Exhibit 10.1

Execution Copy

TAX ALLOCATION AGREEMENT

By and between

AUTOMATIC DATA PROCESSING, INC.

and

BROADRIDGE FINANCIAL SOLUTIONS, INC.

Dated as of March 29, 2007

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TABLE OF CONTENTS

 

          Page(s) ARTICLE I DEFINITIONS    1

Section 1.01

   Definition of Terms    1 ARTICLE II PAYMENT OF TAXES    8

Section 2.01

   Income Taxes    8

Section 2.02

   Transaction Taxes    9

Section 2.03

   Other Taxes    9

Section 2.04

   Other Income Taxes    10

Section 2.05

   Allocation of Certain Income Taxes and Income Tax Items    11

Section 2.06

   Refunds    12

Section 2.07

   Carrybacks    12

Section 2.08

   Treatment of Restricted Stock, Stock Options, and Deferred Compensation    13

Section 2.09

   Successor Employer Status    14

Section 2.10

   APA    14 ARTICLE III PREPARATION AND FILING OF TAX RETURNS    15

Section 3.01

   ADP Responsibility    15

Section 3.02

   Broadridge Responsibility    15

Section 3.03

   Tax Accounting Practices    16

Section 3.04

   Right to Review Tax Returns    16 ARTICLE IV TAX-FREE STATUS OF DISTRIBUTION
   16

Section 4.01

   Representations    16

Section 4.02

   Covenants    16

Section 4.03

   Procedures Regarding Opinions and Rulings    19

Section 4.04

   Canadian Butterfly    19 ARTICLE V TAX CONTESTS; INDEMNIFICATION; COOPERATION
   20

Section 5.01

   Notice    20

Section 5.02

   Control of Tax Contests    20

Section 5.03

   Indemnification Payments    21

Section 5.04

   Interest on Late Payments    22

Section 5.05

   Treatment of Payments    22

Section 5.06

   Expenses    23

Section 5.07

   Cooperation    23

Section 5.08

   Confidentiality    24

Section 5.09

   Retention of Tax Records    24 ARTICLE VI RESOLUTION OF DISPUTES    24

Section 6.01

   Tax Disputes    24 ARTICLE VII MISCELLANEOUS PROVISIONS    25

Section 7.01

   Disposition of Broadridge Subsidiaries    25

 

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          Page(s)

Section 7.02

   Complete Agreement; Representations    25

Section 7.03

   Costs and Expenses    25

Section 7.04

   Governing Law    26

Section 7.05

   Notices    26

Section 7.06

   Amendment, Modification or Waiver    26

Section 7.07

   No Assignment; Binding Effect    27

Section 7.08

   Counterparts    27

Section 7.09

   Specific Performance    27

Section 7.10

   New York Forum    27

Section 7.11

   WAIVER OF JURY TRIAL    28

Section 7.12

   Interpretation; Conflict With Ancillary Agreements    28

Section 7.13

   Severability    28

Section 7.14

   Survival    28

 

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TAX ALLOCATION AGREEMENT dated as of March 29, 2007 (this “Agreement”) between
Automatic Data Processing, Inc., a Delaware corporation (“ADP”) and Broadridge
Financial Solutions, Inc., a Delaware corporation whose sole shareholder is ADP
(“Broadridge” and, together with ADP, each, a “Party” and collectively, the
“Parties”).

WHEREAS, as of the date of this Agreement, the ADP affiliated group includes
Broadridge and its subsidiaries;

WHEREAS, the Parties (or their predecessors-in-interest) have entered into the
Separation and Distribution Agreement, pursuant to which ADP has contributed to
Broadridge the stock and assets associated with the Broadridge Business (as
defined herein) in exchange for shares of common stock of Broadridge, cash and
the assumption by Broadridge of certain liabilities related to the Broadridge
Business (the “Contribution”);

WHEREAS, ADP intends to distribute on a pro rata basis to its shareholders all
of the shares of stock of Broadridge (the “Distribution”);

WHEREAS, the Parties believe the Distribution will provide greater flexibility
for management, capital requirements and growth of the Broadridge Business while
ensuring that ADP senior management can focus its time and resources on the
development of the ADP retained businesses;

WHEREAS, the Parties intend that the Contribution and Distribution qualify as a
“reorganization” under Section 368(a) of the U.S. Internal Revenue Code of 1986,
as amended (the “Code”), with respect to which no gain or loss is recognized
under Code Sections 361 and 355;

WHEREAS, as a result of and upon the Distribution, Broadridge and its
subsidiaries will cease to be members of the ADP Group; and

WHEREAS, the Parties desire to allocate the Tax responsibilities, liabilities
and benefits of transactions that occur on or prior to, and that may occur
after, the date on which the Distribution occurs (the “Distribution Date”) and
to provide for and address certain other Tax matters.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the Parties (each on behalf of itself and each of its
Affiliates) hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01 Definition of Terms. The following terms shall have the following
meanings (such meanings to apply equally to both the singular and the plural
forms of the terms defined). All Section and Exhibit references are to this
Agreement unless otherwise stated.

 

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“Action” means any claim, demand, action, cause of action, suit, countersuit,
arbitration, litigation, inquiry, proceeding or investigation by or before any
Governmental Authority or any arbitration or mediation tribunal or authority.

“Active Trade or Business” means the active conduct by Broadridge of the
businesses conducted by the members of the Broadridge Group as of the
Distribution (determined in accordance with Code Section 355(b)).

“Adjustment Request” means any formal or informal claim or request filed with
any governmental authority for any Refund, underpayment or overpayment of Tax or
any change in available Tax Attributes.

“ADP” has the meaning set forth in the recitals.

“ADP Consolidated Group” means the affiliated group of corporations (within the
meaning of Section 1504 of the Code) of which ADP is the common parent prior to
the Distribution Date.

“ADP Employee” means an employee of ADP or any ADP Affiliate immediately after
the Distribution.

“ADP Group” means ADP and each of its Affiliates and Subsidiaries, and any
corporation or other entity that may become part of such Group from time to
time. For the avoidance of doubt, the ADP Group excludes any entity that is a
member of the Broadridge Group.

“ADP Restricted Stock” means ADP common stock received by an ADP or Broadridge
Employee in connection with his or her employment, which stock has not yet been
included in the income of such Employee as of the Distribution Date.

“ADP Stock Option” means an Option to acquire ADP common stock received by an
ADP or Broadridge Employee in connection with his or her employment, which
Option has not yet been exercised as of the Distribution Date.

“Affiliate” of any Person means any entity that, after the Distribution, is
directly or indirectly “controlled” by any of (i) the Person in question,
(ii) any Person of which the Person in question is an Affiliate under clause
(i), or (iii) any Affiliate under clause (i) of a Person described in clause
(ii). For purposes of this definition, “control” means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through ownership of voting securities or
other interests, by contract or otherwise.

“Agreement” has the meaning set forth in the recitals.

 

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“Ancillary Agreement” has the meaning set forth in the Separation and
Distribution Agreement.

“APA” means the advance pricing agreement currently being negotiated, as such
agreement is finally agreed, or any similar agreement (including any related
competent authority agreement for pre-APA years) that is finally agreed, by ADP,
ADP Canada, a Canadian corporation that is wholly owned by ADP, and ADP Investor
Communications Corporation (“ICC”), a Canadian corporation that is directly and
wholly owned by ADP Canada, with the Internal Revenue Service and the Canada
Revenue Agency (including any competent authority for the United States or
Canada) relating to the pricing of services and software that ADP and its U.S.
subsidiaries (both in the Broadridge Business and in ADP’s other businesses)
provide to ADP Canada and its subsidiaries.

“Balance Sheet” has the meaning set forth in Section 2.01(a).

“Broadridge” has the meaning set forth in the recitals.

“Broadridge Business” means all of the ADP Brokerage Services’ and Securities
Clearing and Outsourcing Services’ business and operations, as more fully
described in ADP’s Form 10-K for the fiscal year ended June 30, 2006.

“Broadridge Capital Stock” means (i) all classes or series of capital stock of
Broadridge, including common stock and all other instruments treated as equity
in Broadridge for U.S. federal Income Tax purposes and (ii) all options,
warrants and other rights to acquire such capital stock.

“Broadridge Cash” means the cash amounts which are distributed to ADP in one or
more transactions intended to qualify as tax-free pursuant to Section 361(b) of
the Code.

“Broadridge Employee” means an employee of Broadridge or any Broadridge
Affiliate immediately after the Distribution.

“Broadridge Group” means Broadridge and each of its Subsidiaries and Affiliates
and any corporation or other entity that may become part of such Group from time
to time.

“Broadridge Restricted Stock” means Broadridge common stock received by a
Broadridge Employee or ADP Employee in connection with his or her employment,
which stock has not yet been included in the income of such Employee as of the
Distribution Date.

“Broadridge Stock Option” means an Option to acquire Broadridge common stock
received by a Broadridge Employee or ADP Employee in connection with his or her
employment, which Option has not yet been exercised as of the Distribution Date.

 

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“Butterfly Transactions” means each of the transactions involving ADP,
Broadridge and the other applicable parties specifically set out in the Canadian
Tax Ruling.

“Canadian Tax Ruling” means the advance income tax ruling issued by the CRA
(whether granted prior to, on or after the date hereof) relating to the
Butterfly Transactions and includes all supplemental rulings, requests for
rulings, information and legal submissions and exhibits to the foregoing.

“Canadian Tax-Free Status” means the Canadian federal and provincial income tax
position of the applicable parties relating to the Butterfly Transactions that
would arise on the assumptions that (i) each of the rulings and opinions
provided in the Canadian Tax Ruling applied to determine such income tax
position of the applicable parties and (ii) the requisite conditions for such
rulings and opinions as set out in the Canadian Tax Ruling were satisfied.

“Code” has the meaning set forth in the recitals.

“Contribution” has the meaning set forth in the recitals.

“CRA” means the Canada Revenue Agency.

“Distribution” has the meaning set forth in the recitals.

“Distribution Date” has the meaning set forth in the recitals.

“Employee Restricted Stock” means either ADP Restricted Stock or Broadridge
Restricted Stock.

“Employee Stock Option” means either an ADP Stock Option or a Broadridge Stock
Option.

“Final Determination” means the final resolution of liability for any Tax for
any taxable period by or as a result of (i) a final and unappealable decision,
judgment, decree or other order by any court of competent jurisdiction; (ii) a
final settlement with the IRS, a closing agreement or accepted offer in
compromise under Code Sections 7121 or 7122, or a comparable arrangement under
the laws of another jurisdiction; (iii) any allowance of a Refund in respect of
an overpayment of Tax, but only after the expiration of all periods during which
such amount may be recovered by the Taxing Authority imposing the Tax; or
(iv) any other final disposition, including by reason of the expiration of the
applicable statute of limitations.

“Gain Recognition Agreement” means any agreement to recognize gain that is
described in Treasury Regulation Section 1.367(a)-8 and entered into in
connection with the Transactions and to which any member of the ADP Group or the
Broadridge Group is a party.

 

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“Governmental Authority” means any federal, state, local, foreign or
international court, government, department, commission, board, bureau or
agency, or any other regulatory, self-regulatory, administrative or governmental
organization or authority, including the New York Stock Exchange, Inc.

“Group” means the ADP Group and/or the Broadridge Group, as the context
requires.

“Income Taxes” means all federal, state, local, and foreign income or franchise
Taxes or other Taxes based on income or net worth.

“Indemnifying Party” has the meaning set forth in Section 5.01.

“Indemnitee” has the meaning set forth in Section 5.01.

“IRS” means the U.S. Internal Revenue Service.

“Joint Return” means any Return that includes both a member of the ADP Group and
a member of the Broadridge Group.

“Law” means any applicable foreign, federal, national, state, provincial or
local law (including common law), statute, ordinance, rule, regulation, code or
other requirement enacted, promulgated, issued or entered into, or act taken, by
a Governmental Authority.

“Option” means an option to acquire common stock, or other equity-based
incentives the economic value of which is designed to mirror that of an option,
including non-qualified stock options, discounted non-qualified stock options,
cliff options to the extent stock is issued or issuable (as opposed to cash
compensation), and tandem stock options to the extent stock is issued or
issuable (as opposed to cash compensation).

“Other Taxes” means all Taxes other than Income Taxes, including (but not
limited to) transfer, sales, use, payroll, property, and unemployment Taxes.

“Past Practices” has the meaning set forth in Section 3.03(a).

“Person” means any natural person, corporation, general or limited partnership,
limited liability company or partnership, joint stock company, joint venture,
association, trust, bank, trust company, land trust, business trust or other
organization, whether or not a legal entity, and any Governmental Authority.

“Post-Distribution Tax Period” means any taxable period (or portion thereof)
beginning after the Distribution Date.

“Pre-Distribution Tax Period” means any taxable period (or portion thereof)
ending on or before the close of the Distribution Date.

 

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“Proposed Acquisition Transaction” has the meaning set forth in
Section 4.02(b)(i).

“Refund” means any cash refund of Taxes or reduction of Taxes by means of
credit, deduction, offset or otherwise.

“Reportable Transaction” means a reportable or listed transaction as defined in
Section 6011 of the Code or the Treasury Regulations promulgated thereunder.

“Restricted Period” means the period beginning on the date of this Agreement and
ending on, and including, the last day of the two-year period following the
Distribution Date.

“Restricted Stock” means either ADP Restricted Stock or Broadridge Restricted
Stock.

“Ruling” means all private letter rulings granted by the IRS, the CRA or any
other taxing authority relating to the Transactions (whether granted prior to,
on or after the date hereof), requests for such rulings, including all
supplemental ruling requests and information submissions, and any exhibit to any
of the foregoing.

“Satisfactory Guidance” means either a ruling from the IRS (or the CRA in
respect of Section 4.04) or an Unqualified Tax Opinion, at the election of
Broadridge, in either case reasonably satisfactory to ADP in both form and
substance, including with respect to any underlying assumptions or
representations. Satisfactory Guidance shall not include an Unqualified Tax
Opinion with respect to which ADP’s counsel, of recognized national standing,
provides an opinion to ADP that the conclusions in such Unqualified Tax Opinion
are not free from doubt. For the avoidance of doubt, this definition is intended
to allow ADP to prevent Broadridge from taking the action that is the subject of
a ruling from the IRS or an Unqualified Tax Opinion, if ADP determines in good
faith that there is any Tax risk to it from such action based upon either
(1) any uncertainty concerning any underlying assumptions or representations in
such ruling or opinion or (2) any legal uncertainty referred to in advice it
receives from its counsel.

“Separate Return” means (i) in the case of the Broadridge Group, a Tax Return of
any member of that Group (including any consolidated, combined, affiliated or
unitary Return) that does not include, for all or any portion of the relevant
taxable period, any member of the ADP Group and (ii) in the case of the ADP
Group, a Tax Return of any member of that Group (including any consolidated,
combined, affiliated or unitary Return) that does not include, for all or any
portion of the relevant taxable period, any member of the Broadridge Group.

“Separation and Distribution Agreement” means the Separation and Distribution
Agreement, as amended from time to time, by and between ADP and Broadridge (or
its predecessor-in-interest) dated as of March 20, 2007.

 

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“Straddle Period” means any taxable period beginning on or before the
Distribution Date and ending after the Distribution Date.

“Tax Advisor” means a U.S. Tax counsel or other Tax advisor of recognized
national standing reasonably acceptable to both Parties.

“Tax Attribute” means a net operating loss, net capital loss, investment credit,
foreign Tax credit, excess charitable contribution, general business credit or
any other item of loss, deduction or credit that could reduce a Tax liability.

“Tax Contest” means an audit, review, examination or any other administrative or
judicial proceeding with the purpose or effect of determining or redetermining
Taxes (including any administrative or judicial review of any Adjustment
Request).

“Tax Dispute” means any dispute arising in connection with this Agreement.

“Tax-Free Status” means the qualification of the Contribution and Distribution
taken together as a transaction, (i) that is a “reorganization” described in
Code Sections 355(a) and 368(a)(1)(D), (ii) in which the Broadridge stock
distributed is “qualified property” for purposes of Code Sections 355(c) and
361(c), (iii) in which no gain or loss will be recognized by ADP upon the
receipt of the Broadridge Cash from Broadridge, (iv) in which ADP, Broadridge
and the shareholders of ADP recognize no income or gain for U.S. federal Income
Tax purposes pursuant to Code Sections 355, 361 and 1032 and (v) that qualifies
for tax-free treatment under comparable provisions of state, local and foreign
law. For the avoidance of doubt, recognition of income or gain that relates to
items described in Sections 2.03(c)(i)(A) or 2.04 or to intercompany items shall
not cause the Distribution to fail to achieve Tax-Free Status.

“Tax Item” means any item of income, gain, loss, deduction, credit, recapture of
credit, or any other item (including the basis or adjusted basis of property)
which increases or decreases Income Taxes paid or payable in any taxable period.

“Tax Opinions/Rulings” means (i) any Ruling and (ii) the opinions of Tax
Advisors relating to the Transactions including, without limitation, those
issued either at the time of the Distribution or to allow a Party to take
actions otherwise prohibited under this Agreement.

“Tax Return” or “Return” means any return, filing, report, questionnaire,
information statement, claim for Refund, or other document required or permitted
to be filed, including any amendments that may be filed, for any taxable period
with any Taxing Authority.

“Taxes” means all forms of taxation or duties imposed, or required to be
collected or withheld, including charges, together with any related interest,
penalties or other additional amounts. For the avoidance of doubt, the term
“Taxes” does not include amounts to be paid to any governmental authority
pursuant to escheat law.

 

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“Taxing Authority” means any governmental authority imposing Taxes.

“Transaction Taxes” means all (i) Taxes of any member of the ADP Group or the
Broadridge Group resulting from, or arising in connection with, the failure of
the Contribution and the Distribution to have Tax-Free Status, (ii) Taxes of the
type described in clause (i) of any third party for which any member of the ADP
Group or the Broadridge Group is or becomes liable, and (iii) reasonable out of
pocket legal, accounting and other advisory and court fees in connection with
liability for Taxes described in clauses (i) or (ii).

“Transactions” means the Contribution, the Distribution, the transactions
contemplated by the Separation and Distribution Agreement and any other transfer
of assets (whether by contribution, sale or otherwise) between any member of the
ADP Group and any member of the Broadridge Group in connection with the
Contribution or the Distribution.

“Unqualified Tax Opinion” means an unqualified “will” opinion of a Tax Advisor
that permits reliance by ADP. The Tax Advisor, in issuing its opinion, shall be
permitted to rely on the validity and correctness, as of the date given, of any
previously issued Tax Opinions/Rulings, unless such reliance would be
unreasonable under the circumstances.

ARTICLE II

PAYMENT OF TAXES

Section 2.01 Income Taxes.

(a) Except as provided in sections 2.02 and 2.04, ADP shall be responsible for
all Income Taxes (i) of Broadridge and its Affiliates for any Pre-Distribution
Tax Period; (ii) of Broadridge and its Affiliates for any Straddle Period, but
only to the extent allocated to ADP pursuant to Section 2.05; or (iii) imposed
under Treasury Regulation Section 1.1502–6 or under any comparable or similar
provision of state, local or foreign laws or regulations on Broadridge or an
Affiliate solely as a result of such company being a member of a consolidated,
combined, or unitary group with ADP or any ADP Affiliate during any Tax period,
in each case to the extent in excess of amounts provided for in respect of such
Income Taxes on the condensed combined balance sheet of Broadridge, including
the notes thereto, as of March 30, 2007 (the “Balance Sheet”).

(b) Broadridge shall be responsible for all Income Taxes (i) of Broadridge and
its Affiliates which are not the responsibility of ADP pursuant to
Section 2.01(a) (including, without limitation, Income Taxes for
Post–Distribution Tax Periods of Broadridge and its Affiliates); and (ii) of ADP
and its Affiliates attributable to acts or

 

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omissions of Broadridge or its Affiliates taken after the Distribution (other
than acts or omissions in the ordinary course of business or otherwise
contemplated by the Separation and Distribution Agreement and Ancillary
Agreements).

Section 2.02 Transaction Taxes.

(a) Broadridge shall be liable, and shall indemnify the ADP Group, for any
Transaction Taxes that are attributable to (i) any inaccurate statement or
representation of fact or intent (or omission to state a material fact) in
Section 4.01 that relates to the Broadridge Group; (ii) any inaccurate statement
or representation of fact or intent (or omission to state a material fact) in a
letter or certificate that is provided by any member of the Broadridge Group
after the date hereof, and that forms the basis for the Tax Opinions/Rulings;
(iii) any act or omission by the Broadridge Group after the date of this
Agreement inconsistent with the covenants set forth in this Agreement; or
(iv) any other act or omission by the Broadridge Group after the date of this
Agreement (except for acts disclosed in any Ruling request submitted to the IRS
or the CRA prior to the date hereof), including any act or omission that would
have resulted in Broadridge being in breach of Section 4.02(b) but for the
receipt by Broadridge of a Ruling from the IRS or the CRA, an Unqualified Tax
Opinion or a waiver.

(b) ADP shall be liable, and shall indemnify the Broadridge Group, for any
Transaction Taxes attributable to: (i) any inaccurate statement or
representation of fact or intent (or omission to state a material fact) made
(x) in Section 4.01 that relates to the ADP Group or (y) before the date hereof
and that formed the basis for any Tax Opinions/Rulings; (ii) any inaccurate
statement or representation of fact or intent (or omission to state a material
fact) in a letter or certificate that is provided by any member of the ADP Group
after the date hereof and that forms the basis for the Tax Opinions/Rulings;
(iii) any act or omission by the ADP Group after the date of this Agreement
inconsistent with the covenants set forth in this Agreement; or (iv) any other
act or omission (except for acts disclosed in any Ruling request submitted to
the IRS prior to the date hereof) by the ADP Group.

(c) Liability for any Transaction Taxes described in both paragraphs (a) and
(b) shall be shared by ADP and Broadridge according to relative fault.

Section 2.03 Other Taxes.

(a) ADP shall be responsible for all Other Taxes attributable to ADP and its
Affiliates (other than Broadridge and its Affiliates) and to its business
activities other than the Broadridge Business, or resulting from the
Transactions for all Pre–Distribution Tax Periods, Straddle Periods, and
Post–Distribution Tax Periods.

(b) Broadridge shall be responsible for all Other Taxes attributable to
Broadridge and its Affiliates or to the Broadridge Business for all
Pre–Distribution Tax Periods, Straddle Periods, and Post–Distribution Tax
Periods.

(c) In each case the responsibilities of 2.03(a) and 2.03(b) shall be consistent
with the principles described below:

 

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(i) Transfer Taxes.

(A) The ADP Group shall be liable, and shall indemnify the Broadridge Group, for
any stamp, sales, use, gross receipts, value-added, real estate transfer or
other transfer Taxes imposed in connection with the Transactions.

(B) If business operations of an ADP entity are transferred to a Broadridge
entity as part of the Transactions, the transferee shall assume any and all
liabilities for stamp, sales, use, gross receipts, value-added, real estate
transfer and other transfer Taxes associated with such transferred operations
and will have sole responsibility for satisfying such liabilities.

(C) With respect to Refund claims pending on the Distribution Date involving any
sales, use, gross receipts or other similar Taxes, (x) in the case of a Refund
received by ADP and payable to Broadridge pursuant to the terms hereof, the
amount of such payment shall be net of all contingent fee expenses and Taxes
paid by ADP and related to such Refund, or (y) in the event that Broadridge
receives a Refund directly from the relevant Taxing Authority, it shall
reimburse ADP for all contingent fee expenses and Taxes paid by ADP with respect
to such Refund. For the avoidance of doubt, Broadridge shall not be liable for
any contingent fee expenses or Taxes related to Refunds received prior to the
Distribution Date.

(ii) Property Taxes. If property is transferred between legal entities, the
transferee shall assume any and all liabilities for real and personal property
Taxes associated with such transferred property and will have sole
responsibility for satisfying such liabilities.

(iii) Payroll Taxes. If an employee moves from one employer to another, the
“new” employer shall assume any and all employment related Taxes attributable to
such transferred employee and will have sole responsibility for satisfying such
liabilities.

Section 2.04 Other Income Taxes. Without regard to anything to the contrary in
this Article II, ADP shall be liable, and shall indemnify the Broadridge Group,
for all Taxes arising as a result of the Transactions from (i) excess loss
accounts taken into account under Code Section 1502, (ii) Code Section 357(c) or
(iii) Code Section 361(b), in each case, including under similar state and local
law provisions. Any Taxes attributable to deferred intercompany gains that are
triggered as a result of the Transactions shall be the responsibility of ADP and
shall not be included in determining the Broadridge Group’s Income Tax
liability. To the extent there are adjustments to the amount of any deferred
intercompany gain triggered as a result of the Distribution, ADP shall be
responsible for paying the additional Tax associated with any increase in the
amount of gain and shall also be entitled to a Refund attributable to any
reduction of gain.

 

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Section 2.05 Allocation of Certain Income Taxes and Income Tax Items.

(a) If ADP, Broadridge or any of their respective Affiliates is permitted but
not required under applicable U.S. federal, state, local or foreign Tax laws to
treat the Distribution Date as the last day of a taxable period, then the
Parties shall treat such day as the last day of a taxable period under such
applicable Tax law, and shall file any elections necessary or appropriate to
such treatment; provided that this Section 2.05(a) shall not be construed to
require ADP to change its taxable year.

(b) Transactions occurring, or actions taken, on the Distribution Date but after
the Distribution outside the ordinary course of business by, or with respect to,
Broadridge or any of its Affiliates shall be deemed subject to the “next day
rule” of Treasury Regulation Section 1.1502–76(b)(1)(ii)(B) (and under any
comparable or similar provision under state, local or foreign laws or
regulations, provided that if there is no comparable or similar provision under
state, local or foreign laws or regulations, then the transaction will be deemed
subject to the “next day rule” of Treasury Regulation
Section 1.1502–76(b)(1)(ii)(B)) and as such shall for purposes of this Agreement
be treated (and consistently reported by the Parties) as occurring in a
Post–Distribution Tax Period of Broadridge or an Broadridge Affiliate, as
appropriate.

(c) Any Taxes for a Straddle Period with respect to Broadridge and/or its
Affiliates (or entities in which Broadridge and/or one of its Affiliates has an
ownership interest) shall, for purposes of this Agreement, be apportioned
between ADP and Broadridge based on the portion of the period ending on and
including the Distribution Date and the portion of the period beginning after
the Distribution Date, and each such portion of such period shall be deemed to
be a taxable period (whether or not it is in fact a taxable period). Any
allocation of income or deductions required to determine any Income Taxes for a
Straddle Period shall be made by means of a closing of the books and records of
Broadridge and its Affiliates as of the close of business on the Distribution
Date; provided that (i) ADP may elect to allocate Tax Items (other than any
extraordinary Tax Items) ratably in the month in which the Distribution occurs
(and if ADP so elects, Broadridge shall so elect) as described in Treasury
Regulation Section 1.1502–76(b)(2)(iii) and corresponding provisions of state,
local, and foreign Tax laws; and (ii) subject to (i), exemptions, allowances or
deductions that are calculated on an annual basis, and not on a closing of the
books method, (including, but not limited to, depreciation and amortization
deductions) shall be allocated between the period ending on and including the
Distribution Date and the period beginning after the Distribution Date based on
the number of days for the portion of the Straddle Period ending on and
including the Distribution Date, on the one hand, and the number of days for the
portion of the Straddle Period beginning after the Distribution Date, on the
other hand.

(d) Tax Attributes determined on a consolidated or combined basis for taxable
periods ending before or including the Distribution Date shall be allocated to
ADP and its Affiliates, and Broadridge and its Affiliates, in accordance with
the Code and the Treasury Regulations (and any applicable state, local, or
foreign law or regulation). ADP shall reasonably determine the amounts and
proper allocation of such

 

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attributes, and the Tax basis of the assets and liabilities transferred to
Broadridge in connection with the Transactions, as of the Distribution Date;
provided that Broadridge shall be entitled to participate in such determination.
ADP and Broadridge agree to compute their Tax liabilities for taxable periods
after the Distribution Date consistent with that determination and allocation,
and treat the Tax Attributes and Tax Items as reflected on any federal (or
applicable state, local or foreign) Income Tax Return filed by the Parties as
presumptively correct.

Section 2.06 Refunds. Except as provided in Section 2.07:

(a) ADP shall be entitled to all Refunds with respect to any Tax for which ADP
is responsible under Sections 2.01, 2.02, 2.03, or 2.04. Broadridge shall be
entitled to all Refunds with respect to any Tax for which Broadridge is
responsible under Sections 2.01, 2.03, or 2.04.

(b) Broadridge and ADP shall each forward to the other Party, or reimburse such
other Party for, any Refunds received by the first Party and due to such other
Party pursuant to this Section (net of all contingent fees and Taxes payable by
the first Party and related to such Refund). Where a Refund is received in the
form of a deduction from, or credit or other offset against other or future Tax
liabilities, reimbursement with respect to such Refund shall be due in each case
on the due date for payment of the Tax from or against which such Refund has
been deducted, credited or otherwise offset.

(c) If one Party reasonably so requests, the other Party (at the first Party’s
expense) shall file for and pursue any Refund to which the first Party is
entitled under this Section; provided that the other Party need not pursue any
Refund on behalf of the first Party unless the first Party provides the other
Party a certification by an appropriate officer of the first Party setting forth
the first Party’s belief (together with supporting analysis) that the Tax
treatment of the Tax Items on which the entitlement to such Refund is based is
more likely than not correct, and is not a Tax Item arising from a Reportable
Transaction.

(d) If the other Party pays any amount to the first Party under this
Section 2.06 and, as a result of a subsequent Final Determination, the first
Party is not entitled to some or all of such amount, the other Party shall
notify the first Party of the amount to be repaid to the other Party, and the
first Party shall then repay such amount to the other Party, together with any
interest, fines, additions to Tax, penalties or any additional amounts imposed
by a Taxing Authority relating thereto.

Section 2.07 Carrybacks.

(a) Notwithstanding anything in this Agreement, Broadridge shall file (or cause
to be filed) on a timely basis any available election to waive the carryback of
net operating losses, Tax credits or other Tax Items by Broadridge or any
Affiliate from a Post–Distribution Tax Period to a Straddle Period or
Pre–Distribution Tax Period. Such elections shall include, but not be limited
to, the election described in

 

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Treasury Regulation Section 1.1502–21T(b)(3)(ii)(B), and any analogous election
under state, local, or foreign Income Tax laws, to waive the carryback of net
operating losses for U.S. federal Income Tax purposes.

(b) If, notwithstanding the provisions of Section 2.07(a), Broadridge is
required to carryback losses or credits, Broadridge shall be entitled to any
Refund of any Tax obtained by ADP or an ADP Affiliate as a result of the
carryback of losses or credits of Broadridge or its Affiliate from any
Post-Distribution Tax Period to any Pre-Distribution Tax Period. Such Refund is
limited to the net amount received by ADP or an ADP Affiliate, net of any Tax
cost incurred by ADP or such Affiliate resulting from such Refund. Upon request
by Broadridge, ADP shall advise Broadridge of an estimate of any Tax cost ADP
projects will be associated with any carryback of losses or credits of
Broadridge or its Affiliates as provided in this Section 2.07(b).

(c) If Broadridge has a Tax Item that must be carried back to any
Pre-Distribution Tax Period, Broadridge shall notify ADP in writing that such
Tax Item must be carried back. Such notification shall include a description in
reasonable detail of the grounds for the Refund and the amount thereof, and a
certification by an appropriate officer of Broadridge setting forth Broadridge’s
belief (together with supporting analysis) that the Tax treatment of such Tax
Item is more likely than not correct, and is not a Tax Item arising from a
Reportable Transaction.

(d) If ADP pays any amount to Broadridge under Section 2.07(b) and, as a result
of a subsequent Final Determination, Broadridge is not entitled to some or all
of such amount, ADP shall notify Broadridge of the amount to be repaid to ADP,
and Broadridge shall then repay such amount to ADP, together with any interest,
fines, additions to Tax, penalties or any additional amounts imposed by a Taxing
Authority relating thereto.

Section 2.08 Treatment of Restricted Stock, Stock Options, and Deferred
Compensation.

(a) To the extent permitted by law, ADP (or the appropriate ADP Affiliate) shall
claim all Tax deductions arising by reason of the grant or vesting of Employee
Restricted Stock, and by reason of exercises of Employee Stock Options, at the
time such Tax deduction can be claimed, provided that such Employee Restricted
Stock or Employee Stock Option is then held by an ADP Employee. To the extent
permitted by law, Broadridge (or the appropriate Broadridge Affiliate) shall
claim all Tax deductions arising by reason of the grant or vesting of Employee
Restricted Stock, and by reason of exercises of Employee Stock Options, at the
time such Tax deduction can be claimed, provided that such Employee Restricted
Stock or Employee Stock Option is then held by a Broadridge Employee. To the
extent permitted by law, Broadridge (or the appropriate Broadridge Affiliate)
shall claim all Tax deductions arising by reason of the payment (or inclusion in
income) of compensation the receipt of which was deferred by an Broadridge
Employee prior to the Distribution Date, the payment of which will occur after
the Distribution Date, and the obligation to make such payment is assumed by
Broadridge in connection with the Contribution and Distribution.

 

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(b) If, pursuant to a Final Determination, all or any part of a Tax deduction
claimed by a Party (or Affiliate thereof) pursuant to Section 2.08(a) is
disallowed, then, to the extent permitted by law, the other Party (or Affiliate
thereof) shall claim such Tax deduction. If such other Party (or Affiliate
thereof) realizes a Tax benefit from the claiming of such Tax deduction, such
other Party (or Affiliate) shall pay the amount of such Tax benefit (net of any
Tax detriment suffered by the payor) to the Party who originally claimed the Tax
deduction.

(c) The Party (or Affiliate thereof) initially claiming the Tax deduction
described in Section 2.08(a) shall withhold applicable Taxes and satisfy
applicable Tax reporting obligations with respect to the taxation of the
Restricted Stock, Option, or deferred compensation with respect to which the Tax
deduction is claimed. The Parties to this Agreement shall cooperate so as to
permit the Party initially claiming such deduction to discharge any applicable
Tax withholding and Tax reporting obligations.

Section 2.09 Successor Employer Status. ADP and Broadridge shall, to the extent
permitted by law, (i) treat Broadridge and its Affiliates (as applicable) as a
“successor employer” and ADP and its Affiliates (as applicable) as a
“predecessor,” within the meaning of sections 3121(a)(1) and 3306(b)(1) of the
Code, with respect to employees of the Broadridge Business that were employed by
Broadridge and its Affiliates starting on March 30, 2007 for purposes of Taxes
imposed under the United States Federal Unemployment Tax Act or the United
States Federal Insurance Contributions Act and (ii) cooperate with each other to
avoid the filing of more than one IRS Form W–2 with respect to each such
employee for the calendar year in which the Distribution occurs.

Section 2.10 APA.

(a) When the APA is finally determined, ICC and another Canadian Affiliate of
Broadridge (“New CanCo 2”) shall pay the APA Amount to the Specified Affiliates.
For the purposes of this provision, (A) “APA Amount” means an amount equal to
the amount of the payables owing under the APA that were retained or assumed by
ICC and New CanCo 2 pursuant to the Separation and Distribution Agreement
(taking into account any adjustments provided for in the Separation and
Distribution Agreement), and (B) “Specified Affiliates” means the U.S.
Affiliates of Broadridge that retained or acquired receivables owing under the
APA from one or more U.S. Affiliates of ADP pursuant to the Separation and
Distribution Agreement.

(b) For the avoidance of doubt, and notwithstanding anything herein to the
contrary, any tax owing as a result of the APA shall be treated as an Income Tax
that is governed by Section 2.01 of this Agreement.

 

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ARTICLE III

PREPARATION AND FILING OF TAX RETURNS

Section 3.01 ADP Responsibility.

(a) Subject to paragraph (b) below, ADP shall make all determinations with
respect to, have ultimate control over the preparation of and file all (i) Joint
Returns and ADP Separate Returns, in each case as it determines to be mandatory
or advisable for all taxable periods, (ii) Broadridge Separate Returns that are
Income Tax Returns for all Pre-Distribution Tax Periods and (iii) at ADP’s
election, Broadridge Separate Returns that are Income Tax Returns for all
Straddle Periods provided that ADP provides written notice to Broadridge 45 days
after the end of such Straddle Period that ADP is exercising its right to
prepare such Tax Return.

(b) If, in connection with the preparation of any Return, ADP materially
modifies any information relating to, or provided in, the pro forma federal and
state Income Tax Returns or other information related to members of the
Broadridge Group prepared by Broadridge and provided to ADP pursuant to
Section 3.02 below, the portions of the Returns that include such information
shall be submitted to Broadridge no later than 30 days prior to the due date
(including extensions) for filing of such federal Returns and 20 days prior to
the due date (including extensions) for filing of such state Returns (or if such
due date is within 30 days following the Distribution Date, as promptly as
practicable following the Distribution Date). Within 10 days after delivery of
any such revised portions of any Return, Broadridge shall provide comments to
ADP in writing to the extent Broadridge objects to any revisions that could
reasonably be expected to adversely impact any member of the Broadridge Group.
Such Broadridge comments shall be incorporated into the Return upon the consent
of ADP, not to be unreasonably withheld. If Broadridge does not so notify ADP of
any objection, Broadridge shall be considered to have consented to the filing of
such Return. The dates for submissions to Broadridge required in this section
may be modified by mutual agreement of ADP and Broadridge.

Section 3.02 Broadridge Responsibility.

(a) Broadridge shall make all determinations with respect to, have ultimate
control over the preparation of and file all Tax Returns (other than those
described in Section 3.01) for the Broadridge Group as it determines to be
mandatory or advisable and for all taxable periods. Broadridge shall prepare and
provide to ADP all pro forma federal and state Income Tax Returns and other
information related to members of the Broadridge Group required to complete any
Tax Return which is the responsibility of ADP pursuant to Section 3.01, in the
format reasonably requested by ADP, and at least 110 days prior to the due date
(including extensions) of the relevant federal Return and at least 100 days
prior to the due date (including extensions) of the relevant state Return. The
dates for submissions to ADP required in this section may be modified by mutual
agreement of ADP and Broadridge.

 

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(b) In the case of any Tax Return that is the responsibility of ADP pursuant to
Section 3.01(a) and that relates to an Income Tax that is provided for on the
Balance Sheet, Broadridge shall pay to ADP the amount of the provision for such
Income Tax no later than 10 days prior to the due date (including extensions)
for the filing of such Tax Return.

Section 3.03 Tax Accounting Practices.

(a) Except as provided in Section 3.03(b), any Tax Return for any
Pre-Distribution Tax Period, to the extent it relates to members of the
Broadridge Group, shall be prepared in accordance with practices, accounting
methods, elections, conventions and Tax positions used with respect to the Tax
Return in question for periods prior to the Distribution (“Past Practices”),
and, in the case of any item the treatment of which is not addressed by Past
Practices, in accordance with generally acceptable Tax accounting practices.
Notwithstanding the foregoing, for any Tax Return described in the preceding
sentence, (i) a Party will not be required to follow Past Practices with either
the written consent of the other Party (not to be unreasonably withheld) or a
“should” level opinion from a Tax Advisor that the proposed method of reporting
is correct and (ii) ADP shall have the right to determine which entities will be
included in any consolidated, combined, affiliated or unitary Return that it is
responsible for filing.

(b) The Parties shall report the Transactions for all Tax purposes in a manner
consistent with the Tax Opinions/Rulings, unless, and only to the extent, an
alternative position is required pursuant to a Final Determination. ADP shall
determine the Tax treatment to be reported on any Tax Return of any Tax issue
relating to the Transactions that is not covered by the Tax Opinions/Rulings.

Section 3.04 Right to Review Tax Returns. Upon request, each Party shall make
available to the other Party the portion of Pre-Distribution Tax Period Tax
Returns that relates to the Broadridge Group that the first Party is responsible
for preparing under this Article III.

ARTICLE IV

TAX-FREE STATUS OF DISTRIBUTION

Section 4.01 Representations. Each of Broadridge and ADP represents that (i) it
knows of no fact (other than the facts disclosed in any Ruling request submitted
prior to the date hereof) that may cause the Contribution and the Distribution
to fail to have Tax-Free Status and (ii) it has no plan or intention to take any
action inconsistent with the Tax Opinions/Rulings or the covenants set forth in
this Agreement.

Section 4.02 Covenants.

(a) Each of Broadridge and ADP will not take or fail to take, or permit its
Affiliates to take or fail to take, any action (which includes the undertaking
of any transaction) where that action or omission would (i) violate, be
inconsistent with or

 

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cause to be untrue any covenant, representation or statement in any Tax
Opinions/Rulings or a letter or certificate that forms the basis therefor, or
(ii) prevent, or be reasonably likely to prevent, or be inconsistent with, the
Tax-Free Status.

(b) During the Restricted Period, except as provided in paragraph (c),
Broadridge shall not, and shall not permit its Affiliates to, in a single
transaction or in a series of transactions:

(i) permit any transaction or series of transactions (or any agreement,
understanding or arrangement to enter into a transaction or series of
transactions) as determined for purposes of Code Section 355(e), in connection
with which (A) any member of the Broadridge Group would merge or consolidate
with any Person other than any other member of the Broadridge Group, (B) any
member of the Broadridge Group would form one or more joint ventures with any
Person other than any other member of the Broadridge Group in which, in the
aggregate, more than 10% of the gross assets of the Broadridge Group are
transferred to such joint ventures or (C) any Person would (directly or
indirectly) acquire, or have the right to acquire, from any other Person or
Persons, a more than 10% interest in Broadridge Capital Stock (a “Proposed
Acquisition Transaction”). For these purposes, any recapitalization, repurchase
or redemption of Broadridge Capital Stock shall be treated as an indirect
acquisition of such stock by any non-exchanging shareholder to the extent such
shareholder’s percentage interest in the issuer increases by vote or value.
Notwithstanding the foregoing, a Proposed Acquisition Transaction shall not
include (w) the adoption by Broadridge of a shareholder rights plan that meets
the requirements of IRS Revenue Ruling 90-11, (x) issuances of Broadridge
Capital Stock pursuant to an employee stock purchase agreement or equity
compensation plan that ADP has notified Broadridge in writing is acceptable to
ADP in its sole discretion (for the avoidance of doubt, (i) any modification or
amendment to such agreement or plan is also subject to the prior written consent
of ADP and (ii) ADP’s approval is required for the underlying purchase agreement
or plan but not for each issuance of stock pursuant thereto), (y) transfers on
an established market of Broadridge Capital Stock described in Safe Harbor VII
of Treasury Regulation Section 1.355-7(d) or (z) issuances of Broadridge Capital
Stock described in Safe Harbor IX (relating to acquisitions by a retirement plan
of an employer) of Treasury Regulation Section 1.355-7(d).

(ii) liquidate or partially liquidate, including by way of merger or
consolidation, any member of the Broadridge Group other than Broadridge;

(iii) liquidate or partially liquidate Broadridge;

(iv) cause or permit the Broadridge Group to cease to engage in the Active Trade
or Business;

(v) sell or transfer assets, other than inventory sold or transferred in the
ordinary course of business, constituting (A) 50% or more of the gross assets
that are held by any member of the Broadridge Group and are used in the Active
Trade or Business and are relied upon to satisfy the requirements of Code
Section

 

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355(b), (B) 50% or more of the consolidated gross assets of the Broadridge Group
that are used in an Active Trade or Business (such percentages to be measured
based on fair market value as of the Distribution Date) or (C) any lesser amount
if that sale or transfer could reasonably be expected to result in a significant
and material change to, or termination of, the Active Trade or Business
immediately after the Distribution Date; or

(vi) amend its certificate of incorporation (or other organizational documents),
or take any other action, affecting the relative voting rights of the separate
classes of Broadridge Capital Stock; provided, however, that this clause
(vi) shall not be deemed to be violated upon Broadridge’s adoption of a
shareholder rights plan that meets the requirements of IRS Revenue Ruling 90-11.

(c) Notwithstanding paragraph (b):

(i) clauses (i) through (vi) of paragraph (b) shall not apply upon the prior
written consent of ADP, which consent may not be withheld if ADP determines in
good faith that Broadridge has provided it with Satisfactory Guidance concluding
that the proposed actions will not result in Transaction Taxes;

(ii) clause (v) of paragraph (b) shall not apply after the six month anniversary
of the Distribution Date;

(iii) for purposes of clause (i), if Broadridge provides ADP an Unqualified Tax
Opinion that is intended to be Satisfactory Guidance concerning a Proposed
Acquisition Transaction, then such Opinion may be based on the assumption that
ADP did not have any agreement, understanding, arrangement or substantial
negotiations, within the meaning of Treasury Regulations Section 1.355-7(h),
with the counterparty to the Proposed Acquisition Transaction within the two
year period preceding the Distribution Date and such assumption shall not
prevent such Unqualified Tax Opinion from being considered Satisfactory Guidance
by the Parties, provided that (x) such assumption must be based on a certificate
of such counterparty that such assumption is true to the best of its knowledge
and belief, and (y) ADP may deem such Opinion not to be Satisfactory Guidance
if, in its reasonable judgment, there is a risk that such assumption is not
correct; and

(iv) In the event that Broadridge intends to consummate any Proposed Acquisition
Transaction after the end of the Restricted Period but before the end of 30
months after the Distribution Date, then either (x) Broadridge shall be
permitted to consummate such proposed Acquisition Transaction, provided that
Broadridge shall provide ADP with an unconditional certification that it did not
have any agreement, understanding, arrangement or substantial negotiations,
within the meaning of Treasury Regulations Section 1.355-7(h), with the
counterparty to such transaction within 12 months after the Distribution Date,
and ADP after reasonable due investigation is satisfied with the correctness of
such certification, or (y) such Proposed Acquisition Transaction shall be
subject to the provisions under Sections 4.02(b) and (c).

 

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(d) Notwithstanding anything herein to the contrary, for purposes of paragraph
(c), no Ruling shall be obtained from the IRS if ADP determines that there is a
reasonable possibility that such an action could have a significant adverse
impact on any member of the ADP Group.

(e) Broadridge will not take any action (including, but not limited to, the sale
or disposition of any stock, securities or other assets), or permit its
Affiliates to take any such action, and Broadridge will not fail to take any
action or permit its Affiliates to fail to take any action that would cause ADP
or any of its Affiliates or Broadridge or any of its Affiliates to recognize
gain under any Gain Recognition Agreement.

Section 4.03 Procedures Regarding Opinions and Rulings.

(a) Subject to Section 4.02(d), if Broadridge may take certain actions
conditioned upon the receipt of Satisfactory Guidance, ADP, at the request of
Broadridge, shall use commercially reasonable efforts to expeditiously obtain,
or assist Broadridge in obtaining, such Satisfactory Guidance. ADP shall not be
required to take any action pursuant to this Section 4.03(a) if Broadridge fails
to certify, upon request, that all information and representations relating to
any member of the Broadridge Group in the relevant documents are true, correct
and complete. Broadridge shall reimburse ADP for all reasonable out-of-pocket
costs and expenses incurred by the ADP Group in obtaining Satisfactory Guidance.

(b) ADP shall have the right to obtain a Ruling from the IRS (or any other
Taxing Authority) or an Unqualified Tax Opinion at any time in its sole
discretion. ADP shall reimburse Broadridge for all reasonable out-of-pocket
costs and expenses incurred by the Broadridge Group in obtaining such a Ruling
or Unqualified Tax Opinion.

(c) ADP shall have exclusive control over the process of obtaining any Ruling
relating to the Transactions and neither Broadridge nor any of its Affiliates
shall independently seek any guidance concerning the Transactions from any
Taxing Authority at any time. In connection with any Ruling relating to the
Transactions that can reasonably be expected to affect Broadridge liabilities
under this Agreement, ADP shall (i) keep Broadridge informed of all material
actions taken or proposed to be taken by ADP, (ii) reasonably in advance of the
submission of any Ruling request provide Broadridge with a draft thereof,
consider Broadridge’s comments on such draft, and provide Broadridge with a
final copy, and (iii) provide Broadridge with notice reasonably in advance of,
and permit Broadridge to attend, any formally scheduled meetings with the IRS
(subject to the approval of the IRS) that relate to such Ruling.

Section 4.04 Canadian Butterfly.

(a) Each of Broadridge and ADP represents that (i) it knows of no fact (other
than the facts disclosed in any Ruling request submitted to the CRA prior to the
date hereof) that may cause the Butterfly Transactions to fail to have Canadian
Tax-Free

 

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Status and (ii) it has no plan or intention to take any action inconsistent with
the request for the Canadian Tax Ruling or the Canadian Tax-Free Status or the
covenants set forth in this Agreement.

(b) Each of Broadridge and ADP will not take or fail to take, or permit its
Affiliates to take or fail to take, any action (which includes the undertaking
of any transaction) where that action or omission would (i) violate, be
inconsistent with or cause to be untrue any covenant, representation or
statement in the Canadian Tax Ruling, or (ii) prevent, or be reasonably likely
to prevent, or be inconsistent with, the Canadian Tax-Free Status, in each case
without first obtaining Satisfactory Guidance concluding that the proposed
action or omission will not have such effect.

ARTICLE V

TAX CONTESTS; INDEMNIFICATION; COOPERATION

Section 5.01 Notice.

(a) Within 15 days after a Party (the “Indemnitee”) becomes aware of the
existence of a Tax Contest that may give rise to an indemnification claim under
this Agreement by it against the other Party (the “Indemnifying Party”), the
Indemnitee shall promptly notify the Indemnifying Party of the Tax Contest, and
thereafter shall promptly forward or make available to the Indemnifying Party
copies of notices and communications with a Taxing Authority relating to such
Tax Contest.

(b) The Indemnifying Party shall not be responsible for any increase in amounts
to which the Indemnitee is otherwise entitled to the extent that such increase
results solely from the failure of the Indemnitee to provide timely notice as
required pursuant to Section 5.01(a).

Section 5.02 Control of Tax Contests.

(a) Except as otherwise provided in paragraphs (b) and (c):

(i) ADP shall control, and have sole discretion in handling, settling or
contesting, any Tax Contest relating to any Joint Returns, as well as any
Separate Returns or other Return if any such Return is related to Taxes for
which ADP is responsible pursuant to Article II, or the Tax treatment of the
Transactions, provided that (x) ADP shall act in good faith in connection with
its control of any such Tax Contests and (y) Broadridge shall have the right to
participate in and advise on (including, without limitation, the opportunity to
review and comment upon ADP’s communications with the Taxing Authority, which
comments shall be incorporated upon the consent of ADP, not to be unreasonably
withheld) such items for which Broadridge could be liable under Article II as a
result of such Tax Contest; and

(ii) If Broadridge disagrees with ADP’s decision to settle a Tax Contest that
may reasonably be expected materially to affect amounts for which Broadridge is
liable under Article II, Broadridge shall have the right to contest its

 

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liability to ADP under Article II notwithstanding the settlement. Broadridge
shall provide written notice to ADP of its intention to contest its liability as
a result of any settlement (and its irrevocable election described below) prior
to the time such settlement is entered into. Any such contest by Broadridge
shall be made under the procedures set forth in Article VI. Under those
procedures, Broadridge may irrevocably elect, in its sole discretion, to require
the Tax Advisor or the arbitrator to determine either (x) the amount of a
settlement with the relevant Taxing Authority that would most accurately reflect
the litigation risk of the relevant issue, or (y) the most likely outcome of the
issue if it were litigated without a settlement. In either such case, Broadridge
shall be liable to ADP, or ADP shall be liable to Broadridge, based solely on
the determination of the Tax Advisor or the arbitrator as if a settlement or
litigation implementing such determination had actually occurred, without regard
to the actual settlement. For the avoidance of doubt, this clause (ii) shall not
limit ADP’s ability to settle a Tax Contest.

(b) Broadridge shall control and have sole discretion in handling, settling or
contesting, any Tax Contest for a Pre-Distribution Tax Period to the extent such
Tax Contest relates solely to Taxes that are the responsibility of Broadridge
pursuant to Article II; provided that ADP shall have the right to participate in
and advise on all aspects of such Tax Contests and may coordinate discussions
with the relevant Taxing Authority with respect thereto.

(c) ADP and Broadridge shall jointly control Tax Contests relating to Tax
liability arising from the failure of the Transactions to qualify for tax-free
treatment under Code Sections 355 or 361, if there is a reasonable likelihood
that Broadridge would be liable to ADP under Article II as a result of such Tax
Contest. Neither Party shall have the right to settle any such Tax Contest
without the consent of the other Party; provided that ADP may settle any such
Tax Contest without the consent of Broadridge if ADP waives any claim for
indemnification with respect thereto.

(d) Except as otherwise provided in paragraph (a), (b) or (c), Broadridge shall
have sole control over any Tax Contest that relates to Broadridge Separate
Returns for any Post-Distribution Tax Period.

(e) Any out-of-pocket costs incurred in handling, settling or contesting a Tax
Contest shall be borne ratably by the Parties based on their ultimate liability
under this Agreement for the Taxes to which the Tax Contest relates; provided,
however, that if Broadridge contests a settlement made by ADP as provided in
clause (ii) of paragraph (a), ADP shall bear the costs relating to Broadridge’s
contest of such settlement unless ADP substantially prevails in such contest.

Section 5.03 Indemnification Payments.

(a) An Indemnitee shall be entitled to make a claim for payment pursuant to this
Agreement when the Indemnitee determines that it is entitled to such payment and
the amount of such payment (including, for the avoidance of doubt, the
finalization of a Return before filing). The Indemnitee shall provide to the
Indemnifying

 

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Party notice of such claim within 10 days of the date on which it first so
becomes entitled to claim such payment, including a description of such claim
and a detailed calculation of the amount of the indemnification payment that is
claimed, provided, however, that no delay on the part of the Indemnitee in
notifying the Indemnitor shall relieve the Indemnitor from any obligation
hereunder unless (and then solely to the extent) the Indemnitor is actually and
materially prejudiced thereby. Except as provided in paragraph (b), the
Indemnifying Party shall make the claimed payment to the Indemnitee within 10
days after receiving such notice, unless the Indemnifying Party reasonably
disputes its liability for, or the amount of, such payment.

(b) If the Indemnitee will be obligated to make the payment described in
paragraph (a) to a Taxing Authority or other third Party (including expenses
reimbursable under this Agreement), the Indemnifying Party shall not be
obligated to pay the Indemnitee more than 5 days before the Indemnitee incurs
such expense or makes such payment. If the Indemnitee’s claim for payment arises
from a payment that the Indemnifying Party will receive from a third Party, such
as a Refund, the Indemnifying Party shall not be obligated to pay the Indemnitee
until 5 days after the Indemnifying Party receives such payment.

(c) In the case of a claim under Article II where no payment will be made to or
received from a Taxing Authority, paragraph (b) shall be applied to the payments
that would be made to or from a Taxing Authority if the Broadridge Group was
treated as a standalone group for all taxable periods.

Section 5.04 Interest on Late Payments. Interest shall accrue with respect to
any indemnification payment (including any disputed payment that is ultimately
required to be made), not made within the period for payment, at 5.75 percent
per annum compounded quarterly.

Section 5.05 Treatment of Payments.

(a) The amount of all indemnification obligations under this Agreement shall be
decreased to take into account the Tax benefits to the Indemnitee of the
deductibility of any indemnified item (whether or not any Tax benefit is
actually received for a deductible item and assuming the highest applicable
taxable rate) and shall be increased where necessary so that, after all the
required deductions (whether or not any Tax benefit is actually received for a
deductible item and assuming the highest applicable taxable rate) have been made
and Taxes imposed, the Indemnitee receives the amount it would have been
entitled to receive under this Agreement in the absence of such deductions and
Taxes.

(b) Any payments made to one Party by another Party pursuant to (i) this
Agreement or (ii) Sections 2.3(b), 2.3(c), 4.2, and 4.3 of the Separation and
Distribution Agreement (or any other payment made pursuant to the Separation and
Distribution Agreement that relates to taxable periods (or portions thereof)
ending on or before the Distribution) shall be treated by the Parties for all
Tax purposes as a distribution by, or capital contribution to, Broadridge, as
the case may be, made immediately prior to the Distribution, except to the
extent otherwise required by a Final Determination.

 

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Section 5.06 Expenses. Except as otherwise provided herein, each Party and its
Affiliates shall bear their own expenses incurred in connection with preparation
of Tax Returns, Tax Contests, and other matters under this Agreement.

Section 5.07 Cooperation. Each member of the ADP Group and the Broadridge Group
shall cooperate fully with all reasonable requests from the other Party in
connection with the preparation and filing of Tax Returns and Adjustment
Requests, Tax Contests and other matters covered by this Agreement.

(a) Such cooperation shall include:

(i) the retention until the expiration of the applicable statute of limitations,
and the provision upon request, of Tax Returns, books, records (including
information regarding ownership and Tax basis of property), documentation and
other information relating to the Tax Returns, including accompanying schedules,
related workpapers, and documents relating to Rulings or other determinations by
Taxing Authorities;

(ii) the execution of any document that may be necessary or reasonably helpful
in connection with any Tax Contest, the filing of a Tax Return or Adjustment
Request by a member of the ADP Group or the Broadridge Group, obtaining a Tax
opinion or private letter ruling (except as otherwise provided in
Section 4.02(d)), or other matters covered by this Agreement, including
certification (provided in such form as may be required by applicable law or
reasonably requested and made to the best of a Party’s knowledge) of the
accuracy and completeness of the information it has supplied;

(iii) the use of the Parties’ reasonable best efforts to obtain any
documentation that may be necessary or reasonably helpful in connection with any
of the foregoing;

(iv) the use of the Parties’ reasonable best efforts to make the applicable
Party’s current or former directors, officers, employees, agents and facilities
available on a reasonable and mutually convenient basis in connection with the
foregoing matters; and

(v) making determinations with respect to actions described in Section 4.02(c)
as promptly as practicable including, without limitation, making determinations
within 10 days with respect to modifications and amendments of employee stock
purchase agreements or equity compensation plans under Section 4.02(b)(i)(x).

(b) If a Party fails to comply with any of its obligations set forth in this
Section 5.07 upon reasonable request and notice by the other Party, and such
failure results in the imposition of additional Taxes, the nonperforming Party
shall be liable in full for such additional Taxes.

 

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Section 5.08 Confidentiality. Any information or documents provided under this
Agreement shall be kept confidential by the recipient-Party, except as may
otherwise be necessary in connection with the filing of Tax Returns or with any
Tax Contest. In addition, if ADP or Broadridge determines that providing such
information could be commercially detrimental, violate any law or agreement or
waive any privilege, the Parties shall use reasonable best efforts to permit
compliance with the obligations under this Agreement in a manner that avoids any
such harm or consequence.

Section 5.09 Retention of Tax Records. Broadridge may request from ADP and
retain copies of (i) with respect to any Joint Return, all pro forma federal and
state Tax Returns, supporting schedules and workpapers related to members of the
Broadridge Group, and (ii) any Separate Returns for any Broadridge Group
members, including supporting schedules and workpapers. If either ADP or
Broadridge intends to dispose of documentation with respect to any
Pre-Distribution Tax Period, including books, records, Tax Returns and all
supporting schedules and information relating thereto (after the expiration of
the applicable statute of limitations), of any member of the other Group, or in
the case of the Broadridge Group any member included in a Joint Return, they
shall provide written notice to the other Party describing the documentation to
be disposed of 30 days prior to taking such action. The other Party may arrange
to take delivery of the documentation described in the notice at its own expense
during the succeeding 30 day period.

ARTICLE VI

RESOLUTION OF DISPUTES

Section 6.01 Tax Disputes. The Parties will endeavor, and will cause their
respective Affiliates to endeavor, to resolve in an amicable manner all disputes
arising in connection with this Agreement. The Parties shall negotiate in good
faith to resolve any Tax Dispute for not less than 45 days. Upon written notice
of either Party after 45 days, the matter will be referred to a Tax Advisor
acceptable to both Parties. The Tax Advisor may, in its discretion, obtain the
services of any third-party necessary to assist it in resolving the dispute. The
Tax Advisor shall furnish written notice to the Parties of its resolution of the
dispute as soon as practicable, but in any event no later than 45 days after its
acceptance of the matter for resolution. Any such resolution by the Tax Advisor
will be binding on the Parties and the Parties shall take, or cause to be taken,
any action necessary to implement the resolution. All fees and expenses of the
Tax Advisor shall be shared equally by ADP, on the one hand, and Broadridge, on
the other hand. If, having determined that the dispute must be referred to a Tax
Advisor, after 45 days the Parties are unable to find a Tax Advisor willing to
adjudicate the dispute in question and whom the Parties in good faith find
acceptable, then the dispute will be submitted for arbitration to the American
Arbitrators Association, provided, however, that only an arbitrator that
qualifies as a Tax Advisor shall be selected.

 

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ARTICLE VII

MISCELLANEOUS PROVISIONS

Section 7.01 Disposition of Broadridge Subsidiaries. In the event that
Broadridge disposes of the stock of a subsidiary that is not a Party to this
Agreement (i) without receiving compensation equal to the fair market value of
such subsidiary, prior to the disposition, such subsidiary shall deliver to ADP
an executed agreement, in a form reasonably acceptable to ADP, agreeing to be
bound by this Agreement as if it had been an original Party hereto or (ii) in an
exchange intended to result in the receipt of compensation equal to the fair
market value of such subsidiary, prior to the disposition, such subsidiary shall
deliver to ADP an executed agreement, in a form reasonably acceptable to ADP,
agreeing to be bound by Sections 5.07, 5.08, 5.09 and Article VII of this
Agreement as if it had been an original Party hereto.

Section 7.02 Complete Agreement; Representations.

(a) Except as explicitly stated herein, this Agreement, together with the
exhibits and schedules hereto constitutes the entire agreement between the
Parties with respect to the subject matter hereof and shall supersede all
previous negotiations, commitments and writings with respect to such subject
matter.

(b) ADP represents on behalf of itself and each other member of the ADP Group
and Broadridge represents on behalf of itself and each other member of the
Broadridge Group as follows:

(i) each such Person has the requisite corporate or other power and authority
and has taken all corporate or other action necessary in order to execute,
deliver and perform this Agreement and to consummate the transactions
contemplated by this Agreement; and

(ii) this Agreement has been duly executed and delivered by such Person (if such
Person is a Party) and constitutes a valid and binding agreement of it
enforceable in accordance with the terms thereof (assuming the due execution and
delivery thereof by the other Party), except as such enforceability may be
limited by bankruptcy, fraudulent conveyance, insolvency, reorganization,
moratorium and other Laws relating to creditors’ rights generally and by general
equitable principles.

Section 7.03 Costs and Expenses. All costs and expenses incurred in connection
with the negotiation, preparation, execution and performance of this Agreement
and the transactions contemplated hereby shall be borne as provided in the
Separation and Distribution Agreement.

 

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Section 7.04 Governing Law. This Agreement and any dispute arising out of, in
connection with or relating to this Agreement shall be governed by and construed
in accordance with the Laws of the State of New York, without giving effect to
the conflicts of laws principles thereof.

Section 7.05 Notices. All notices, requests, claims, demands and other
communications hereunder must be in writing and will be deemed to have been duly
given only if delivered personally or by facsimile transmission or mailed (first
class postage prepaid) to the Parties at the following addresses or facsimile
numbers:

If to ADP or any member of the ADP Group, to:

Automatic Data Processing, Inc.

One ADP Boulevard

Roseland, New Jersey 07068

Attn: General Counsel

Fax: 973-974-3324

If to Broadridge or any member of the Broadridge Group, to:

Broadridge Financial Solutions, Inc.

2 Journal Square Plaza

Jersey City, New Jersey 07306

Attn: General Counsel

Fax: 201-714-3506

All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this section, be deemed given upon receipt and (iii) if delivered by
mail in the manner described above to the address as provided in this section,
be deemed given upon receipt (in each case regardless of whether such notice,
request or other communication is received by any other Person to whom a copy of
such notice, request or other communication is to be delivered pursuant to this
section). Any party from time to time may change its address, facsimile number
or other information for the purpose of notices to that party by giving notice
specifying such change to the other party.

Section 7.06 Amendment, Modification or Waiver.

(a) Prior to the Distribution, this Agreement may be amended, modified, waived,
supplemented or superseded, in whole or in part, by ADP in its sole discretion
by execution of a written amendment delivered to Broadridge. Subsequent to the
Distribution, this Agreement may be amended, modified, supplemented or
superseded only by an instrument signed by duly authorized signatories of both
Parties.

 

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(b) Following the Distribution, any term or condition of this Agreement may be
waived at any time by the Party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the Party waiving such term or condition. No waiver
by any Party of any term or condition of this Agreement, in any one or more
instances, shall be deemed or construed as a waiver of the same or any other
term or condition of this Agreement on any future occasion. All remedies, either
under this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.

Section 7.07 No Assignment; Binding Effect. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the Parties without
the prior written consent of the other Party; provided, however, that no such
consent shall be required in the event of a merger, consolidation or sale of
either ADP or Broadridge. Subject to the preceding sentence, this Agreement is
binding upon, inures to the benefit of and is enforceable by the Parties hereto
and their respective successors and assigns.

Section 7.08 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

Section 7.09 Specific Performance. From and after the Distribution, in the event
of any actual or threatened default in, or breach of, any of the terms,
conditions and provisions of this Agreement, the Parties agree that the Party or
Parties to this Agreement who are or are to be thereby aggrieved shall have the
right to specific performance and injunctive or other equitable relief of its or
their rights under this Agreement, in addition to any and all other rights and
remedies at law or in equity, and all such rights and remedies shall be
cumulative. The Parties agree that, from and after the Distribution, the
remedies at law for any breach or threatened breach of this Agreement, including
monetary damages, are inadequate compensation for any loss, that any defense in
any action for specific performance that a remedy at law would be adequate is
hereby waived, and that any requirements for the securing or posting of any bond
with such remedy are hereby waived.

Section 7.10 New York Forum. Each of the Parties agrees that, except as
otherwise provided in Section 6.01, all Actions arising out of or in connection
with this Agreement, or for recognition and enforcement of any judgment arising
out of or in connection with this Agreement, shall be tried and determined
exclusively in the state or federal courts in the State of New York, County of
New York, and each of the Parties hereby irrevocably submits with regard to any
such action or proceeding for itself and in respect to its property, generally
and unconditionally, to the exclusive jurisdiction of the aforesaid courts. Each
of the Parties hereby expressly waives any right it may have to assert, and
agrees not to assert, by way of motion, as a defense, counterclaim or otherwise,
in any such action or proceeding: (a) any claim that it is not subject to
personal jurisdiction in the aforesaid courts for any reason; (b) any claim

 

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that it or its property is exempt or immune from jurisdiction of any such court
or from any legal process commenced in such courts; and (c) any claim that
(i) any of the aforesaid courts is an inconvenient or inappropriate forum for
such action or proceeding, (ii) venue is not proper in any of the aforesaid
courts and (iii) this Agreement, or the subject matter hereof, may not be
enforced in or by any of the aforesaid courts. Each of the Parties agrees that
mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 7.05 or any other manner as may be
permitted by Law shall be valid and sufficient service thereof.

Section 7.11 WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED
AND DIFFICULT ISSUES, AND THEREFORE EACH PARTY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE WAIVER IN THIS SECTION,
(ii) SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER,
(iii) SUCH PARTY MAKES SUCH WAIVER VOLUNTARILY AND (iv) SUCH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS,
AGREEMENTS AND CERTIFICATIONS HEREIN.

Section 7.12 Interpretation; Conflict With Ancillary Agreements. The language of
this Agreement shall be construed according to its fair meaning and shall not be
strictly construed for or against any Party. Notwithstanding the foregoing, the
purposes of Article IV are to ensure the Tax-Free Status and, accordingly, the
Parties agree that the language thereof shall be interpreted in a manner that
serves this purpose to the greatest extent possible. The Article and Section
headings contained in this Agreement are solely for the purpose of reference,
are not part of the agreement of the Parties and shall not in any way affect the
meaning or interpretation of this Agreement. If, and to the extent, the
provisions of this Agreement conflict with the Separation and Distribution
Agreement, or any Ancillary Agreement, the provisions of this Agreement shall
control.

Section 7.13 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom.

Section 7.14 Survival. Except with respect to Sections 5.07, 5.08 and 5.09 which
shall remain in effect without limitation as to time, the provisions in this
Agreement shall be unconditional and absolute and shall remain in effect until
the expiration of the statute of limitations for all taxable periods that end
before or include June 30 of the calendar year in which the Distribution occurs
and the resolution of all disputes under this Agreement that arose during such
periods.

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
as of the date first above written.

 

AUTOMATIC DATA PROCESSING, INC. By:  

/s/ James B. Benson

Name:   James B. Benson Title:   Corporate Vice President

BROADRIDGE FINANCIAL

SOLUTIONS, INC.

By:  

/s/ James B. Benson

Name:   James B. Benson Title:   President

Signature Page – Tax Allocation Agreement