Exhibit 10.21
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TAX ALLOCATION AND INDEMNIFICATION AGREEMENT
Dated as of October 30, 1996
Among
DEPUY, INC.,
BOEHRINGER MANNHEIM CORPORATION
and
CORANGE LIMITED
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TAX ALLOCATION AND INDEMNIFICATION AGREEMENT (the "Agreement")
dated as of October 30, 1996 among
DEPUY, INC., a Delaware Corporation
(the "Company"),
BOEHRINGER MANNHEIM CORPORATION, an Indiana corporation
("BMC") and CORANGE LIMITED,
a Bermuda corporation ("Corange").
WHEREAS, each of the Company and BMC is an indirect, wholly-owned
subsidiary of Corange, which is the ultimate holding company within the Corange
Limited group of companies (the "Corange Group"), and each of various
subsidiaries in the Corange Group listed in Exhibit A hereto is engaged in the
manufacture and/or the distribution of orthopaedic products for the DePuy
division of the Corange Group;
WHEREAS, Corange U.S. Holdings Inc., an Indiana corporation ("CUSHI") was
the common parent corporation, within the meaning of Section 1502 of the
Internal Revenue Code of 1986, as amended (the "Code"), of an affiliated group
of corporations (the "Affiliated Group") filing consolidated Federal income tax
returns and consolidated, combined or unitary state income tax returns, pursuant
to which CUSHI, BMC, and other members of the Affiliated Group have paid taxes
on a consolidated, combined or unitary basis;
WHEREAS, in connection with an overall plan of reorganization affecting
those corporations within the DePuy division of the Corange Group, which plan
was approved by the Board of Directors of Corange in resolutions adopted at a
meeting held on July 11, 1996: (i) CUSHI has sold all of the outstanding shares
of BMC to Pharminvest S.A., a Luxembourg corporation in the Corange Group (the
"BMC Share Sale"), (ii) Corange and certain direct and indirect subsidiaries of
Corange have sold or otherwise transferred to CUSHI or to newly-created
subsidiaries of CUSHI, their shareholding in certain subsidiaries within the
DePuy division of the Corange Group, and certain assets related to the DePuy
business previously owned by a foreign distribution subsidiary of Corange
affiliated with the Boehringer Mannheim business of the Corange Group, and (iii)
CUSHI has merged with and into the Company (the "Merger"), with the Company
being the surviving corporation in the Merger (collectively, the "Pre-Offering
Reorganization");
WHEREAS, pursuant to the Pre-Offering Reorganization, CUSHI ceased to be
the common parent of the Affiliated Group, BMC ceased to be a member of the
Affiliated Group, and the Company became the common parent corporation of the
Affiliated Group;
WHEREAS, Corange, BMC and the Company desire to allocate the liability for
the taxes (including any interest or penalties thereon) of members of the
Affiliated Group for any taxable period beginning before the Pre-Offering
Reorganization and to provide for certain other tax-related matters;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows.
1. Indemnification by Corange and BMC. (a) Corange shall indemnify and
hold harmless on an After-Tax Basis (as hereinafter defined) the Company
and the DePuy Subsidiaries (as hereinafter defined) against any Corange Tax
Liabilities (as hereinafter defined). The term "Corange Tax Liabilities"
shall mean any Taxes (as hereinafter defined): (i) imposed (x) with respect
to any taxable period that ends prior to the date upon which the Closing of
the public offering of the stock of the Company occurs (the "Closing Date")
and (y) with respect to a taxable period that begins before and ends after
the Closing Date, the portion of such period up to and including the the
Closing Date (each period described in clause (x) or clause (y), being
hereinafter referred to as a "Pre-Closing Tax Period"), or (ii) imposed as
a result of the Pre-Offering Reorganization; provided, however, that the
Taxes subject to indemnification as Corange Tax Liabilities under this
Section 1(a) shall not include any "BMC Tax Liabilities" (as hereinafter
defined) subject to indemnification by BMC under Section 1(b) hereof or any
"DePuy Tax Liabilities" (as hereinafter defined) subject to indemnification
by the Company and the DePuy Subsidiaries under Section 2 hereof.
(b) BMC shall indemnify and hold harmless on an After-Tax Basis the
Company and the DePuy Subsidiaries against any BMC Tax Liabilities. The
term "BMC Tax Liabilities" shall mean: (i) the full amount of the Taxes of
BMC or a BMC Subsidiary (as hereinafter defined), as the case may be, for
any taxable period for which the Tax liability of BMC or a BMC Subsidiary,
as applicable, is determined on the basis of a separate Tax return, and
(ii) in the case of any taxable period for which the Tax liability of BMC
or a BMC Subsidiary, as applicable, is determined on the basis of a
Consolidated Return (as hereinafter defined), the portion of the Taxes of
the Consolidated Group (as hereinafter defined) attributable to BMC or to a
BMC Subsidiary, as determined under Section 6 with respect to consolidated
or combined returns, and under Section 7 with respect to unitary returns;
provided, however, that the term "BMC Tax Liabilities" shall include no
liabilities for Taxes imposed as a result of the Pre-Offering
Reorganization.
(c) Corange hereby guarantees BMC's obligation to indemnify and hold
harmless on an After-Tax Basis the Company and the DePuy Subsidiaries
against the BMC Tax Liabilities. In the event that BMC defaults on its
obligations to make indemnification payments with respect to any BMC Tax
Liabilities in accordance with this Agreement, the Company and the DePuy
Subsidiaries shall be entitled to collect such indemnification payments
from Corange; provided, however, that the Company and the DePuy
Subsidiaries shall in no event be entitled to receive more than the full
amount of one indemnification payment with respect to any single claim for
Taxes under this Agreement.
2. Indemnification by the Company. The Company and each DePuy
Subsidiary shall indemnify and hold harmless on an After-Tax Basis Corange,
BMC, the Corange Subsidiaries (as hereinafter defined) and the BMC
Subsidiaries against any and all DePuy Tax Liabilities. The term "DePuy
Tax Liabilities" shall mean: (i) the full
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amount of the Taxes of the Company or a DePuy Subsidiary, as the case may
be, for any taxable period for which the Tax liability of the Company or a
DePuy Subsidiary, as applicable, is determined on the basis of a separate
Tax return, (ii) in the case of any taxable period for which the Tax
liability of the Company or a DePuy Subsidiary, as applicable, is
determined on the basis of a Consolidated Return, that portion of the Taxes
of the Consolidated Group attributable to the Company or to a DePuy
Subsidiary, as determined under Section 6 with respect to consolidated or
combined returns, and as determined under Section 7 with respect to unitary
returns, and (iii) Taxes imposed as a result of the Pre-Offering
Reorganization solely by reason of one or more actions taken by the Company
or any DePuy Subsidiary in violation of any of its obligations under the
agreements entered into with respect to the Pre-Offering Reorganization;
provided, however, that the term "DePuy Tax Liabilities" shall include (x)
no liabilities for Taxes imposed as a result of the Pre-Offering
Reorganization except for liabilities for Taxes described in clause (iii)
hereof, and (y) no liabilities for any interest or any penalties relating
to any taxes, tariffs or governmental charges, in the case of liabilities
for Taxes described in clauses (i) and (ii) hereof, and all such
liabilities for interest and penalties shall be deemed to be Corange Tax
Liabilities subject to indemnification by Corange under Section 1(a)
hereof.
3. Definitions. (a) The term "Tax" or "Taxes" means Federal, state,
local and foreign income, franchise, property, sales, excise, transfer,
withholding (with respect to amounts paid or received), employment or other
taxes, tariffs or governmental charges (and all interest and penalties
relating thereto) imposed by a governmental authority pursuant to the
exercise of its power to tax.
(b) The term "After-Tax Basis" means, with respect to any payment, an
amount calculated by taking into account the Tax consequences of the
receipt of such payment, as well as any Tax benefit associated with the
liability giving rise to the payment. In the case of any item which gives
rise to a deduction, the Tax benefit of such deduction shall be determined
at the maximum statutory tax rate in effect during the relevant taxable
period, whether or not the taxpayer actually realizes currently such Tax
benefit. For this purpose, all indemnification payments made by Corange
under this Agreement shall be deemed to be capital contributions to the
Company.
(c) The term "DePuy Subsidiary" shall mean each entity listed in
Exhibit A hereto and shall be deemed to include any predecessor or
transferee of (or successor or transferor to) the Company or any entity
listed in Exhibit A, but shall not include CUSHI for any period prior to
the Merger or any subsidiary in the Corange Group affiliated with the
Boehringer Mannheim business of the Corange Group; provided, however, that
the DePuy division of BMC, which was a predecessor of DePuy, Inc.
(incorporated on January 1, 1992) shall be deemed to be a DePuy Subsidiary.
The term "BMC Subsidiary" shall mean any subsidiary of BMC, and shall be
deemed to include any predecessor or transferee of (or successor or
transferor to) BMC or any subsidiary of BMC, but shall not include CUSHI
(or any predecessor thereof or transferor thereto),
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the Company or any DePuy Subsidiary. The term "Corange Subsidiary" shall
mean any subsidiary in the Corange Group, including CUSHI, and shall be
deemed to include any predecessor or transferee of (or successor or
transferor to) Corange or any subsidiary of Corange, but shall not include
the Company, any DePuy Subsidiary, BMC or any BMC Subsidiary.
(d) The term "Tax Asset" shall mean any net operating loss, net
capital loss, investment tax credit, foreign tax credit, target jobs tax
credit, low income housing credit, research and experimentation credit,
charitable deduction or any other credit or tax attribute, including
additions to basis of property, which could reduce any tax, including,
without limitation, deductions, credits, or alternative minimum net
operating loss carryforwards related to alternative minimum taxes.
(e) The term "BMC Sale Date" shall mean the date upon which the BMC
Share Sale occurs, and the term "Pre-BMC Sale Tax Period" shall mean (i)
any taxable period that ends prior to the BMC Sale Date and (ii) with
respect to a taxable period that begins before and ends after the BMC Sale
Date, the portion of such period up to and including the BMC Sale Date.
(f) The term "Consolidated Group" shall mean (i) the Affiliated Group
and (ii) any group filing consolidated, combined or unitary tax returns for
state tax purposes for any taxable period beginning before the BMC Sale
Date which, for such taxable period, is comprised of at least one
corporation which is a BMC Subsidiary and at least one corporation which is
a DePuy Subsidiary. The term "Consolidated Return" shall mean any Federal
income tax return or any state tax return filed by the Consolidated Group
on a consolidated, combined or unitary basis.
4. Tax Return Filing and Related Matters. (a) The Company shall
prepare all Consolidated Returns of the Consolidated Group for taxable
periods beginning on or after January 1, 1996 and ending on or before
December 31, 1996, and all separate Tax returns of the Company and the
DePuy Subsidiaries. With respect to any Consolidated Returns referred to
in the first sentence of this Section 4(a), BMC shall provide pro forma tax
returns and other relevant data to the Company at least forty-five (45)
days prior to the due date of such Tax returns (taking into account any
applicable extensions). The Company shall provide BMC with preliminary
draft copies of such Tax returns at least thirty (30) days prior to the due
date for filing (taking into account any applicable extensions) for review
and approval by BMC with respect to BMC Tax Liabilities. If BMC objects to
any matter reflected in such draft Tax returns with respect to BMC Tax
Liabilities, BMC shall inform the Company within ten (10) days of receipt
of the draft Tax returns, and the Company shall revise such Tax returns as
so directed by BMC, and shall sign and timely file such Tax returns with
the appropriate taxing authorities.
(b) BMC shall prepare all Consolidated Returns of the Consolidated
Group for taxable priods ending on or before December 31, 1995, all
separate Tax returns of
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CUSHI for taxable periods ending on or before the Merger, and all separate
Tax returns of BMC and the BMC Subsidiaries. The provisions of this
Section 4 shall apply with respect to any action or inaction after the date
of this Agreement in connection with the preparation and filing of any such
Tax returns. With respect to any Consolidated Returns referred to in the
first sentence of this Section 4(b), the Company shall provide pro forma
tax returns and other relevant data to BMC at least forty-five (45) days
prior to the due date of such Tax returns (taking into account any
applicable extensions). BMC shall provide the Company with preliminary
draft copies of such Tax returns at least thirty (30) days prior to the due
date for filing (taking into account any applicable extensions) for review
and approval by the Company with respect to DePuy Tax Liabilities. If the
Company objects to any matter reflected in such draft Tax returns with
respect to DePuy Tax Liabilities, the Company shall inform BMC within ten
(10) days of receipt of the draft Tax returns and BMC shall revise such Tax
returns as so directed by the Company, and shall sign and timely file such
Tax returns with the appropriate taxing authorities.
(c) With respect to Consolidated Returns of the Consolidated Group for
taxable periods beginning on or after January 1, 1996 and ending on or
before December 31, 1996, BMC shall pay, or cause to be paid, to the
Company an amount equal to (1) BMC's share of the Consolidated Group's
consolidated Federal Tax liability and consolidated state Tax liability,
determined in accordance with Section 6, and (2) BMC's share of the
Consolidated Group's unitary state Tax liability, determined in accordance
with Section 7, as provided below.
(i) Promptly after the Company makes an estimated Tax payment
with respect to any such Consolidated Return, the Company shall in
good faith determine the amount of BMC's share of such estimated Tax
payment in accordance with Section 6, in the case of any consolidated
Federal Tax liability or any consolidated state Tax liability of the
Consolidated Group, and in accordance with Section 7 using 1995
apportionment factors, adjusted for significant dispositions or
transfers of assets, in the case of any unitary state Tax liability of
the Consolidated Group. The Company shall deliver a written statement
to BMC reflecting the determination described above. Within ten (10)
business days after delivery of such written statement, BMC shall
notify the Company whether BMC agrees with such determination. BMC
shall pay to the Company or the Company shall pay to BMC, as
appropriate, the amount determined to be payable hereunder (x) within
ten (10) business days thereafter, if BMC agrees with such
determination, or (y) if the Company and BMC cannot agree on the
determination, within ten (10) business days after the date of the
determination of the amount payable pursuant to Section 11 hereof.
(ii) Promptly after the Company files an application to extend
the due date of any such Consolidated Return, the Company shall in
good faith determine the estimated amount of BMC's share of the
Consolidated Group's consolidated Federal Tax liability or
consolidated state Tax liability for such Consolidated
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Return in accordance with Section 6 or, in the case of a unitary state
Tax return, in accordance with Section 7 using 1995 apportionment
factors, adjusted for significant dispositions or transfers of assets.
The amount payable hereunder shall equal the difference, if any,
between (x) the amounts so determined and (y) the aggregate amount of
estimated installments paid with respect to BMC's share of such Tax
liability for such Consolidated Return, adjusted to take into account
amounts previously paid or received by BMC in connection with any
previous extension payments. The Company shall deliver to BMC a
written statement of the amount payable hereunder, as described above.
Within ten (10) business days after delivery of such written
statement, BMC shall notify the Company whether BMC agrees with such
determination. BMC shall pay to the Company or the Company shall pay
to BMC, as appropriate, the amount determined to be payable hereunder
(x) within ten (10) business days thereafter, if BMC agrees with such
determination, or (y) if the Company and BMC cannot agree on the
determination, within ten (10) business days after the date of the
determination of the amount payable pursuant to Section 11 hereof.
(iii) Promptly after the Company files any such Consolidated
Return, the Company shall deliver to BMC a written statement setting
forth the difference between (x) BMC's share of the Consolidated
Group's consolidated Federal Tax liability, consolidated state Tax
liability or unitary state Tax liability for such Consolidated Return,
determined in accordance with Section 6 or Section 7, as the case may
be, and (y) the aggregate amount of payments with respect to BMC's
share of such Tax liability for such Consolidated Return previously
made pursuant to this Section. Within ten (10) business days of
delivery of such written statement, BMC shall notify the Company
whether BMC agrees with such determination. BMC shall pay to the
Company or the Company shall pay to BMC, as appropriate, the amount
equal to such difference, if any, (x) within ten (10) business days
thereafter, if BMC agrees with such determination, or (y) if the
Company and BMC cannot agree on the determination, within ten (10)
business days after the date of the determination of the amount
payable pursuant to Section 11 hereof.
(d) With respect to Consolidated Returns of the Consolidated Group for
taxable periods ending on or before December 31, 1995, the Company shall
pay, or cause to be paid, to BMC the Company's share of the Consolidated
Group's consolidated Federal Tax liability, consolidated state Tax
liability, and unitary state Tax liability, determined in accordance with
past practices.
(e) In the case of Consolidated Returns of the Consolidated Group for
taxable periods beginning on or after January 1, 1996 and ending on or
before December 31, 1996, if the Company determines that it will be
necessary to incur incremental out-of-pocket costs for legal, accounting or
other related professional fees and disbursements attributable to the
preparation of tax returns for BMC or the BMC Subsidiaries, the
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Company shall obtain from BMC its written approval of such incremental out-
of-pocket costs prior to incurring such costs. BMC shall reimburse the
Company for such incremental out-of-pocket costs which have been approved
by BMC pursuant to this Section 4(e) within thirty (30) days of delivery of
a written statement of such costs specifying such costs in reasonable
detail.
(f) Without the prior written consent of BMC (in the case of BMC Tax
Liabilities), which shall not be unreasonably withheld, and the prior
written consent of Corange (in the case of Corange Tax Liabilities), which
shall not be unreasonably withheld, the Company shall refrain, and shall
cause each of the DePuy Subsidiaries to refrain, (i) from making, filing or
amending any Tax return that includes any Pre-Closing Tax Period or any
Pre-BMC Sale Tax Period that would materially affect the Tax liability of
Corange, BMC, the Corange Subsidiaries or the BMC Subsidiaries, and (ii)
from making any material tax election that would bind, or materially affect
the Tax liability of, Corange, BMC, the Corange Subsidiaries or the BMC
Subsidiaries.
5. Contests. (a) If the Company or any DePuy Subsidiary receives
oral or written notice from the Internal Revenue Service or any other
taxing authority of the commencement of an audit, the assertion of a claim,
an assessment, or other dispute with respect to Taxes for which Corange or
BMC are or may be required to indemnify, in whole or in part, under this
Agreement, the Company shall provide notice to Corange and BMC (in the case
of Corange Tax Liabilities), or shall provide notice to BMC and Corange (in
the case of BMC Tax Liabilities) of the same in writing within ten (10)
business days, specifying in reasonable detail the basis of such claim and
the facts pertaining thereto, and shall not make payment of the Tax claimed
for at least thirty (30) days after the giving of such notice. Corange (in
the case of Corange Tax Liabilities) or BMC (in the case of BMC Tax
Liabilities), at its own cost and expense, shall be entitled to control any
such contest, including the determination of whether and when to settle any
such contest; provided, however, that Corange or BMC, as the case may be,
will consider in good faith any reasonable requests by the Company
regarding the conduct of such contest and will promptly, and in any event
within ten (10) business days, notify the Company of any action taken or
proposed to be taken from time to time by Corange or BMC, as the case may
be, with respect to such contest, and provided, further, that Corange and
BMC will not settle any such contest that would materially affect the Tax
liability of the Company or the DePuy Subsidiaries without the prior
written consent of the Company, which shall not be unreasonably withheld.
The Company agrees to provide to Corange and BMC (in the case of a contest
regarding Corange Tax Liabilities) or to BMC and Corange (in the case of a
contest regarding BMC Tax Liabilities) promptly, and in any event within
ten (10) business days, copies of any correspondence or notices received
from time to time from the Internal Revenue Service or any other taxing
authority with respect to such contest.
(b) If Corange, BMC, any Corange Subsidiary or any BMC Subsidiary
receives any oral or written notices from the Internal Revenue Service or
any other
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taxing authority that relate to the Company or the DePuy Subsidiaries,
Corange (on behalf of Corange or such Corange Subsidiary) or BMC (on behalf
of BMC or such BMC Subsidiary) shall provide written notice to the Company
of the same in writing within ten (10) business days. The Company, at its
cost and expense, shall be entitled to control any contests with respect to
the Tax liability of the Company or the DePuy Subsidiaries, except for
contests subject to control by Corange and BMC pursuant to this Agreement.
(c) Indemnification payments required pursuant to this Agreement shall
become due and payable upon a final determination of the liability for
Taxes of the relevant taxpayer; provided, however, that indemnification
payments which Corange is required to pay as guarantor pursuant to Section
1(c) hereof shall be due and payable ten (10) business days after the
Company notifies Corange that BMC has defaulted on its obligations to make
such indemnification payments in accordance with this Agreement. A "final
determination" shall be deemed to occur with respect to a contest when (i)
there is a decision, judgment, decree or other order by any court of
competent jurisdiction, which decision, judgment, decree or other order has
become final with respect to the taxpayer (i.e., all allowable appeals have
been exhausted by either party to the action or the time period within
which such appeal may be filed has expired), (ii) there is a closing
agreement or other administrative settlement with the Internal Revenue
Service or other taxing authority, (iii) the time for instituting a claim
for refund in respect of the taxpayer has expired, or, if a claim was
filed, the time for instituting suit with respect thereto has expired, or
(iv) the Taxes which are the subject of such contest are paid, and pursuant
to written agreement between the Company and Corange or BMC, no claim for
refund is filed and no further contest is pursued.
6. Consolidated or Combined Tax Liability. (a) With respect to any
consolidated Federal Tax liability or consolidated state Tax liability, BMC
and the BMC Subsidiaries shall be responsible for the aggregate amount of
such Tax liability of BMC and all BMC Subsidiaries that are members of the
relevant Consolidated Group, and the Company and the DePuy Subsidiaries
shall be responsible for the aggregate amount of such Tax liability of the
Company and all DePuy Subsidiaries that are members of the relevant
Consolidated Group. A member's share of such Taxes shall be calculated as
if such member were not and never were part of the Consolidated Group, but
rather were a corporation filing separate income tax returns; provided,
however, that (i) the applicable Tax rate shall be the relevant maximum
statutory rate in effect during the relevant taxable period (with any
applicable surtax exemption being ratably apportioned among the members),
and (ii) in no event shall the Company's and the DePuy Subsidiaries' share
of any consolidated Federal Tax liability or consolidated state Tax
liability exceed the amount that would have constituted the Company's and
the DePuy Subsidiaries' share of such Tax liability if such share had been
calculated in the manner set forth in Treasury Regulation Sections 1.1552-
1(a)(2) and 1.1502-33(d)(2).
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(b) For purposes of paragraph (a) above, "Tax liability" (1) shall
exclude any liability for the payment of alternative minimum tax, and (2)
shall refer to an actual out-of-pocket payment to any taxing authority,
after taking into account the utilization of net operating losses and any
other Tax Assets.
(c) Any alternative minimum Tax liability (and any Tax Assets
attributable to such Tax liability) and any environmental Tax imposed under
Section 59A of the Code shall be allocated among the members of the
Consolidated Group in accordance with the formulas referenced in Proposed
Treasury Regulation Section 1.1502-5(b)(6). With respect to foreign tax
credits under the Code, any consolidated unused foreign tax credits of the
Consolidated Group shall be apportioned to the members of such Consolidated
Group pursuant to Treasury Regulation Section 1.1502-79(d).
(d) Any interest imposed in connection with any Tax liability shall be
allocated in the same manner as the underlying Tax liability, as provided
above.
(e) Any penalty imposed in connection with any Tax liability shall be
the responsibility of the party whose action or inaction resulted in the
imposition of such penalty; provided, however, that if such a determination
cannot be made, the penalty shall be allocated in the same manner as the
underlying Tax liability, as provided above.
7. Unitary Tax Liability. (a) BMC's share of any unitary state Tax
liability shall be, with respect to each state, the aggregate amount of
unitary state Tax liability of BMC and all BMC Subsidiaries that are
members of the relevant Consolidated Group. The Company's share of any
unitary state Tax liability shall be, with respect to each state, the
aggregate amount of unitary state Tax liability of the Company and all
DePuy Subsidiaries that are members of the relevant Consolidated Group. A
member's liability for its share of unitary state Tax shall be determined
in accordance with paragraph (c) of this Section 7; provided, however, that
credits and any minimum taxes shall be allocated to the member responsible
for the generation of such credit or minimum taxes.
(b) BMC's share of any unitary state Tax Assets shall be, with respect
to each state, the aggregate amount of unitary state Tax Assets of BMC and
all BMC Subsidiaries that are members of the relevant Consolidated Group.
The Company's share of any unitary state Tax Assets shall be, with respect
to each state, the aggregate amount of unitary state Tax Assets of the
Company and all DePuy Subsidiaries that are memebers of the relevant
Consolidated Group. A member's share of such unitary state Tax Assets
shall be determined in accordance with paragraph (c) of this Section 7.
(c) In the case of a member of the Consolidated Group, such member's
share of any unitary state Tax liability or unitary state Tax Asset shall
be determined in accordance with past practices.
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(d) Any interest imposed in connection with any Tax liability shall be
allocated in the same manner as the underlying Tax liability, as provided
above.
(e) Any penalty imposed in connection with any Tax liability shall be
the responsibility of the party whose action or inaction resulted in the
imposition of such penalty; provided, however, that if such a determination
cannot be made, the penalty shall be allocated in the same manner as the
underlying Tax liability, as provided above.
8. Allocation of Taxes To Certain Tax Periods. In the case of any
taxable period that includes but does not end on either the Closing Date or
the BMC Sale Date (any such taxable period, being hereinafter referred to
as a "Straddle Period"),
(a) real, personal and intangible property Taxes, other than transfer
and similar Taxes, ("Property Taxes") allocated to the Pre-Closing Tax
Period or the Pre-BMC Sale Tax Period, as the case may be, shall be equal
to the amount of such Property Taxes for the entire Straddle Period
multiplied by a fraction, the numerator of which is the number of days
during the Straddle Period that are in the Pre-Closing Tax Period or the
Pre-BMC Sale Tax Period, as applicable, and the denominator of which is the
number of days in the Straddle Period; and
(b) all Taxes (other than Property Taxes) for the Pre-Closing Tax
Period or the Pre-BMC Sale Tax Period, as the case may be, shall be
computed in accordance with the principles of Treasury Regulation Section
1.1502-76; provided, however, that the transfers and transactions
(including Taxes attributable thereto) which occur to effectuate the Pre-
Offering Reorganization shall be allocated to the Pre-Closing Tax Period or
the Pre-BMC Sale Tax Period, as the case may be, and provided, further,
however, that in the case of any Taxes attributable to the ownership of any
equity interest in any partnership or other "flow through" entity, the
Taxes allocated to the Pre-Closing Tax Period or the Pre-BMC Sale Tax
Period, as the case may be, shall be determined on a daily proration basis.
9. Credits and Refunds. (a) If the Company or any DePuy Subsidiary
receives from any taxing authority any refunds or credits of Taxes which
are attributable to any item of income, loss, credit, deduction or other
tax attribute of Corange, BMC, a Corange Subsidiary, or a BMC Subsidiary,
the Company shall pay, or cause to be paid, the amount of such refund or
credit, together with any related interest actually received or credited,
to Corange (if attributable to an item or other tax attribute of Corange or
a Corange Subsidiary) or to BMC (if attributable to an item or other tax
attribute of BMC or a BMC Subsidiary) within twenty (20) business days of
receipt.
(b) If Corange, BMC, a Corange Subsidiary or a BMC Subsidiary receives
from any taxing authority any refunds or credits of Taxes which are
attributable to any item of income, loss, credit, deduction or other tax
attribute of the Company or a DePuy Subsidiary, Corange (in the case of
refunds or credits received by Corange or a Corange
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Subsidiary) or BMC (in the case of refunds or credits received by BMC or a
BMC Subsidiary) shall pay, or caused to be paid, the amount of such refund
or credit, together with any related interest actually received or
credited, to the Company or to such DePuy Subsidiary within twenty (20)
business days of receipt.
(c) The determination as to whether a refund or credit is attributable
to an item or other tax attribute of Corange, BMC, a Corange Subsidiary, a
BMC Subsidiary, the Company or a DePuy Subsidiary, as the case may be,
shall be made under Section 6 hereof with respect to consolidated or
combined returns, under Section 7 hereof with respect to unitary returns,
and on a separate return basis with respect to separate returns.
10. Cooperation. Corange, BMC and the Company agree to cooperate in
all reasonable respects with respect to Tax matters contemplated by this
Agreement, which cooperation shall include executing and filing such
waivers, consents, forms, court petitions, refund claims (including filing
refund claims as may be directed by another party hereto), complaints,
powers of attorney and other documents needed from time to time in
connection with such Tax matters. The Company agrees to furnish timely,
and to cause each of the DePuy Subsidiaries to so furnish, Corange and BMC
with any and all information reasonably requested by Corange and BMC in
order to carry out the provisions of this Agreement. Corange and BMC agree
to furnish timely, and to cause each of their subsidiaries to so furnish,
the Company with any and all information reasonably requested by the
Company in order to carry out the provisions of this Agreement.
11. Computations. If Corange or BMC and the Company cannot agree on
any computation of any amount payable under this Agreement, such
computation shall be made by a nationally recognized independent public
accounting firm acceptable to both such parties and the decision of such
firm shall be final and binding. The fees and expenses incurred in
connection with such calculation shall be borne equally by the disputing
parties.
12. Offsets. No payment shall be required to be made by one party
(the "first party") to another party (the "second party") pursuant to this
Agreement to the extent that there is an amount then due and payable under
this Agreement by the second party to the first party.
13. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole
or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of,
and be enforceable by, the parties hereto and their respective successors
and assigns.
11
14. Survival. The provisions of this Agreement shall survive for the
full period of all applicable statutes of limitations (giving effect to any
waiver or extensions thereof) and sixty (60) days thereafter.
15. Notices. All notices, requests or other communications hereunder
shall be given or made in writing and shall be (i) delivered personally
(including commercial courier), (ii) sent by registered or certified
airmail, postage prepaid, or (iii) sent by telecopier, addressed to the
party to whom they are directed at the following addresses, or at such
other address as may be designated by notice from such party.
To the Company:
DePuy, Inc.
700 Orthopaedic Drive
Warsaw, Indiana 46581
Attention: Mr. Thomas J. Oberhausen
Senior Vice President and Chief Financial Officer
with a copy to:
DePuy, Inc.
700 Orthopaedic Drive
Warsaw, Indiana 46581
Attention: Steven L. Artusi, Esq.
Senior Vice President, General Counsel
and Secretary
To BMC:
Boehringer Mannheim Corporation
9115 Hague Road
Indianapolis, Indiana 46250
Attention: Mr. John D. Kellar
Vice President, Taxes
with a copy to:
Boehringer Mannheim Corporation
9115 Hague Road
Indianapolis, Indiana 46250
Attention: Steven Oldham, Esq.
General Counsel and Secretary
12
To Corange:
Corange Limited
22 Church Street
HM 11
P.O. Box HM 2026
Hamilton, HM HX
Bermuda
with a copy to:
Anthony Williams, Esq.
Coudert Brothers
1114 Avenue of the Americas
New York, New York 10036
Any notice, request or other communication given or made in the manner
prescribed in this Section shall be deemed to have been given and to be
effective upon receipt or refusal by the addressee, or if later upon such
later date as is specified therein. Any party may change its address for
notices hereunder, effective upon giving of notice of such change hereunder
to the other parties.
16. Governing Law. This Agreement is made and shall be construed in
all respects in accordance with the laws of the State of New York without
regards to its conflicts of laws principles. Any controversy concerning the
interpretation or operation of this Agreement shall be resolved first by
resort to good faith negotiation between the parties for up to thirty (30)
days and, if that fails, by submitting the issue to arbitration in
accordance with the commercial arbitration rules of Conciliation and
Arbitration of the International Chamber of Commerce by three (3)
arbitrators approved in accordance with such rules. Such arbitration shall
be conducted in New York City, New York. The award of the arbitrator(s)
shall be final and binding on the parties. Judgement upon the award
rendered by the arbitration may be entered in any court having jurisdiction
thereof.
17. Entire Agreement. This Agreement (a) constitutes the entire
agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter of
this Agreement and (b) is not intended to confer upon any person other than
the parties hereto any rights or remedies.
18. Counterparts. This Agreement may be executed in any number of
duplicate counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
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19. Severability. In the event any of the provisions of this
Agreement are held to be unenforceable or invalid by any court of competent
jurisdiction, unless the unenforceability or invalidity thereof causes a
substantial departure from the underlying intent and sense of the remainder
of this Agreement, the validity and enforceability of the remaining
provisions shall not be affected thereby, except those remaining provisions
of which the unenforceable or invalidated provisions comprise an integral
part or from which they are otherwise clearly inseparable. In the event
any provision is held unenforceable or invalid, the parties shall use their
best efforts to agree upon an enforceable and valid provision which shall
be a reasonable substitute for such unenforceable or invalid provision in
light of the purpose of this Agreement and, upon so agreeing, shall
incorporate such substitute provision in this Agreement.
20. Headings. Headings of sections in this Agreement are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
21. Amendments. This Agreement may be modified, amended or
supplemented only by the mutual written agreement of the parties hereto.
[Remainder Of Page Intentionally Left Blank.]
14
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
DEPUY, INC.
By: /s/ James A. Lent
------------------
Name: James A. Lent
Title: Chairman and Chief Executive
Officer
BOEHRINGER MANNHEIM
CORPORATION
By: /s/ Hubert Rehkaemper
----------------------
Name: Hubert Rehkaemper
Title: President & CEO
CORANGE LIMITED
By: /s/ Anthony Williams
---------------------
Name: Anthony Willams
Title: Vice Chairman
15
EXHIBIT A
---------
DEPUY SUBSIDIARIES
Name and Registered Office/Principal Place of Business of Subsidiaries
----------------------------------------------------------------------
DePuy Orthopadie GmbH DePuy Japan Incorporated
Mellinweg 16 Noto Building
66280 Sulzbach 22-1 Shinkawa 2-Chome
Germany Chuo-ku, Tokyo 104
Japan
De Puy A.G.
Alte Steinhauserstrasse 19 DePuy Korea, Inc.
6330 Cham 12th Floor
Switzerland Yooksung Building
706-725 Yoksam-Dong
DePuy Orthopedie SA Kangnam-ku
2 rue de Bois Sauvage Seoul
91055 Evry Cedex Korea
France
DePuy Far East Pte Ltd.
DePuy Italia S.r.L. 21 Collyer Quay
Palazzo Marco Polo #14-02/03 (c/o May Oh & Wee)
Il Girasole Hong Kong Bank Building
20084 Lacchiarella Singapore 0104
Milan
Italy DePuy GmbH
Torfstecherstrasse 1
DePuy Iberica, S.A. 5111 Burmoos
Avenida Melchor Fernandez Austria
Almagro 23
28029 Madrid DePuy Olmed AB
Spain Dag Hammerskjolds vag 12
75183 Uppsala
Medical Trivest SL Sweden
Calle Museu 6
Baedalona 08915 DePuy Hungary
Barcelona Kereskedelmi Kft
Spain 1134 Budapest
Apaly vtoa 4/A
1X em 36
Hungary
DePuy CZ s.r.o. DePuy Canada Ltd.
Konopistska 16 6695 Millcreek Drive
CZ-101 00 Prague 10 Unit 3
Czech Republic Mississauga, Ontario
L5N 5R8
DePuy New Zealand Canada
Limited
15 Rakino Way DePuy Orthopaedics, Inc.
Mount Wellington P.O. Box 988
Auckland, New Zealand 700 Orthopaedic Drive
Warsaw, IN 46581
Corange U.K. Holdings Ltd.
St. Anthony's Road DePuy Orthopaedic Technology, Inc.
Leeds LS11 8DT 1905 North MacArthur Drive
England Tracy, CA 95376
DePuy International Ltd. DePuy ACE Medical Company
St. Anthony's Road 2260 East El Segundo Blvd.
Leeds LS11 8DT El Segundo, CA 90245
England
DePuy DuPont Orthopedics Partnership
DePuy Joints S.A. P.O. Box 988
Uribu 663 700 Orthopaedic Drive
1027 Buenos Aires Warsaw, IN 46581
Argentina (50% owned)
DePuy Taiwan DePuy Motech, Inc.
20th Floor P.O. Box 988
510 Chungshiao East Road 700 Orthopaedic Drive
Section 5 Warsaw, IN 46581
Taipei, Taiwan (80% owned)
Republic of China
Expanded Optics, Inc.
DePuy Australia Pty Limited 7382 Bolsa Avenue
1113 Palmer Court Westminster, CA 92683
P.O. Box 476
Mount Waverly, Victoria 3149 DePuy Overseas Trading Ltd.
Australia 22 Church Street
Hamilton, HM 11, Bermuda
DePuy Mexico S.A. De C.V.
Huizaches 25
Colonia Ranchos los Colorines
Mexico D.F. 14386
Mexico
2