EXHIBIT 10.4
TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT (this "Agreement"), is made and
entered into as of __________, 2002, by and between ALLERGAN, INC., a Delaware
corporation ("Allergan"), and ADVANCED MEDICAL OPTICS, INC., a Delaware
corporation and wholly owned subsidiary of Allergan ("AMO").
WHEREAS, Allergan, AMO and Allergan's other subsidiaries have
joined in filing consolidated federal Income Tax Returns and certain
consolidated, combined, unitary or similar state, foreign and local Tax Returns;
WHEREAS, pursuant to a Contribution and Distribution Agreement
dated as of ___________, 2002, by and among Allergan and AMO (the "Distribution
Agreement"), Allergan will distribute to the holders of its common stock all of
the shares of common stock of AMO (the "Distribution");
WHEREAS, pursuant to the Distribution Agreement, AMO will leave
the Allergan Group (as defined herein); and
WHEREAS, the parties hereto wish to provide for (i) the
allocation of, and indemnification against, certain liabilities for Taxes, (ii)
the preparation and filing of Tax Returns and the payment of Taxes with respect
thereto, and (iii) certain related matters.
NOW THEREFORE, in consideration of the foregoing and the
respective covenants and agreements set forth below, the parties agree as
follows:
ARTICLE I.
DEFINITIONS
When used herein the following terms shall have the following
meanings:
Actual Additional Taxes Payable: as defined in Section 3.6(f) of
this Agreement.
Actual Taxes Payable: as defined in Section 3.4(a) of this
Agreement.
Acquisition: with respect to the stock of Allergan or AMO, as
applicable, any acquisition of stock or issuance of stock, excluding (a) any
acquisition of stock that qualifies under Treasury Regulation section
1.355-7T(d)(5) or any successor thereto, (b) any acquisition of stock that is in
connection with the performance of services as an employee or director and that
qualifies under Treasury Regulation section 1.355-7T(d)(6) or any successor
thereto, including, without limitation, any acquisition of
stock pursuant to an AMO Equity Plan, and (c) any acquisition of
stock by a retirement plan of an employer that qualifies under Treasury
Regulation section 1.355-7T(d)(7) or any successor thereto.
Acquisition Approval Process: as defined in Section 5.2(b) of
this Agreement.
Additional Pre-Closing Straddle Period Portion: as defined in
Section 3.6(f) of this Agreement.
Adverse Consequence(s): all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, liabilities, obligations, liens, losses, expenses,
and fees, including court costs and reasonable attorney's fees and expenses.
Affiliate: with respect to any corporation (the "given
corporation"), each entity that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
given corporation. For purposes of this definition, "control" means the
possession, directly or indirectly, of 50% or more of the voting power or value
of outstanding equity interests.
Affiliated Group: an affiliated group of corporations within
the meaning of Code Section 1504(a) (and without regard to the exclusions
contained in Code Section 1504(b)) for the Taxable Period or, for purposes of
any state, foreign or local Tax matters that are filed on a consolidated,
combined, unitary or similar basis, any consolidated, combined, unitary or
similar group of corporations within the meaning of the corresponding provisions
of tax law for the jurisdiction in question.
After-Tax Basis: any indemnity payment made hereunder shall
give effect to, and be adjusted by the value of, any and all Income Tax
Benefit(s) for federal, state, foreign or other Income Tax purposes attributable
to the payment of the indemnified liability, which value shall be determined on
an assumed basis by (a) multiplying the amount of any applicable deductions,
losses, offsets or other Income Tax items (such amount determined as if such
deductions, losses, offsets or other Income Tax items will generate an immediate
deduction for the full amount ultimately available) by (i) 39%, (ii) if no state
Income Tax Benefit shall result therefrom (determined on a hypothetical basis by
using the highest marginal corporate Income Tax rate), 35% (such percentages to
increase or decrease on a percentage-for-percentage basis with any subsequent
increases or decreases in the current 35% maximum marginal federal Income Tax
rate for corporations, and 100% minus the maximum marginal federal Income Tax
rate for corporations (e.g., 65%) of any increases or decreases in the maximum
marginal state or local Income Tax rate for corporations), or (iii) if such
indemnity payment is made on account of the payment of a foreign Income Tax to
which an Income Tax Benefit in a foreign jurisdiction is attributable, the
applicable statutory rate of Income Tax in the foreign jurisdiction in which the
Income Tax Benefit results, and (b) valuing any credits or other direct
reductions of Income Tax on a dollar-for-dollar basis. For example, if a payment
of $100 (other than a payment of foreign Income Tax) that is deductible by the
indemnitee is indemnified hereunder, the indemnification payment with respect
thereto (applying the characterization set forth in Section 7.2) shall be
reduced by $39 to $61.
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Allergan: as defined in the preamble to this Agreement.
Allergan Business: as defined in the Distribution Agreement.
Allergan Group: Allergan and each corporation that is a member
of an Affiliated Group with respect to which Allergan is the common parent.
AMO: as defined in the preamble to this Agreement.
AMO Business: as defined in the Distribution Agreement;
provided, however, that for Taxable Periods or portions thereof after the
Closing Date, the "AMO Business" shall include any business or operations
conducted by any of the AMO Members.
AMO Equity Plan: each of the following stock option or
employee stock purchase plans adopted by AMO for the benefit of its employees
and directors: the AMO Incentive Compensation Plan, the AMO Employee Stock
Purchase Plan, and the AMO International Employee Stock Purchase Plan (each in
the form and under the plan name adopted by AMO as of the Distribution Date);
provided, however, that any acquisition of AMO stock shall not be treated as
acquired pursuant to an AMO Equity Plan for purposes of this Agreement if the
acquiror or a coordinating group of which the acquiror is a member is a
controlling shareholder or a 10-percent shareholder of AMO within the meaning of
Treasury Regulation section 1.355-7T(d)(6) or any successor thereto.
AMO Group: AMO and each corporation that was a
Pre-Distribution Member and which, on the day after the Closing Date, will be a
member of an Affiliated Group with respect to which AMO is the common parent.
For purposes of this Agreement, the AMO Group shall exist as of the day after
the Closing Date.
AMO Group Allocable Portion: With respect to a Tax Return
filed after the Closing Date for either a Pre-Closing Taxable Period or Straddle
Period, the amount of Taxes for such period attributable to the AMO Business
(net of any previously paid estimated Taxes for such period that are
attributable to the AMO Business). The determination of the amount of Taxes
attributable to the AMO Business for a given Tax Return shall be calculated on a
"with and without basis," by calculating the amount of the excess (if any) of
(i) the amount of Taxes shown as due and payable on such Tax Return as filed,
over (ii) the amount of Taxes that would be shown as due and payable on such Tax
Return if such Tax Return was recalculated excluding the AMO Business. For
purposes of this determination, any Transaction Taxes incurred shall be deemed
not to have been incurred as part of the conduct of the AMO Business, regardless
of which entity incurs such Transaction Taxes.
AMO Member: a corporation that is a member of the AMO Group.
Audit: any audit, assessment of Taxes, other examination by
any Taxing Authority, proceeding or appeal of such a proceeding relating to
Taxes, whether judicial or administrative.
Carrybacks: as defined in Section 4.3 of this Agreement.
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Carryforwards: as defined in Section 4.4 of this Agreement.
Closing Date: the date on which the Distribution is effected
by Allergan.
Code: the Internal Revenue Code of 1986, as amended, or any
successor thereto, as in effect for the Taxable Year in question.
Dispute Resolution Procedure: a procedure whereby (i) Allergan
shall select a representative of a nationally recognized accounting firm or
nationally recognized law firm; (ii) AMO shall select a representative of a
second nationally recognized accounting firm or nationally recognized law firm;
(iii) the two representatives so selected shall together select a representative
of a third nationally recognized accounting firm or nationally recognized law
firm; and (iv) the three representatives together (or, if they are unable to
agree, a majority of them) shall, within a reasonable period of time, decide the
issue(s) submitted to them. The fees of the three representatives and all other
costs of the dispute resolution shall be borne by the losing party in the
dispute. Any decision rendered pursuant to a Dispute Resolution Procedure shall
be final and binding on all Post-Distribution Members and AMO Members.
Distribution: as defined in the preamble to this Agreement.
Distribution Agreement: as defined in the preamble to this
Agreement.
Estimated Additional Pre-Closing Straddle Period Portion: as
defined in Section 3.6(e) of this Agreement.
Estimated AMO Group Allocable Portion: as defined in Section
3.4(a) of this Agreement.
Final Determination: (i) a decision, judgment, decree, or
other order by a court of competent jurisdiction, which has become final and
unappealable; (ii) a closing agreement or accepted offer in compromise under
Code Sections 7121 or 7122, or comparable agreements under the laws of other
jurisdictions; (iii) any other final settlement with the IRS or other Taxing
Authority (including the execution of IRS Form 870AD, or a comparable form under
the laws of other jurisdictions, but excluding any such form that reserves
(whether by its terms or by operation of law) the right of the taxpayer to file
a claim for refund and/or the right of the Taxing Authority to assert a further
deficiency); (iv) the expiration of an applicable statute of limitations; or (v)
the allowance of a refund or credit, but only after the expiration of all
periods during which such refund or credit may be recovered (including by way of
offset).
Group: the Allergan Group, Pre-Distribution Allergan Group,
Post-Distribution Allergan Group or AMO Group, as the context requires.
Income Tax(es): with respect to any corporation or Affiliated
Group, any and all Taxes based upon or measured by net income (regardless of
whether denominated as an "income tax," a "franchise tax" or otherwise).
Income Tax Benefit: any Tax Benefit relating to Income Tax.
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Income Tax Return: a Tax Return relating to the payment of any
Income Tax or to the receipt of any refund of any Income Tax.
Indemnification Threshold: as defined in Section 6.4 of this
Agreement.
IRS: the Internal Revenue Service or any successor thereto,
including but not limited to its Representatives.
IRS Ruling: The letter ruling issued by the IRS in response to
the Ruling Request.
Newly Formed AMO Member: an AMO Member other than a
Pre-Existing AMO Member.
Overdue Rate: a variable rate of interest per annum equal to
the Federal short-term rate as established from time to time pursuant to Code
Section 1274(d).
Post-Closing Straddle Period: with respect to any Straddle
Period, the portion beginning after the Closing Date and ending on the last day
of such Taxable Year.
Post-Closing Taxable Period: a Taxable Year that begins after
the Closing Date.
Post-Distribution Allergan Group: Allergan and each
corporation that was a Pre-Distribution Member and which, on the day after the
Closing Date, will be a member of an Affiliated Group with respect to which
Allergan is the common parent. For purposes of this Agreement, the
Post-Distribution Allergan Group shall exist as of the day after the Closing
Date.
Post-Distribution Member: a corporation that was a
Pre-Distribution Member and is a member of the Post-Distribution Allergan Group
as of the day after the Closing Date.
Pre-Closing Straddle Period: with respect to any Straddle
Period, the portion beginning on the first day of such Taxable Year and ending
at the close of business on the Closing Date.
Pre-Closing Taxable Period: a Taxable Year that ends on or
before the Closing Date.
Pre-Distribution Allergan Group: Allergan and each corporation
that is a member of an Affiliated Group with respect to which Allergan is the
common parent during any Pre-Closing Taxable Period. For purposes of this
Agreement, the Pre-Distribution Allergan Group shall terminate at the close of
business on the Closing Date.
Pre-Distribution Member: a corporation that was a member of
the Pre-Distribution Allergan Group at any time on or prior to the Closing Date.
Pre-Existing AMO Member: each of Allergan K.K., Allergan
(Hangzou) Pharmaceutical Co. Ltd and Allergan Trading International Limited.
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Representative(s): with respect to any person or entity, any
of such person's or entity's directors, officers, employees, agents,
consultants, accountants, attorneys and other advisors.
Ruling Request: The private letter ruling request filed by
Allergan with the IRS, as supplemented and amended from time to time, with
respect to certain federal Income Tax matters relating to the Distribution and
other related matters.
Section 355 Tax Treatment: as defined in Section 5.1 of this
Agreement.
Section 355(e) Gain: as defined in Section 5.2 of this
Agreement.
Special Year-End Item: any item of taxable income that, as a
matter of law, is taken into account at the end of a Taxable Year but relates to
operations throughout the year, including, without limitation, income taken into
account under Sections 951-964 of the Code, and profits splits in accordance
with Section 936 of the Code.
Stock Option: when immediately preceded by "Allergan," means
an option to purchase Allergan common stock pursuant to an Allergan stock option
plan. When immediately preceded by "AMO," "Stock Option" means an option to
purchase AMO common stock pursuant to an AMO stock option plan.
Straddle Period: any Taxable Year beginning before and ending
after the Closing Date.
Tax Benefit(s): (i) in the case of a Tax for which a
consolidated federal, or a consolidated, combined, unitary or similar state,
foreign or local Tax Return is filed, the amount by which the Tax liability of
the Affiliated Group is reduced (by deduction, entitlement to refund, credit,
offset or otherwise, whether available in the current Taxable Year, as an
adjustment to taxable income in any other Taxable Year or as a carryforward or
carryback, and including the effect on other Taxes of such reduction), plus any
interest received with respect to any related Tax refund, and (ii) in the case
of any other Tax, the amount by which the Tax liability of a corporation is
reduced (by deduction, entitlement to refund, credit, offset or otherwise,
whether available in the current Taxable Year, as an adjustment to taxable
income in any other Taxable Year or as a carryforward or carryback, and
including the effect on other Taxes of such reduction), plus any interest
received with respect to any related Tax refund, determined in the case of both
(i) and (ii) on a basis consistent with the computation of After-Tax Basis.
Tax Practices: the most recently applied policies, procedures
and practices employed by the Allergan Group in the preparation and filing of,
and positions taken on, any Tax Returns of Allergan or any Pre-Distribution
Member or Allergan Affiliate for any Pre-Closing Taxable Period.
Tax Return(s): with respect to any corporation or Affiliated
Group, all returns, reports, estimates, statements, declarations, information
returns, claims for refund and other filings relating to, or required to be
filed by any taxpayer in connection with, Taxes, including any schedule or
attachment thereto.
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Taxable Period: a Pre-Closing Taxable Period, a Post-Closing
Taxable Period or a Straddle Period.
Taxable Year: a taxable year (which may be shorter than a full
calendar or fiscal year) or similar period with respect to which any Tax may be
imposed.
Tax(es): any federal, state, foreign or local income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, customs duties, capital stock,
franchise, profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty or addition thereto.
Taxing Authority: the IRS or any other domestic or foreign
governmental authority responsible for the administration of any Tax.
Transaction Taxes: all Taxes occurring solely as a result of
the Transactions, provided, however, that "Transaction Taxes" shall not include
any Taxes resulting from the failure of the Distribution to qualify as tax-free
under Section 355 of the Code.
Transactions: the Contribution (as defined in the Distribution
Agreement), the Distribution, and the series of transactions constituting the
Restructuring Plan (as defined in the Distribution Agreement).
ARTICLE II.
FILING OF TAX RETURNS
Section 2.1 Preparation and Filing of Tax Returns.
(a) By Allergan. Allergan shall prepare and timely
file (or cause to be prepared and timely filed):
(i) all Tax Returns of the Allergan Group or any
Pre-Distribution Member or group of Pre-Distribution Members
for all Pre-Closing Taxable Periods that are filed on or
after the date of this Agreement;
(ii) all Tax Returns of the Allergan Group or any
Pre-Distribution Member or group of Pre-Distribution
Members, other than Newly Formed AMO Members, for all
Straddle Periods; and
(iii) all Tax Returns of the Post-Distribution
Allergan Group or any Post-Distribution Member or group of
Post-Distribution Members for all Post-Closing Taxable
Periods.
(b) By AMO. AMO shall prepare and timely file (or
cause to be prepared and timely filed):
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(i) all Tax Returns of the Newly Formed AMO
Members for all Straddle Periods; and
(ii) all Tax Returns of the AMO Group or any AMO
Member or group of AMO Members for all Post-Closing Taxable
Periods.
Section 2.2 Provision of Filing Information. AMO (or Allergan,
as the case may be) shall cooperate and assist Allergan (or AMO) in the
preparation and filing of all Tax Returns subject to Section 2.1 and any tax
planning related thereto, and shall submit to Allergan (or AMO) (i) all
necessary filing information in a manner consistent with past Tax Practices and
(ii) all other information reasonably requested by Allergan (or AMO) in
connection with the preparation of such Tax Returns and any such tax planning
promptly after such request, including permission to copy any applicable
documents. In particular, with respect to any Tax Return described in Section
2(a)(ii) that relates to an AMO Member, AMO shall sign the Tax Return as
prepared by Allergan and shall otherwise cooperate with Allergan so as to enable
Allergan to file the Tax Return on behalf of AMO. It is expressly understood and
agreed that Allergan's (or AMO's) ability to discharge its Tax Return
preparation and filing responsibilities is contingent upon AMO (or Allergan)
providing Allergan (or AMO) with all cooperation, assistance and information
reasonably necessary or requested for the filing of such Tax Returns and that
AMO (or Allergan) shall indemnify Allergan (or AMO), if, and to the extent that,
Taxes are increased as a result of material inaccuracies in such information or
failures to provide such information and assistance on a timely basis.
Section 2.3 Taxable Year and Allocation of Tax Items. AMO and
Allergan agree that, to the extent permitted by applicable law:
(a) the Taxable Year of the AMO Members included in
the consolidated federal Income Tax Return of the Allergan Group for the Taxable
Period that includes the Closing Date (and all corresponding consolidated,
combined, unitary or similar state, foreign or local Income Tax Returns of the
Allergan Group) shall end at the close of business on the Closing Date, and the
AMO Group and each AMO Member shall begin a new Taxable Year for purposes of
such federal, state, foreign or local Income Taxes on the day after the Closing
Date;
(b) the determination of the items of income to be
included in Tax Returns of the Allergan Group for the Straddle Period and Tax
Returns of AMO Members for the initial Post-Closing Taxable Period shall be
determined by Allergan in the exercise of its discretion on a reasonable and
equitable basis consistent with Treasury Regulation section 1.1502-76 or any
similar provisions under state, local or foreign law;
(c) for purposes of this determination, any Taxes
attributable to a Special Year-End Item shall be treated as occurring ratably
throughout the applicable Taxable Year; and
(d) all federal, state, foreign or local Tax Returns
shall be filed consistently with the positions adopted by Allergan pursuant to
this Section 2.3.
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Section 2.4 Advance Review of Tax Returns.
(a) At least fifteen (15) days prior to the filing of
any Tax Return (including amendments thereto) of a Pre-Existing AMO Member for a
Straddle Period (excluding any Tax Return which includes both a Pre-Existing AMO
Member and an entity other than a Pre-Existing AMO Member), Allergan shall
provide AMO with a draft of such Tax Return. AMO and its Representatives shall
have the right to review all related work papers prior to the filing of any such
Tax Return. Allergan shall consult with AMO regarding AMO's comments with
respect to such Tax Returns and shall in good faith (i) consult with AMO in an
effort to resolve any differences with respect to the preparation and accuracy
of such Tax Returns, and (ii) consider AMO's recommendations for alternative
positions with respect to items reflected on such Tax Returns; provided,
however, that Allergan shall not be required to consider any such recommendation
if the result thereof would adversely affect the Taxes of the Allergan Group or
any Post-Distribution Member for any Taxable Period (including an increase in
the amount payable by Allergan pursuant to Section 3.2), and Allergan may
condition the acceptance of any such recommendation upon the receipt of
appropriate indemnification from AMO for any increases in Taxes that may result
from the adoption of the relevant alternative position.
(b) In the case of each Tax Return (including
amendments thereto) subject to the conformity requirements of Section 2.5 and
filed by AMO pursuant to Section 2.1(b), AMO shall provide Allergan with a draft
of any such Tax Return at least fifteen (15) days prior to the filing thereof.
Allergan and its Representatives, shall have the right to review all related
work papers prior to the filing of any such Tax Return. AMO shall consult with
Allergan regarding Allergan's comments with respect to such Tax Returns and
shall in good faith (i) consult with Allergan in an effort to resolve any
differences with respect to the preparation and accuracy of such Tax Returns,
their consistency with past Tax Practices, and their consistency with the IRS
Ruling and the Ruling Request, and (ii) consider Allergan's recommendations for
alternative positions with respect to items reflected on such Tax Returns;
provided, however, that AMO shall not be required to consider any such
recommendation if the result thereof would adversely affect the Taxes of the AMO
Group or any AMO Member for any Taxable Period, and AMO may condition the
acceptance of any such recommendation upon the receipt of appropriate
indemnification from Allergan for any increases in Taxes that may result from
the adoption of the relevant alternative position.
Section 2.5 Consistent Positions on Tax Returns. AMO shall (a)
prepare all Tax Returns for Pre-Existing AMO Members filed pursuant to this
Agreement for all Taxable Years ended on or before December 31, 2004, in a
manner consistent with past Tax Practices, and (b) prepare all Tax Returns filed
pursuant to this Agreement in a manner consistent with the IRS Ruling and the
Ruling Request, except in either (a) or (b) as otherwise required by changes in
applicable law or material underlying facts, as the parties hereto shall
otherwise consent in writing, which consent shall not be unreasonably withheld,
or as required by a Final Determination.
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ARTICLE III.
PAYMENT OF TAXES
Section 3.1 Pre-Closing Taxable Periods. Allergan shall pay
and be liable for all Taxes shown due and payable on all Tax Returns as filed
pursuant to Section 2.1(a)(i) hereof; provided, however, that AMO shall be
liable for, and shall indemnify Allergan for, the AMO Group Allocable Portion of
such Taxes shown to be due and payable on such Tax Returns as filed.
Section 3.2 Straddle Periods.
(a) Allergan shall pay and be liable for all Taxes
shown due and payable on all Tax Returns as filed pursuant to Section 2.1(a)(ii)
hereof (other than Tax Returns for Pre-Existing AMO Members); provided, however,
that AMO shall be liable for, and shall indemnify Allergan for, the AMO Group
Allocable Portion of such Taxes shown to be due and payable on such Tax Returns
as filed.
(b) AMO shall pay and be liable for all Taxes shown
due and payable on all Tax Returns as filed pursuant to Section 2.1(b)(i)
hereof; provided, however, that Allergan shall be liable for, and shall
indemnify AMO for, any Transaction Taxes shown to be due and payable on such Tax
Returns as filed.
(c) AMO shall pay and be liable for all Taxes shown
due and payable on all Tax Returns of Pre-Existing AMO Members as filed by
Allergan pursuant to Section 2.1(a)(ii) hereof; provided, however, that Allergan
shall be liable for, and shall indemnify AMO for, the amount of the excess, if
any, of (i) such Taxes shown to be due and payable on such Tax Returns as filed
over (ii) the AMO Group Allocable Portion of such Taxes.
Section 3.3 Post-Closing Taxable Periods.
(a) Allergan shall pay and be liable for all Taxes
shown to be due and payable on all Tax Returns as filed pursuant to Section
2.1(a)(iii) hereof.
(b) AMO shall pay and be liable for all Taxes shown
to be due and payable on all Tax Returns as filed pursuant to Section 2.1(b)(ii)
hereof.
Section 3.4 Reimbursement Procedure for AMO Group Allocable
Portion of Taxes Shown on Tax Returns of Pre-Existing AMO Members for Straddle
Periods.
(a) Prior to the payment of Taxes shown due and
payable on any Tax Returns for a Pre-Existing AMO Member filed pursuant to
Section 2.1(a)(ii) hereof, (i) Allergan shall provide AMO with (A) an estimate
of the AMO Group Allocable Portion of the Taxes shown on such Pre-Existing AMO
Member Tax Return (the "Estimated AMO Group Allocable Portion") and (B) the
amount of the Taxes shown as due and payable on such Pre-Existing AMO Member Tax
Returns (the "Actual Taxes Payable"), (ii) AMO shall provide Allergan with a
check made out to the appropriate taxing authority in the amount of the Actual
Taxes Payable at least ten (10) days prior to the filing of such Tax Return, and
(iii) Allergan shall pay AMO, within ten (10) days of Allergan's receipt of the
amount set forth in Section 3.4(a)(ii), an amount equal to the excess, if any,
of (A) the Actual Taxes Payable over (B) the Estimated AMO Group Allocable
Portion.
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(b) Within one hundred twenty (120) days after
Allergan files each Tax Return for a Pre-Existing AMO Member filed pursuant to
Section 2.1(a)(ii) hereof, Allergan shall notify AMO of the amount of Tax for
which Allergan is liable pursuant to Section 3.2(c) hereof. Any notification
contemplated by this Section 3.4(b) shall include the determination of the AMO
Group Allocable Portion for such Tax Return, supporting work papers and an
explanation of the basis for indemnification hereunder. Within sixty (60) days
of receipt of such notice, (i) AMO shall either notify Allergan of any
objections to the determination of the amount of Allergan's liability (whereupon
the parties shall use their best efforts to resolve any such disagreement), or
(ii) AMO (or Allergan, as the case may be) shall pay to Allergan (or AMO), in
accordance with Article VII, the amount by which the AMO Group Allocable Portion
for such Tax Return is greater than (or is less than) the Estimated AMO Group
Allocable Portion previously determined with respect to such Tax Return;
provided, however, that notwithstanding Section 7.1, any payment made after such
60-day period shall include interest at the Overdue Rate from the last day of
such 60-day period. Any disputes between the parties not settled within such
60-day period will be resolved through the Dispute Resolution Procedure in
accordance with Section 8.4 hereof.
Section 3.5 Reimbursement Procedure for AMO Group Allocable
Portion of Taxes Shown on Other Tax Returns. Except as otherwise provided in
Section 3.4 with respect to Pre-Existing AMO Member Straddle Period Tax Returns,
within one hundred twenty (120) days after Allergan files each Tax Return filed
pursuant to Section 2.1(a)(i) or 2.1(a)(ii) hereof, pursuant to which any AMO
Member may be liable for any Taxes pursuant to Sections 3.1 or 3.2, Allergan
shall notify AMO of the amount of Tax for which AMO is liable pursuant to
Sections 3.1 and 3.2 hereof. Any notification contemplated by this Section 3.5
shall include the determination of the AMO Group Allocable Portion for such Tax
Return, supporting work papers and an explanation of the basis for
indemnification hereunder. Within sixty (60) days of receipt of such notice, AMO
shall either (a) notify Allergan of any objections to the determination of the
amount of AMO's liability (whereupon the parties shall use their best efforts to
resolve any such disagreement) or (b) pay to Allergan the amount requested in
the notice in accordance with Article VII; provided, however, that
notwithstanding Section 7.1, any payment made after such 60-day period shall
include interest at the Overdue Rate from the last day of such 60-day period.
Any disputes between the parties not settled within such 60-day period will be
resolved through the Dispute Resolution Procedure in accordance with Section 8.4
hereof.
Section 3.6 Additional Taxes.
(a) Except as otherwise provided in Article V,
Allergan shall pay and be liable for, and shall indemnify AMO for, all
additional Taxes that shall become due and payable as a result of a Final
Determination with respect to all Taxes attributable to Pre-Closing Taxable
Periods or Straddle Periods (other than Taxes for Straddle Periods for either
Newly Formed AMO Members or Pre-Existing AMO Members), regardless of whether
such additional Tax is part of the AMO Group Allocable Portion of such Taxes.
(b) Except as otherwise provided in Article V, for
additional Taxes that shall become due and payable as a result of a Final
Determination with respect to all Taxes attributable to Post-Closing Taxable
Periods, Allergan shall pay and be liable for such additional Taxes of the
Post-Distribution Allergan Group or any Post-Distribution Member or group of
Post-
11
Distribution Members, and AMO shall pay and be liable for such additional Taxes
of the AMO Group or any AMO Member or group of AMO Members.
(c) Except as otherwise provided in Article V, for
additional Taxes that shall become due and payable as a result of a Final
Determination with respect to all Taxes attributable to Straddle Periods for
Newly Formed AMO Members, AMO shall pay and be liable for such additional Taxes.
(d) Except as otherwise provided in Article V, for
additional Taxes that shall become due and payable as a result of a Final
Determination with respect to all Taxes attributable to Straddle Periods for
Pre-Existing AMO Members, AMO shall pay and be liable for such additional Taxes;
provided, however that Allergan shall be liable for, and shall indemnify AMO
for, any such additional Taxes attributable to Pre-Closing Straddle Periods.
(e) For purposes of Section 3.6(d), no later than ten
(10) days before AMO is required to pay any additional Taxes that shall become
due and payable as a result of a Final Determination with respect to all Taxes
attributable to Straddle Periods for Pre-Existing AMO Members, Allergan shall
(i) provide AMO with an estimate of the amount of such additional Taxes
attributable to the Pre-Closing Straddle Period (the "Estimated Additional
Pre-Closing Straddle Period Portion"), and (ii) pay AMO an amount equal to the
Estimated Additional Pre-Closing Straddle Period Portion.
(f) For purposes of Section 3.6(d), within one
hundred twenty (120) days after AMO pays any additional Taxes that shall become
due and payable as a result of a Final Determination with respect to all Taxes
attributable to Straddle Periods for Pre-Existing AMO Members (the "Actual
Additional Taxes Payable"), Allergan shall allocate the Actual Additional Taxes
Payable between Pre- and Post-Closing Straddle Periods in its discretion using
any reasonable and equitable method that it determines to be appropriate, and
Allergan shall notify AMO of the amount of such Taxes allocable to Pre-Closing
Straddle Periods (the "Additional Pre-Closing Straddle Period Portion"). Any
notification contemplated by this Section 3.6(f) shall include the basis for the
allocation of the Actual Additional Taxes Payable between the Pre- and
Post-Closing Straddle Periods and supporting work papers. Within sixty (60) days
of receipt of such notice, AMO shall either (i) notify Allergan of any
objections to the determination of the Additional Pre-Closing Straddle Period
Portion (whereupon the parties shall use their best efforts to resolve any such
disagreement) or (ii) Allergan (or AMO, as the case may be) shall pay to AMO (or
Allergan), in accordance with Article VII, the amount by which the Additional
Pre-Closing Straddle Period Portion is greater than (or is less than) the
Estimated Additional Pre-Closing Straddle Period Portion previously determined;
provided, however, that notwithstanding Section 7.1, any payment made after such
60-day period shall include interest at the Overdue Rate from the last day of
such 60-day period. Any disputes between the parties not settled within such
60-day period will be resolved through the Dispute Resolution Procedure in
accordance with Section 8.4 hereof.
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ARTICLE IV.
REFUNDS, CARRYBACKS, TAX BENEFITS, AND TAX ATTRIBUTES
Section 4.1 Amendments to Tax Returns. Allergan shall be
entitled to amend Tax Returns filed by it pursuant to Section 2.1(a), and AMO
shall be entitled to amend Tax Returns filed by it pursuant to Section 2.1(b);
provided, however, that, AMO (or Allergan) shall not amend any Tax Return of a
Pre-Existing AMO Member (excluding any Tax Return which includes both a
Pre-Existing AMO Member and an entity other than a Pre-Existing AMO Member) with
respect to issues for which Allergan (or AMO) may be responsible in part for
Taxes under Section 3.6, except (a) pursuant to the settlement or other
resolution of an Audit subject to Article XI or (b) with Allergan's (or AMO's)
written consent (which consent shall not be unreasonably withheld), provided,
however, that such consent may be conditioned upon the receipt of appropriate
indemnification for any increases in liability for Taxes that may result from
the amendment; and, provided, however, that such prohibition shall not extend to
the correction of mathematical or material factual errors or other adjustments
necessary to conform such Tax Returns to applicable law or to comply with
Section 2.5.
Section 4.2 Refunds of Taxes. Allergan shall be entitled to
any refund of Taxes for which Allergan would be ultimately liable pursuant to a
Final Determination of such Taxes under Section 3.6, and AMO shall be entitled
to any refund of Taxes for which AMO would be ultimately liable pursuant to a
Final Determination of such Taxes under Section 3.6. If Allergan or any
Post-Distribution Member (or AMO or any AMO Member, as the case may be) receives
a Tax refund to which AMO or any AMO Member (or Allergan or any
Post-Distribution Member) is entitled pursuant to this Agreement, Allergan (or
AMO) shall pay (in accordance with Article VII) the amount of such refund
(including any interest received thereon) to AMO (or Allergan) promptly after
receipt thereof.
Section 4.3 Carrybacks. AMO shall notify Allergan promptly of
the existence of any items of deduction, loss or credit (the "Carrybacks")
arising in a Post-Closing Taxable Year that may be carried back to a Pre-Closing
Taxable Period or Straddle Period of the Allergan Group or any Pre-Distribution
Member if AMO would like to utilize such Carrybacks. AMO may carry such
deduction, loss or credit back to a Pre-Closing Taxable Period or Straddle
Period, but AMO hereby expressly agrees (on its behalf and on behalf of all AMO
Members and successors thereto) that Allergan or any Post-Distribution Member is
entitled to and may retain any cash refund or reduction of a Tax liability or
any other Tax Benefit obtained by Allergan, any Post-Distribution Member, AMO or
any AMO Member as a result of any Carrybacks without compensation to AMO or any
AMO Member, unless Allergan, in its sole discretion, agrees to compensate AMO or
an AMO Member for the use of such Carrybacks.
Section 4.4 Carryforwards. If any AMO Members have
attributable to them, under applicable federal and state Income Tax law
(including, without limitation, Code Section 1502 and the Treasury Regulations
promulgated thereunder), any net operating loss carryforwards, investment tax
credit carryforwards, alternative minimum tax credit carryforwards or foreign
tax credit carryforwards (the "Carryforwards"), the parties hereto agree that
the AMO Group and the AMO Members shall be exclusively entitled to use and
benefit from the Carryforwards without compensation to the Allergan Group or any
Pre-Distribution Member. Allergan hereby agrees to take any action or make any
election reasonably required to permit AMO and the AMO Members to utilize the
Carryforwards; provided, however, that no such action or election shall be
required if it would adversely affect in any way the Income Tax liabilities of
the Allergan Group or any Post-
13
Distribution Member for any Taxable Year. The parties also hereby agree that the
provisions of this Section 4.4 shall apply with respect to any similar
carryforwards available under applicable state, foreign or local Tax law.
Section 4.5 Determination of Tax Attributes. In a reasonable
and equitable manner consistent with applicable law, Allergan shall determine
the allocation of all tax attributes of the Pre-Distribution Allergan Group,
including, but not limited to, earnings and profits, basis and net operating
losses, between the Post-Distribution Allergan Group and the AMO Group. Allergan
and AMO agree to file all federal, state, foreign or local Tax Returns in a
manner consistent with such allocation except as otherwise required by either
changes in applicable law or a Final Determination.
Section 4.6 Tax Benefits from Exercise of Allergan Stock
Options by AMO Employees. AMO shall notify Allergan promptly of any event after
the Closing Date giving rise to any deduction in respect of the exercise of an
Allergan Stock Option by an individual who is an employee of the AMO Group on
the day after the Closing Date. Notwithstanding anything to the contrary in this
Agreement, Allergan shall be entitled to, and AMO shall pay Allergan an amount
equal to the value of, such deduction; provided, however, that if Allergan
determines that, under applicable law, Allergan is entitled to include such
deduction on its Tax Returns, Allergan shall notify AMO promptly of such
determination, and Allergan (and not AMO) shall be entitled to include such
deduction on its Tax Return, in which case, (a) AMO shall not be required to pay
to Allergan an amount equal to the value of such deduction, but (b) AMO shall
indemnify Allergan against the loss of such deduction pursuant to a Final
Determination. For purposes of determining AMO's indemnification obligation this
Section 4.6, if any, the value of any deduction shall be determined on an
assumed basis by multiplying the amount of any applicable deductions by (a) 39%
or (b) if no state Income Tax Benefit shall result therefrom (determined on a
hypothetical basis by using the highest marginal corporate Income Tax rate), 35%
(such percentages to increase or decrease on a percentage-for-percentage basis
with any subsequent increases or decreases in the current 35% maximum marginal
federal Income Tax rate for corporations, and 100% minus the maximum marginal
federal Income Tax rate for corporations (e.g., 65%) of any increases or
decreases in the maximum marginal state or local Income Tax rate for
corporations). For example, if, after the Closing Date, an AMO employee
exercises an Allergan Stock Option with respect to which exercise $100 is
deductible by AMO, AMO shall make an indemnification payment to Allergan
(applying the characterization set forth in Section 7.2) of $39. The parties
hereby agree that if there is a change in generally accepted accounting
principles related to the issuance or exercise of stock options, Allergan and
AMO will negotiate in good faith a reasonable and equitable amendment to this
Section 4.6 to compensate for such change.
ARTICLE V.
DISTRIBUTION TAX TREATMENT
Section 5.1 Section 355 Tax Treatment.
(a) The parties expressly agree for all purposes
to treat the Distribution as a tax-free distribution under Code Section 355 in
accordance with the IRS Ruling and Ruling Request (the "Section 355 Tax
Treatment"). Each party hereto also expressly agrees (i)
14
to comply (and to cause each of its Affiliates to comply) with the
representations set forth in the Ruling Request, (ii) not to take (and to cause
each of its Affiliates not to take) any action (except where such action is
required by law) that is inconsistent with the treatment of the Distribution and
all related transactions in accordance with the Section 355 Tax Treatment, and
(iii) to take (and to cause each of its Affiliates to take) any and all actions
reasonably available to such party (or Affiliate) to support and defend the
Section 355 Tax Treatment.
(b) Notwithstanding anything to the contrary in
Article III, Sections 6.1 or 6.2 herein:
(i) If there is a Final Determination that
results in the disallowance, in whole or in part, of the
Section 355 Tax Treatment (other than Section 355(e) Gain,
which is addressed by Section 5.2), and any AMO Member (and no
Post-Distribution Member) has breached Section 5.1(a) or has
taken any action after the Distribution which breach or action
results in such disallowance, then AMO shall be liable for,
and shall indemnify and hold each Post-Distribution Member
harmless for, any Taxes and other Adverse Consequences which
would not have occurred but for such disallowance.
(ii) If there is a Final Determination that
results in the disallowance, in whole or in part, of the
Section 355 Tax Treatment (other than Section 355(e) Gain,
which is addressed by Section 5.2), and any Post-Distribution
Member (and no AMO Member) has breached Section 5.1(a) or has
taken any action after the Distribution which breach or action
results in such disallowance, then Allergan shall be liable
for, and shall indemnify and hold each AMO Member harmless
for, any Taxes and other Adverse Consequences which would not
have occurred but for such disallowance.
(iii) If there is a Final Determination that
results in the disallowance, in whole or in part, of the
Section 355 Tax Treatment, and if one or more
Post-Distribution Members and one or more AMO Members have
breached Section 5.1(a) or have taken action(s) after the
Distribution which breach or action result in such
disallowance, then any Taxes and other Adverse Consequences
which would not have occurred but for such disallowance shall
be allocated between Allergan and AMO in accordance with their
responsibility for such Taxes and other Adverse Consequences
as determined pursuant to the Dispute Resolution Procedure.
Section 5.2 Section 355(e) Taxes.
(a) Unless, for each Acquisition described in this
Section 5.2(a), the Acquisition Approval Process is first satisfied at AMO's
expense, AMO shall not take or allow any action, and shall cause its Affiliates
to refrain from taking or allowing any action, which would result in the direct
or indirect Acquisition by one or more persons of either:
(i) any interest in AMO, regardless of size,
either (A) during the six month period following the Closing Date
or (B) for which Acquisition
15
there was any agreement, understanding, arrangement or
substantial negotiations during the six month period following
the Closing Date; or
(ii) a fifteen percent (15%) or greater interest
in AMO, measured either individually or when cumulated with all
prior Acquisitions occurring after the Closing Date, during the
two year period following the Closing Date.
(b) As used herein with reference to any Acquisition,
the "Acquisition Approval Process" shall be satisfied if and only if all of the
following requirements are satisfied in the order set forth below:
(i) AMO notifies Allergan of the proposed
Acquisition;
(ii) AMO obtains either (A) an opinion of a
nationally recognized law firm or a nationally recognized accounting
firm (acceptable in either case to Allergan), which opinion may be
relied upon by Allergan, that such Acquisition will not be treated as
part of a plan or series of transactions with the Distribution within
the meaning of Section 355(e); or (B) a ruling from the IRS that such
Acquisition will not be treated as part of a plan or series of
transactions with the Distribution within the meaning of Section
355(e), provided, however, that no such ruling from the IRS may be
sought without the prior approval of Allergan;
(iii) AMO submits the opinion or ruling described
in Section 5.2(b)(ii) to Allergan for Allergan's review; provided that
if AMO submits an opinion to Allergan and Allergan finds the opinion
unsatisfactory, Allergan may require AMO to obtain a ruling for
Allergan's review prior to Allergan's approval of the proposed
Acquisition; and
(iv) Allergan provides AMO with written approval of
the proposed Acquisition; provided, however, that
(A) for any Acquisition described by Section
5.2(a)(i), Allergan's approval may be provided or withheld
at Allergan's sole discretion; and
(B) for any Acquisition described by Section
5.2(a)(ii) (and not also described by Section 5.2(a)(i)),
Allergan may not unreasonably withhold its approval, and
Allergan may withhold its approval only for reasons
related to the Section 355 Tax Treatment or AMO's ability
to satisfy its indemnification obligations under this
Agreement.
(c) If Section 355(e) of the Code is applicable to the
Distribution because the Distribution was part of a plan (or series of related
transactions) pursuant to which one or more persons acquired directly or
indirectly AMO stock representing a "50-percent or greater interest" within the
meaning of Section 355(e), AMO shall pay and be liable for, and shall indemnify
Allergan against any liability for, any resulting Taxes (the "Section 355(e)
Gain") and
16
other Adverse Consequences regardless of whether the Acquisition Approval
Process has been satisfied.
(d) If Section 355(e) of the Code is applicable to the
Distribution because the Distribution was part of a plan (or series of related
transactions) pursuant to which one or more persons acquired directly or
indirectly Allergan stock representing a "50-percent or greater interest" within
the meaning of Section 355(e), Allergan shall pay and be liable for, and shall
indemnify AMO against any liability for, the Section 355(e) Gain and other
Adverse Consequences.
ARTICLE VI.
INDEMNIFICATION.
Section 6.1 By Allergan.
(a) Taxes. Subject to Article V, Allergan shall
indemnify and hold AMO and each AMO Member harmless (on an After-Tax Basis)
against any and all Taxes for which Allergan is ultimately liable pursuant to
Article III, taking into account any reimbursement obligations described
therein.
(b) Member Liability. Subject to Section 6.2 and
Article V, Allergan shall indemnify and hold AMO and each AMO Member harmless
(on an After-Tax Basis) against each and every liability for Taxes of the
Allergan Group asserted by any Taxing Authority under Treasury Regulation
Section 1.1502-6, or any similar law, rule or regulation to the extent
applicable to any state, foreign or local Tax matters that are filed on a
consolidated, combined, unitary or similar basis.
Section 6.2 By AMO. Subject to Article V, AMO shall indemnify
and hold the Allergan Group and each Post-Distribution Member harmless (on an
After-Tax Basis) against the Taxes for which AMO is ultimately liable pursuant
to Article III, taking into account any reimbursement obligations described
therein.
Section 6.3 Procedure for Indemnification. (a)Except as
otherwise provided in Sections 3.4, 3.5 or 3.6, AMO (or Allergan, as the case
may be) shall notify Allergan (or AMO) of any Taxes paid by the AMO Group or any
AMO Member (or the Allergan Group or any Post-Distribution Member) which are
subject to indemnification under this Article VI. Any notification contemplated
by this Section 6.3 shall include a detailed calculation (including, if
applicable, separate allocations of such Taxes between Pre- and Post-Closing
Taxable Periods and supporting work papers) and a brief explanation of the basis
for indemnification hereunder. Whenever a notification described in this Section
6.3 is given, the notified party shall pay the amount requested in such notice
to the notifying party in accordance with Article VII, but only to the extent
that the notified party agrees with such request. To the extent the notified
party disagrees with such request, it shall, within thirty (30) days of receipt
of such notice, so notify the notifying party, whereupon the parties shall use
their best efforts to resolve any such disagreement. To the extent not otherwise
provided for in this Article VI or in Article VII, any payment made after such
30-day period shall include interest at the Overdue Rate from the date of
receipt of original notice of such payment.
17
Any disputes between the parties not settled within such 30-day period will be
resolved through the Dispute Resolution Procedure in accordance with Section 8.4
hereof.
Section 6.4 Indemnification Threshold. No Tax liability of
$250,000 (the "Indemnification Threshold") or less in the aggregate shall in any
event be indemnified under this Agreement; and provided, however, that after the
Indemnification Threshold is met by either AMO or Allergan, all indemnification
payments owed pursuant to this Agreement shall be paid relating back to the
first dollar without regard to any Indemnification Threshold.
Section 6.5 Loss of Tax Benefits. Appropriate payments shall
be made between the parties to take account of a Final Determination which
results in a loss of, or change in any Tax Benefit that has been taken into
account for purposes of determining the After-Tax Basis of any indemnification
payment.
ARTICLE VII.
METHOD, TIMING AND CHARACTER OF PAYMENTS REQUIRED BY THIS AGREEMENT.
Section 7.1 Payment in Immediately Available Funds; Interest;
Method. All payments made pursuant to this Agreement shall be made in
immediately available funds. Except as otherwise provided herein, any payment
not made within thirty (30) days of receipt of notice of such payment shall
thereafter bear interest at the Overdue Rate from the date of receipt of notice
of such payment. All indemnification payments made pursuant this Agreement shall
be made by and between Allergan (and not any other Post-Distribution Member) and
AMO (and not any other AMO Member).
Section 7.2 Characterization of Payments. Any payment (other
than interest thereon) made hereunder by Allergan to AMO or by AMO to Allergan
shall be treated by all parties for all purposes to the extent permitted by law
as a non-taxable dividend distribution or capital contribution made prior to the
close of business on the Closing Date. If, pursuant to a Final Determination or
as mutually agreed by Allergan and AMO, it is determined that the receipt or
accrual of any payment under this Agreement (other than interest thereon) is,
itself, subject to, or will result in the payment by the recipient of, any Tax
(including, but not limited to, Taxes resulting from the creation of an excess
loss account or from the loss of Tax Benefits), the party making such payment
shall be required to pay an additional amount to cover the additional Tax (on an
After-Tax Basis), together with interest at the Overdue Rate from the date the
Tax accrues through the date of payment of the additional amount. For example,
if AMO and Allergan agree that an indemnification payment of $100 made hereunder
by AMO to Allergan is fully taxable to Allergan but not deductible to AMO, AMO
shall pay Allergan an amount equal to $100 plus the amount of Tax that Allergan
will pay as a result having received the payment (assuming that the payment of
additional Tax does not result in a Tax Benefit, which would reduce the total
payment calculated on an After-Tax Basis).
18
ARTICLE VIII.
COOPERATION; DOCUMENT RETENTION; CONFIDENTIALITY; DISPUTES.
Section 8.1 Provision of Cooperation, Documents and Other
Information. Upon reasonable request by a requesting party, Allergan and AMO
shall promptly provide (and shall cause their respective Affiliates to provide)
such requesting party with such cooperation and assistance, documents, and other
information, without charge, as may be necessary or reasonably helpful in
connection with (a) the preparation and filing of any original or amended Tax
Return, (b) the conduct of any Audit involving to any extent Taxes or Tax
Returns within the scope of this Agreement, or (c) the verification by a party
of an amount payable hereunder to, or receivable hereunder from, another party.
Such cooperation and assistance shall include, without limitation: (i) the
provision on demand of books, records, Tax Returns, documentation or other
information relating to any relevant Tax Return; (ii) the execution of any
document that may be necessary or reasonably helpful in connection with the
filing of any Tax Return by the Allergan Group, a Pre-Distribution Member, a
Post-Distribution Member, the AMO Group or an AMO Member, or in connection with
any Audit of the type generally referred to in the preceding sentence,
including, without limitation, the execution of powers of attorney and
extensions of applicable statutes of limitations with respect to Tax Returns
which Allergan may be obligated to file on behalf of AMO Members pursuant to
Section 2.1; (iii) the prompt and timely filing of appropriate claims for
refund; and (iv) the use of reasonable best efforts to obtain any documentation
from a governmental authority or a third party that may be necessary or helpful
in connection with the foregoing. Each party shall make its employees and
facilities available on a mutually convenient basis to facilitate such
cooperation.
Section 8.2 Retention of Books and Records. Allergan, each
Post-Distribution Member, AMO and each AMO Member shall retain or cause to be
retained all Tax Returns, and all books, records, schedules, work papers, and
other documents relating thereto, until the expiration of the later of (a) seven
(7) years from the close of the applicable Taxable Year, (b) all applicable
statutes of limitations (including any waivers or extensions thereof), (c) the
completion of any audits with respect to the applicable Taxable Year, and (d)
any retention period required by law (e.g., depreciation or inventory records)
or pursuant to any record retention agreement. The parties hereto shall notify
each other in writing of any waivers, extensions or expirations of applicable
statutes of limitations. The parties hereto shall provide at least thirty (30)
days prior written notice of any intended destruction of the documents referred
to in this Section 8.3. A party giving such a notification shall not dispose of
any of the foregoing materials without first obtaining the written approval
(which may not be unreasonably withheld) of the notified party and, in lieu of
destruction or disposition, the notified party shall be permitted to take
possession, at its sole cost, of the foregoing materials which affect (or
potentially affect) its liability for Tax.
Section 8.3 Confidentiality of Documents and Information.
Except as required by law or with the prior written consent of the other party,
all Tax Returns, documents, schedules, work papers and similar items and all
information contained therein which are within the scope of this Agreement shall
be kept confidential by the parties hereto and their Representatives, shall not
be disclosed to any other person or entity and shall be used only for the
purposes provided herein.
Section 8.4 Disputes. If Allergan and AMO are unable to agree
on any calculation, numerical value, procedure or payment set forth in or
required by this Agreement, including, but not limited to, any dispute under
Sections 3.4(b), 3.5, 3.6(f) or 6.3, such item shall be determined pursuant to
the Dispute Resolution Procedure.
19
ARTICLE IX.
AUDITS.
Section 9.1 Status and Other Information Regarding Audits and
Disputes. Upon the receipt by Allergan or any Post-Distribution Member (or AMO
or any AMO Member, as the case may be) of notice of, or relating to, an Audit
which asserts, proposes or recommends a deficiency, claim or adjustment
(including the receipt of a IRS Form 5701 or comparable form from any other
Taxing Authority) that, if sustained, would affect the liability for Taxes which
are subject to indemnification by AMO (or Allergan) under this Agreement,
Allergan (or AMO) shall promptly notify AMO (or Allergan) in writing of the
receipt of such notice. Allergan (or AMO) shall use reasonable best efforts to
keep AMO (or Allergan) advised as to the status of Audits pertaining to Taxes
subject to indemnification by AMO (or Allergan) under this Agreement. To the
extent relating to any such issue, Allergan (or AMO) shall promptly furnish AMO
(or Allergan) with copies of any inquiries or requests for information from any
Taxing Authority or any other administrative, judicial or other governmental
authority, as well as copies of any revenue agent's report or similar report,
notice of proposed adjustment or notice of deficiency.
Section 9.2 Control and Settlement.
(a) Pre-Closing Taxable Periods. Allergan shall have
the right to control, and to represent the interests of all affected taxpayers
in, any Audit relating, in whole or in part, to any Pre-Closing Taxable Period,
and to employ counsel of its choice at its expense.
(b) Straddle Periods.
(i) Allergan shall have the right to control, and
to represent the interests of all affected taxpayers in, any
Audit relating, in whole or in part to any Straddle Period
(other than Tax Returns for a Straddle Period of a Newly
Formed AMO Member which Tax Returns do not also include an
entity other than a Newly Formed AMO Member), and to employ
counsel of its choice at its expense; provided, however, that,
with respect to such issues for which AMO may be responsible
in part for Taxes under Section 3.6 and Article V, Allergan
shall in good faith (A) afford AMO full opportunity to observe
at any such proceedings and to review any submissions related
to such issues, (B) consult with AMO regarding its comments
with respect to such proceedings and submissions in an effort
to resolve any differences with respect to Allergan's
positions with regard to such issues, (C) in good faith
consider AMO's recommendations for alternative positions with
respect to such issues, (D) advise AMO of the reasons for
rejecting any such alternative position, and (E) provide AMO
with final copies of such submissions. In the event of any
disagreement regarding the proceedings, Allergan shall have
the ultimate control of the Audit and any settlement or other
resolution thereof.
(ii) AMO shall have the right to control, and to
represent the interests of all affected taxpayers in, any
Audit relating, in whole or in part to any Straddle Period for
any Newly Formed AMO Members, and to employ counsel of its
choice at its expense; provided, however, that AMO shall in
good faith (A) afford Allergan full opportunity to observe at
any such proceedings and to review any submissions related
thereto and (B) not agree to settle any such proceeding in a
manner that could reasonably be expected to have a material
and adverse effect on (x) any indemnification obligation of
Allergan hereunder or (y) any Tax liability of the Allergan
Group or any Post-Distribution Member for any Taxable Period,
without the prior written consent of Allergan, which consent
shall not be unreasonably withheld.
(c) Post-Closing Taxable Periods.
(i) Allergan shall have the right to control, and
to represent the interests of all affected taxpayers in, any
Audit relating solely to any Post-Closing Taxable Period of
the Post-Distribution Allergan Group or any Post-Distribution
Member, and to employ counsel of its choice at its expense.
(ii) AMO shall have the right to control, and to
represent the interests of all affected taxpayers in, any
Audit relating solely to any Post-Closing Taxable Period of
the AMO Group or any AMO Member, and to employ counsel of its
choice at its expense; provided, however, that for any Audit
of Tax Returns for Taxable Years ending on or before December
31, 2004, AMO shall in good faith (A) afford
20
Allergan full opportunity to observe at any such proceedings
and to review any submissions related thereto and (B) not
agree to settle any such proceeding in a manner that could
reasonably be expected to have a material and adverse effect
on (x) any indemnification obligation of Allergan hereunder or
(y) any Tax liability of the Allergan Group or any
Post-Distribution Member for any Taxable Period, without the
prior written consent of Allergan, which consent shall not be
unreasonably withheld.
ARTICLE X.
MISCELLANEOUS.
Section 10.1 Effectiveness. This Agreement shall be effective
from and after the Closing Date and shall survive until the expiration of any
applicable statute of limitations.
Section 10.2 Entire Agreement. This Agreement and the
Distribution Agreement, together with all documents and instruments referred to
herein and therein constitute the entire agreement and supersede and terminate
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
Section 10.3 Guarantees of Performance. Allergan and AMO
hereby guarantee the complete and prompt performance by the members of their
respective Affiliated Groups of all of their obligations and undertakings
pursuant to this Agreement. If after the Closing Date either Allergan or AMO
shall be acquired by another entity such that 50% or more of its common stock is
in common control by the acquirer, such acquirer shall, by making such
acquisition, simultaneously agree to jointly and severally guarantee the
complete and prompt performance by the acquired
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corporation and any Affiliate of the acquired corporation of all of their
obligations and undertakings pursuant to this Agreement.
Section 10.4 Severability. The invalidity of any portion
hereof shall not affect the validity, force or effect of the remaining portions
hereof. If it is ever held that any restriction hereunder is too broad to permit
enforcement of such restriction to its fullest extent, each party agrees that a
court of competent jurisdiction may enforce such restriction to the maximum
extent permitted by law, and each party hereby consents and agrees that such
scope may be judicially modified accordingly in any proceeding brought to
enforce such restriction.
Section 10.5 Indulgences, etc. Neither the failure nor any
delay on the part of any party hereto to exercise any right under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right preclude any other or further exercise of the same or any other right,
nor shall any waiver of any right with respect to any occurrence be construed as
a waiver of such right with respect to any other occurrence.
Section 10.6 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of California, without
regard to any applicable conflicts of laws.
Section 10.7 Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be made in the
manner provided in Section 12.09 of the Distribution Agreement.
Section 10.8 Amendments. This Agreement may be amended at any
time only by written agreement executed and delivered by duly authorized
officers of AMO and Allergan.
Section 10.9 Assignments. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by either of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
Section 10.10 Headings; References. The article, section and
paragraph headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
All references herein to "Article", "Sections" or "Exhibits" shall be deemed to
be references to Articles or Sections hereof or Exhibits hereto unless otherwise
indicated.
Section 10.11 Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
Section 10.12 Predecessors and Successors. To the extent
necessary to give effect to the purposes of this Agreement, any reference to any
corporation, Affiliated Group or member of
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an Affiliated Group shall also include any predecessors or successors thereto,
by operation of law or otherwise.
Section 10.13 Tax Elections. Nothing in this Agreement is
intended to change or otherwise affect any previous tax election made by or on
behalf of the Allergan Group. Allergan, as common parent of the Allergan Group,
shall continue to have sole discretion to make any and all elections with
respect to all members of the Allergan Group for all Taxable Periods for which
it is obligated to file Tax Returns under Section 2.1(a). AMO, as common parent
of the AMO Group, shall have sole discretion to make any and all elections with
respect to all members of the AMO Group for all Taxable Periods for which it is
obligated to file Tax Returns under Section 2.1(b).
Section 10.14 Specific Performance. The parties hereto agree
that the remedy at law for any breach of this Agreement will be inadequate and
that any party by whom this Agreement is enforceable shall be entitled to
specific performance in addition to any other appropriate relief or remedy. Such
party may, in its sole discretion, apply to a court of competent jurisdiction
for specific performance or injunctive or such other relief as such court may
deem just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable laws, each party waives any
objection to the imposition of such relief.
Section 10.15 Further Assurances. Subject to the provisions
hereof, the parties hereto shall make, execute, acknowledge and deliver such
other instruments and documents, and take all such other actions, as may be
reasonably required in order to effectuate the purposes of this Agreement and to
consummate the transactions contemplated hereby. Subject to the provisions
hereof, each party shall, in connection with entering into this Agreement,
performing its obligations hereunder and taking any and all actions relating
hereto, comply with all applicable laws, regulations, orders and decrees, obtain
all required consents and approvals and make all required filings with any
governmental agency, other regulatory or administrative agency, commission or
similar authority and promptly provide the other party with all such information
as it may reasonably request in order to be able to comply with the provisions
of this sentence.
Section 10.16 Setoff. All payments to be made by any party
under this Agreement shall be made without setoff, counterclaim or withholding,
all of which are expressly waived.
Section 10.17 Expenses. Except as specifically provided in
this Agreement or in a Related Agreement, all fees and expenses incurred in
connection with this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the party incurring such expenses.
Section 10.18 Rules of Construction. Any ambiguities shall be
resolved without regard to which party drafted the Agreement.
[Signature Page To Follow]
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IN WITNESS WHEREOF, Allergan and AMO have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
ALLERGAN, INC.,
a Delaware corporation
By:
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Name:
Title:
ADVANCED MEDICAL OPTICS, INC.,
a Delaware corporation
By:
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Name:
Title:
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