Equifax businesses in foreign jurisdictions, as described on
Exhibit A.
(w) "Group"
means the Equifax Group or the Certegy Group, as the
context so requires.
(x) "Initial
IRS Ruling" means the private letter ruling issued by the
IRS regarding certain Federal income Tax consequences of the
Separation and the
Distribution.
(y) "IRS"
means the United States Internal Revenue Service.
(z) "Payment
Services" means Certegy Payment Services, Inc., a wholly
-owned subsidiary of Equifax organized under the laws of the State
of Delaware.
(aa)
"Payment Services Business" means the businesses conducted by
Equifax and its affiliates of providing payment transaction
processing and check
risk management services to financial institutions and
merchants.
(bb)
"Post-Distribution Period" means (i) any Tax Period beginning
after the Effective Time and (ii) the portion of any Straddle
Period beginning
after the Effective Time.
(cc)
"Pre-Distribution Period" means (i) any Tax Period ending on or
before the Effective Time and (ii) the portion of any Straddle
Period ending on
or before the Effective Time.
(dd)
"Regulations" means Income Tax Regulations issued by the United
States Department of Treasury pursuant to the Code.
(ee)
"Restructuring Tax" means any Tax imposed on any member of the
Equifax Group or the Certegy Group resulting from the Separation or
the
Distribution that would not have been imposed had such transactions
not
occurred.
(ff) "Ruling
Documents" means (i) the request for the Initial IRS
Ruling, filed with the IRS in connection with the Separation and
Distribution,
together with any supplemental filings or requests for Supplemental
Ruling or
other materials subsequently submitted on behalf of Equifax, its
subsidiaries
and shareholders to the IRS, the appendices and exhibits thereto,
and any
rulings issued by the IRS to Equifax in connection with the
Separation and
Distribution or (ii) any similar filings submitted to, or rulings
issued by, any
other Tax Authority in connection with the Separation or
Distribution.
(gg)
"Separation" means the transactions necessary to transfer the
Payment Services Business to Certegy, including without limitation,
the
transactions necessary to transfer
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the equity of High Integrity Systems, LLC to Equifax, the Foreign
Restructuring,
and the Contribution.
(hh)
"Special Refund Allocation Ratio" means with respect to either
Group, the aggregate outstanding amount of Special Refund Claims
filed by a
member of such Group pending as of the Effective Date divided by
the aggregate
outstanding amount of all Special Refund Claims.
(ii)
"Special Refund Claims" means the claims for refund of state
income Taxes filed by members of the Equifax Group and the Certegy
Group prior
to the Effective Date and still outstanding as of the Effective
Date, as set
forth on Exhibit C to this Agreement.
(jj)
"Straddle Period" means any Tax Period that begins before the
Effective Time and ends after the Effective Time.
(kk)
"Supplemental Ruling" means any ruling issued after the
issuance
of the Initial IRS Ruling (a) by the IRS in connection with the
Distribution or
any transactions undertaken in connection with the Distribution or
(b) by any
other Tax Authority, addressing the application of a provision of
the laws of
another jurisdiction to any transaction undertaken in connection
with the
Distribution.
(ll)
"Supplemental Ruling Documents" has the meaning ascribed to
such
term in Section 2.5(d)(i).
(mm) "Tax"
or "Taxes" means all forms of taxation, whenever created or
imposed, whether domestic or foreign, imposed by any Tax Authority,
and without
limiting the generality of the foregoing shall include net income,
alternative
or add-on minimum tax, gross income, sales, use, franchise, gross
receipts,
value added, ad valorem, profits, license, payroll, withholding,
social
security, unemployment insurance, employment, property, transfer,
recording,
excise, severance, stamp, occupation, premium, windfall profit,
custom duty, or
other tax, governmental fee or other like assessment or charge of
any kind
whatsoever, together with any related interest, penalties or other
additions to
tax, or additional amounts imposed by any such Tax Authority. For
purposes of
computing the Taxes of a party for any purpose of this Agreement,
interest shall
be computed without regard to any Tax Items attributable to any
other party (as
determined pursuant to Section 2.4) and without regard to any
netting of
interest on any refund of Tax owed by the Tax Authority to the
other party.
(nn) "Tax
Authority" means any nation, locality, municipality,
government, authority, state, federation, or other governmental
body or agency.
(oo) "Tax
Benefit" means any Tax Item which decreases Taxes paid or
payable.
(pp) "Tax
Controversy" means any audit, examination, dispute, suit,
action, litigation, or other judicial or administrative proceeding
by or against
the IRS or any other Tax Authority. Notwithstanding the foregoing,
any
proceeding pursuant to the Special Refund Claims shall not
constitute a Tax
Controversy for purposes of this Agreement.
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(qq) "Tax
Item" means any item of income, gain, loss, deduction,
credit, recapture of credit or any other item, including, but not
limited to, an
adjustment under Code section 481 resulting from a change in
accounting method,
which increases or decreases Taxes paid or payable.
(rr) "Tax
Period" means with respect to any Tax, the period for which
the Tax is reported.
(ss) "Tax
Returns" means all reports, estimates, declarations of
estimated tax, information statements, returns or other documents
required or
permitted to be filed with a Tax Authority in connection with any
Taxes,
including but not limited to requests for extensions of time,
information
statements and reports, claims for refund, and amended returns.
ARTICLE II
ALLOCATION OF TAX LIABILITIES
2.1 Equifax Group.
(a) Current
and Prior Periods. Except as otherwise provided in this
Agreement, Equifax shall be responsible and liable for all Taxes
attributable to
the Equifax Group that are imposed for any Pre-Distribution Period.
Equifax
hereby assumes all such liability and shall indemnify and hold
harmless Certegy
and any member of the Certegy Group from and against any share or
amount of all
Taxes attributable to the Equifax Group that are imposed for any
Pre-
Distribution Period.
(b) Future
Periods. Except as otherwise provided in this Agreement,
Equifax shall be responsible and liable for all Taxes attributable
to the
Equifax Group that are imposed for any Post-Distribution Period and
shall
indemnify and hold harmless Certegy and any member of the Certegy
Group from and
against all such Taxes.
2.2 Certegy Group.
(a) Current
and Prior Periods. Except as otherwise provided in this
Agreement, Certegy shall be responsible and liable for all Taxes
attributable to
the Certegy Group that are imposed for all Pre-Distribution
Periods. Certegy
hereby assumes all such liability and shall indemnify and hold
harmless Equifax
and any member of the Equifax Group from and against any share or
amount of
Taxes attributable to the Certegy Group that are imposed for any
Pre-
Distribution Period.
(b) Future
Periods. Except as otherwise provided in this Agreement,
Certegy shall be liable for all Taxes attributable to the Certegy
Group that are
imposed for any Post-Distribution Period, and shall indemnify and
hold harmless
Equifax and any member of the Equifax Group from and against all
such Taxes.
2.3 Restructuring Taxes.
(a)
Generally. Notwithstanding Section 2.1 or Section 2.2 to the
contrary, Equifax shall be responsible and liable for and shall
indemnify and
hold harmless each member
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of the Certegy Group from and against any and all Contemplated
Restructuring
Taxes. Notwithstanding anything in this Article II (other than
Section 2.3(b) or
Section 2.3(c)) to the contrary, Equifax shall be responsible and
liable for,
and shall indemnify and hold harmless Certegy and any member of the
Certegy
Group from and against, any and all Additional Restructuring
Taxes.
(b)
Liability and Indemnification for Certegy Tainting Acts.
Notwithstanding anything in this Article II (other than Section
2.3(c)) to the
contrary, Certegy shall be responsible and liable for and shall
indemnify and
hold harmless each member of the Equifax Group from and against,
(i) any
Additional Restructuring Taxes, and (ii) any liability resulting
from a decision
that Equifax is liable to Equifax's or Certegy's shareholders
because of a Final
Determination that the Distribution is taxable, but in any case
only to the
extent such Additional Restructuring Taxes or liability to
shareholders is due
to a Certegy Tainting Act (and not an Equifax Tainting Act).
(c)
Liability and Indemnification for Combined Tainting Acts.
Notwithstanding anything in this Article II to the contrary, in the
event of a
Final Determination that Additional Restructuring Taxes are due to
a Tax
Authority and such Additional Restructuring Taxes are caused by
both an Equifax
Tainting Act and a Certegy Tainting Act, then the liability of
Equifax and
Certegy for any Restructuring Taxes arising from such Final
Determination and
any liability to shareholders arising from such Final Determination
shall be
borne fifty percent (50%) by Equifax and fifty percent (50%) by
Certegy. Each
party, jointly and severally with its Affiliated Group, agrees to
pay and to
indemnify and hold the other party harmless from and against the
amount of
Additional Restructuring Taxes and liability to shareholders
allocated to such
first party under this subsection 2.3(c).
2.4 Allocation of Tax Liabilities. For
purposes of determining whether any
Taxes or Tax Items are attributable to the Certegy Group or the
Equifax Group
and whether any Tax Item is attributable to a Pre-Distribution
Period or a
Post-Distribution Period, the following principles shall apply:
(a) For
purposes of this Agreement, the determination of whether Taxes
or Tax Items are "attributable" to a member of the Certegy Group or
the Equifax
Group shall be made using the methods that Equifax has used in Tax
Periods prior
to the Distribution Date to allocate its Tax liabilities among the
various
members of its affiliated group; provided that in any state that
imposes income
Tax on a unitary basis, such determination for any Straddle Period
shall be
based on apportionment factors applicable for the businesses and
operations of
each Group as of the Effective Time notwithstanding any change in
apportionment
factors resulting from a change in such businesses and operations
occurring
after the Effective Time. The fact that a member of the Certegy
Group or the
Equifax Group prepared or filed a return with respect to any Taxes
is not
relevant in determining whether such Taxes are "attributable" to
such member.
(b) The
principles of Treasury Regulation Section 1.1502-76(b) as
reasonably interpreted and applied by Equifax 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
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Date does not coincide with the end of a calendar month, 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 (or the parties shall consistently use such
accounting
conventions as the parties shall hereafter agree in writing).
(c) In
determining the apportionment of Tax Items between Pre-
Distribution Periods and Post-Distribution Periods, any Tax Items
relating to
the Separation and the Distribution 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.
2.5 Certain Representations and
Covenants.
(a) The
parties hereby make the following representations and
covenants.
(i) Certegy for itself and on behalf of each member of the
Certegy
Group represents to Equifax that the information and
representations furnished in any Ruling Document (as modified,
qualified or
elaborated in any subsequent Ruling Documents) are
accurate and
complete as of the date hereof, to the extent that such
information
and representations relate to the Certegy Group or the
business or
activities of such entity.
(ii) Equifax for itself and on behalf of each member of the
Equifax
Group represents to Certegy that, as of the date hereof, there
is no plan
or intention to take any action inconsistent with the
information
and representations furnished in any Ruling Documents (as
modified,
qualified or elaborated in any subsequent Ruling Documents).
(iii) Each of Certegy and Equifax respectively represents to
the
other party
that, as of the date hereof, it is not aware of any plan
or intention
by the current shareholders of Equifax to sell, exchange,
transfer by
gift, or otherwise dispose of any of their stock in, or
securities
of, Equifax or Certegy subsequent to the Distribution,
except as
described in any Ruling Document (as modified, qualified or
elaborated
in any subsequent Ruling Documents).
(iv) Each of Certegy and Equifax respectively covenants to the
other party
(A) that it will use its best efforts to verify that the
foregoing
representations made by it in this Section 2.5(a) are
accurate and
complete as of the Distribution Date and (B) if, after
the date
hereof, it obtains information indicating, or otherwise
becomes
aware, that any such representations are or may be inaccurate
or
incomplete, that it will promptly inform the other party, as
the
case may
be.
(v) Each of Certegy and Equifax respectively covenants to the
other party
that it shall treat for income Tax purposes all
transactions
that are the subject of the Initial IRS Ruling
consistently
therewith.
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(b) Each of
Certegy and Equifax covenants to the other party that,
except as permitted in Section 2.5(c):
(i) During the two-year period following the Distribution Date,
it will not
merge or consolidate with any other person, or enter into
any
transaction that constitutes a liquidation of such entity for
federal
income tax purposes.
(ii) During the two-year period following the Distribution
Date,
it will not
sell, exchange, distribute or otherwise dispose of assets
used in the
active conduct of the historic businesses relied upon to
satisfy Code
section 355(b), if such sale, exchange, distribution, or
other
disposition would cause Code section 355(b) not to be satisfied
if such test
were applied immediately after such transaction.
(iii) Following the Distribution, it will, for a minimum of two
years,
continue the active conduct of the historic businesses relied
upon to
satisfy Code section 355(b).
(iv) It will not redeem, reacquire or otherwise repurchase
stock
in a manner
contrary to the requirements of Section 4.05 of Revenue
Procedure
96-30.
(v) During the two-year period following the Distribution Date,
it will not
engage in any transaction resulting in the direct or
indirect
acquisition of such party's stock representing a 50% or
greater
interest in such party within the meaning of Code section
355(d)(4).
Equifax further covenants that it will prevent any member of the
Equifax Group
which is a party to the Canadian Restructuring or the U.K.
Restructuring (each
as defined in Exhibit A) from undertaking any transaction described
in Section
2.5(b)(i) through Section 2.5(b)(v) above except as permitted in
Section 2.5(c)
below. Certegy further covenants that it will prevent any member of
the Certegy
Group which is a party to the Canadian Restructuring or the U.K.
Restructuring
from undertaking any transaction described in Section 2.5(b)(i)
through Section
2.5(b)(v) above except as permitted in Section 2.5(c) below.
(c) A party
may take actions inconsistent with the covenants contained
in Section 2.5(b), if prior to taking such action:
(i) Such party obtains an opinion of counsel, which counsel and
which
opinion are acceptable to the other party in its reasonable
discretion,
to the effect that such actions should not affect the
Federal
income Tax treatment of the Separation and the Distribution to
the parties
and the shareholders of Equifax as set forth in any prior
private
letter ruling issued by the IRS, it being understood that each
party agrees
to cooperate with the other party and use its reasonable
best efforts
to assist the other party in attempting to obtain, as
expeditiously as possible, any opinion requested by the other
party
described in
this Section 2.5(c)(i);
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(ii) Equifax obtains a Supplemental Ruling to the effect that
such actions
will not affect the Federal income Tax treatment of the
Separation
and the Distribution to the parties and the shareholders of
Equifax as
set forth in any prior private letter ruling issued by the
IRS; or
(iii) Such party obtains the written consent of the other
party.
(d)
Supplemental Rulings.
(i) Equifax agrees that at the reasonable request of Certegy,
Equifax
shall cooperate with Certegy and use its reasonable best
efforts to
seek to obtain, as expeditiously as possible, a
Supplemental
Ruling or other guidance from a Tax Authority for the
purpose of
confirming (A) the continuing validity of any ruling
(including
another Supplemental Ruling) previously issued by the IRS
or any other
Tax Authority, or (B) compliance on the part of a member
of the
Certegy Group with its obligations under this Section 2.5.
Equifax
shall be obligated to seek a Supplemental Ruling requested by
Certegy
unless it reasonably believes that the relevant Tax Authority
would not
issue such a ruling. Notwithstanding the foregoing sentence,
in no event
shall Equifax be obligated to file a request for a
Supplemental
Ruling unless Certegy represents that (a) it has read the
request for
the Supplemental Ruling and any materials, appendices and
exhibits to
be submitted or filed therewith ('Supplemental Ruling
Documents")
and (B) all information (other than information provided
by an
external expert) and representations, if any, relating to any
member of
the Certegy Group contained in the Supplemental Ruling
Documents
are true, correct and complete in all material respects.
Certegy
shall reimburse Equifax for all reasonable costs and expenses
incurred by
Equifax in seeking or obtaining a Supplemental Ruling
requested by
Certegy. Certegy hereby agrees that Equifax shall have
sole and
exclusive control over the process of obtaining a
Supplemental
Ruling, and that only Equifax shall apply for a
&n
