EXHIBIT 10-B
TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT ("Agreement"), dated as of September 30,
1997, is entered into by BINDLEY WESTERN INDUSTRIES, INC., an Indiana
corporation ("BWI"), and PRIORITY HEALTHCARE CORPORATION, an Indiana corporation
("PHC"), and shall be deemed effective as of the Distribution Date (as
hereinafter defined).
RECITALS
WHEREAS, BWI presently owns 10,214,286 shares of the Class A Common
Stock $0.01 par value of PHC (the "Class A Common Stock") which represents 100%
of the shares of all classes of common stock of PHC currently outstanding; and
WHEREAS, BWI may distribute pro rata on the Distribution Date the
shares of Class A Common Stock then owned by BWI to the owners of BWI common
stock; and
WHEREAS, the purpose of this Agreement is to set forth the agreement
between BWI and PHC with respect to the Federal, state, local and foreign taxes
attributable to each of them and their subsidiaries for all taxable periods
beginning on or before the Distribution Date; and
WHEREAS, this Agreement also provides certain indemnity obligations
between the parties hereto if the actions of either party or its shareholders
have an adverse effect on the tax-free nature of the distribution described
above and consequently the tax liability of the other party.
NOW THEREFORE, in consideration of the mutual agreements of the
parties hereto, and further good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following definitions shall apply:
"Adjustment" shall mean any final change in any pre-Distribution
Income Tax liabilities of any member of the BWI Affiliated Group initiated or
agreed to by the IRS.
"Affiliated Group" shall mean an affiliated group of corporations
within the meaning of Code section 1504(a) for the taxable period in question.
"BWI Affiliated Group" shall mean, for each taxable period, the
Affiliated Group of which BWI or any successor of BWI is a member or the common
parent, as defined in Code Section 1504(a).
"BWI Group" shall mean, with respect to any taxable period, the
corporations that were members of the BWI Affiliated Group during such period,
exclusive of the corporations that are included in the PHC Affiliated Group
immediately after the Distribution Date.
"Carryback Item" shall mean any net operating loss, net capital loss,
unused general business tax credit or any other Tax Item of the PHC Affiliated
Group which under the Code or any other applicable Income Tax law can be used to
generate a Tax Benefit for the BWI Affiliated Group.
"Code" shall mean the Internal Revenue Code of 1986, as amended and in
effect for the taxable period in question.
"Deferred Taxes" shall mean the tax effect of differences arising from
the recognition of revenue and expense in different periods for tax and
financial statement purposes.
"Deferred Tax Liabilities" shall mean the net liability for Deferred
Taxes for all taxable periods beginning on or before the Distribution Date.
"Distribution" shall mean the pro rata distribution by BWI of the
Class A Common Stock to the holders of BWI common stock as of the close of
business on the record date for such distribution.
"Distribution Date" shall mean the date on which the Distribution
occurs. For all purposes, the Distribution shall be effective as of the close of
business on the Distribution Date.
"Event of Loss" shall mean the incurrence by the BWI Affiliated Group
or the PHC Affiliated Group, as the case may be, of any liability for Income Tax
as a result of the Distribution.
"Final Determination" shall mean the final resolution of any tax
liability (including all related interest and penalties) in respect of any
Adjustment for a taxable period. A Final Determination shall result from the
first to occur of:
(i) the expiration of 30 days after IRS acceptance of a Waiver
of Restrictions (or partial Waiver of Restrictions) on Assessment and
Collection of Deficiency in Tax and Acceptance of Overassessment on
Federal Revenue Form 870 or 870-AD, except as to reserved matters
specified therein (or any successor comparable form or the expiration
of a comparable agreement or form under the laws of other
jurisdictions);
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(ii) a decision, judgment, decree, or other order by a court of
competent jurisdiction that is (x) not subject to further judicial
review (by appeal or otherwise) or (y) subject to further judicial
review but with respect to which BWI notifies PHC, in good faith and
in its sole discretion that it has determined not to appeal;
(iii) the execution of a closing agreement under section 7121 of
the Code or the acceptance by the IRS or its counsel of an offer in
compromise under section 7122 of the Code, or comparable agreements
under the laws of other jurisdictions, except as to reserved matters
specified therein;
(iv) the expiration of the time for filing a claim for refund
or for instituting suit in respect of a claim for refund disallowed in
whole or part by the IRS;
(v) any other final disposition of the tax liability for such
period by reason of the expiration of the applicable statute of
limitations; or
(vi) any other event that the parties agree is a final and
irrevocable determination of the liability at issue.
"Income Tax or Taxes" shall mean all Federal, state and local, and
foreign taxes imposed upon, or measured by, income, including, without
limitation, environmental and alternative or add-on minimum taxes, and such
related franchise, excise and similar taxes as have been customarily included in
the provision for income taxes on BWI's financial statements, together with all
related interest, penalties and additions to tax.
"IRS" shall mean the United States Internal Revenue Service or any
successor thereto, including, but not limited to, its agents, representatives,
and attorneys.
"Other Taxes" shall mean any gross income, gross receipts, sales, use,
ad valorem, franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, windfall profits tax, custom,
duty or other charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed by any governmental
authority responsible for the imposition of any such tax.
"PHC Affiliated Group" shall mean, for each taxable period beginning
after the Distribution Date, the Affiliated Group of which PHC or any successor
of PHC is a member or the common parent, as defined in Code section 1504(a).
"PHC Assets" shall mean all of the assets held by the members of the
PHC Affiliated Group immediately after the Distribution.
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"PHC Group" shall mean, with respect to any taxable period, the
corporations that were members of the BWI Affiliated Group and that are members
of the PHC Affiliated Group immediately after the Distribution Date.
"Return" shall mean any return, report, information return, officer
report or filing or other document (including, without limitation, estimated
returns and related or supporting information) in respect of Income Taxes or
Other Taxes, as the case may be.
"Stub Period" shall mean the taxable period (or portion thereof) that
begins on January 1, 1998 and ends on the Distribution Date.
"Tax Benefit" shall mean a reduction in the Income Tax liability of a
corporation (or of the Affiliated Group of which it is a member) for any taxable
period that arises, or may arise in the future, as a result of any adjustment
to, or addition or deletion of, a Tax Item in the computation of the Income Tax
liability of the taxpayer (or the Affiliated Group of which it is a member).
"Tax Detriment" shall mean an increase in the Income Tax liability of
a corporation (or of the Affiliated Group of which it is a member) for any
taxable period that arises, or may arise in the future, as a result of any
adjustment to, or addition or deletion of, a Tax Item in the computation of the
Income Tax liability of the taxpayer (or the Affiliated Group of which it is a
member).
"Taxes" shall mean Income Taxes and Other Taxes.
"Tax Item" shall mean any item of income, gain, loss, deduction,
credit, recapture of credit, or any other item which increases or decreases
Income Taxes paid or payable.
ARTICLE II
FILING OF TAX RETURNS
Section 2.1. Pre-Distribution Tax Returns.
(a) BWI shall file all consolidated Federal Income Tax Returns and
all state and local Income Tax Returns required to be filed on a combined,
consolidated or unitary basis for each member of the BWI Affiliated Group
that are required to be filed for the taxable year ending December 31, 1997
and for the taxable year that begins on January 1, 1998 and ends on or
after the Distribution Date. PHC acknowledges that Treas. Reg. sec. 1.1502-
77(a) confers certain authority on BWI as the common parent of the BWI
Affiliated Group, with respect to Federal Income Tax matters for all
taxable periods beginning on or before the Distribution Date and agrees to
enter into any election or consent reasonably requested by BWI with respect
to such matters for such taxable years.
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(b) BWI shall file all foreign Income Tax Returns and all state and
local Income Tax Returns for each member of the PHC Group not required to
be included in a combined, consolidated or unitary state and local Income
Tax Return of the BWI Affiliated Group for the taxable period ending
December 31, 1997 and for the taxable period that begins on January 1, 1998
and ends on or before the Distribution Date. PHC shall file all foreign
Income Tax Returns and all state and local Income Tax Returns for each
member of the PHC Group not required to be included in a combined,
consolidated or unitary state and local Income Tax Return of the BWI
Affiliated Group for any taxable period that ends after the Distribution
Date.
(c) All Returns with respect to Other Taxes for a period beginning
before the Distribution Date and all other filings required to be filed
with any taxing authority after the Distribution Date shall be filed by the
party that under Section 3.5 is responsible for paying the tax to which the
Return relates or for making such filing, as the case may be.
Section 2.2. Post-Distribution Tax Returns. For taxable periods
beginning after the Distribution Date (1) BWI shall be responsible for filing
all Returns relating to members of the BWI Group and, except with respect to any
requirement under Section 3.7 hereof, shall pay all Taxes required by such
Returns; and (2) PHC shall be responsible for filing all Returns relating to
members of the PHC Group and, except with respect to any requirement under
Section 3.8 hereof, shall pay all Taxes required by such Returns.
ARTICLE III
PAYMENT OF TAXES
Section 3.1. Certain Pre-Distribution Income Taxes. The parties
acknowledge that there has not yet been a Final Determination of the
consolidated Income Tax liability of the BWI Affiliated Group for any taxable
period beginning on or after January 1, 1992. The parties further acknowledge
that BWI has contributed to the capital of the PHC Group an amount equal to
PHC's Deferred Tax Liabilities for all taxable periods ending on or before
December 31, 1997 based on the Returns as filed or expected to be filed for such
periods. Absent an adjustment under Section 3.2 or an indemnity obligation
under Section 3.3, Section 3.7 or Section 3.8, the parties acknowledge and agree
that no further sum shall be due to BWI from any member of the PHC Group or from
BWI to any member of the PHC Group on account of the Income Tax liabilities
reflected in the consolidated and other Returns filed or to be filed with
respect to all taxable periods ending on or before December 31, 1997.
Section 3.2. PHC Deferred Tax Liabilities.
(a) In connection with BWI's calculation of PHC's share of the
consolidated Income Tax liability of the BWI Affiliated Group pursuant to
Section 3.1 hereof, the parties acknowledge that a portion of the Deferred
Taxes have
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been reconciled to and are supported by the Federal and state and local
Income Tax Returns of the BWI Affiliated Group filed for all taxable
periods ending on or before December 31, 1996. The parties further
acknowledge that the PHC Group has been allocated its estimated share of
Deferred Taxes for the taxable period ending December 31, 1997. Within 120
days of the filing of the Federal Income Tax Return for the taxable period
ending on December 31, 1997, the estimate of Deferred Taxes allocated to
the PHC Group will be reconciled to the actual amounts determined to be
allocable to the PHC Group through December 31, 1997, and any necessary
adjustments will be made between the parties as provided in Section 3.2(b)
below. The determination of whether such an adjustment is required shall be
made in accordance with generally accepted accounting principles as set
forth in Accounting Principles Board Opinion Number 11 and the methodology
used by the BWI Affiliated Group in preparing its financial statements for
the year ended December 31, 1997.
(b) To the extent that the actual Deferred Tax Liabilities for the
taxable period ending December 31, 1997 are in excess of the amount
originally estimated as described in Section 3.2(a), BWI will pay PHC this
difference. To the extent that actual Deferred Tax Liabilities for the
taxable period ending December 31, 1997 are less than the amount originally
estimated as described in Section 3.2(a), PHC will pay BWI this difference.
Such payment shall be made within one hundred and fifty (150) days of the
filing by the BWI Affiliated Group of the Federal Income Tax Return for the
taxable period ending on December 31, 1997.
Section 3.3. Responsibility for Certain Pre-Distribution Income Tax
Liabilities.
(a) PHC shall pay, reimburse and indemnify BWI an amount computed
pursuant to paragraph (c) below if there is an Adjustment that results in a
Tax Detriment to the BWI Affiliated Group and a corresponding decrease in
the PHC Group's Deferred Tax Liabilities that is required to be reflected
(without regard to materiality) in any financial statements of PHC pursuant
to Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting
for Income Taxes" ("FAS 109") in a post-Distribution period.
(b) BWI shall pay, reimburse and indemnify PHC an amount computed
pursuant to paragraph (d) below if there is an Adjustment that results in a
Tax Benefit to the BWI Affiliated Group and a corresponding increase in the
PHC Group's Deferred Tax Liabilities that is required to be reflected
(without regard to materiality) in any financial statements of PHC pursuant
to FAS 109 in a post-Distribution period.
(c) Any payment made pursuant to paragraph (a) of this Section 3.3
shall be made in accordance with Section 3.9 hereof and shall equal the
amount of the Adjustment (computed without regard to any interest,
penalties or additions to tax),
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reduced by the amount of any decrease in the Deferred Tax Liabilities of
the BWI Affiliated Group arising as a result of the effect of such
Adjustment in all pre-Distribution periods.
(d) Any payment made pursuant to paragraph (b) of this Section 3.3
shall be made in accordance with Section 3.9 hereof and shall equal the
amount of the Adjustment (computed without regard to any interest,
penalties or additions to tax), reduced by the amount of any increase in
the Deferred Tax Liabilities of the BWI Affiliated Group arising as a
result of the effect of such Adjustment in all pre-Distribution periods.
Section 3.4. Stub Period Income Taxes.
(a) Notwithstanding anything to the contrary in Section 3.3 hereof,
PHC shall be responsible for all Income Taxes imposed upon, or otherwise
allocable to, the PHC Group for the Stub Period, such allocation to be made
in a manner consistent with this Agreement. In this regard, the parties
acknowledge that, pursuant to Sections 2.1(a) and 2.1(b) hereof, BWI shall
file certain Income Tax Returns on behalf of, or which include, the members
of the PHC Group for the Stub Period. PHC shall reimburse BWI for any
Income Taxes shown due on such Return which are imposed upon or otherwise
allocable to the PHC Group for the Stub Period within five (5) days of the
earlier to occur of the filing of any Return by BWI or the payment by BWI
of any Income Tax (including the payment of estimated Income Taxes) for the
Stub Period.
(b) PHC shall pay any Income Tax shown due on any Return that
includes the Stub Period for which it has filing responsibility pursuant to
Section 2.1 hereof.
(c) PHC shall indemnify and hold harmless BWI against all Taxes
imposed upon, or otherwise allocable to, the PHC Group for the Stub Period.
Any payment required to be made by PHC to BWI pursuant to this Section
3.4(c) shall be made in accordance with Section 3.9 hereof.
(d) If BWI receives a refund of Income Taxes for the Stub Period for
which BWI had previously been reimbursed or otherwise indemnified by PHC
pursuant to paragraph (a) or (c), as the case may be, of this Section 3.4,
BWI shall pay the amount of such refund to PHC within five (5) days of
receipt thereof. If, in filing any Return for which BWI has filing
responsibility pursuant to Sections 2.1 or 2.2 hereof, BWI claims a credit
against Income Taxes that is attributable to Income Taxes for the Stub
Period for which BWI had previously been reimbursed by PHC pursuant to
paragraph (a) of this Section 3.4, BWI shall pay the amount of such credit
to PHC within five (5) days of the filing of such Return with respect to
which such credit is claimed.
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Section 3.5. Other Taxes. The BWI Group shall pay all Other Taxes (and
shall be entitled to receive and retain all refunds of Other Taxes) which are
attributable to members of the BWI Group. The PHC Group shall pay all Other
Taxes (and shall be entitled to receive and retain all refunds of Other Taxes)
which are attributable to members of the PHC Group.
Section 3.6. Carrybacks. Unless BWI and PHC otherwise agree in
writing, PHC hereby expressly agrees to elect (under Code section 172(b)(3)(C)
and, to the extent feasible, any similar provision of any state and local Income
Tax law) to relinquish any Carryback Item (and hereby acknowledges that it has
no interest in any Carryback Item and that it waives and relinquishes any claim
thereto so that no payment shall be due from BWI to PHC in respect of any such
Carryback Item).
Section 3.7. Responsibility of PHC Group for an Event of Loss. PHC and
any successor corporation shall be responsible for, and shall indemnify and hold
harmless BWI and each member of the BWI Group from all liability, loss, cost,
expense or damage in any way occasioned by an Event of Loss to the extent such
Event of Loss would not have resulted but for a breach of any covenant contained
in Section 6.2 of this Agreement (without regard to whether an opinion of
counsel has been obtained).
Section 3.8. Responsibility of BWI Group for an Event of Loss. BWI and
any successor corporation shall be responsible for and shall indemnify and hold
harmless PHC and each member of the PHC Group from all liability, loss, cost,
expense or damage in any way occasioned by an Event of Loss to the extent such
Event of Loss would not have resulted but for a breach of BWI's covenant
contained in Section 6.3 of this Agreement.
Section 3.9. Payment.
(a) If PHC is required to make a payment to a member of the BWI Group
under this Agreement, such payment shall be made by PHC to BWI or any
successor corporation, and if BWI is required to make a payment to a member
of the PHC Group under this Agreement, such payment shall be made to PHC.
Any payment by PHC shall be made by the earlier of 5 days after (1) BWI
makes a tax payment to the applicable taxing authority (including, without
limitation, any payment made in connection with either an estimated or
annual tax liability) or (2) a Final Determination of the tax liability in
question. Any payment by BWI shall be made by the earlier of 5 days after
(1) BWI receives a refund from any taxing authority or claims a tax credit
on any Return or (2) a Final Determination of the tax liability in
question. BWI and PHC agree that to the extent permitted, any payment made
shall be reported as non-deductible and any payment received shall be
reported as non-taxable.
(b) Any payment required to be made from one party to the other under
this Agreement and not made when due shall bear interest at the rate per
annum equal to the lesser of (i) the maximum rate permitted by applicable
law and (ii) two
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percentage points in excess of the per annum rate of interest generally
charged from time to time by Bank One, Indiana, NA as its "prime rate" of
interest. For the purposes of this Agreement, such "prime rate" of interest
shall be ascertained monthly, as of the first business day of each calendar
month, and such rate, as so ascertained, shall be deemed to be the "prime
rate" in effect throughout such calendar month.
ARTICLE IV
COOPERATION AND EXCHANGE OF INFORMATION
Section 4.1. Matters Giving Rise to Indemnity.
(a) Whenever BWI or PHC becomes aware of an issue which it believes
gives rise to an indemnity from the other party under Article III, BWI or
PHC (as the case may be) promptly shall give notice of the issue to the
other party.
(b) In connection with any pre-Distribution Income Tax liability
arising with respect to a Return for which BWI had filing responsibilities
pursuant to Section 2.1 or 2.2 hereof, BWI shall have the sole right to
control any audit or determination by any authority, initiate any claim for
refund or amended return, contest, defend against, resolve and settle any
assessment, notice of deficiency or other adjustment of taxes or otherwise
resolve any issue pertaining to taxes. BWI acknowledges that, with respect
to any negotiation, settlement or litigation of any Pre-Distribution Tax
Liabilities that may give rise to an indemnification obligation by PHC
pursuant to Sections 3.3(a), 3.4 or 3.7 hereof in a taxable year beginning
after the Distribution, BWI shall (i) promptly give notice in writing to
PHC of the commencement of the audit or examination by any taxing
authority, (ii) consult in good faith with PHC in contesting any proposed
adjustment to Taxes and (iii) consider any reasonable advice from PHC
concerning such contest. Notwithstanding the foregoing, all decisions with
respect to such negotiation, settlement or litigation shall be made by BWI
in its sole discretion.
(c) PHC shall have the right, with respect to any Income Tax Return
for which it has filing responsibility pursuant to Sections 2.1 or 2.2
hereof, to control any audit or determination by any authority, initiate
any claim for refund or amended return, contest, defend against, resolve
and settle any assessment, notice of deficiency or other adjustment of such
Income Taxes or otherwise resolve any issue pertaining to such Income
Taxes.
(d) The party responsible for the payment of Other Taxes pursuant to
Section 3.5 hereof shall have the right to control any audit or
determination by any authority, initiate any claim for refund or amended
return, contest, defend against, resolve and settle any assessment, notice
of deficiency or other adjustment of such
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Other Taxes for which such party is responsible or otherwise resolve any
issue pertaining to such Other Taxes.
(e) Except as otherwise provided above, BWI shall have sole control
over, and shall have no duty to consult with PHC as to, any liability for
Income Taxes of all members of the BWI Affiliated Group arising on or
before the Distribution Date, including specifically any Income Taxes
arising as a result of the Distribution.
(f) BWI and PHC hereby agree to pursue and to cooperate in the
pursuit of every opportunity to realize a Tax Benefit for a member of the
BWI Group or the PHC Group, respectively, unless the Tax Benefit produced
thereby will be less than $25,000.
Section 4.2. Tax Return Information. PHC shall, and shall cause each
appropriate member of the PHC Group to, timely provide BWI with all information
reasonably requested by BWI to enable BWI to file the BWI consolidated Federal
Income Tax Return and those state and local Income Tax Returns required to be
filed on a combined, consolidated or unitary basis for the taxable period ended
on the Distribution Date.
BWI shall timely provide PHC with a copy of those portions of the BWI
consolidated Federal Income Tax Return and those portions of the state and local
Income Tax Returns required to be filed on a combined or consolidated basis
relating to the PHC Group with respect to the taxable period ended December 31,
1997. BWI shall prepare such Returns on a basis consistent with its past
practices, except as to new Tax Items or as to any changes required by law.
BWI shall timely provide PHC with a copy of those portions of the BWI
consolidated Federal Income Tax Return and those portions of the state and local
Income Tax Returns required to be filed on a combined or consolidated basis
relating to the PHC Group with respect to the Stub Period. BWI shall prepare
such Returns on a basis consistent with its past practices, except as to new Tax
Items or as to any changes required by law.
BWI and PHC agree to cooperate fully with each other in connection
with the preparation of any tax Return or claim for refund or in conducting any
audit or other proceeding in respect of taxes for all open taxable periods. Such
cooperation shall include making personnel and records available promptly and
within 20 days (or such other period as may be reasonable under the
circumstances) after a request for such personnel or records is made by the tax-
imposing authority or the other party. If any member of the BWI Group or the PHC
Group, as the case may be, fails to provide any information requested pursuant
to this section, then the requesting party shall have the right to engage a
public accountant of its choice to gather such information. PHC and BWI, as the
case may be, agree to permit any such public accountant full access to all
appropriate records or other information in the possession of any member of the
BWI Group or the PHC Group, as the case may be, during reasonable business
hours, and to reimburse or pay directly all costs and expenses in connection
with the engagement of such public accountant.
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If any member of the BWI Group or the PHC Group, as the case may be,
supplies information to a member of the other group pursuant to this section and
an officer of the requesting party signs a statement or other document under
penalties of perjury in reliance upon the accuracy of such information, then a
duly authorized officer of the party supplying such information shall certify,
under penalties of perjury, the accuracy and completeness of the information so
supplied. BWI agrees to indemnify and hold harmless each member of the PHC
Group and its officers and employees, and PHC agrees to indemnify and hold
harmless each member of the BWI Group and its officers and employees against any
cost, fine, penalty or other expense of any kind attributable to the negligence
of a member of the BWI Group or the PHC Group, as the case may be, in supplying
a member of the other group with inaccurate or incomplete information.
PHC shall have access to only those portions of the BWI consolidated
Federal Income Tax Return and those state and local Income Tax Returns required
to be filed on a combined or consolidated basis relating to the PHC Group.
Under no circumstances will PHC have access to any portions of the BWI
consolidated Federal Income Tax Return pertaining to the BWI Group and those
state and local Income Tax Returns required to be filed on a combined or
consolidated basis pertaining to the BWI Group.
Section 4.3. Record Retention. BWI and PHC agree to retain the
appropriate records for all taxable periods which may affect the determination
of the Income Tax liability of the BWI Affiliated Group or the PHC Affiliated
Group for such period until such time as a Final Determination occurs with
respect to such taxable period.
Any party intending to destroy any material, records or documents
shall provide the other party with advance notice and the opportunity to copy or
take possession of such records and documents. The parties hereto will notify
each other in writing of any waivers or extensions of the applicable statute of
limitations that may affect the period for which the foregoing records or other
documents must be retained.
ARTICLE V
DISPUTES
Section 5.1. Disputes. If the parties are, after negotiation in good
faith, unable to agree upon the appropriate application of this Agreement, the
controversy shall be submitted to and resolved by a firm of independent
certified public accountants with recognized expertise in tax matters generally,
who shall be mutually acceptable to BWI and PHC. If BWI and PHC are not able to
agree upon such firm, then the firm shall be designated jointly by the firms
that act as the independent certified public accountants for BWI and PHC. The
expenses of such procedure shall be borne in equal parts by the parties.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
Section 6.1. Representations and Warranties. As an inducement to
enter into this Agreement, each party represents to and agrees with the other
that:
(a) PHC is a corporation duly organized and validly existing under
the laws of the State of Indiana and BWI is a corporation duly organized
and validly existing under the laws of the State of Indiana, and each of
them has all requisite corporate power to own, lease and operate its
properties, to carry on its business as presently conducted and to carry
out the transactions contemplated by this Agreement;
(b) it has duly and validly taken all corporate action necessary to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby;
(c) this Agreement has been duly executed and delivered by it and
constitutes its legal, valid and binding obligation enforceable in
accordance with its terms (subject, as to the enforcement of remedies, to
(i) applicable bankruptcy, reorganization, insolvency, moratorium or other
similar laws affecting the enforcement of creditors' rights generally from
time to time in effect, and (ii) general principles of equity), whether
enforcement is sought in a proceeding at law or in equity; and
(d) none of the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or the compliance with
any of the provisions of this Agreement will (i) conflict with or result in
a breach of any provision of its Articles of Incorporation or by-laws, (ii)
breach, violate or result in a default under any of the terms of any
agreement or other instrument or obligation to which it is a party or by
which it or any of its properties or assets may be bound or (iii) violate
any order, writ, injunction, decree, statute, rule or regulation applicable
to it or affecting any of its properties or assets.
Section 6.2. Covenants of PHC.
(a) PHC hereby covenants and agrees that during the two-year period
after the Distribution Date it will not participate in or enter into a
binding commitment to participate in, nor will any of PHC's directors
approve or recommend, any of the following described events or
transactions:
(i) any transaction or series of transactions that would result
in PHC (and its subsidiaries taken as a whole) failing to conduct its
historic business on an active basis;
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(ii) any merger, consolidation or other business combination in
which PHC is not the surviving corporation; or
(iii) the issuance of shares of stock or the redemption of stock
outstanding as of this date, in both cases except in connection with
employee compensation or benefit plans or employee stock ownership
plans.
(b) PHC represents that, as of the date hereof, it has no present
intention to take any actions described in paragraph (a) of this Section
6.2.
(c) Notwithstanding the foregoing, PHC may engage in acts
inconsistent with the covenants contained in paragraph (a) of this Section
6.2 if:
(i) BWI consents in writing to such action; or
(ii) on the basis of valid representations, PHC obtains a ruling
from the IRS, or obtains an opinion from a nationally recognized
independent tax counsel selected by PHC and approved by BWI, which
ruling or opinion states that such action will not cause either BWI or
its shareholders to recognize taxable income by virtue of the
Distribution.
Section 6.3. Covenant of BWI. BWI hereby covenants and agrees that
after the Distribution Date it will not take or fail to take any action or
actions that would result in an Event of Loss to the PHC Group.
ARTICLE VII
MISCELLANEOUS
Section 7.1. Term of Agreement. This Agreement shall become
effective as of the Distribution Date and, except as otherwise expressly
provided herein, the respective covenants of the parties contained herein shall
continue in full force and effect until the parties have fully performed.
Section 7.2. Prior Tax Sharing Agreements. This Agreement shall
supersede any other tax-sharing or allocation agreement or arrangement in effect
between the parties hereto prior to the effective date hereof with respect to
the matters expressly dealt with herein.
Section 7.3. Election under Section 1552 of the Code. Nothing in
this Agreement is intended to change or otherwise affect any election made by or
on behalf of the BWI Affiliated Group with respect to the calculation of
earnings and profits under section 1552 of the Code or the
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Consolidated Return Regulations. BWI, in its sole discretion, is authorized to
seek any change in the method of calculating earnings and profits as it deems
desirable.
Section 7.4. Injunctions. The parties acknowledge that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or were otherwise
breached. The parties hereto shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof in any court having jurisdiction,
such remedy being in addition to any other remedy to which they may be entitled
at law or in equity.
Section 7.5. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such which may be hereafter declared invalid, void or
unenforceable. In the event that any such term, provision, covenant or
restriction is held to be invalid, void or unenforceable, the parties hereto
shall use their best efforts to find and employ an alternate means to achieve
the same or substantially the same result as that contemplated by such term,
provision, covenant or restriction.
Section 7.6. Assignment. Except by operation of law (and with
respect thereto, only after two years from the date hereof) or in connection
with the sale of all or substantially all the assets of a party hereto (in
either case, with respect to PHC, subject to the express limitations of Section
6.2), this Agreement shall not be assignable, in whole or in part, directly or
indirectly, by any party hereto without the written consent of the other party;
and any attempt to assign any rights or obligations arising under this Agreement
without such consent shall be void; provided, however, that the provisions of
this Agreement shall be binding upon, inure to the benefit of and be enforceable
by the parties hereto and their respective successors and permitted assigns.
Section 7.7. 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 of
the parties 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 parties with all such information as
they may reasonably request in order to be able to comply with the provisions of
this sentence.
Section 7.8. Parties in Interest. Except as herein otherwise
specifically provided, nothing in this Agreement expressed or implied is
intended to confer any right or benefit upon any
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person, firm or corporation other than the parties and their respective
successors and permitted assigns.
Section 7.9. Waiver, Etc. No failure or delay on the part of the
parties in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No modification or waiver of any provision of this Agreement
nor consent to any departure by the parties therefrom shall in any event be
effective unless the same shall be in writing, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given.
Section 7.10. Change of Law. If, due to any change in applicable law
or regulations or the interpretation thereof by any court of law or other
governing body having jurisdiction subsequent to the date of this Agreement,
performance of any provision of this Agreement or any transaction contemplated
thereby shall become impracticable or impossible, the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such provision.
Section 7.11. Confidentiality. Subject to any contrary requirement
of law and the right of each party to enforce its rights hereunder in any legal
action, each party agrees that it shall keep strictly confidential, and shall
cause its employees and agents to keep strictly confidential, any information
which it or any of its agents or employees may acquire pursuant to, or in the
course of performing its obligations under, any provision of this Agreement;
provided, however, that such obligation to maintain confidentiality shall not
apply to information which (x) at the time of disclosure was in the public
domain not as a result of acts by the receiving party or (y) was in the
possession of the receiving party at the time of disclosure.
Section 7.12. Headings. Descriptive headings are for convenience
only and shall not control or affect the meaning or construction of any
provision of this Agreement.
Section 7.13. Counterparts. For the convenience of the parties, any
number of counterparts of this Agreement may be executed by the parties hereto,
and each such executed counterpart shall be, and shall be deemed to be, an
original instrument.
Section 7.14. Notices. All notices, consents, requests,
instructions, approvals and other communications provided for herein shall be
validly given, made or served, if in writing and delivered by hand, by
facsimile, by United States Postal Service, postage prepaid, registered or
certified mail (delivery verification requested) or by reputable overnight
courier service (charges paid by sender, next business day delivery and delivery
verification requested) and shall be deemed given (a) when delivered by hand,
(b) when transmitted by facsimile (with either (i) receipt confirmed or (ii)
hard copy deposited within one business day of such transmission with a
reputable overnight courier service as above provided), (c) three business days
after mailing if mailed through the United States Postal Service as above
provided or (d) one business day after depositing with a
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reputable overnight courier service as above provided, in each case addressed to
the parties as follows:
(a) if to BWI:
Bindley Western Industries, Inc.
00000 Xxxxx Xxxxxxxx Xx., Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Attention: President
Facsimile: (000) 000-0000
(b) if to PHC:
Priority Healthcare Corporation
000 Xxxx Xxxxxxx Xxxxxxx
Xxxxxxxxx Xxxxxxx, XX 00000
Attention: President
Facsimile: (000) 000-0000
subject to the right of each party to designate a different address in the
United States and/or addressee by notice similarly given at least 15 days before
the effectiveness of such new designation.
Section 7.15. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the domestic substantive laws of the
State of Indiana without regard to any choice or conflict of laws rule or
provisions that would cause the application of the domestic substantive laws of
any other jurisdiction.
Section 7.16. Costs and Expenses. Unless otherwise specifically
provided herein, each party agrees to pay its own costs and expenses resulting
from the fulfillment of its respective obligations hereunder.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed by their respective officers, each of whom is duly authorized, all
as of the day and year first above written.
BINDLEY WESTERN INDUSTRIES, INC.
By: /s/ Xxxxxxx X. XxXxxxxxx
-------------------------------------
Xxxxxxx X. XxXxxxxxx
Executive Vice President
PRIORITY HEALTHCARE CORPORATION
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Xxxxxx X. Xxxxx
President and Chief Executive Officer
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