Exhibit 10.4
TAX SHARING AGREEMENT dated as of [DATE], between
Xxxxxxx-Xxxxx Squibb Company, a Delaware corporation ("BMS"),
and Xxxxxx Holdings, Inc., a Delaware corporation ("Zimmer",
collectively, the "Companies").
WHEREAS, as of the date hereof, BMS is the common parent of an
affiliated group of domestic corporations, including Zimmer and its direct and
indirect subsidiaries, which has elected to file consolidated federal income tax
returns;
WHEREAS, pursuant to an Amended and Restated Business Transfer
Agreement dated as of December 29, 2000, Xxxxxxx-Xxxxx Xxxxxx X.X., a Japanese
kabushiki kaisha and a wholly-owned subsidiary of BMS ("BMS KK"), transferred to
Xxxxxx X.X., a Japanese kabushiki kaisha and a wholly-owned subsidiary of BMS KK
("Xxxxxx XX"), certain assets relating to the Japanese portion of the Zimmer
Business in exchange for 2.9 billion Yen, subject to adjustment, and the
assumption of certain liabilities, all in accordance with the Amended and
Restated Business Transfer Agreement (the "Japan Restructuring");
WHEREAS, the Board of Directors of BMS KK has determined to
distribute its shares of Xxxxxx XX to BMS (the "Japan Distribution");
WHEREAS, the Board of Directors of Xxxxxxx-Xxxxx Squibb Holdings
Limited, a United Kingdom public limited company and a wholly-owned subsidiary
of BMS ("BMS Holdings UK"), has determined to distribute the stock of Zimmer
Limited, a United Kingdom public limited company ("Zimmer Limited") and a
wholly-owned subsidiary of BMS UK, to BMS (the "UK Distribution");
WHEREAS, the Board of Directors of BMS has determined to contribute
all the outstanding shares of common stock of Xxxxxx XX, Xxxxxx Limited and
Xxxxxx, Inc., a Delaware corporation and a direct wholly-owned subsidiary of
BMS, and certain other stock and/or assets in exchange for all the outstanding
shares of common stock of Zimmer and the assumption by Zimmer of certain
liabilities of BMS (the "Contribution");
WHEREAS, the Board of Directors of BMS has determined to distribute
(the "Distribution") all the outstanding shares of common stock of Zimmer to the
BMS shareholders of record as of a date to be determined and, as a result of the
Distribution, Zimmer and its subsidiaries will not be included in the
consolidated federal income tax return of BMS for the portion of the taxable
year following the Distribution or in future taxable years;
WHEREAS, the Companies have entered into a contribution and
distribution agreement (the "Contribution and Distribution Agreement") to, among
other things, allocate and assign responsibility for certain liabilities of the
Companies in connection with and after the Contribution and Distribution (the
"US Transactions");
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WHEREAS, the Companies intend that the Japan Restructuring and the
Contribution qualify as tax-free transfers under Sections 351 and 368(a)(1)(D)
of the Internal Revenue Code of 1986, as amended (the "Code"), and that the
Japan Distribution, the UK Distribution, and the Distribution qualify as a
tax-free spin-offs under Sections 355 and 368(a)(1)(D) of the Code;
WHEREAS, BMS submitted a private letter ruling request to the United
States Internal Revenue Service ("IRS") to the effect that, for United States
federal income tax purposes, no gain or loss will be recognized by BMS or Zimmer
from the US Transactions or by the holders of BMS common stock upon receipt of
Zimmer shares in the Distribution (the initial submission dated February 22,
2001 and all supplements thereto collectively referred to herein as the "Ruling
Request"); and
WHEREAS, the Companies desire to allocate the tax responsibilities,
liabilities and benefits of transactions which occurred on or prior to the date
on which the Distribution occurs (the "Distribution Date"), and transactions
which may occur after the Distribution Date, and to provide for certain other
Tax (as hereafter defined) matters;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the Companies (each on behalf of itself, each of
its subsidiaries as of the Distribution Date, and its future subsidiaries)
hereby agree as follows:
ARTICLE I
DEFINITIONS
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 references are to this Agreement unless otherwise stated.
"936 RETURN" means any IRS Form 5735 (or any successor form) and
any IRS Form 1120 (or any successor form) required to be filed with respect
to Xxxxxx Caribe.
"AFFILIATED GROUP" means an affiliated group of corporations within
the meaning of Code Section 1504(a) for the taxable period in question.
"BMS AFFILIATED GROUP" means the Affiliated Group of which BMS or
any successor of BMS is the common parent.
"BMS GROUP" means (i) the corporations that are members of the BMS
Affiliated Group and (ii) the corporations that would be members of the BMS
Affiliated Group but for the fact they are not includible corporations under
Code Section 1504(b).
"CHANGE IN ZIMMER STOCK OWNERSHIP" means any change in the
ownership, in terms of either value or voting power, of any class of stock of
Zimmer or of options or other securities or interests exchangeable for or
convertible into any class of stock of Zimmer, including, without limitation, a
change resulting from issuance of any class of stock of Zimmer in connection
with a public offering, private placement, stock or
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asset acquisition, merger, option grant or capital contribution, or any change
in ownership required to be reported on Schedule 13D or 13G (or successor
schedules thereto) or issuance of employee stock options or issuance of stock
pursuant to the exercise of employee stock options. This definition and its
application are intended to monitor compliance with Section 355(e) of the Code
following the Distribution and shall be interpreted accordingly. Any
clarification of or change in the Treasury Regulations promulgated under Section
355(e) of the Code shall be incorporated in this definition and its
interpretation.
"CODE" is defined in the recitals to this Agreement.
"CONTRIBUTION" is defined in the recitals to this Agreement.
"CONTRIBUTION AND DISTRIBUTION AGREEMENT" is defined in the recitals
to this Agreement.
"COMBINED STATE INCOME TAXES" means any State Income Taxes with
respect to which BMS currently files, or has filed, Tax Returns on a combined,
consolidated or unitary basis.
"DISTRIBUTION" is defined in the recitals to this Agreement.
"DISTRIBUTION DATE" is defined in the recitals to this Agreement.
"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
agreement under the laws of other jurisdictions, which resolves the entire Tax
liability for any taxable period; (iii) any allowance of a refund or credit in
respect of an overpayment of Tax, but only after the expiration of all periods
during which such refund may be recovered by the jurisdiction imposing the Tax;
or (iv) any other final disposition, including by reason of the expiration of
the applicable statute of limitations.
"FOREIGN TAXES" means any Taxes imposed by a Taxing Authority
(including Puerto Rico or any of its localities) other than the United States or
any of its states or localities.
"FORM 5471" is defined in Section 2.02(c).
"GROUP" means either the BMS Group or the Zimmer Group, as the case
may be.
"INDEMNIFYING PARTY" is defined in Section 6.01(a).
"INDEMNITEE" is defined in Section 6.01(a).
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"INDEMNITY ISSUE" is defined in Section 6.01(a).
"IRS" is defined in the recitals to this Agreement.
"JAPAN DISTRIBUTION" is defined in the recitals to this Agreement.
"JAPAN RESTRUCTURING" is defined in the recitals to this Agreement.
"OPTIONS" means any options or stock appreciation rights relating to
BMS or Zimmer stock that are outstanding immediately after the Distribution.
"POST-DISTRIBUTION PERIOD" means any taxable period ending after the
Distribution Date (in the case of a Straddle Period including only the portion
of such taxable period beginning on the day after the Distribution Date).
Accordingly, for the avoidance of doubt, the Distribution Date shall never be
included in any Post-Distribution Period.
"PRE-DISTRIBUTION PERIOD" means any taxable period beginning on or
before the Distribution Date (in the case of a Straddle Period including only
the portion of such taxable period ending on the Distribution Date).
Accordingly, for the avoidance of doubt, the Distribution Date shall, in all
cases, be included in the Pre-Distribution Period.
"PRELIMINARY TRANSACTIONS" means transactions by members of the BMS
Group to prepare for the Contribution and Distribution, other than the Japan
Restructuring, the Japan Distribution, and the UK Distribution.
"RULING REQUEST" is defined in the recitals to this Agreement.
"SECOND ANNIVERSARY PERIOD" means the period beginning on the date
of this Agreement and ending on the second anniversary of the Distribution Date.
"STATE INCOME TAXES" means any United States state or local Taxes
determined by reference to income, net worth, gross receipts or capital, or any
such Taxes imposed (including franchise or similar Taxes) in lieu of income
Taxes.
"STRADDLE PERIOD" means any taxable period that begins on or before
and ends after the Distribution Date.
"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.
"TAXING AUTHORITY" means any governmental authority imposing Taxes.
"TAX OPINION" means the opinion of Cravath, Swaine & Xxxxx
concerning the United States federal income tax treatment of the Japan
Restructuring, the Japan Distribution and the UK Distribution.
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"TAX RETURN" means any return, filing, report, questionnaire,
information statement or other document required to be filed, including amended
returns that may be filed, for any taxable period with any Taxing Authority
(whether or not a payment is required to be made with respect to such filing).
"TAX RULING" means a private letter ruling received in response to
the Ruling Request.
"THIRD ANNIVERSARY PERIOD" means the period beginning on the date of
this Agreement and ending on the third anniversary of the Distribution Date.
"TRANSACTIONS" means the Contribution, the Distribution, the Japan
Restructuring, the Japan Distribution, the UK Distribution and the Preliminary
Transactions.
"TRANSACTION TAXES" means Taxes of, or indemnification for Taxes by,
any member of the BMS Group (as in existence prior to the Distribution)
resulting from, or arising in connection with, (a) the failure of (i) the
Contribution or the Japan Restructuring to be tax-free to such member under Code
Sections 351 and 368(a)(1)(D), or (ii) the Distribution, the Japan Distribution
or the UK Distribution to be tax-free to such member, or its shareholders, under
Code Sections 355 and 368(a)(1)(D) (including, without limitation, by reason of
the application of Code Sections 355(d) or (e)) or (b) the failure of any of the
Transactions to be tax-free under comparable provisions of federal, state, local
or foreign law.
"TREASURY REGULATION" means the regulations promulgated from time to
time under the Code as in effect for the relevant taxable period.
"UK DISTRIBUTION" is defined in the recitals to this Agreement.
"US TRANSACTIONS" is defined in the recitals to this Agreement.
"ZIMMER AFFILIATED GROUP" means the Affiliated Group of which Zimmer
or any successor of Zimmer is the common parent.
"ZIMMER BUSINESS" is defined in the Ruling Request.
"ZIMMER CARIBE" means Xxxxxx Caribe, Inc., a Delaware corporation
and a member of the Zimmer Group.
"ZIMMER CUMULATIVE OWNERSHIP CHANGE" is defined in Section 5.02.
"ZIMMER CUMULATIVE OWNERSHIP CHANGE BY VALUE" is defined in Section
5.01(a).
"ZIMMER CUMULATIVE OWNERSHIP CHANGE BY VOTE" is defined in Section
5.01(b).
"ZIMMER GROUP" means (i) the corporations that are members of the
Zimmer Affiliated Group and (ii) the corporations that would be members of the
Zimmer
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Affiliated Group but for the fact they are not includible corporations
under Code Section 1504(b).
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ARTICLE II
Preparation and Filing of Tax Returns
SECTION 2.01. TAX RETURNS FOR TAXABLE PERIODS ENDING ON OR BEFORE
THE DISTRIBUTION DATE. (a) BMS shall prepare and file all federal income Tax
Returns, all Combined State Income Tax Returns and all Foreign Tax Returns of
each member of the BMS Group for any taxable period that ends on or before the
Distribution Date. Zimmer hereby irrevocably designates, and agrees to cause
each of its affiliates to designate, BMS as its agent to take any and all
actions necessary or incidental to the preparation and filing by BMS of any Tax
Return described in this Section 2.01.
(b) Zimmer shall prepare and file all Tax Returns (other than Tax
Returns described in Sections 2.02(b), (c) and (d), of each member of the Zimmer
Group for any taxable period that ends on or before the Distribution Date.
SECTION 2.02. TAX RETURNS FOR STRADDLE PERIODS. (a) Except as
provided in Sections 2.02(b), (c) and (d), Zimmer shall prepare and file all
Tax Returns of each member of the Zimmer Group for all Straddle Periods.
(b) In the case of any Straddle Period for State Income Taxes,
Zimmer shall prepare all Tax Returns of each member of the Zimmer Group on a
basis consistent with past practice, and shall present such Tax Returns to BMS
for review at least 30 days before the date on which such Tax Returns are
required to be filed. Zimmer shall not file such Tax Returns without the written
consent of BMS, which shall not be unreasonably withheld. Promptly upon
receiving the written consent of BMS, Zimmer shall file, or cause to be filed,
such Tax Returns.
(c) In the case of any IRS Form 5471, or any successor form (a "Form
5471") relating to the calendar year in which the Distribution occurs, that is
required to be filed with respect to any member of the Zimmer Group, Zimmer
shall prepare such Form 5471 on a basis consistent with past practice, and shall
present such Form 5471 to BMS for review at least 30 days before the date on
which such Form 5471 is required to be filed. Zimmer shall not file such Form
5471 without the written consent of BMS, which shall not be unreasonably
withheld. BMS shall, and promptly upon receiving the written consent of BMS,
Zimmer shall, file or cause to be filed, such Form 5471, in each case in a
consistent manner.
(d) In the case of any 936 Return required to be filed for a
Straddle Period, BMS shall prepare such 936 Return on a basis consistent with
past practice, and shall present such 936 Return to Zimmer for review at
least 30 days before the date on which such 936 Return is required to be
filed. BMS shall consider in good faith any suggestions or comments made by
Zimmer after such review. On or before the date on which such 936 Return is
required to be filed, Zimmer shall file or cause to be filed such 936 Return.
BMS shall be entitled to charge, and Zimmer shall be required to pay, a
reasonable fee for services provided by BMS to Zimmer pursuant to this
Section 2.02(d).
SECTION 2.03. TAX RETURNS FOR TAXABLE PERIODS ENDING AFTER THE
DISTRIBUTION DATE (OTHER THAN STRADDLE PERIODS). In the case of any Tax Return
for any taxable period ending after the Distribution Date (other than a Straddle
Period), such Tax Returns shall be prepared and filed by BMS if they relate to
any member of the BMS Group and by Zimmer if they relate to any member of the
Zimmer Group.
SECTION 2.04. MANNER OF TAX RETURN PREPARATION. (a) Unless otherwise
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required by a Final Determination, the Companies shall file all Tax Returns, and
take all other actions, in a manner consistent with the Ruling Request and any
Tax Ruling.
(b) Zimmer and BMS shall execute and file such consents, elections
and other documents as may be required or appropriate for the proper filing of
each Straddle Period Tax Return.
ARTICLE III
Payment of Taxes
SECTION 3.01. (a) PRE-DISTRIBUTION PERIOD TAXES. Except as otherwise
provided in Sections 3.02 and 3.03, BMS shall be liable for, shall indemnify
each member of the Zimmer Group against, and shall be entitled to retain all
refunds of, all federal income Taxes, Combined State Income Taxes and Foreign
Taxes of each member of the BMS Group for all Pre-Distribution Periods.
(b) Except as otherwise provided in Sections 3.02 and 3.03, Zimmer
shall be liable for, shall indemnify each member of the BMS Group against, and
shall be entitled to retain all refunds of, all Taxes (other than Taxes
described in section 3.01(a)) of each member of the Zimmer Group for all
Pre-Distribution Periods.
(c) POST-DISTRIBUTION PERIOD TAXES. Except as otherwise provided in
Sections 3.02 and 3.03, Zimmer shall be liable for, shall indemnify each member
of the BMS Group against, and shall be entitled to retain all refunds of, all
Taxes of each member of the Zimmer Group for all Post-Distribution Periods.
(d) APPORTIONMENT OF STRADDLE PERIOD TAXES. Straddle Period income
Taxes shall be apportioned between the Pre-Distribution Period and the
Post-Distribution Period on a closing of the books basis.
SECTION 3.02. TRANSACTION TAXES.
(a) ZIMMER GROUP LIABILITY FOR CERTAIN TRANSACTION TAXES. Each
member of the Zimmer Group shall be jointly and severably liable for, and shall
indemnify each member of the BMS Group against, any Transaction Taxes that are
primarily attributable to:
(i) any inaccurate statement or representation of fact or intent (or
omission to state a material fact) in the Ruling Request or Section 4.01
that relates to the Zimmer Group; or
(ii) any inaccurate statement or representation of fact or intent
(or omission to state a material fact) that relates to the Zimmer Group in
a letter or certificate that forms the basis for the Tax Opinion; or
(iii) any action or omission by the Zimmer Group after the date of
the Distribution inconsistent with the covenants set forth in Section
4.02.
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(b) BMS GROUP LIABILITY FOR REMAINING TRANSACTION TAXES. BMS shall
be liable for, and shall indemnify each member of the Zimmer Group against, any
Transaction Taxes not allocated to the Zimmer Group under Section 3.02(a).
SECTION 3.03. COMPENSATION DEDUCTIONS. (a) Each of BMS and Zimmer,
respectively, shall be responsible for timely filing with any relevant Taxing
Authorities all required Tax Returns with respect to grants or exercises of
Options on its stock (or grants or vesting of restricted stock issued by it).
BMS (or the appropriate member of the BMS Group) shall claim all Tax deductions
arising by reason of exercises of Options on, or receipt or vesting of
restricted shares of, BMS stock. Zimmer (or the appropriate member of the Zimmer
Group) shall claim all Tax deductions arising by reason of exercises of Options
on, or receipt or vesting of restricted shares of, Zimmer stock.
(b) If, pursuant to a Final Determination, all or any part of a Tax
deduction claimed pursuant to Section 3.03(a) is disallowed to the Group
claiming such deduction, then, to the extent such deduction may be allowable to
a member of the other Group, such member shall promptly claim such deduction and
shall promptly pay to the Group whose Tax deduction was disallowed the amount of
any Tax benefit realized by such member or its Group as a result of claiming
such deduction.
ARTICLE IV
REPRESENTATIONS AND COVENANTS WITH RESPECT TO THE DISTRIBUTION
SECTION 4.01. REPRESENTATIONS. (a) Zimmer represents that, as of the
date of this Agreement, it knows of no fact that may cause the Contribution or
the Japan Restructuring to fail to qualify as a tax-free transfer under Section
351 and 368(a)(1)(D) of the Code, or the Distribution, the Japan Distribution or
the UK Distribution to fail to qualify as a tax-free spin-off under Sections 355
and 368 (a)(1)(D) of the Code.
(b) Zimmer represents that, as of the date of this Agreement, there
is no plan or intention to:
(i) liquidate any of the members of the Zimmer Group or merge or
consolidate any of such corporations with any other person subsequent to
the Distribution;
(ii) sell or dispose of the assets of any member of the Zimmer Group
subsequent to the Distribution, except in the ordinary course of business;
(iii) take any action inconsistent with the Ruling Request, the Tax
Opinion or any Tax Ruling;
(iv) purchase stock of Zimmer, other than in accordance with the
requirements of Revenue Procedure 96-30 and in conformity with the Ruling
Request and any Tax Ruling; or
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(v) enter into any negotiations, discussions, agreements or
arrangements with respect to any proposed Change in Zimmer Stock Ownership
after which the Zimmer Cumulative Ownership Change would exceed 10
percent.
(c) Zimmer represents that it is not aware of any plan or intention
by shareholders of BMS to sell, exchange, transfer, or otherwise dispose of any
of their stock or securities in BMS or Zimmer subsequent to the Distribution.
SECTION 4.02. COVENANTS. (a) Zimmer agrees that it will not take,
and will not permit any member of the Zimmer Group to take, any action that will
cause the Contribution or the Japan Restructuring to fail to qualify as a
tax-free transfer under Sections 351 and 368(a)(1)(D) of the Code, or the
Distribution, the Japan Distribution or the UK Distribution to fail to qualify
as a tax-free spin-off under Code Sections 355 and 368(a)(1)(D).
(b) Zimmer agrees that:
(i) No member of the Zimmer Group shall purchase stock of Zimmer,
other than in accordance with the requirements of Revenue Procedure 96-30
and in conformity with the Ruling Request, the Tax Opinion and any Tax
Ruling;
(ii) On or after the Distribution Date, Zimmer shall not, nor shall
it permit any member of the Zimmer Group to, make or change any tax
election, change any accounting method, amend any Tax Return or take any
position on any Tax Return, take any action, omit to take any action or
enter into any transaction that results in an increased tax liability or
reduction of any Tax attribute of BMS with respect to any Pre-Distribution
Period;
(iii) During the Second Anniversary Period:
(A) No member of the Zimmer Group shall liquidate, merge or
consolidate with any other person;
(B) Zimmer shall not sell, exchange, distribute or otherwise
dispose of the assets of any member of the Zimmer Group, except in
the ordinary course of business;
(C) Zimmer shall continue the active conduct of its historic
United States business (i.e. the manufacture and marketing of
reconstructive implants, fracture management products and orthopedic
surgical products in the United States); and
(D) Zimmer shall not consummate any proposed Change in Zimmer
Stock Ownership after which the Zimmer Cumulative Ownership Change
will exceed 10%. Notwithstanding the foregoing, if a proposed Change
in Zimmer Stock Ownership is a result of negotiations, discussions,
agreements or arrangements that occurred at any time before, or
during the six-month period immediately following, the Distribution,
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then the preceding sentence shall apply to that proposed Change in
Zimmer Stock Ownership during the Third Anniversary Period; and
(iv) Within 30 days after entering into an agreement or adopting a
plan to consummate any Change in Zimmer Stock Ownership, Zimmer will
notify BMS of such agreement or plan and provide BMS with complete details
as to how the proposed Change in Zimmer Stock Ownership will affect the
Zimmer Cumulative Ownership Change.
(c) EXCEPTIONS. Notwithstanding the foregoing, Zimmer and the
members of the Zimmer Group shall be permitted to take an action inconsistent
with the provisions of Section 4.02(b)(iii), if, prior to taking such action,
Zimmer:
(i) Provides notification to BMS of its plans with respect to such
action, and promptly responds to any inquiries by BMS following such
notification; and
(ii) obtains and provides to BMS either:
(A) a ruling from the IRS to the effect that such action shall
not cause any of the Transactions to be taxable to BMS or its
shareholders; or
(B) an opinion, in form and substance acceptable to BMS in its
sole discretion, of Cravath, Swaine & Xxxxx (or of other independent
counsel that is nationally recognized as being expert in federal Tax
matters and is acceptable to BMS in its sole discretion) to the
effect that such action shall not cause any of the Transactions to
be taxable to BMS or its shareholders.
ARTICLE V
CALCULATION OF ZIMMER CUMULATIVE OWNERSHIP CHANGE
SECTION 5.01. (a) ZIMMER CUMULATIVE OWNERSHIP CHANGE BY VALUE.
"Zimmer Cumulative Ownership Change by Value" means the total percentage change
in Zimmer stock ownership in terms of value immediately after a proposed Change
in Zimmer Stock Ownership and shall be calculated by multiplying (a) 100 by (b)
a fraction (i) the numerator of which is the sum of (A) the total value of the
shares of Zimmer stock proposed to be issued, or for which there is a change in
ownership, in the proposed Change in Zimmer Stock Ownership, (B) the total value
of the shares of Zimmer stock issued, or for which there has been a change in
ownership, in all prior Changes in Zimmer Stock Ownership, and (C) the value of
the number of shares of Zimmer stock determined by BMS and Zimmer on or prior to
the Distribution Date, and (ii) the denominator of which is the total value of
the shares of Zimmer stock that would be outstanding after the proposed Change
in Zimmer Stock Ownership.
(b) ZIMMER CUMULATIVE OWNERSHIP CHANGE BY VOTE. "Zimmer Cumulative
Ownership Change by Vote" means the total percentage change in Zimmer
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stock ownership in terms of voting power immediately after a proposed Change in
Zimmer Stock Ownership and shall be calculated by multiplying (a) 100 by (b) a
fraction (i) the numerator of which is the sum of (A) the total voting power of
the shares of Zimmer stock proposed to be issued, or for which there is a change
in ownership, in the proposed Change in Zimmer stock Ownership, (B) the total
voting power of the shares of Zimmer Stock issued, or for which there has been a
change in ownership, in all prior Changes in Zimmer Stock Ownership, and (C) the
voting power of the number of shares of Zimmer stock determined by BMS and
Zimmer on or prior to the Distribution Date, and (ii) the denominator of which
is the total voting power of the shares of Zimmer stock that would be
outstanding after the proposed Change in Zimmer Stock Ownership.
(c) CALCULATION. In calculating the value or voting power of shares
of Zimmer stock (i) to be issued or issued or for which there is or has been a
change in ownership in either a proposed or prior Change in Zimmer Stock
Ownership, or (ii) that would be outstanding after a proposed Change in Zimmer
Stock Ownership, any options or other securities exchangeable for or convertible
into any class of stock of Zimmer shall be treated as exercised, exchanged or
converted, as the case may be, where such treatment would increase the resulting
Zimmer Cumulative Ownership Change.
SECTION 5.02. ZIMMER CUMULATIVE OWNERSHIP CHANGE. The "Zimmer
Cumulative Ownership Change" shall equal the greater of the Zimmer Cumulative
Ownership Change by Value and the Zimmer Cumulative Ownership Change by Vote.
ARTICLE VI
TAX PROCEEDINGS; COOPERATION AND EXCHANGE OF INFORMATION
SECTION 6.01. TAX PROCEEDINGS. (a) NOTIFICATION. Within 15 days
after a party (the "Indemnitee") becomes aware of the existence of a Tax issue
(an "Indemnity Issue") that may give rise to an indemnification claim under
Article III of this Agreement (a "Tax Controversy"), by it against the other
party (the "Indemnifying Party"), the Indemnitee shall promptly notify the
Indemnifying Party of the Indemnity Issue, and thereafter shall promptly forward
to the Indemnifying Party copies of notices and communications with a Taxing
Authority relating to such Tax Controversy (E.G., any IRS revenue agent's
reports or similar reports, notices of proposed adjustment, or notices of
deficiency).
(b) CONTROL OF TAX PROCEEDINGS. Except as provided in Section
6.01(c), the Indemnifying Party may elect to control, and may elect to have sole
discretion in handling, settling or contesting any audit inquiry, information
request, audit proceeding, suit, contest or any other action with respect to a
Tax Controversy for which it would be required to indemnify the other party if
it acknowledges in writing that it has sole liability for any Taxes that might
arise in such proceeding. The Indemnifying Party shall not settle any Tax
proceeding with respect to a Tax Controversy on a basis that would materially
adversely affect the Indemnitee without obtaining the Indemnitee's written
consent, which consent shall not be unreasonably withheld. The Indemnitee shall
not settle any Tax Controversy without obtaining the Indemnifying Party's
written consent, which shall
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not be unreasonably withheld. Any out-of-pocket costs incurred in handling,
settling or contesting a Tax controversy shall be borne by the Indemnifying
Party.
(c) CONTROL OF TRANSACTION TAX PROCEEDINGS. BMS and Zimmer shall
jointly control, and shall each have the right to participate in all activities
and strategic decisions with respect to, any Tax proceedings relating to
Transaction Taxes. BMS may assume sole control of a Transaction Tax proceeding
if it acknowledges in writing that it has sole liability for any Transaction
Taxes that might arise in such proceeding.
SECTION 6.02. INDEMNIFICATION PAYMENTS. (a) If an Indemnitee has a
claim for an indemnification payment from an Indemnifying Party under this
Agreement, the Indemnitee shall promptly provide to the Indemnifying Party
notice of such claim, including a description of such claim and a detailed
calculation of the amount of the indemnification payment that is claimed. The
Indemnifying Party shall make the claimed payment to the Indemnitee within 20
business days after receiving such notice, unless the Indemnifying Party
reasonably disputes the amount of, or its liability for, such payment. All
disputes regarding the amounts of, or liability for, any such claimed payment
shall be resolved pursuant to the procedures set forth in the Contribution and
Distribution Agreement. 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 provided for payment, at the
underpayment rate in effect under the Code at such time.
(b) TREATMENT OF PAYMENTS. The amount of all indemnification
obligations under this Agreement shall be calculated on an after-Tax basis. Any
payments made to one party by another party which this Agreement shall be
treated for all Tax purposes as nontaxable payments (dividends or capital
contributions, as the case may be) made immediately prior to the Distribution,
unless, and then only to the extent, otherwise required by a Final
Determination.
SECTION 6.03. COOPERATION AND EXCHANGE OF INFORMATION. (a) Each
member of the BMS Group and the Xxxxxx Group shall cooperate fully with all
reasonable requests from the other party in connection with the preparation and
filing of Tax Returns, claims for refund, and Tax proceedings concerning issues
or other matters covered by this Agreement. Such cooperation shall include,
without limitation:
(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 work papers, 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 proceeding, or the filing of
a Tax Return or refund claim by a member of the BMS or Xxxxxx Group,
including certification, to the best of a party's knowledge, of the
accuracy and completeness of the information it has supplied; and
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(iii) the use of the parties' best efforts to obtain any
documentation that may be necessary or reasonably helpful in connection
with any of the foregoing.
Each party shall make its employees and facilities available on a
reasonable and mutually convenient basis in connection with the foregoing
matters.
(b) If a party fails to comply with any of its obligations set forth
in Section 6.03(a) of this Agreement 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.
SECTION 6.04. RETENTION OF INFORMATION. A party intending to
dispose of documentation of BMS or Zimmer or any member of its respective Group,
including without limitation, books, records, Tax Returns and all supporting
schedules and information relating thereto (after the expiration of the
applicable statute of limitations), shall provide written notice to the other
party describing the documentation to be destroyed or disposed of 60 days prior
to taking such action. The other party may arrange to take delivery of the
documentation described in the notice at its expense during the succeeding
60-day period.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.01. NOTICE. Any payment, notice or communication required
or permitted to be given under this Agreement shall be in writing (including
facsimile) and mailed, faxed or delivered to the parties at the following
addresses (or at such other address as one party may specify by notice to the
other party):
If to BMS to:
Xxxxxxx-Xxxxx Squibb Company
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq., Vice President, Taxes
Xxxxxxx-Xxxxx Squibb Company
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: General Counsel
If to Zimmer:
Xxxxxx Holdings, Inc.
000 Xxxx Xxxx Xxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
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Notification of a change of address shall be given by either party to the other
as provided in this Section 7.01. All such notices and communications shall be
effective (i) when received, if mailed or delivered, or (ii) when confirmed by
fax answerback, if faxed.
SECTION 7.02. GOVERNING LAW. This Agreement shall be governed by the
laws applicable to contracts entered into and to be performed within the State
of New York by residents thereof.
SECTION 7.03. JURISDICTION. Each party agrees to submit itself
exclusively to the personal jurisdiction of any New York court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement and agrees that it will not attempt to deny or defeat such
personal jurisdiction or venue by motion or other request for leave from any
such New York court. Each party further agrees that service of any process,
summons, notice or document by U.S. registered mail to such party's respective
address set forth above shall be effective service of process for any action,
suit or proceeding in New York with respect to any matters to which it has
submitted to jurisdiction in this Section 7.03.
SECTION 7.04. WAIVER OF JURY TRIAL. Each party waives, to the
fullest extent permitted by applicable law, any right it may have to a trial by
jury in respect of any dispute arising out of this Agreement.
SECTION 7.05. ENTIRE AGREEMENT. This Agreement embodies the entire
understanding between the parties relating to its subject matter and supersedes
and terminates all prior agreements and understandings among the parties with
respect to such matters. No promises, covenants or representations of any kind,
other than those expressly stated herein, have been made to induce any party to
enter into this Agreement. This Agreement 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. If, and to the extent, the provisions of
this Agreement conflict with the Contribution and Distribution Agreement, or any
other agreement entered into in connection with the Transactions, the provisions
of this Agreement shall control.
SECTION 7.06. 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 BMS or Zimmer. Subject to the preceding sentence, this
Agreement shall be binding on, and shall inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and assigns.
SECTION 7.07. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same.
SECTION 7.08. SEVERABILITY. If any provision of this Agreement or
the
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application of any such provision to any person or circumstances shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.
SECTION 7.09. HEADINGS. Headings of sections in this Agreement are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
SECTION 7.10. SURVIVAL. Notwithstanding anything in this Agreement
to the contrary, the provisions of this Agreement shall survive for the full
period of all applicable statutes of limitations (giving effect to any waiver,
mitigation or extension thereof).
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed by its respective duly authorized officer as of the date first set
forth above.
Xxxxxxx-Xxxxx Squibb Company
by
----------------------------
Name:
Title:
Xxxxxx Holdings, Inc.
by
----------------------------
Name:
Title:
