EX-10.3 2 d381653dex103.htm FORM OF TAX MATTERS AGREEMENT FORM OF TAX MATTERS AGREEMENT
Exhibit 10.3
FORM OF
This TAX MATTERS AGREEMENT (this “Agreement”) is entered into as of [ ], by and among Pfizer Inc., a Delaware corporation (“Pfizer”), and Zoetis Inc. a Delaware corporation and a wholly owned subsidiary of Pfizer (“Zoetis”) (Pfizer and Zoetis are sometimes collectively referred to herein as the “Companies” and, as the context requires, individually referred to herein as the “Company”).
“Active Trade or Business” means, with respect to Zoetis, the active conduct (as defined in Section 355(b)(2) of the Code and the regulations thereunder) of the Animal Health Business as conducted immediately prior to the IPO, or, with respect to another Separation Transaction intended to qualify as tax-free pursuant to Section 355 of the Code or analogous provisions of state or local law, the active conduct (as defined in Section 355(b)(2) of the Code and the regulations thereunder, or the analogous provisions of state or local law) by the relevant Zoetis Entity of the Animal Health Business relating to such Zoetis Entity as conducted immediately prior to such Separation Transaction.
“Adjustment Request” means any formal or informal claim or request filed with any Tax Authority, or with any administrative agency or court, for the adjustment, refund, or credit of Taxes, including (i) any amended Tax Return claiming adjustment to the Taxes as reported on the Tax Return or, if applicable, as previously adjusted, (ii) any claim for equitable recoupment or other offset, and (iii) any claim for refund or credit of Taxes previously paid.
“Affiliate” has the meaning set forth in the Separation Agreement.
“Agreement” means this Tax Matters Agreement.
“Animal Health Assets” has the meaning set forth in the Separation Agreement.
“Animal Health Business” has the meaning set forth in the Separation Agreement.
“Animal Health Liabilities” has the meaning set forth in the Separation Agreement.
“Board Certificate” has the meaning set forth in Section 6.01(d) of this Agreement.
“Business Day” has the meaning set forth in the Separation Agreement.
“Code” means the U.S. Internal Revenue Code of 1986, as amended.
“Companies” and “Company” have the meaning provided in the first sentence of this Agreement.
“Contribution” has the meaning set forth in the Separation Agreement.
“Contribution Agreement” has the meaning set forth in the Separation Agreement.
“Controlling Party” has the meaning set forth in Section 9.02(c) of this Agreement.
“Debt-for-Debt Exchange” has the meaning set forth in the Separation Agreement.
“Debt-for-Equity Exchange” has the meaning set forth in the Separation Agreement.
“Deconsolidation Date” means the last date on which Zoetis qualifies as a member of the affiliated group (as defined in Section 1504 of the Code) of which Pfizer is the common parent.
“DGCL” means the Delaware General Corporation Law.
“Dispute” has the meaning set forth in Section 13 of this Agreement.
“Distribution” has the meaning set forth in the Separation Agreement.
“Distribution Date” means the date or dates on which the Distribution occurs.
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“Employee Matters Agreement” means the Employee Matters Agreement, dated as of [ ], by and among Pfizer and Zoetis.
“Employment Tax” means any Tax the liability or responsibility for which is allocated pursuant to the Employee Matters Agreement.
“Federal Income Tax” means any Tax imposed by Subtitle A of the Code other than an Employment Tax, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.
“Fifty Percent or Greater Interest” has the meaning ascribed to such term for purposes of Sections 355(d) and (e) of the Code.
“Filing Date” has the meaning set forth in Section 6.04(d) of this Agreement.
“Final Determination” means the final resolution of liability for any Specified Tax, which resolution may be for a specific issue or adjustment or for a taxable period, (i) by IRS Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance by or on behalf of the taxpayer, or by a comparable form under the laws of a State, local, or foreign taxing jurisdiction, except that a Form 870 or 870-AD or comparable form shall not constitute a Final Determination to the extent that it reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for refund or the right of the Tax Authority to assert a further deficiency in respect of such issue or adjustment or for such taxable period (as the case may be); (ii) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (iii) by a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the laws of a State, local, or foreign taxing jurisdiction; (iv) by any allowance of a refund or credit in respect of an overpayment of a Specified Tax, but only after the expiration of all periods during which such refund may be recovered (including by way of offset) by the jurisdiction imposing such Specified Tax; (v) by a final settlement resulting from a treaty-based competent authority determination; or (vi) by any other final disposition, including by reason of the expiration of the applicable statute of limitations or by mutual agreement of the parties.
“Foreign Income Tax” means any Tax imposed by any foreign country or any possession of the United States, or by any political subdivision of any foreign country or United States possession, which is an income tax as defined in Treasury Regulation Section 1.901-2, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.
“Gain Recognition Agreement” means a gain recognition agreement as described in Treasury Regulations Section 1.367(a)-8 or any successor provision thereto.
“Group” means the Pfizer Group or the Zoetis Group, or both, as the context requires.
“Income Tax” means any Federal Income Tax, State Income Tax or Foreign Income Tax.
“Indemnitee” has the meaning set forth in Section 12.02 of this Agreement.
“Indemnitor” has the meaning set forth in Section 12.02 of this Agreement.
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“Internal Restructuring” has the meaning set forth in Section 6.01(e) of this Agreement.
“IPO” has the meaning set forth in the Separation Agreement.
“IRS” means the United States Internal Revenue Service.
“Joint Return” means any Tax Return that actually includes, by election or otherwise, one or more members of the Pfizer Group together with one or more members of the Zoetis Group.
“Local Separation Agreements” has the meaning set forth in the Separation Agreement.
“Non-Controlling Party” has the meaning set forth in Section 9.02(c) of this Agreement.
“Notified Action” has the meaning set forth in Section 6.03(a) of this Agreement.
“Other Disposition” has the meaning set forth in the Separation Agreement.
“Past Practices” has the meaning set forth in Section 3.04(b) of this Agreement.
“Payment Date” means (i) with respect to any Pfizer Federal Consolidated Income Tax Return, (A) the due date for any required installment of estimated taxes determined under Section 6655 of the Code, (B) the due date (determined without regard to extensions) for filing the return determined under Section 6072 of the Code, or (C) the date the return is filed, as the case may be, and (ii) with respect to any other Tax Return, the corresponding dates determined under the applicable Tax Law.
“Payor” has the meaning set forth in Section 4.03 of this Agreement.
“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof, without regard to whether any entity is treated as disregarded for U.S. federal income tax purposes.
“Pfizer” has the meaning provided in the first sentence of this Agreement.
“Pfizer Affiliated Group” means the affiliated group (as that term is defined in Section 1504 of the Code and the regulations thereunder) of which Pfizer is the common parent.
“Pfizer Business” has the meaning provided in the Separation Agreement.
“Pfizer Federal Consolidated Income Tax Return” means any United States federal Income Tax Return for the Pfizer Affiliated Group.
“Pfizer Group” means Pfizer and its Affiliates, excluding any entity that is a member of the Zoetis Group, as determined immediately after the IPO.
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“Pfizer Separate Return” means any Tax Return of or including any member of the Pfizer Group (including any consolidated, combined or unitary return) that does not include any member of the Zoetis Group.
“Post-2012 Period” means any Tax Period beginning after December 31, 2012 and, in the case of any Straddle Period, the portion of such Straddle Period beginning January 1, 2013.
“Post-Deconsolidation Period” means any Tax Period beginning after the Deconsolidation Date and, in the case of any Tax Period beginning before the Deconsolidation Date and ending after the Deconsolidation Date, the portion of such Tax Period beginning on the day after the Deconsolidation Date.
“Pre-2013 Period” means any Tax Period ending on or before December 31, 2012, and, in the case of any Straddle Period, the portion of such Straddle Period ending on December 31, 2012.
“Pre-Deconsolidation Period” means any Tax Period ending on or before the Deconsolidation Date and, in the case of any Straddle Period, the portion of such Straddle Period ending on the Deconsolidation Date.
“Preliminary Tax Advisor” has the meaning set forth in Section 13.03 of this Agreement.
“Prime Rate” means the base rate on corporate loans charged by Citibank, N.A. from time to time, compounded daily on the basis of a year of 365 or 366 (as applicable) days and actual days elapsed.
“Privilege” means any privilege that may be asserted under applicable law, including, any privilege arising under or relating to the attorney-client relationship (including the attorney-client and work product privileges), the accountant-client privilege and any privilege relating to internal evaluation processes.
“Proposed Acquisition Transaction” means a transaction or series of transactions (or any agreement, understanding or arrangement, within the meaning of Section 355(e) of the Code and Treasury Regulation Section 1.355-7, or any other regulations promulgated thereunder, to enter into a transaction or series of transactions), whether such transaction is supported by Zoetis management or shareholders, is a hostile acquisition, or otherwise, as a result of which Zoetis would merge or consolidate with any other Person or as a result of which any Person or any group of related Persons would (directly or indirectly) acquire, or have the right to acquire, from Zoetis and/or one or more holders of outstanding shares of Zoetis Capital Stock, a number of shares of Zoetis Capital Stock that would, when combined with any other changes in ownership of Zoetis Capital Stock pertinent for purposes of Section 355(e) of the Code, comprise 40% or more of (i) the value of all outstanding shares of stock of Zoetis as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series, or (ii) the total combined voting power of all outstanding shares of voting stock of Zoetis as of the date of such transaction, or in the case of a series of transactions, the date of the last transaction of such series. Notwithstanding the foregoing, a Proposed Acquisition Transaction shall not include (i) the adoption by Zoetis of a shareholder rights plan or (ii) issuances by Zoetis that satisfy Safe
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Harbor VIII (relating to acquisitions in connection with a person’s performance of services) or Safe Harbor IX (relating to acquisitions by a retirement plan of an employer) of Treasury Regulation Section 1.355-7(d). For purposes of determining whether a transaction constitutes an indirect acquisition, any recapitalization resulting in a shift of voting power or any redemption of shares of stock shall be treated as an indirect acquisition of shares of stock by the non-exchanging shareholders. This definition and the application thereof is intended to monitor compliance with Section 355(e) of the Code and shall be interpreted accordingly. Any clarification of, or change in, the statute or regulations promulgated under Section 355(e) of the Code shall be incorporated in this definition and its interpretation.
“Representation Letters” means the statements of facts and representations, officer’s certificates, representation letters and any other materials (including, without limitation, a Ruling Request and any related supplemental submissions to the IRS or other Tax Authority) delivered or deliverable by Pfizer, its Affiliates or representatives thereof in connection with the rendering by Tax Advisors, and/or the issuance by the IRS or other Tax Authority, of the Tax Opinions/Rulings.
“Required Action” has the meaning set forth in Section 6.01(f) of this Agreement.
“Required Party” has the meaning set forth in Section 4.03 of this Agreement.
“Responsible Company” means, with respect to any Tax Return, the Company having responsibility for preparing and filing such Tax Return under this Agreement.
“Retention Date” has the meaning set forth in Section 8.01 of this Agreement.
“Ruling” means a private letter ruling issued by the IRS to Pfizer in connection with the Contribution and Distribution.
“Ruling Request” means any letter filed by Pfizer with the IRS or other Tax Authority requesting a ruling regarding certain tax consequences of the Separation Transactions (including all attachments, exhibits, and other materials submitted with such ruling request letter) and any amendment or supplement to such ruling request letter.
“Section 6.01(d) Acquisition Transaction” means any transaction or series of transactions that is not a Proposed Acquisition Transaction but would be a Proposed Acquisition Transaction if the percentage reflected in the definition of Proposed Acquisition Transaction were 25% instead of 40%.
“Separate Return” means a Pfizer Separate Return or a Zoetis Separate Return, as the case may be.
“Separation” has the meaning set forth in the Separation Agreement.
“Separation Agreement” means the Global Separation Agreement, as amended from time to time, by and among Pfizer and Zoetis dated [ ].
“Separation Plan” means, collectively, (i) the Animal Health Global Macro Step Plan dated [ ], attached hereto as Exhibit A-1, and (ii) the External Transactions Step Plan dated [ ], attached hereto as Exhibit A-2.
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“Separation Transactions” means those transactions undertaken by the Companies and their Affiliates pursuant to the Separation Plan to separate ownership of the Animal Health Business from ownership of the Pfizer Business.
“Separation Taxes” means those Taxes shown on Exhibit B hereto, identified by the jurisdiction imposing such Tax, the step in the Separation Plan with respect to which such Tax is triggered, and a description of the nature of such Tax. Dollar amounts shown on Exhibit B reflect the current estimate of the amount of such Separation Taxes, where available; the indemnification obligations of Pfizer pursuant to Section 2.08 hereof with respect to such Separation Taxes shall be determined based upon the final amount of such Separation Taxes as determined under applicable Tax Law rather than upon the estimated amounts set forth on Exhibit B. For the avoidance of doubt, Separation Taxes shall include only those Taxes shown on Exhibit B, and shall not include any other Taxes.
“Specified Taxes” means those Taxes described in Section 2.01 through Section 2.04 of this Agreement, as well as those Taxes described in Section 2.07 or Section 2.08 of this Agreement.
“State Income Tax” means any Tax imposed by any State of the United States or by any political subdivision of any such State which is imposed on or measured by net income, including state or local franchise or similar Taxes measured by net income, as well as any state or local franchise, capital or similar Taxes imposed in lieu of a tax imposed on or measured by net income, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.
“State Other Tax” means any Tax imposed by any State of the United States or by any political subdivision of any such State other than any State Income Taxes or Employment Taxes, and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.
“Straddle Period” means any Tax Period that begins before and ends after December 31, 2012.
“Tax” or “Taxes” means any income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers compensation, unemployment, disability, property, ad valorem, value added, stamp, excise, severance, occupation, service, sales, use, license, lease, transfer, import, export, alternative minimum, estimated or other tax (including any fee, assessment, or other charge in the nature of or in lieu of any tax), imposed by any governmental entity or political subdivision thereof, and any interest, penalty, additions to tax, or additional amounts in respect of the foregoing.
“Tax Advisor” means a tax counsel or accountant of recognized national standing.
“Tax Attribute” or “Attribute” means a net operating loss, net capital loss, unused investment credit, unused foreign tax credit, excess charitable contribution, general business credit, research and development credit or any other Tax Item that could reduce a Tax or create a Tax Benefit.
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“Tax Authority” means, with respect to any Tax, the governmental entity or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such entity or subdivision.
“Tax Benefit” means any refund, credit, or other reduction in otherwise required liability for Taxes.
“Tax Contest” means an audit, review, examination, or any other administrative or judicial proceeding with the purpose or effect of redetermining Taxes (including any administrative or judicial review of any claim for refund).
“Tax Control” means the definition of “control” set forth in Section 368(c) of the Code (or in any successor statute or provision), as such definition may be amended from time to time.
“Tax-Free Status” means the qualification of the Contribution, the Debt-for Debt Exchange, the Debt-for-Equity Exchange and the Distribution, taken together, (i) as a reorganization described in Sections 355(a) and 368(a)(1)(D) of the Code, (ii) as a transaction in which the stock distributed thereby is “qualified property” for purposes of Sections 355(d), 355(e) and 361(c) of the Code and in which the Zoetis Securities are “securities” within the meaning of Section 361(a) of the Code, and (iii) as a transaction in which Pfizer, Zoetis and the shareholders of Pfizer recognize no income or gain for U.S. federal income tax purposes pursuant to Sections 355, 361 and 1032 of the Code, other than, in the case of Pfizer and Zoetis, intercompany items or excess loss accounts taken into account pursuant to the Treasury Regulations promulgated pursuant to Section 1502 of the Code.
“Tax Item” means, with respect to any Income Tax, any item of income, gain, loss, deduction, or credit.
“Tax Law” means the law of any governmental entity or political subdivision thereof relating to any Tax.
“Tax Opinions/Rulings” means the opinions of Tax Advisors and/or the rulings by the IRS or other Tax Authorities deliverable to Pfizer in connection with the Contribution and the Distribution or otherwise with respect to the Separation Transactions.
“Tax Period” means, with respect to any Tax, the period for which the Tax is reported as provided under the Code or other applicable Tax Law.
“Tax Records” means any (i) Tax Returns, (ii) Tax Return workpapers, (iii) documentation relating to any Tax Contests, and (iv) any other books of account or records (whether or not in written, electronic or other tangible or intangible forms and whether or not stored on electronic or any other medium) required to be maintained under the Code or other applicable Tax Laws or under any record retention agreement with any Tax Authority, in each case filed with respect to or otherwise relating to Specified Taxes.
“Tax-Related Losses” means (i) all Taxes (including interest and penalties thereon) imposed pursuant to any settlement, Final Determination, judgment or otherwise; (ii) all accounting, legal and other professional fees, and court costs incurred in connection with such
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Taxes, as well as any other out-of-pocket costs incurred in connection with such Taxes; and (iii) all costs, expenses and damages associated with stockholder litigation or controversies and any amount paid by Pfizer (or any Pfizer Affiliate) or Zoetis (or any Zoetis Affiliate) in respect of the liability of shareholders, whether paid to shareholders or to the IRS or any other Tax Authority, in each case, resulting from the failure of the Contribution, the Debt-for-Debt Exchange, the Debt-for-Equity Exchange and the Distribution to have Tax-Free Status or from the failure of a Separation Transaction to have the tax treatment described in the Tax Opinions/Rulings.
“Tax Return” or “Return” means any report of Specified Taxes due, any claim for refund of Specified Taxes paid, any information return with respect to Specified Taxes, or any other similar report, statement, declaration, or document required to be filed under the Code or other Tax Law with respect to Specified Taxes, including any attachments, exhibits, or other materials submitted with any of the foregoing, and including any amendments or supplements to any of the foregoing.
“Transfer Pricing Adjustment” means any proposed or actual allocation by a Tax Authority of any Tax Item between or among any member of the Pfizer Group and any member of the Zoetis Group with respect to any Tax Period ending prior to or including the final Distribution Date or the date of any Other Disposition, as the case may be.
“Treasury Regulations” means the regulations promulgated from time to time under the Code as in effect for the relevant Tax Period.
“Unqualified Tax Opinion” means an unqualified “will” opinion of a Tax Advisor, which Tax Advisor is acceptable to Pfizer, on which Pfizer may rely to the effect that a transaction will not affect the Tax-Free Status. Any such opinion must assume that the Contribution, the Debt-for-Debt Exchange, the Debt-for-Equity Exchange and the Distribution would have qualified for Tax-Free Status if the transaction in question did not occur.
“Zoetis” has the meaning provided in the first sentence of this Agreement.
“Zoetis Capital Stock” means all classes or series of capital stock of Zoetis, including (i) the Zoetis Common Stock, (ii) all options, warrants and other rights to acquire such capital stock and (iii) all instruments properly treated as stock in Zoetis for U.S. federal income tax purposes.
“Zoetis Carryback” means any net operating loss, net capital loss, excess tax credit, or other similar Tax item of any member of the Zoetis Group which may or must be carried from one Tax Period to another prior Tax Period under the Code or other applicable Tax Law.
“Zoetis Common Stock” has the meaning given to the term “Company Common Stock” in the Separation Agreement.
“Zoetis Entity” means an entity which will be a member of the Zoetis Group immediately after the IPO.
“Zoetis Group” means (i) Zoetis and its Affiliates, as determined immediately after the IPO, as well as (ii) any entity which (A) was an Affiliate of Pfizer or an Affiliate of a member of the Zoetis Group, (B) conducted solely or predominantly the Animal Health Business, and (C) is no longer an Affiliate of Pfizer as of the IPO.
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“Zoetis Separate Return” means any Tax Return of or including any member of the Zoetis Group (including any consolidated, combined or unitary return) that does not include any member of the Pfizer Group.
“Zoetis Securities” has the meaning given to the term “Debt-for-Debt Senior Indebtedness” in the Separation Agreement.
Section 2. Allocation of Tax Liabilities.
(a) Allocation of Federal Income Tax Relating to Joint Returns
(i) Allocation for Pre-2013 Periods. With respect to any Joint Return, Pfizer shall be responsible for any and all Federal Income Taxes due with respect to or required to be reported on any such Income Tax Return (including any increase in such Tax as a result of a Final Determination) for all Pre-2013 Periods.
(b) Allocation of Federal Income Tax Relating to Separate Returns.
(i) Pfizer shall be responsible for any and all Federal Income Taxes due with respect to or required to be reported on any Pfizer Separate Return (including any increase in such Tax as a result of a Final Determination) for all Tax Periods.
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(ii) Zoetis shall be responsible for any and all Federal Income Taxes due with respect to or required to be reported on any Zoetis Separate Return (including any increase in such Tax as a result of a Final Determination) for all Tax Periods.
(a) Allocation of State Income Tax Relating to Joint Returns
(i) Allocation for Pre-2013 Periods. Pfizer shall be responsible for any and all State Income Taxes due with respect to or required to be reported on any Joint Return (including any increase in such Tax as a result of a Final Determination) for all Pre-2013 Periods.
(b) Allocation of State Income Tax Relating to Separate Returns.
(i) Pfizer shall be responsible for any and all State Income Taxes due with respect to or required to be reported on any Pfizer Separate Return (including any increase in such Tax as a result of a Final Determination) for all Tax Periods.
(ii) Zoetis shall be responsible for any and all State Income Taxes due with respect to or required to be reported on any Zoetis Separate Return (including any increase in such Tax as a result of a Final Determination) for all Tax Periods.
(c) Allocation of State Other Tax Relating to Joint Returns.
(i) Allocation for Pre-2013 Periods. Pfizer shall be responsible for any and all State Other Taxes due with respect to or required to be reported on any Joint Return (including any increase in such Tax as a result of a Final Determination) for all Pre-2013 Periods.
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(d) Allocation of State Other Tax Relating to Separate Returns.
(i) Zoetis shall be responsible for any and all State Other Taxes due with respect to or required to be reported on any Zoetis Separate Return (including any increase in such Tax as a result of a Final Determination) for all Tax Periods.
(ii) Pfizer shall be responsible for any and all State Other Taxes due with respect to or required to be reported on any Pfizer Separate Return (including any increase in such Tax as a result of a Final Determination) for all Tax Periods.
(a) Allocation of Foreign Income Tax Relating to Joint Returns
(i) Allocation for Pre-2013 Periods. Pfizer shall be responsible for any and all Foreign Income Taxes due with respect to or required to be reported on any Joint Return (including any increase in such Tax as a result of a Final Determination) for all Pre-2013 Periods.
(b) Allocation of Foreign Income Tax Relating to Separate Returns.
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(i) Pfizer shall be responsible for any and all Foreign Income Taxes due with respect to or required to be reported on any Pfizer Separate Return, including any Foreign Income Tax of Pfizer or any member of the Pfizer Group imposed by way of withholding by a member of the Zoetis Group (and including any increase in such Foreign Income Tax as a result of a Final Determination) for all Tax Periods.
(ii) Zoetis shall be responsible for any and all Foreign Income Taxes due with respect to or required to be reported on any Zoetis Separate Return, including any Foreign Income Tax of Zoetis or any member of the Zoetis Group imposed by way of withholding by a member of the Pfizer Group (and including any increase in such Foreign Income Tax as a result of a Final Determination) for all Tax Periods.
Section 2.05 Certain Employment and Other Taxes.
Section 2.06 Determination of Tax Attributable to the Animal Health Business.
(a) United States Federal Income Tax. For purposes of Section 2.02(a)(ii), the amount of Federal Income Taxes attributable to the Animal Health Business shall be as determined by Pfizer on a pro forma Zoetis Group consolidated return prepared:
(i) assuming that the members of the Zoetis Group were not included in the Pfizer Affiliated Group;
(ii) including only Tax Items of members of the Zoetis Group that were included in the relevant Pfizer Federal Consolidated Income Tax Return;
(iii) except as provided in Section 2.06(a)(v) hereof, using all elections, accounting methods and conventions used on the Pfizer Federal Consolidated Income Tax Return for such period;
(iv) applying the highest statutory marginal corporate income Tax rate in effect for such taxable period;
(v) assuming that the Zoetis Group elects not to carry back any net operating losses; and
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(vi) assuming that the Zoetis Group’s utilization of any Tax Attribute carryforward or carryback is limited to the Tax Attributes of the Zoetis Group that would be available if the Federal Income Tax of the Zoetis Group for each taxable year ending after December 31, 2012 were determined in accordance with this Section 2.06(a).
(b) State Income Tax. For purposes of Section 2.03(a)(ii), the amount of State Income Taxes attributable to the Animal Health Business shall be as determined by Pfizer in a manner consistent with the principles set forth in Section 2.06(a).
(c) Foreign Income Tax. For purposes of Section 2.04(a)(ii), the amount of Foreign Income Taxes attributable to the Animal Health Business shall be as determined by Pfizer in a manner consistent with the principles set forth in Section 2.06(a).
(d) Limitation. The amount of Federal Income Taxes, State Income Taxes or Foreign Income Taxes attributable to the Animal Health Business for any Tax Period shall not be less than zero.
(a) any Tax resulting from a breach by Zoetis of any covenant in this Agreement, the Separation Agreement or any Ancillary Agreement; and
(b) any Tax-Related Losses for which Zoetis is responsible pursuant to Section 6.04 of this Agreement.
(a) any Separation Tax;
(b) any Tax resulting from a breach by Pfizer of any covenant in this Agreement, the Separation Agreement or any Ancillary Agreement; and
(c) any Tax-Related Losses for which Pfizer is responsible pursuant to Section 6.04 of this Agreement.
Section 3. Preparation and Filing of Tax Returns.
(a) All Joint Returns; and
(b) Pfizer Separate Returns.
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Section 3.04 Tax Reporting Practices.
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Section 3.06 Right to Review Tax Returns.
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Section 4.03 Indemnification Payments.
(a) If any Company (the “Payor”) is required under applicable Tax Law to pay to a Tax Authority a Tax that another Company (the “Required Party”) is liable for under this
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Agreement, the Required Party shall reimburse the Payor within 20 Business Days of delivery by the Payor to the Required Party of an invoice for the amount due, accompanied by evidence of payment and a statement detailing the Taxes paid and describing in reasonable detail the particulars relating thereto. The reimbursement shall include interest on the Tax payment computed at the Prime Rate based on the number of days from the date of the payment to the Tax Authority to the date of reimbursement under this Section 4.03.
(b) All indemnification payments under this Agreement shall be made by Pfizer directly to Zoetis and by Zoetis directly to Pfizer; provided, however, that if the Companies mutually agree with respect to any such indemnification payment, any member of the Pfizer Group, on the one hand, may make such indemnification payment to any member of the Zoetis Group, on the other hand, and vice versa. All indemnification payments shall be treated in the manner described in Section 12.01.
Section 6.01 Restrictions on Zoetis.
(a) Zoetis agrees that it will not take or fail to take, or permit any Zoetis Affiliate, as the case may be, to take or fail to take, any action where such action or failure to act would be inconsistent with or cause to be untrue any statement, information, covenant or representation in any Representation Letters or Tax Opinions/Rulings. Zoetis agrees that it will not take or fail to take, or permit any Zoetis Affiliate, as the case may be, to take or fail to take, any action which adversely affects or could reasonably be expected to adversely affect (A) the Tax-Free Status of the Contribution, the Debt-for-Debt Exchange, the Debt-for-Equity Exchange and the Distribution, or (B) the qualification of any Separation Transaction under U.S. federal, state, local or non-U.S. Tax Law as wholly or partially tax-free or tax-deferred (including, but not limited to, those transactions described in any of the Tax Opinions/Rulings received with respect to such Separation Transaction).
(b) Zoetis agrees that, from the date hereof until the first Business Day after the two-year anniversary of the final Distribution Date, it will (i) maintain its status as a company engaged in the Active Trade or Business for purposes of Section 355(b)(2) of the Code, (ii) not engage in any transaction that would result in it ceasing to be a company engaged in the Active Trade or Business for purposes of Section 355(b)(2) of the Code, (iii) cause each Zoetis Affiliate whose Active Trade or Business is relied upon in the Tax Opinions/Rulings for purposes of
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qualifying a transaction as tax-free pursuant to Section 355 of the Code or other Tax Law to maintain its status as a company engaged in such Active Trade or Business for purposes of Section 355(b)(2) of the Code and any such other applicable Tax Law, (iv) not engage in any transaction or permit a Zoetis Affiliate to engage in any transaction that would result in a Zoetis Affiliate described in clause (iii) hereof ceasing to be a company engaged in the relevant Active Trade or Business for purposes of Section 355(b)(2) or such other applicable Tax Law, taking into account Section 355(b)(3) of the Code for purposes of clauses (i) through (iv) hereof, and (v) not dispose of or permit a Zoetis Affiliate to dispose of, directly or indirectly, any interest in a Zoetis Affiliate described in clause (iii) hereof or permit any such Zoetis Affiliate to make or revoke any election under Treasury Regulation Section 301.7701-3.
(c) Zoetis agrees that, from the date hereof until the first Business Day after the two-year anniversary of the final Distribution Date, it will not and will not permit any Zoetis Affiliate described in clause (iii) of Section 6.01(b) to (i) enter into any Proposed Acquisition Transaction or, to the extent Zoetis has the right to prohibit any Proposed Acquisition Transaction, permit any Proposed Acquisition Transaction to occur (whether by (a) redeeming rights under a shareholder rights plan, (b) finding a tender offer to be a “permitted offer” under any such plan or otherwise causing any such plan to be inapplicable or neutralized with respect to any Proposed Acquisition Transaction, (c) approving any Proposed Acquisition Transaction, whether for purposes of Section 203 of the DGCL or any similar corporate statute, any “fair price” or other provision of Zoetis’s charter or bylaws, (d) amending its certificate of incorporation to declassify its Board of Directors or approving any such amendment, or otherwise), (ii) merge or consolidate with any other Person or liquidate or partially liquidate, (iii) in a single transaction or series of transactions sell or transfer (other than sales or transfers of inventory in the ordinary course of business) all or substantially all of the assets that were transferred to Zoetis pursuant to the Contribution or sell or transfer 25% or more of the gross assets of any Active Trade or Business or 25% or more of the consolidated gross assets of Zoetis and its Affiliates (such percentages to be measured based on fair market value as of the initial Distribution Date), (iv) redeem or otherwise repurchase (directly or through a Zoetis Affiliate) any Zoetis stock, or rights to acquire stock, except to the extent such repurchases satisfy Section 4.05(1)(b) of Revenue Procedure 96-30 (as in effect prior to the amendment of such Revenue Procedure by Revenue Procedure 2003-48), (v) amend its certificate of incorporation (or other organizational documents), or take any other action, whether through a stockholder vote or otherwise, affecting the voting rights of Zoetis Capital Stock (including, without limitation, through the conversion of one class of Zoetis Capital Stock into another class of Zoetis Capital Stock) or (vi) take any other action or actions (including any action or transaction that would be reasonably likely to be inconsistent with any representation made in the Representation Letters or the Tax Opinions/Rulings) which in the aggregate (and taking into account any other transactions described in this subparagraph (d)) would be reasonably likely to have the effect of causing or permitting one or more persons (whether or not acting in concert) to acquire directly or indirectly stock representing a Fifty-Percent or Greater Interest in Zoetis or otherwise jeopardize the Tax-Free Status, unless prior to taking any such action set forth in the foregoing clauses (i) through (vi), (A) Zoetis shall have requested that Pfizer obtain a Ruling in accordance with Section 6.04(b) and (d) of this Agreement to the effect that such transaction will not affect the Tax-Free Status and Pfizer shall have received such a Ruling in form and substance satisfactory to Pfizer in its sole and absolute discretion, or (B) Zoetis shall provide Pfizer with an Unqualified Tax Opinion in form and substance satisfactory to Pfizer in its sole and absolute discretion (and in determining whether an
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opinion is satisfactory, Pfizer may consider, among other factors, the appropriateness of any underlying assumptions and management’s representations if used as a basis for the opinion and Pfizer may determine that no opinion would be acceptable to Pfizer) or (C) Pfizer shall have waived the requirement to obtain such Ruling or Unqualified Tax Opinion.
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Section 6.03 Procedures Regarding Opinions and Rulings.
(a) If Zoetis notifies Pfizer that it desires to take one of the actions described in clause (i) or (ii) of Section 6.01(c) or clauses (i) through (iv) or Section 6.01(f) (a “Notified Action”), Pfizer and Zoetis shall reasonably cooperate to attempt to obtain the Ruling or Unqualified Tax Opinion referred to in Section 6.01(c) or (f), unless Pfizer shall have waived the requirement to obtain such Ruling or Unqualified Tax Opinion.
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(d) Zoetis hereby agrees that Pfizer shall have sole and exclusive control over the process of obtaining any Ruling, and that only Pfizer shall apply for a Ruling. In connection with obtaining a Ruling pursuant to Section 6.03(b), (A) Pfizer shall keep Zoetis informed in a timely manner of all material actions taken or proposed to be taken by Pfizer in connection therewith; (B) Pfizer shall (1) reasonably in advance of the submission of any Ruling Request documents provide Zoetis with a draft copy thereof, (2) reasonably consider Zoetis’s comments on such draft copy, and (3) provide Zoetis with a final copy; and (C) Pfizer shall provide Zoetis with notice reasonably in advance of, and Zoetis shall have the right to attend, any formally scheduled meetings with the IRS (subject to the approval of the IRS) that relate to such Ruling. Neither Zoetis nor any Zoetis Affiliate directly or indirectly controlled by Zoetis shall seek any guidance from the IRS or any other Tax Authority (whether written, verbal or otherwise) at any time concerning the Contribution, the Debt-for-Debt Exchange, the Debt-for-Equity Exchange or the Distribution (including the impact of any transaction on the Contribution, the Debt-for-Debt Exchange, the Debt-for-Equity Exchange or the Distribution).
Section 6.04 Liability for Tax-Related Losses.
(a) Notwithstanding anything in this Agreement or the Separation Agreement to the contrary (and in each case regardless of whether a Ruling, Unqualified Tax Opinion or waiver described in clause (A), (B) or (C) of Section 6.01(c) or a Ruling, Unqualified Tax Opinion or waiver described in clause (A), (B) or (C) of Section 6.01(f) may have been provided, and regardless of whether an action may be a Required Action), subject to Section 6.04(c), Zoetis shall be responsible for, and shall indemnify and hold harmless Pfizer and its Affiliates and each of their respective officers, directors and employees from and against, one hundred percent (100%) of any Tax-Related Losses that are attributable to or result from any one or more of the following: (A) the acquisition (other than pursuant to the Contribution, the Debt-for-Equity Exchange, the IPO, or the Distribution) of all or a portion of Zoetis’s stock and/or its or its subsidiaries’ assets by any means whatsoever by any Person, (B) any negotiations, understandings, agreements or arrangements by Zoetis with respect to transactions or events (including, without limitation, stock issuances, pursuant to the exercise of stock options or otherwise, option grants, capital contributions or acquisitions, or a series of such transactions or events) that cause the Distribution to be treated as part of a plan pursuant to which one or more Persons acquire directly or indirectly stock of Zoetis representing a Fifty-Percent or Greater Interest therein, (C) any action or failure to act by Zoetis after the Distribution (including, without limitation, any amendment to Zoetis’s certificate of incorporation (or other
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organizational documents), whether through a stockholder vote or otherwise) affecting the voting rights of Zoetis stock (including, without limitation, through the conversion of one class of Zoetis Capital Stock into another class of Zoetis Capital Stock), (D) any act or failure to act by Zoetis or any Zoetis Affiliate described in Section 6.01 (regardless whether such act or failure to act may be a Required Action or may be covered by a Ruling, Unqualified Tax Opinion or waiver described in clause (A), (B) or (C) of Section 6.01(c), a Board Certificate described in Section 6.01(d), a consent described in Section 6.01(e), or a Ruling, Unqualified Tax Opinion or waiver described in clause (A), (B) or (C) of Section 6.01(f)) or (E) any breach by Zoetis of its agreement and representation set forth in Section 6.01(a).
(b) Notwithstanding anything in this Agreement or the Separation Agreement to the contrary, subject to Section 6.04(c), Pfizer shall be responsible for, and shall indemnify and hold harmless Zoetis and its Affiliates and each of their respective officers, directors and employees from and against, one hundred percent (100%) of any Tax-Related Losses that are attributable to, or result from any one or more of the following: (A) the acquisition (other than pursuant to the Contribution, the Debt-for-Equity Exchange, the IPO, or the Distribution) of all or a portion of Pfizer’s stock and/or its assets by any means whatsoever by any Person, (B) any negotiations, agreements or arrangements by Pfizer with respect to transactions or events (including, without limitation, stock issuances, pursuant to the exercise of stock options or otherwise, option grants, capital contributions or acquisitions, or a series of such transactions or events) that cause the Distribution to be treated as part of a plan pursuant to which one or more Persons acquire directly or indirectly stock of Pfizer representing a Fifty-Percent or Greater Interest therein, (C) any act or failure to act by Pfizer or a member of the Pfizer Group described in Section 6.02 or any breach by Pfizer of its agreement and representation set forth in Section 6.02.
(c)
(i) To the extent that any Tax-Related Loss is subject to indemnity under both Sections 6.04(a) and (b), responsibility for such Tax-Related Loss shall be shared by Pfizer and Zoetis according to relative fault.
(ii) Notwithstanding anything in Section 6.04(b) or (c)(i) or any other provision of this Agreement or the Separation Agreement to the contrary:
(A) with respect to (I) any Tax-Related Loss resulting from Section 355(e) of the Code (other than as a result of an acquisition of a Fifty-Percent or Greater Interest in Pfizer) and (II) any other Tax-Related Loss resulting (for the absence of doubt, in whole or in part) from an acquisition after the Distribution of any stock or assets of Zoetis (or any Zoetis Affiliate) by any means whatsoever by any Person or any action or failure to act by Zoetis affecting the voting rights of Zoetis stock, Zoetis shall be responsible for, and shall indemnify and hold harmless Pfizer and its Affiliates and each of their respective officers, directors and employees from and against, one hundred percent (100%) of such Tax-Related Loss; and
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(B) for purposes of calculating the amount and timing of any Tax-Related Loss for which Zoetis is responsible under this Section 6.04, Tax-Related Losses shall be calculated by assuming that Pfizer, the Pfizer Affiliated Group and each member of the Pfizer Group (I) pay Tax at the highest marginal corporate Tax rates in effect in each relevant taxable year and (II) have no Tax Attributes in any relevant taxable year.
(iii) Notwithstanding anything in Section 6.04(a) or (c)(i) or any other provision of this Agreement or the Separation Agreement to the contrary, with respect to (I) any Tax-Related Loss resulting from Section 355(e) of the Code (other than as a result of an acquisition of a Fifty-Percent or Greater Interest in Zoetis) and (II) any other Tax-Related Loss resulting (for the absence of doubt, in whole or in part) from an acquisition after the Distribution of any stock or assets of Pfizer (or any Pfizer Affiliate) by any means whatsoever by any Person, Pfizer shall be responsible for, and shall indemnify and hold harmless Zoetis and its Affiliates and each of their respective officers, directors and employees from and against, one hundred percent (100%) of such Tax-Related Loss.
(d) Zoetis shall pay Pfizer the amount of any Tax-Related Losses for which Zoetis is responsible under this Section 6.04: (A) in the case of Tax-Related Losses described in clause (i) of the definition of Tax-Related Losses no later than two Business Days prior to the date Pfizer files, or causes to be filed, the applicable Tax Return for the year of the Contribution or Distribution, as applicable (the “Filing Date”) (provided that if such Tax-Related Losses arise pursuant to a Final Determination described in clause (a), (b) or (c) of the definition of “Final Determination”, then Zoetis shall pay Pfizer no later than two Business Days after the date of such Final Determination with interest calculated at the Prime Rate plus two percent, compounded semiannually, from the date that is two Business Days prior to the Filing Date through the date of such Final Determination) and (B) in the case of Tax-Related Losses described in clause (ii) or (iii) of the definition of Tax-Related Losses, no later than two Business Days after the date Pfizer pays such Tax-Related Losses. Pfizer shall pay Zoetis the amount of any Tax-Related Losses (described in clause (ii) or (iii) of the definition of Tax-Related Loss) for which Pfizer is responsible under this Section 6.04 no later than two Business Days after the date Zoetis pays such Tax-Related Losses.
Section 7. Assistance and Cooperation.
Section 7.01 Assistance and Cooperation.
(a) The Companies shall cooperate (and cause their respective Affiliates to cooperate) with each other and with each other’s agents, including accounting firms and legal counsel, in connection with Tax matters relating to the Companies and their Affiliates including (i) preparation and filing of Tax Returns, (ii) determining the liability for and amount of any Specified Taxes due (including estimated Taxes) or the right to and amount of any refund of Taxes, (iii) examinations of Tax Returns, and (iv) any administrative or judicial proceeding in respect of Specified Taxes assessed or proposed to be assessed. Such cooperation shall include making all information and documents in their possession relating to the other Company and its Affiliates available to such other Company as provided in Section 8. Each of the Companies
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shall also make available to the other, as reasonably requested and available, personnel (including officers, directors, employees and agents of the Companies or their respective Affiliates) responsible for preparing, maintaining, and interpreting information and documents relevant to Specified Taxes, and personnel reasonably required as witnesses or for purposes of providing information or documents in connection with any administrative or judicial proceedings relating to Specified Taxes. In the event that a member of the Pfizer Group, on the one hand, or a member of the Zoetis Group, on the other hand, suffers a Tax detriment as a result of a Transfer Pricing Adjustment, the Companies shall cooperate pursuant to this Section 7 to seek any competent authority relief that may be available with respect to such Transfer Pricing Adjustment. Zoetis shall cooperate with Pfizer and take any and all actions reasonably requested by Pfizer in connection with obtaining the Tax Opinions/Rulings (including, without limitation, by making any new representation or covenant, confirming any previously made representation or covenant or providing any materials or information requested by any Tax Advisor or Tax Authority; provided that, Zoetis shall not be required to make or confirm any representation or covenant that is inconsistent with historical facts or as to future matters or events over which it has no control).
(b) Any information or documents provided under this Section 7 shall be kept confidential by the Company receiving the information or documents, except as may otherwise be necessary in connection with the filing of Tax Returns or in connection with any administrative or judicial proceedings relating to Taxes. Notwithstanding any other provision of this Agreement or any other agreement, (i) neither Pfizer nor any Pfizer Affiliate shall be required to provide Zoetis or any Zoetis Affiliate or any other Person access to or copies of any information or procedures (including the proceedings of any Tax Contest) other than information or procedures that relate to Zoetis, the business or assets of Zoetis or any Zoetis Affiliate and (ii) in no event shall Pfizer or any Pfizer Affiliate be required to provide Zoetis, any Zoetis Affiliate or any other Person access to or copies of any information if such action could reasonably be expected to result in the waiver of any Privilege. In addition, in the event that Pfizer determines that the provision of any information to Zoetis or any Zoetis Affiliate could be commercially detrimental, violate any law or agreement or waive any Privilege, the parties shall use reasonable best efforts to permit compliance with its obligations under this Section 7 in a manner that avoids any such harm or consequence.
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Section 9.02 Control of Tax Contests.
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timely provide the Non-Controlling Party copies of any written materials relating to such potential adjustment in such Tax Contest received from any Tax Authority; (iii) the Controlling Party shall timely provide the Non-Controlling Party with copies of any correspondence or filings submitted to any Tax Authority or judicial authority in connection with such potential adjustment in such Tax Contest; (iv) the Controlling Party shall consult with the Non-Controlling Party and offer the Non-Controlling Party a reasonable opportunity to comment before submitting any written materials prepared or furnished in connection with such potential adjustment in such Tax Contest; and (v) the Controlling Party shall defend such Tax Contest diligently and in good faith. The failure of the Controlling Party to take any action specified in the preceding sentence with respect to the Non-Controlling Party shall not relieve the Non-Controlling Party of any liability and/or obligation which it may have to the Controlling Party under this Agreement except to the extent that the Non-Controlling Party was actually harmed by such failure, and in no event shall such failure relieve the Non-Controlling Party from any other liability or obligation which it may have to the Controlling Party. In the case of any Tax Contest described in Section 9.02(a) or (b), “Controlling Party” means the Company entitled to control the Tax Contest under such Section and “Non-Controlling Party” means the other Company.
Section 10. Effective Date. This Agreement shall be effective as of the date hereof.
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Section 12. Treatment of Payments.
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Advisor on behalf of the Companies to act as an arbitrator in order to resolve the Dispute. The Tax Advisor may, in its discretion, obtain the services of any third-party appraiser, accounting firm or consultant that the Tax Advisor deems necessary to assist it in resolving such disagreement. The Tax Advisor shall furnish written notice to the Companies of its resolution of any such Dispute as soon as practical, but in any event no later than 30 Business Days after its acceptance of the matter for resolution. Any such resolution by the Tax Advisor will be conclusive and binding on the Companies. Following receipt of the Tax Advisor’s written notice to the Companies of its resolution of the Dispute, the Companies shall each take or cause to be taken any action necessary to implement such resolution of the Tax Advisor. Each Company shall pay its own fees and expenses (including the fees and expenses of its representatives) incurred in connection with the referral of the matter to the Tax Advisor (and the Preliminary Tax Advisors, if any). All fees and expenses of the Tax Advisor (and the Preliminary Tax Advisors, if any) in connection with such referral shall be shared equally by the Companies.
Section 16. General Provisions.
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If to Pfizer:
Pfizer Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: [ ]
with a copy to:
[ ]
If to the Company to:
Zoetis Inc.
[ ]
[with a copy to:
[ ]]
A party may change the address for receiving notices under this Agreement by providing written notice of the change of address to the other parties.
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in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors’ rights generally and general equity principles.
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PFIZER INC., a Delaware corporation | ||
By: |
| |
Name: | ||
Title: | ||
ZOETIS INC., a Delaware corporation | ||
By: |
| |
Name: | ||
Title: |
[Signature Page to Tax Matters Agreement]