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Exhibit 2
Arbitration Agreement
1. THE ARBITRATION PROCESS. Arbitration is mandatory as part of the procedures outlined in Rev.
Proc. 2002-67 and will be used to assist
(hereinafter “Taxpayer”) and the Commissioner of
the Internal Revenue Service (collectively the “Parties”) in resolving certain issues relating to the
Taxpayer’s participation in a Contingent Liability Transaction, a transaction designated by the
Commissioner and Treasury as a “listed transaction” in Notice 2001-17, 2001-1 C.B. 730. The
applicable provisions and requirements of Rev. Proc. 2002-67 are hereby incorporated in this
Agreement by reference.
The Parties have agreed to use Final Offer Arbitration, also known as baseball arbitration. The Final
Offers of both Parties shall reflect the following:
a) The amount of capital loss permitted on the sale of stock received in the Contingent Liability
Transaction, which amount will reflect a concession by the Taxpayer of between 50% and 90%
of the capital loss reported by the Taxpayer on the sale of the stock received in the Contingent
Liability Transaction.
b) The identity of the corporation that is entitled to the tax benefits associated with the
deduction resulting from the liability assumed in the Contingent Liability Transaction, including
whether such corporation is or has been a member of the Taxpayer’s consolidated group
(including any successor to such group).
c) With respect to the Electing Taxpayer or an entity that was a member of the Electing
Taxpayer’s consolidated group (including any successor to such group) at any time, the
manner and timing of the reduction in the tax benefits necessary to eliminate any duplication in
the tax benefits associated with the Contingent Liability Transaction in amounts that, in the
aggregate, equal the capital loss permitted under (a) above.
d) The amount of any penalty under section 6662.
The Arbitrator, after reviewing the Final Offers and the accompanying information, will choose one Final
Offer. Each Party’s Final Offer shall state an amount that reflects the above, including the effect of any
present value calculation, as appropriate
The Parties to this Agreement (see section 2 below) agree to be bound by the Arbitrator’s
determination. There can be no ex parte communications between the Arbitrator and any Party, third
party, witness, agent, or other person regarding the issues for arbitration. All communications between
the Arbitrator and either Party, unless otherwise stated, including requesting and transferring
documentation and information, will be made through an Administrator. The Administrator for this
Arbitration Session will be an Appeals employee to be assigned by Appeals. The Administrator will
inform and discuss with the Parties the rules and procedures pertaining to the Arbitration process.
2. PARTICIPANTS. The Parties to the arbitration will be the Taxpayer and the Commissioner. The
Taxpayer may elect to have the representation of counsel or an authorized representative to assist in
preparing for and conducting the arbitration proceeding. The Office of Chief Counsel will represent the
Commissioner in the arbitration proceeding. The specific participants on behalf of the Taxpayer in the
Arbitration Session will be:
Taxpayer:
For Taxpayer: