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EXHIBIT 10.5
TAX LIABILITY ALLOCATION AND
INDEMNIFICATION AGREEMENT
This Agreement, made and entered into as of the 9th day of September,
1999, by and between LIBERTY MEDIA CORPORATION, a Delaware corporation
("Liberty"), LIBERTY DIGITAL, INC., a Delaware corporation ("Digital"), for and
on behalf of itself and each member of the Digital Group (as defined below), and
LIBERTY MEDIA GROUP LLC, a Delaware limited liability company ("Liberty Group
LLC").
WITNESSETH:
WHEREAS, AT&T Corp., a New York corporation ("AT&T"), Liberty, for and
on behalf of each member of the Liberty Group (as defined below) and Digital
Group, Tele-Communications, Inc., a Delaware corporation ("TCI"), Liberty
Ventures Group LLC, a Delaware limited liability company, Liberty Group LLC, TCI
Starz, Inc., a Colorado corporation, TCI CT Holdings, Inc., a Delaware
corporation, each Covered Entity (as defined therein), and certain other
entities which may become parties thereto pursuant to Section 23 thereof, have
entered into a Tax Sharing Agreement dated as of March 9, 1999, as amended (the
"AT&T/Liberty TSA"), which allocates and settles (i) the consolidated federal
income Tax liability of the AT&T Affiliated Group and the TCI Affiliated Group
and (ii) the state, local and foreign Tax liability in connection with all
combined, consolidated and unitary state, local and foreign Tax returns which
include members of the Liberty Group and either the Common Stock Group or the
TCI Group; and
WHEREAS, Liberty has incurred obligations under the AT&T/Liberty TSA
for and on behalf of the Digital Group; and
WHEREAS, it is deemed equitable that with respect to each Taxable
period for which a Joint Return (as defined below) is filed in any Tax
jurisdiction, Digital pay to Liberty an amount equal to the Digital Group's
Separate Return Tax Liability (as defined below) in each such Tax jurisdiction;
and
WHEREAS, it is deemed equitable that with respect to each Taxable
period for which a Joint Return is filed in any Tax jurisdiction and in which
the Affiliated Group for such Tax jurisdiction utilizes a net operating loss or
credit of Digital, Liberty shall, in the manner prescribed hereinafter, credit
against the future liability of Digital to Liberty hereunder an amount equal to
the Tax benefit obtained by such Affiliated Group as a result of the utilization
of such net operating loss or credit of Digital; and
WHEREAS, it is deemed equitable that in the event that Digital or its
Subsidiaries for any reason become disaffiliated from any Affiliated Group, the
portion of the economic
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burdens and benefits of Tax payments, deficiencies and refunds of such
Affiliated Group which are attributable to the period in which disaffiliation
occurs and for prior Joint Return periods in which Digital or any other member
of the Digital Group was included in such Affiliated Group, are to be allocated
to Liberty and Digital as hereinafter provided.
NOW, THEREFORE, the parties signatory hereto agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall be defined as follows:
(a) "Affiliated Group" shall mean, for any federal, state, local
or foreign Tax jurisdiction, the consolidated, combined or unitary group that
files a Joint Return.
(b) "AT&T" shall have the meaning set forth in the recitals
hereto.
(c) "AT&T Tax Proceedings" shall have the meaning given to such
term in Section 12(b) hereof.
(d) "AT&T/Liberty TSA" shall have the meaning set forth in the
recitals hereto.
(e) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(f) "Common Stock Group" shall have the meaning given to such term
in the AT&T/Liberty TSA.
(g) "Consolidated Return Regulations" shall mean the Treasury
Regulations promulgated under Chapter 6 of Subtitle A of the Code, including, as
applicable, any predecessors or successors thereto.
(h) "Contested Digital Group Item" shall have the meaning given to
such term in Section 12(b) hereof.
(i) "Contributed Entities" shall mean each of the "Contributed
Subsidiaries" and each "Additional Contributed Subsidiary," as such terms are
defined in the Contribution Agreement.
(j) "Contribution Agreement" shall mean the Agreement dated
______, 1999, by and among Liberty, LMC Capital, LLC, a Delaware limited
liability company, Liberty DMX, Inc., a Colorado corporation, TCI Interactive,
Inc., a Delaware corporation, ETC w/tci, Inc., a Delaware corporation, and
Digital.
(k) "Digital" shall have the meaning set forth in the first
paragraph hereof.
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(l) "Digital Group" shall mean Digital and each of the other Legal
Entities that is or was at any time owned directly or indirectly by Digital,
including, without limitation, each of the Contributed Entities and any of their
direct or indirect Subsidiaries for all Taxable periods covered by this
Agreement.
(m) "DIT" shall mean any "deferred intercompany transaction" or
"intercompany transaction" within the meaning of the Treasury Regulations (or
predecessors thereto), or any similar transaction under state, local or foreign
Tax law.
(n) "Final Determination" shall mean a closing agreement with the
Internal Revenue Service or the relevant state, local or foreign Taxing
authorities, an agreement contained in Internal Revenue Service Form 870AD or
other similar form, an agreement that constitutes a determination under Section
1313(a)(4) of the Code, a claim for refund which has been allowed, a deficiency
notice with respect to which the period for filing a petition with the Tax Court
or the relevant state, local or foreign tribunal has expired or a decision of
any court of competent jurisdiction that is not subject to appeal or as to which
the time for appeal has expired.
(o) "Governmental Authority" shall have the meaning set forth in
the definition of "Tax."
(p) "Group" shall mean either the Liberty Group or the Digital
Group.
(q) "Joint Return" shall mean any federal, state, local or foreign
Tax Return that includes at least two Legal Entities, of which one Legal Entity
is a member of the Digital Group and the other Legal Entity is a member of the
Liberty Group, the TCI Group or the Common Stock Group.
(r) "Legal Entity" shall mean a corporation, partnership, limited
liability company or other legal entity under the corporation, partnership,
limited liability company or other organizational laws of a state or other
jurisdiction.
(s) "Liberty" shall have the meaning set forth in the first
paragraph hereof.
(t) "Liberty Group" shall have the meaning given to such term in
the AT&T/Liberty TSA; provided, however, that such term shall not include any
Legal Entity for such period as and to the extent that such Legal Entity is a
member of the Digital Group.
(u) "Liberty Group Contribution Agreement" shall mean the
Contribution Agreement, dated as of March 9, 1999, by and among Liberty, Liberty
Media Management LLC, Liberty Group LLC and Liberty Ventures Group LLC.
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(v) "Liberty Group LLC" shall have the meaning set forth in the
first paragraph hereof.
(w) "Liberty Tax Proceedings" shall have the meaning given to such
term in Section 12(b) hereof.
(x) "Losses" shall mean costs, expenses, fees, liabilities,
obligations and losses.
(y) "Merger Agreement" shall mean the Agreement and Plan of
Restructuring and Merger dated as of June 23, 1998, by and among AT&T, Italy
Merger Corp. and TCI.
(z) "Parent" shall mean, as the context may require, the common
parent of any consolidated, combined, or unitary group that has filed, or is
required to file, any Joint Return.
(aa) "Redetermination" shall mean any redetermination as the
result of an audit by the Internal Revenue Service (or the relevant state, local
or foreign Governmental Authority), a claim for refund, an amended Tax Return or
otherwise.
(bb) "Separate Return" shall mean any Tax Return that is not a
Joint Return.
(cc) "Separate Return Tax Liability" shall have the meaning given
to such term in Section 3 hereof.
(dd) "Subsidiary" means, as to any Legal Entity, any other Legal
Entity of which at least (i) 50% of the equity and (ii) 50% of the voting
interests are owned, directly or indirectly, by such first Legal Entity.
(ee) "Tax" shall mean any tax, wherever created or imposed, and
whether of the United States or elsewhere, and whether imposed by a local,
municipal, governmental, state, foreign, federation or other body (a
"Governmental Authority"), and, without limiting the generality of the
foregoing, shall include income, gross receipts, property, sales, use, license,
excise, franchise, employment, payroll, unemployment insurance, social security,
stamp, environmental, value added, alternative or added minimum, ad valorem,
trade, recording, withholding, occupation or transfer tax, custom or duty or
other like governmental assessment or charge of any kind whatsoever, together
with any related interest, penalties and additions imposed by any Governmental
Authority.
(ff) "Tax Item" shall mean any item of income, gain, loss,
deduction, credit, recapture of credit or any other item which increases or
decreases Taxes paid or payable, including an adjustment under Code Section 481
resulting from a change in accounting method.
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(gg) "Tax Proceeding" shall mean any Tax audit, examination,
controversy or litigation.
(hh) "Tax Return" shall mean any Tax report, return or other
information (including any attached schedules or any amendments to such report,
return or other information) required to be supplied to or filed with a
Governmental Authority, including an information return, claim for refund,
amended return or declaration or estimated Tax return.
(ii) "TCI" shall have the meaning set forth in the recitals
hereto.
(jj) "TCI Group" shall have the meaning given to such term in the
AT&T/Liberty TSA.
(kk) "Treasury Regulations" shall mean the Treasury Regulations
promulgated under the Code.
2. Payment of Separate Return Tax Liability by Digital to Liberty. With
respect to each Taxable period for which a Joint Return is filed in any Tax
jurisdiction, Digital shall pay to Liberty an amount equal to the Separate
Return Tax Liability of the Digital Group, determined in accordance with Section
3 hereof, such payment by Digital, including installments of estimated Tax
payments, to be made to Liberty at least five business days prior to the due
dates thereof (including extensions), whether or not the Affiliated Group is
obligated to pay a Tax liability for the applicable period. The amount of
estimated Tax payments to be made by Digital to Liberty shall be reasonably
determined by Liberty.
3. Determination of Separate Return Tax Liability. For each Taxable
period during which a Joint Return is filed in any Tax jurisdiction, the
Separate Return Tax Liability of the Digital Group for such Tax jurisdiction
shall mean the hypothetical federal, state, local or foreign Tax liability
(computed without regard to any credit or net operating loss deduction)
determined as if the Digital Group had filed a separate consolidated, combined
or unitary Tax return for the applicable period in such Tax jurisdiction and its
income were taxable at the highest corporate tax rate in effect for such period;
provided, however, that the Consolidated Return Regulations (or any similar
provisions of state, local or foreign Tax law) and the Joint Returns filed by
the Affiliated Group in such Tax jurisdiction shall determine the timing of the
recognition of Tax Items with respect to DITS and the determination of which
Legal Entity shall bear the Tax benefit or burden of such Tax Items, and the
Digital Group shall be responsible for the Tax Items recognized by its
respective members with respect to any DITS. If the computation of the Separate
Return Tax Liability of the Digital Group pursuant to this Section 3 for a
Taxable period does not result in positive Tax liability, then for purposes of
Section 2 hereof the Separate Return Tax Liability of the Digital Group shall be
deemed to be zero, and any net operating loss or Tax credit of the Digital Group
for such period shall be taken into account only as otherwise provided herein.
The determination of the Separate Return Tax Liability of the Digital Group
shall be made by Liberty and such determination shall be conclusive for purposes
hereof.
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4. Credit to Separate Return Tax Liability of Digital. If the Digital
Group is entitled to a Tax credit or would incur a net operating loss during a
Taxable period if it filed a separate consolidated, combined or unitary Tax
return for such period, or would, if it filed a separate consolidated, combined
or unitary Tax return for all periods covered by this Agreement computed as
described in Section 3, be entitled to a credit or a net operating loss
deduction with respect to net operating losses or credits carried forward or
back to such period (exclusive of net operating losses or credits utilized by
any Affiliated Group for prior or subsequent periods for which the Digital Group
has previously received credit because of the Tax benefit to such Affiliated
Group as described below), and if it is determined by Liberty that such credit,
net operating loss or deduction will be utilized by the Affiliated Group in
filing its Joint Return for the current Taxable period or for any previous
period and that such credit, net operating loss or deduction will provide a Tax
benefit in any such period, Liberty shall credit against the Separate Return Tax
Liability owed by Digital to Liberty pursuant to this Agreement for the current
Taxable period and all future Taxable periods until the credit fully utilizes an
amount equal to the net Tax benefit which Liberty, in its reasonable judgement,
determines the Affiliated Group will obtain. Liberty shall apply such credit
against the Separate Return Tax Liability of the Digital Group as provided above
with respect to any Taxable period as of the first installment date for such
year. Liberty shall have the right to adjust, as of the last day of succeeding
quarters the amount credited pursuant to this Section 4 based upon the
determination of Liberty that the amount credited in preceding quarters was
incorrect.
5. Tax Liability of Digital in the Event of Disaffiliation. In the
event that Digital becomes disaffiliated from any Affiliated Group for any
reason, Digital shall remain liable under this Agreement for the Tax liability
of the Digital Group for the Taxable period during which disaffiliation occurs
and for prior Taxable periods in which Digital was a member of the Affiliated
Group, in accordance with Section 1.1502-6 of the Consolidated Return
Regulations or any similar provision of state, local or foreign Tax law, and
Digital shall be required to pay Liberty those amounts for the period of
disaffiliation that are determined pursuant to this Agreement. Payment of such
Tax liability by Digital shall be made to Liberty at least five business days
prior to the due date of the applicable Tax return. Moreover, should a Tax
Proceeding ultimately result in assessment of a Tax deficiency against any
Affiliated Group for years in which Digital was affiliated with such Affiliated
Group, Digital shall remain liable for Digital's portion of such Tax deficiency
determined pursuant to this Agreement, plus interest and penalties as provided
in Section 9, if any. In addition to the foregoing, Digital shall remain liable
in all periods following disaffiliation for any payments required to be made
pursuant to Section 7(b) hereof.
6. Payment of Tax Refunds and Utilized Tax Benefits to Digital in the
Event of Disaffiliation.
(a) If, after the disaffiliation of Digital from any Affiliated
Group, Parent receives from a Governmental Authority any refund of Tax (and
interest, if any) paid by such
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Affiliated Group, any amount of which in the sole judgment of Liberty should be
regarded as a refund of amounts paid by Digital pursuant to Section 2 hereof,
such amount shall be paid by Liberty to Digital within sixty business days after
receipt by Parent.
(b) If, upon the disaffiliation of Digital from any Affiliated
Group, Digital has not received a credit against its Separate Return Tax
Liability in any Tax jurisdiction pursuant to Section 4 hereof for any net
operating losses or credits of the Digital Group that have been utilized by such
Affiliated Group (the "Unpaid Benefits"), Liberty shall pay to Digital, at such
times that, and only to the extent that, the Digital Group has a Separate Return
Tax Liability for such Tax jurisdiction (or if the Digital Group actually files
a separate consolidated, combined or unitary federal, state, local, or foreign
Tax Return, its actual Tax liability shown on such Tax Return), an amount equal
to the net Tax benefit which Liberty, in its reasonable judgement, determines
the Affiliated Group has obtained from the Unpaid Benefits in such Tax
jurisdiction. Notwithstanding the previous sentence Liberty shall not make a
payment for any net operating loss or credit which would have expired at the
time that the Digital Group has a Separate Return Tax Liability (or actual Tax
liability for any separate consolidated, combined, or unitary federal, state,
local, or foreign Tax Return). Digital shall provide Liberty with a written
calculation of the Separate Return Tax Liability of the Digital Group (or a copy
of the actual Tax Return filed by the Digital Group) at such time that the Tax
Return is due for such Tax jurisdiction, or if earlier, is filed by the Digital
Group. Liberty shall make any payment required by this Section 6(b) within 30
business days after receipt from Digital of the written calculation of the
Digital Group's Separate Return Tax Liability or receipt of a copy of the
applicable Tax Return that has been filed.
(c) Notwithstanding Section 6(b) hereof, at such time that the
members of the Liberty Group which are part of an affiliated group (as defined
in Section 1504 of the Code) including Liberty for U.S. federal income tax
purposes, do not continue to own stock of Digital constituting 20% of the voting
power of Digital (a "Loss of Control"), Liberty shall pay to Digital an amount
equal to the net Tax benefit which Liberty, in its reasonable judgement,
determines the Affiliated Group has obtained from the Unpaid Benefits (which
Digital has not previously received credit or payment for pursuant to Sections 4
or 6(b) of this Agreement) in such Tax jurisdiction, and Digital shall have no
further rights with respect to such Unpaid Benefits following such payment.
Notwithstanding the previous sentence, Liberty shall not make a payment for any
net operating loss or credit which would have expired at the time of a Loss of
Control. Liberty shall make any payment required by this Section 6(c) within 30
business days following a Loss of Control.
7. Special Rules.
(a) Convertible Preferred Stock Treatment. Solely for purposes of
determining the amount of any Separate Return Tax Liability or any Tax credit,
loss, or deduction of the Digital Group hereunder, the Convertible Preferred
Stock, Series B of Digital
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shall be treated as if, for tax purposes, it is indebtedness of Digital. The
previous sentence shall not apply in any period following the disaffiliation of
Digital from any Affiliated Group.
(b) Deferred Compensation and Stock Appreciation Rights Plan. For
purposes of this Agreement (including, without limitation, the determination of
the Separate Return Tax Liability of Digital pursuant to Section 3 hereof and
the Credit to Separate Return Tax Liability of Digital pursuant to Section 4
hereof), any deduction or loss allowed with respect to the Deferred Compensation
and Stock Appreciation Rights Plan set forth on Schedule 4.14 to the
Contribution Agreement (the "Deferred Compensation and Stock Appreciation Rights
Plan") shall be considered a deduction or loss of Liberty (and not a deduction
of the Digital Group) for all Joint Returns. With respect to each Separate
Return filed by the Digital Group (including, without limitation, all Separate
Returns of the Digital Group for Taxable periods beginning after the
disaffiliation of the Digital Group from any Affiliated Group), Digital shall
pay to Liberty an amount equal to the net Tax benefit which the Digital Group
has obtained in any such Taxable period from any deduction or loss resulting
from the Deferred Compensation and Stock Appreciation Rights Plan that is
utilized by the Digital Group on such Separate Return. Digital shall make the
payment required by the preceding sentence within 30 business days following the
date the applicable Tax Return is filed.
8. Adjustments.
(a) In the event of any Redetermination of any Joint Return which
affects the calculation of the Digital Group's Separate Return Tax Liability for
any Taxable period, the amounts required to be paid pursuant to Section 2 shall
be recomputed for such Taxable period to take into account such Redetermination,
and payments pursuant to Section 2, and the credits and payments to the Digital
Group pursuant to Sections 4 and 6 hereof, shall be appropriately adjusted.
Digital shall pay Liberty or Liberty shall pay Digital an amount equal to the
difference between the payment or payments previously made between the parties
in respect of such redetermined Joint Return and the amount that would have been
paid pursuant to this Agreement in respect of such redetermined Joint Return if
such redetermined Joint Return had been filed on the basis of the
Redetermination. In the event Parent is required to pay to any Governmental
Authority any amount for additional Taxes due to the disallowance of all or part
of any item utilized by the Affiliated Group and for which Digital received a
credit or payment for pursuant to Sections 4 or 6 hereof (or if Parent would
have been so required to pay any Governmental Authority but for other
adjustments), Digital shall pay to Liberty the amount of such additional Tax
paid by Parent (or which Parent would have been required to pay but for other
adjustments); provided, however, the amount so paid by Digital to Liberty shall
not exceed the cumulative amount credited or paid to Digital pursuant to
Sections 4 and 6 hereof with respect to such item (except as provided in Section
9 below).
(b) In the event that AT&T is not required to take any Package
Position (as defined in the AT&T/Liberty TSA) of the Liberty Group pursuant to
the procedures set forth in Section 9(c) of the AT&T/Liberty TSA, and if such
Package Position affects any Tax Item of the
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Digital Group, the amounts required to be paid pursuant to Section 2 shall be
recomputed for such Taxable period to take into account the position actually
taken by AT&T on such Joint Return, and payments pursuant to Section 2, and the
credits and payments to the Digital Group pursuant to Sections 4 and 6 hereof,
shall be appropriately adjusted. Digital shall pay Liberty or Liberty shall pay
Digital an amount equal to the difference between the payment or payments
previously made between the parties in respect of the Digital Group's Separate
Return Tax Liability and the amount that would have been paid pursuant to this
Agreement in respect of the Digital Group's Separate Return Tax Liability if
such original calculation of the Digital Group's Separate Return Tax Liability
had been made on the basis of the position actually taken by AT&T on such Joint
Return.
(c) Any payment by Liberty or Digital required by any
Redetermination shall be paid within seven days after the date of a Final
Determination with respect to such Redetermination.
9. Payment of Interest, Penalties and Expenses. Interest, penalties and
expenses incurred by Parent in connection with the amendment of any Joint
Return, and/or any Tax Proceeding, shall be borne equitably by those parties
whose Tax liability may be affected by such amendment, examination or subsequent
proceedings. No interest shall be charged in connection with any allocation
under this Agreement, however, unless interest is payable to a Governmental
Authority or to a member of the Common Stock Group pursuant to the AT&T/Liberty
TSA.
10. Indemnification.
(a) Each Legal Entity that is a member of the Liberty Group shall
indemnify and hold harmless each Legal Entity that is a member of the Digital
Group and their respective directors, officers, employees, affiliates, agents,
successors and assigns (the "Digital Group Indemnitees") from and against (i)
any Taxes which such member of the Liberty Group is required to pay to a
Governmental Authority (except for Taxes which Liberty has a right of
reimbursement from Digital), or in respect of which Liberty is required to make
a payment hereunder to Digital, (ii) any amount Digital is required to pay to
any Governmental Authority or to AT&T with respect to any Joint Return in excess
of the Digital Group's Separate Return Tax Liability for such Tax jurisdiction,
as such may be redetermined pursuant to Section 8 hereof, and (iii) any Losses
incurred by any Digital Group Indemnitee by reason of a breach by any member of
the Liberty Group of its obligations or covenants hereunder.
(b) Each Legal Entity that is a member of the Digital Group shall
indemnify and hold harmless each Legal Entity that is a member of the Liberty
Group and their respective directors, officers, employees, affiliates, agents,
successors and assigns (the "Liberty Indemnitees") from and against (i) any
Taxes which such member of the Digital Group is required to pay to a
Governmental Authority (except for Taxes which Digital has a right of
reimbursement from Liberty) or in respect of which Digital is required to make a
payment
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hereunder to Liberty and (ii) any Losses incurred by any Liberty Indemnitee by
reason of a breach by any member of the Digital Group of its obligations or
covenants hereunder.
11. Appointment of Agent. Digital agrees to the appointment of AT&T as
agent for the members of the Digital Group for all matters described in Section
10 of the AT&T/Liberty TSA and consents to the filing of any Tax Returns and to
the making of any elections that AT&T is permitted to make pursuant thereto. For
all other matters, Digital consents to the appointment of Liberty as agent for
the members of the Digital Group, and agrees that Liberty shall have full
authority to prepare the calculation of the Digital Group's Separate Return Tax
Liability (subject to Digital's right to review such calculation), to file Joint
Returns and to make any elections that Liberty has the authority to make under
the AT&T/Liberty TSA on behalf of the Digital Group. The agency power of AT&T
and Liberty, as described in this Section, shall extend to all periods during
which Digital or any member of the Digital Group is a member of any Affiliated
Group, and, in the event of Digital's disaffiliation, AT&T and Liberty shall
retain their agency powers described herein to make or change on behalf of
Digital, or any member of the Digital Group, any election or other decision
affecting Tax liabilities for such periods that Digital was affiliated with the
Affiliated Group under the provisions of the Code providing for elections.
12. Filing of Returns and Contests.
(a) Digital shall provide Liberty with all information necessary
for Liberty to properly and timely prepare its Tax Package pursuant to Section
9(c) of the AT&T/Liberty TSA or to properly and timely file any Joint Returns
that any member of the Liberty Group is permitted to file. In the event Digital
fails to provide information in the form requested by Liberty and within
sufficient time to permit the timely preparation of such Tax Package or the
timely filing of any such Joint Return, any penalties, interest, or other
payment obligation assessed against the Liberty Group (either by a Governmental
Authority or by AT&T) by reason of a delay in submitting such Tax Package to
AT&T or in filing such Tax Return shall be payable by Digital. If Digital
provides information in the form requested by Liberty and within sufficient time
to permit the timely preparation of such Tax Package or the timely filing of a
particular Tax Return, any penalties, interest, or other payments assessed
against the Liberty Group (either by a Governmental Authority or by AT&T) by
reason of a delay in submitting such Tax Package to AT&T or in filing such Tax
Return shall not be payable by Digital.
(b) AT&T shall have the right to control all Tax Proceedings
described in Section 9(d) of the AT&T/Liberty TSA ("AT&T Tax Proceedings"), and
Liberty shall have the right to control all Tax Proceedings described in Section
9(b) of the AT&T/Liberty TSA ("Liberty Tax Proceedings"). In any AT&T Tax
Proceeding or Liberty Tax Proceeding in which any Tax Item of the Digital Group
is a subject of such Tax Proceeding (a "Contested Digital Group Item"), Digital
shall be entitled to participate in such Tax Proceeding at its expense, insofar
as the Tax liabilities of the Digital Group are concerned, and Liberty shall
consult with Digital with respect to any Contested Digital Group Item. In any
AT&T Tax Proceeding involving a Contested Digital Group Item, Liberty shall keep
Digital updated and informed with
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respect to such Contested Digital Group Item to the extent that Liberty is so
informed by AT&T, and in any Liberty Tax Proceeding, Liberty shall keep Digital
updated and informed with respect to such Contested Digital Group Item.
13. Separate Returns. Any Separate Return that includes only a member
or members of the Digital Group and any Taxes with respect to such Separate
Return shall be the responsibility of the Digital Group, provided that the
Digital Group timely files such Separate Returns and pays the Taxes due with
respect thereto. In the event that the Digital Group does not so file such a
Separate Return or does not pay the Taxes due with respect thereto, Digital
shall indemnify Liberty with respect to such Separate Return as provided in
Section 10 and, notwithstanding any other provision hereof, Liberty (or AT&T, if
required under the AT&T/Liberty TSA) shall be entitled to file such Separate
Return in any manner it chooses so long as it files such Separate Return in good
faith.
14. Cooperation. The parties shall cooperate with one another in all
matters relating to Taxes. The Digital Group shall provide Liberty with such
cooperation and information as is necessary in order to enable Liberty to
satisfy its tax, accounting and other legitimate requirements, including
obligations of Liberty under the AT&T/Liberty TSA. Such cooperation and
information by the members of the Digital Group shall include making their
respective knowledgeable employees available during normal business hours,
providing the information required by reasonable AT&T Tax and accounting
questionnaires (at the times and in the format required by AT&T or Liberty),
maintaining such books and records and providing such information as may be
necessary or useful in the filing of Joint Returns and Separate Returns, and
executing any documents and taking any actions which AT&T or Liberty may
reasonably request in connection therewith. Liberty shall provide Digital, upon
request, with copies of any Joint Returns filed by Liberty and with copies of
Joint Returns received by AT&T that include any member of the Digital Group,
promptly after such Joint Returns are filed (or, in the event filed by AT&T,
after receipt of such Joint Returns from AT&T) and with copies of schedules and
workpapers in Liberty's possession that were used to prepare such Joint Returns
or determine payments pursuant to this Agreement.
15. Binding Effect. This Agreement shall be binding upon and shall
inure to the benefit of Liberty, Digital, Liberty Group LLC, and each other
party hereto and each other Subsidiary that becomes a party hereto pursuant to
Section 25 hereof. This Agreement shall inure to the benefit of, and be binding
upon, any successors or assigns of the parties hereto (including, without
limitation, any Subsidiary that becomes a party hereto pursuant to Section 25).
Liberty and Digital may assign their right to receive payments under this
Agreement but may not assign or delegate their obligations hereunder; provided,
however, that concurrently with the Liberty Media Corporation Contribution (as
defined in the Liberty Group Contribution Agreement) which will occur as soon as
practicable after the occurrence of a Triggering Event (as defined in the
Liberty Group Contribution Agreement), Liberty Group LLC shall assume all the
obligations of Liberty and each other member of the Liberty Group hereunder (and
which obligations thereafter shall be exercisable against Liberty Group LLC for
all purposes of this
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Agreement), and Liberty shall assign all of the rights of Liberty under this
Agreement to Liberty Group LLC (and which rights thereafter shall be exercisable
by Liberty Group LLC for all purposes of this Agreement, on behalf of Liberty or
otherwise).
16. Application of Agreement. This Agreement shall be applicable to all
Taxable periods ending after July 11, 1997, and to each Taxable period
thereafter, so long as a Joint Return is filed by Parent.
17. Interpretation. This Agreement is intended to calculate, allocate
and settle certain federal, state, local and foreign Tax liabilities of the
members of the Liberty Group and the Digital Group, and any situation or
circumstance concerning such calculation and allocation that is not specifically
contemplated hereby or provided for herein shall be dealt with in a manner
consistent with the underlying principles of calculation and allocation in this
Agreement. This Agreement shall not be interpreted to require any payment by
Digital to Liberty that is duplicative of any amount that is required to be
paid, and has been paid, by Digital directly to AT&T pursuant to the
AT&T/Liberty TSA.
18. Legal and Accounting Fees. Unless otherwise specified herein, any
fees or expenses (including internal expenses) for legal, accounting or other
professional services rendered in connection with tax research relating to
Digital, the preparation of a Joint Return or financial statement or the conduct
of any Tax Proceeding (whether incurred directly by the Liberty Group or for
which Liberty is required to reimburse AT&T under the AT&T/Liberty TSA) shall be
allocated between Liberty and Digital in a manner resulting in Liberty and
Digital, respectively, bearing a reasonable approximation of the actual amount
of such fees or expenses hereunder reasonably related to, and for the benefit
of, their respective Groups.
19. Effect of the Agreement. This Agreement shall determine the
liability of Liberty and Digital to each other as to the matters provided for
herein, whether or not such determination is effective for purposes of the Code
or of state, local or foreign Tax laws, or for financial reporting purposes or
for any other purposes.
20. Allocation Among Digital and Its Included Subsidiaries. Nothing
herein shall be deemed to preclude or require any allocation of the Separate
Return Tax Liability of Digital among or between Digital and its Subsidiaries,
if any.
21. Modifications. This Agreement may be modified or amended only
pursuant to an instrument in writing executed by all the parties signatory
hereto.
22. Entire Agreement. Except with respect to the AT&T/Liberty TSA, this
Agreement embodies the entire understanding among the parties relating to its
subject matter and supersedes and terminates any prior agreements and
understandings among the parties with respect to such subject matter, and no
party to this Agreement shall have any right, responsibility, obligation or
liability thereunder. This Agreement shall supersede the AT&T/Liberty TSA
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insofar as the allocation and settlement of Taxes between the parties hereto;
however, this Agreement shall not be deemed to supersede the AT&T/Liberty TSA in
any other respect. Any and all prior correspondence, conversations and memoranda
are merged herein and shall be without effect hereon. No promises, covenants or
representations of any kind, other than those expressly stated herein, have been
made to induce either party to enter into this Agreement. This Agreement,
including this provision against oral modification, shall not be modified or
terminated except by a writing duly signed by each of the parties hereto, and no
waiver of any provisions of this Agreement shall be effective unless in a
writing duly signed by the party sought to be bound.
23. Code References. Any references to the Code or Treasury Regulations
shall be deemed to refer to the relevant provisions of any successor statute or
regulation and shall refer to such provisions as in effect from time to time.
24. Notices. Any payment, notice or communication required or permitted
to be given under this Agreement shall be in writing (including telecopy
communication) and mailed, telecopied or delivered:
If to Liberty or any member of the Liberty Group:
Liberty Media Corporation
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxxx Xxxxxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxx & Xxxxx, L.L.P.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxxxx, Esq.
Xxxxxxxxx X. XxXxxxx, Esq.
Facsimile: (000) 000-0000
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If to Digital or any member of the Digital Group:
Liberty Digital, Inc.
c/o Liberty Media Corporation
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention:
Facsimile:
with a copy to:
Xxxxxxx & Xxxxxx L.L.C.
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Land Xxxxxxx, Esq.
Facsimile: (000) 000-0000
or to any other address as Liberty or Digital shall furnish in writing to one
another. All such notices and communications shall be effective when received.
25. New Members. Each of the parties to this Agreement recognizes that
from time to time, new Subsidiaries of Digital may be added to the Digital
Group. Each of the parties agree that any new Subsidiary that is part of the
Digital Group shall, without the express written consent of the other parties,
become a party to this Agreement for all purposes of this Agreement with respect
to Taxable periods ending after such Subsidiary was added to the Digital Group.
26. Termination. This Agreement shall terminate at such time as all
obligations and liabilities of the parties hereto have been satisfied. The
obligations and liabilities of the parties arising under this Agreement shall
continue in full force and effect until all such obligations have been met and
such liabilities have been paid in full, whether by expiration of time,
operation of law, or otherwise. The obligations and liabilities of each party
are made for the benefit of, and shall be enforceable by, the other parties and
their successors and permitted assigns.
27. Headings. The headings used in this Agreement are for convenience
only and shall not in any way affect the meaning or interpretation of any
provision hereof.
28. Copies. This Agreement may be executed in multiple counterparts
each of which shall be deemed an original, but all of which shall together
constitute one Agreement.
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IN WITNESS WHEREOF, each of the parties have caused this Agreement to
be executed by its respective duly authorized officer as of the date first set
forth above.
LIBERTY MEDIA CORPORATION
BY /s/ Xxxxxxx X. Xxxxxx
------------------------------
Xxxxxxx X. Xxxxxx
Senior Vice President
LIBERTY DIGITAL, INC., for itself and on behalf
of each member of the Digital Group
BY /s/ Xxxxxxx X. Xxxxxx
------------------------------
Xxxxxxx X. Xxxxxx
Vice President
LIBERTY MEDIA GROUP LLC
BY /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Xxxxxxx X. Xxxxxx
Senior Vice President
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