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Exhibit
10.2
EXECUTION
COPY
TAX ALLOCATION
AGREEMENT
TAX ALLOCATION AGREEMENT
(this “ Agreement ”), dated as of
November 13 th ,
2007, among APP Pharmaceuticals, Inc. (f/k/a Generico Holdings,
Inc.), a Delaware corporation (“ Gholdco ”), APP
Pharmaceuticals, LLC, a Delaware limited liability company (“
Generico ”) (Gholdco and Generico, collectively, the
“ Generico Parties ”), New Abraxis, Inc., a
Delaware corporation (to be renamed Abraxis BioScience, Inc.)
(“ New Alpha ”), and Abraxis BioScience, LLC, a
Delaware limited liability company (“ New Alpha, LLC
”) (New Alpha and New Alpha, LLC, collectively, the “
Alpha Parties ”).
RECITALS
WHEREAS, prior to the Alpha
Merger (as defined below), the corporation formerly known as
Abraxis BioScience, Inc. (“ Alpha ”) was the
common parent of an affiliated group of corporations within the
meaning of Section 1504(a) of the Internal Revenue Code of
1986, as amended (the “ Code ”), which currently
files consolidated federal Income Tax Returns (the “
Affiliated Group ”);
WHEREAS, on the date hereof,
Alpha merged (the “ Alpha Merger ”) with and
into New Alpha, LLC, whereby each issued and outstanding share of
common stock, $0.001 par value per share, of Alpha (other than
shares held by Alpha in treasury) was converted into one share of
common stock, par value $0.001 per share, of Gholdco (the “
Gholdco Common Stock ”), with New Alpha, LLC being the
surviving entity in the Alpha Merger and all of its membership
interests held by Gholdco;
WHEREAS, as a consequence of
the Alpha Merger, Alpha ceased to exist and Gholdco became the
common parent of the Affiliated Group;
WHEREAS, pursuant to the
Separation Agreement dated as of the date hereof between the
Generico Parties and the Alpha Parties (as may be amended from time
to time in accordance with its terms, the “ Separation
Agreement ”), Gholdco will distribute to its stockholders
on a pro rata basis, all of the issued and outstanding shares of
New Alpha common stock (“ New Alpha Common Stock
”) (as described more fully in the Separation Agreement, the
“ Share Distribution ”) and New Alpha will
change its name to Abraxis BioScience, Inc.;
WHEREAS, in connection with
the transactions contemplated by the Separation Agreement, one or
more of the Generico Group members will incur an aggregate of up to
$1.0 billion of indebtedness, the “ Debt Financing
”;
WHEREAS, the parties to this
Agreement intend that (i) the Alpha Merger will qualify as a
tax-free reorganization within the meaning of
Section 368(a)(1)(F) of the Code, (ii) following the
Alpha Merger, Gholdco, as the “successor” to Alpha for
Tax purposes, became the common parent of the Affiliated Group;
(iii) the New Alpha Contribution and the Cash Contribution
followed by the Share Distribution will qualify as a tax-free
reorganization within the meaning of Section 368(a)(1)(D) of
the Code; and (iv) the Share Distribution will qualify as a
distribution eligible for nonrecognition under Sections 355(a) and
361(c) of the Code;
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WHEREAS, after the
Distribution Date (as defined in the Separation Agreement), neither
New Alpha, New Alpha, LLC nor any of the Alpha Subsidiaries (as
hereinafter defined) will be a member of the Affiliated Group for
federal income tax purposes, at all times from its formation
through the Distribution Date, New Alpha, LLC will be disregarded
as an entity separate from New Alpha for U.S. federal income tax
purposes, and at all times from its formation through the
Distribution Date, Generico will be disregarded as an entity
separate from New Alpha or Gholdco for U.S. federal income tax
purposes;
WHEREAS, after the Share
Distribution the Affiliated Group shall continue and Gholdco shall
be treated as the common parent of the Affiliated Group for federal
income tax purposes; and
WHEREAS, the Generico Group
and the Alpha Group (as hereinafter defined) desire on behalf of
themselves and their successors to set forth their rights and
obligations with respect to Taxes due for periods before, on and
after the Distribution Date.
NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01.
General . Capitalized terms used in this Agreement have the
meanings set forth in this Agreement, or, when not so defined, in
the Separation Agreement. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the
terms defined):
“
Affiliate” has the meaning set forth in the Separation
Agreement.
“ Affiliated
Group ” has the meaning set forth in the first
recital.
“ Agreement
” means this Tax Allocation Agreement as the same may be
amended from time to time.
“ Alpha ”
has the meaning set forth in the first recital.
“ Alpha Business
” has the meaning set forth in the Separation
Agreement.
“ Alpha Group
” means New Alpha, New Alpha, LLC and the Alpha
Subsidiaries.
“ Alpha Indemnified
Parties ” has the meaning set forth in the Separation
Agreement.
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“ Alpha Merger
” has the meaning set forth in the second recital.
“ Alpha Parties
” has the meaning set forth in the preamble.
“ Alpha Separate
Group Basis ” means, in the case of any Covered Group
Return, the amount of Covered Group Taxes for such Covered Group
Return that would have been due if the underlying Covered Group
conducted solely the Alpha Business and did not conduct the
Generico Business and was computed (i) by taking into account
elections and accounting methods actually used in computing the
Covered Group Taxes for such Covered Group Return and
(ii) with such other adjustments as are contemplated by this
Agreement.
“ Alpha
Subsidiary ” means each direct and indirect Subsidiary of
Alpha immediately after the Distribution.
“ Alpha Taxes
” means all Taxes to the extent related to the Alpha
Business. The amount of Alpha Taxes for the 2007 taxable year shall
be deemed to be zero.
“ Claim ”
has the meaning set forth in Section 3.03.
“ Code ”
has the meaning set forth in the first recital.
“ Combined
Return ” has the meaning set forth in
Section 2.14.
“ Controlling
Party ” means the party described as the Controlling
Party in accordance with Section 3.01.
“ Covered Group
” means, the group of Persons that join in the filing of a
Covered Group Return.
“ Covered Group
Return ” means any Tax Return (including any
consolidated, combined, or unitary Tax Return) that includes both
Alpha Taxes and Generico Taxes for a period that ends prior to or
includes the Distribution Date.
“ Covered Group
Taxes ” means any Taxes reportable on a Covered Group
Return.
“ Debt Financing
” has the meaning set forth in the fifth recital.
“ ERISA ”
means the Employee Retirement Income Security Act of 1974, as
amended.
“ Filing Party
” has the meaning set forth in Section 2.09.
“ Final
Determination ” means with respect to any issue
(a) a decision, judgment, decree or other order by any court
of competent jurisdiction, which decision, judgment, decree or
other order has become final and not subject to further appeal,
(b) a closing agreement (whether or not entered into under
Section 7121 of the Code) or any other binding settlement
agreement (whether or not with the IRS) entered into in connection
with or in contemplation of an administrative or judicial
proceeding, (c) the completion of the highest level of
administrative proceedings if a judicial contest is not or is no
longer available, or (d) any other final disposition,
including by reason of the expiration of the applicable statute of
limitations.
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“ Generico
” has the meaning set forth in the preamble.
“ Generico
Business ” has the meaning set forth in the Separation
Agreement.
“ Generico Group
” means Gholdco, Generico and the Generico
Subsidiaries.
“ Generico
Indemnified Parties ” has the meaning set forth in the
Separation Agreement.
“ Generico
Parties ” has the meaning set forth in the
preamble.
“ Generico
Subsidiary ” means each direct and indirect Subsidiary of
Generico other than a member of the Alpha Group.
“ Generico Tainting
Act ” means:
(a) any action (or failure to
take any reasonably available action) after the Distribution Date
by any of the Generico Parties or any Affiliate of the Generico
Parties other than an action contemplated by any of the Transaction
Agreements;
(b) any acquisition or other
transaction involving the equity of any member of the Generico
Group (other than the distribution of the New Alpha Common Stock in
the Share Distribution); or
(c) any Prohibited Act
performed by any of the Generico Parties or any Affiliate of the
Generico Parties;
“ Generico Taxes
” means all Taxes to the extent related to the Generico
Business.
“ Gholdco
” has the meaning set forth in the preamble.
“ Gholdco Common
Stock ” has the meaning set forth in the second
recital.
“Governmental
Entity” has the meaning set forth in the Separation
Agreement.
“ Income Tax
” means any Tax measured by or imposed on or in lieu of net
income.
“ Income Tax
Return ” means any Tax Return relating to Income
Taxes.
“ Indemnifiable
Losses ” has the meaning set forth in the Separation
Agreement.
“ Indemnified
Parties ” has the meaning set forth in
Section 3.02(b).
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“ Independent
Firm ” has the meaning set forth in Article
VI.
“ IRS ”
means the United States Internal Revenue Service.
“ Liable Party
” has the meaning set forth in Section 2.09.
“ New Alpha
” has the meaning set forth in the preamble.
“ New Alpha Common
Stock ” has the meaning set forth in the fourth
recital.
“ New Alpha, LLC
” has the meaning set forth in the preamble.
“ Person ”
has the meaning set forth in the Separation Agreement.
“ Post-Distribution
Period ” means any Taxable year or other Taxable period
beginning after the Distribution Date and, in the case of any
Taxable year or other Taxable period that begins on or before and
ends after the Distribution Date, that part of the Taxable year or
other Taxable period that begins at the beginning of the day after
the Distribution Date.
“ Pre-Distribution
Period ” means any Taxable year or other Taxable period
that ends on or before the close of the Distribution Date and, in
the case of any Taxable year or other Taxable period that begins on
or before and ends after the Distribution Date, that part of the
Taxable year or other Taxable period through the close of the
Distribution Date.
“ Prior Payments
” means, for any type of Tax Return and any Taxable year, all
payments previously made to a Governmental Entity in respect of
such Tax Return for such Taxable year and the amount of any
overpayment for a prior Taxable period that is creditable against
the liability reportable on such Tax Return for such Taxable
year.
“ Private Letter
Ruling ” has the meaning set forth in the Separation
Agreement.
“ Prohibited
Acts ” has the meaning specified in
Section 4.02(a).
“ Restricted
Period ” has the meaning specified in
Section 4.02(a).
“ Restructuring
Taxes ” means any Taxes (and other liabilities,
including, without limitation, liability to stockholders and the
costs of defending against the imposition of such Taxes and other
liabilities) of any member of the Generico Group or the Alpha Group
arising from or attributable to one or more of the Transactions,
including but not limited to (a) any failure of the Share
Distribution to constitute a tax-free distribution under
Section 355 and Section 368(a)(1)(D) of the Code, or
(b) any failure of any stock of New Alpha to qualify as
“qualified property” within the meaning of
Section 355(c)(2) or Section 361(c)(2) of the Code
because of the application of Section 355(d) or
Section 355(e) of the Code to the Share
Distribution.
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“ Ruling Request
” means the ruling request and any other materials (including
the attachments and supplemental submissions to the IRS) delivered
or deliverable by the Alpha Parties and others in connection with
the issuance by the IRS of the Private Letter Ruling.
“ Separation
Agreement ” has the meaning set forth in the fourth
recital.
“ Share
Distribution ” has the meaning set forth in the fourth
recital.
“ Straddle
Period ” has the meaning set forth in
Section 2.05.
“ Subsidiary
” means, when used with respect to any Person, any
corporation or other organization, whether incorporated or
unincorporated, at least a majority of the securities or other
interests of which having by their terms ordinary voting power to
elect a majority of the board of directors or others performing
similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such
Person or by any one or more of its Subsidiaries, or by such Person
and one or more of its Subsidiaries.
“ Tax ”
(and, with correlative meaning, “Taxes” and
“Taxable”) has the meaning set forth in the Separation
Agreement.
“ Tax Carryover
Attribute ” has the meaning specified in
Section 2.08.
“Tax Liability
Issue” has the meaning set forth in
Section 3.02(b).
“ Tax Return
” means any return, report or similar statement filed or
required to be filed with respect to any Tax (including any
attached schedules), including, without limitation, any information
return, claim for refund, amended return or declaration of
estimated Tax.
“ Transaction
Taxes ” has the meaning set forth in
Section 2.04(b).
ARTICLE II
TAX RETURNS, TAX PAYMENTS
AND TAX SHARING OBLIGATIONS
SECTION 2.01.
Obligations to File Tax Returns .
(a) Gholdco shall prepare and
timely file or cause to be timely filed all Tax Returns with
respect to any member of the Alpha Group or the Generico Group that
are due (after taking into account any extensions properly filed)
before the Distribution Date.
(b) From and after the
Distribution Date, Gholdco shall prepare and timely file or cause
to be timely filed (i) all Covered Group Returns and
(ii) any Tax Returns that relate solely to the Generico
Business (including all Income Tax Returns with respect to one or
more members of the Generico Group that do not include any members
of the Alpha Group).
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(c) From and after the
Distribution Date, New Alpha shall prepare and timely file or cause
to be timely filed any Tax Returns that relate solely to the Alpha
Business (including all Income Tax Returns with respect to one or
more members of the Alpha Group that do not include any members of
the Generico Group).
(d) All Covered Group Returns
and all other Tax Returns relating to (i) any member of the
Generico Group for Taxable years or periods ending on or before or
including the Distribution Date and (ii) any member of the
Alpha Group that are required to be filed by Gholdco pursuant to
this Agreement, shall (to the extent permitted by Applicable Laws)
be prepared on a basis consistent with the elections, methods of
accounting, positions, conventions and principles of taxation and
the manner in which any Tax item or other information is reported
as reflected in comparable Tax Returns filed before the date of
this Agreement, provided that a different method can be used
(x) if it would not materially increase Taxes for which the
Alpha Group would be responsible under this Agreement or
(y) with the prior written consent of New Alpha (such consent
not to be unreasonably withheld). The preceding sentence shall not
apply to the extent (i) otherwise contemplated or required by
the Ruling Request or Private Letter Ruling, or (ii) necessary
to comply with any change in Applicable Laws. Consent shall not be
considered unreasonably withheld within the meaning of the second
preceding sentence if such different method would increase Taxes
for which the Alpha Parties would be responsible under this
Agreement and for which Gholdco does not compensate the Alpha
Parties. Gholdco shall (A) make available to New Alpha any Tax
Return it is responsible for filing pursuant to
Section 2.01(a) at least 30 calendar days prior to filing,
provided that New Alpha shall supply Gholdco with all
information regarding any member of the Alpha Group necessary for
preparing such Return at least 90 calendar days prior to the due
date (taking into account any available extensions) for filing such
Return, and (B) make reasonable revisions to any such Tax
Return that are requested by New Alpha.
(e) Gholdco, New Alpha, or
Alpha, as the case may be, shall bear 100% of out-of-pocket costs,
including accountants’ and attorneys’ fees, incurred in
preparing any Tax Returns it is responsible for preparing and
filing under Section 2.01.
SECTION 2.02.
Obligation to Remit Taxes . Gholdco and New Alpha shall each
timely remit or cause to be timely remitted any Taxes due in
respect of any Tax Return it is required to file or cause to be
filed pursuant to Section 2.01.
SECTION 2.03. Tax
Indemnity; Prior Agreements; Refunds .
(a) From and after the
Distribution Date, the Alpha Parties shall indemnify, defend, and
hold harmless the Generico Indemnified Parties from and against,
any and all Indemnifiable Losses incurred or suffered by one or
more of the Generico Indemnified Parties in connection with,
relating to, arising out of, or due to, directly or indirectly,
(i) any Alpha Taxes (including, for the avoidance of doubt,
any Alpha Taxes arising from a redetermination thereof from an
audit or examination of a Pre-Distribution Period or Straddle
Period);
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and (ii) any amount for which New
Alpha is liable under Section 2.04. Any amount payable by the
Alpha Parties to the Generico Parties with respect to any Tax
pursuant to this Section 2.03(a) shall be reduced by any
direct or indirect payments made by the Alpha Parties or any Alpha
Affiliate with respect to such Tax after the Distribution Date to
any Generico Indemnified Party and by any Prior Payments made by or
on behalf of the Alpha Parties. The portion of a Prior Payment that
is deemed to be on behalf of the Alpha Parties shall be the portion
which bears the same proportion to the Prior Payment as the portion
of Covered Group Taxes to which the Prior Payment relates that
constitute Alpha Taxes bears to the amount of Covered Group Taxes
to which the Prior Payment relates for the taxable year. As an
example, if the amount of notional Taxes that constitute Alpha
Taxes for the period beginning on January 1, 2007 and ending
on the Distribution Date was $20X and the amount of notional Taxes
that constitute Generico Taxes for the same period was $30X, then
40 percent of any estimated Tax payments made with respect to that
period shall be deemed to have been made on behalf of the Alpha
Parties.
(b) From and after the
Distribution Date, the Generico Parties shall indemnify, defend,
and hold harmless the Alpha Indemnified Parties from and against,
any and all Indemnifiable Losses incurred or suffered by one or
more of the Alpha Indemnified Parties in connection with, relating
to, arising out of, or due to, directly or indirectly, (i) any
Generico Taxes (including, for the avoidance of doubt, any Generico
Taxes arising from a redetermination thereof from an audit or
examination of a Pre-Distribution Period or Straddle Period); and
(ii) any amount for which Gholdco is liable under
Section 2.04. Any amount payable by the Generico Parties to
the Alpha Parties with respect to any Tax pursuant to this
Section 2.03(b) shall be reduced by any direct or indirect
payments made by the Generico Parties or any Generico Affiliate
with respect to such Tax after the Distribution Date to any Alpha
Indemnified Party and by any Prior Payments made on behalf of the
Generico Parties. The portion of a Prior Payment that is deemed to
be on behalf of the Generico Parties shall be the portion which
bears the same proportion to the Prior Payment as the portion of
Covered Group Taxes to which the Prior Payment relates that
constitute Generico Taxes bears to the amount of Covered Group
Taxes to which the Prior Payment relates for the taxable
year.
(c) Any and all prior Tax
sharing agreements or practices between the Generico Parties or any
Gholdco Subsidiary, on the one hand, and the Alpha Parties or any
Alpha Subsidiary, on the other hand, shall automatically be
terminated as of the Distribution Date (other than any such
agreements set forth in the Transaction Agreements).
(d) From and after the
Distribution Date, New Alpha shall be entitled to any refund of or
credit for Alpha Taxes, provided that the Generico Parties
shall be entitled to receive and retain any refund of Taxes to the
extent such refund is attributable to a Tax Carryover Attribute
relating to the Generico Business. From and after the Distribution
Date, Gholdco shall be entitled to any refund of or credit for
Generico Taxes.
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SECTION 2.04.
Restructuring Taxes; Other Taxes Relating to the Share
Distribution .
(a) Except as otherwise
provided in Section 4.02(c) and in the next sentence of this
Section 2.04(a), the Alpha Parties shall be liable for 100% of
any Restructuring Taxes. The Generico Parties shall be liable for
any Restructuring Taxes that are imposed as a result of a Generico
Tainting Act.
(b) Notwithstanding
Section 2.04(a), the Generico Parties shall be liable for 50%
and the Alpha Parties shall be liable for 50% of any sales,
transfer, value added or other similar Taxes or fees (including all
real estate, transfer Taxes, real estate recording fees, patent,
copyright, and trademark recording fees and similar items relating
to patents, copyrights and trademarks, but excluding Restructuring
Taxes) payable in connection with the transactions contemplated by
the Separation Agreement (the “ Transaction Taxes
”). The parties agree to timely sign and deliver such
certificates or forms as are requested by the other party and may
be necessary or appropriate to enable such party to file promptly
and timely the Tax Returns for such Transaction Taxes with the
appropriate Taxing authorities and remit payment of the Transaction
Taxes.
SECTION 2.05.
Straddle Periods .
(a) The portion of any
Covered Group Taxes constituting Alpha Taxes shall be computed on
an Alpha Separate Group Basis. The remaining portion of any Covered
Group Taxes shall constitute Generico Taxes.
(b) Any Tax (including
escheat liability) other than Covered Group Taxes (which Taxes are
addressed in Section 2.05(a) above) shall constitute
(i) an Alpha Tax to the extent it relates to the Alpha
Business (including any Tax relating to the Alpha Business
attributable to a Pre-Distribution Period for which Gholdco is
liable as the “successor” to Alpha for Tax purposes)
and (ii) a Generico Tax to the extent it relates to the
Generico Business.
SECTION 2.06.
Pre-Closing vs. Post Closing Issues .
(a) Notwithstanding any other
provision of this Agreement, any amount arising by virtue of
(i) the exercise after the Distribution Date of any
compensatory option to acquire New Alpha Common Stock or Gholdco
Common Stock or (ii) the vesting after the Distribution Date
of any restricted stock units in New Alpha or Gholdco shall be
deductible by Gholdco, if the holder of such option or restricted
stock unit was employed by Gholdco or a subsidiary of Gholdco from
the date such option or restricted stock unit was granted through
the date of exercise or vesting, as applicable, and deductible by
New Alpha, if the holder of such option or restricted stock unit
was employed by New Alpha or a subsid
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