Exhibit 10.2

 

TAX MATTERS AGREEMENT

 

DATED AS OF SEPTEMBER 28, 2018

 

BY AND BETWEEN

 

SERVICEMASTER GLOBAL HOLDINGS, INC.,

 

AND

 

FRONTDOOR, INC.

 

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TABLE OF CONTENTS

 

 

 

Page

Section 1.

Definition of Terms

2

 

 

 

Section 2.

Allocation of Tax Liabilities

11

 

 

 

Section 2.01

General Rule

11

Section 2.02

Allocation of United States Federal Income Tax and Federal Other Tax

11

Section 2.03

Allocation of State Income and State Other Taxes

12

Section 2.04

Allocation of Foreign Taxes

13

Section 2.05

Certain Transaction and Other Taxes

13

 

 

 

Section 3.

Proration of Taxes for Straddle Periods

14

 

 

 

Section 4.

Preparation and Filing of Tax Returns

14

 

 

 

Section 4.01

General

14

Section 4.02

Parent’s Responsibility

14

Section 4.03

SpinCo’s Responsibility

15

Section 4.04

Tax Accounting Practices

15

Section 4.05

Consolidated or Combined Tax Returns

15

Section 4.06

Right to Review Tax Returns

16

Section 4.07

SpinCo Carrybacks and Claims for Refund

16

Section 4.08

Apportionment of Earnings and Profits and Tax Attributes

17

 

 

 

Section 5.

Tax Payments

17

 

 

 

Section 5.01

Payment of Taxes With Respect to Joint Returns

17

Section 5.02

Payment of Taxes With Respect to Section 2.03(c) Returns

18

Section 5.03

Indemnification Payments

19

 

 

 

Section 6.

Tax Benefits

19

 

 

 

Section 6.01

Tax Benefits

19

 

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Section 6.02

Parent and SpinCo Income Tax Deductions in Respect of Certain Equity Awards and
Incentive Compensation

20

 

 

 

Section 7.

Tax-Free Status

21

 

 

 

Section 7.01

Tax Opinions/Rulings and Representation Letters

21

Section 7.02

Restrictions on SpinCo

21

Section 7.03

Restrictions on Parent

24

Section 7.04

Procedures Regarding Opinions and Rulings

24

Section 7.05

Liability for Tax-Related Losses

25

Section 7.06

Section 336(e) Election

27

 

 

 

Section 8.

Assistance and Cooperation

28

 

 

 

Section 8.01

Assistance and Cooperation

28

Section 8.02

Income Tax Return Information

28

Section 8.03

Reliance by Parent

29

Section 8.04

Reliance by SpinCo

29

 

 

 

Section 9.

Tax Contests

29

 

 

 

Section 9.01

Notice

29

Section 9.02

Control of Tax Contests

30

 

 

 

Section 10.

Effective Date; Termination of Prior Intercompany Tax Allocation Agreements

32

 

 

 

Section 11.

Survival of Obligations

32

 

 

 

Section 12.

Treatment of Payments; Tax Gross Up

32

 

 

 

Section 12.01

Treatment of Tax Indemnity and Tax Benefit Payments

32

Section 12.02

Tax Gross Up

32

Section 12.03

Interest Under This Agreement

33

 

 

 

Section 13.

Disagreements

33

 

 

 

Section 13.01

Interaction with Article VII of the Separation and Distribution Agreement

33

 

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Section 13.02

Dispute Resolution

33

 

 

 

Section 14.

Late Payments

34

 

 

 

Section 15.

Expenses

34

 

 

 

Section 16.

General Provisions

34

 

 

 

Section 16.01

Addresses and Notices

34

Section 16.02

Binding Effect

35

Section 16.03

Waiver

35

Section 16.04

Severability

35

Section 16.05

Authority

35

Section 16.06

Further Action

35

Section 16.07

Integration

35

Section 16.08

Construction

36

Section 16.09

No Double Recovery

36

Section 16.10

Counterparts

36

Section 16.11

Governing Law

36

Section 16.12

Jurisdiction

36

Section 16.13

Amendment

36

Section 16.14

SpinCo Subsidiaries

37

Section 16.15

Successors

37

Section 16.16

Injunctions

37

 

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TAX MATTERS AGREEMENT

 

This TAX MATTERS AGREEMENT (this “Agreement”) is entered into as of
September 28, 2018, by and between ServiceMaster Global Holdings, Inc., a
Delaware corporation (“Parent”) and frontdoor, inc., a Delaware corporation and
a wholly owned subsidiary of Parent (“SpinCo”) (Parent and SpinCo sometimes
collectively referred to herein as the “Companies” and, as the context requires,
individually referred to herein as a “Company”).

 

RECITALS

 

WHEREAS, the board of directors of Parent (the “Parent Board”) has determined
that it is in the best interests of Parent and its stockholders to create a new
publicly traded company that shall operate the SpinCo Business;

 

WHEREAS, in furtherance of the foregoing, the Parent Board has determined that
it is appropriate and desirable to separate the SpinCo Business from the Parent
Business (the “Separation”) and, following the Separation, to make a
distribution, on a pro rata basis, to holders of Parent Shares on the Record
Date of at least eighty percent (80%) of the outstanding SpinCo Shares (the
“Distribution”);

 

WHEREAS, SpinCo has been incorporated solely for these purposes and has not
engaged in activities, except in connection with the Separation and the
Distribution;

 

WHEREAS, for U.S. federal income tax purposes, the Contribution and the
Distribution, taken together, are intended to qualify as a transaction that is
generally tax-free for U.S. federal income tax purposes under Sections 355 and
368(a)(1)(D) of the Code;

 

WHEREAS, in connection with the Separation, and in accordance with the Plan of
Reorganization, SMCS Holdco II, Inc. (a Delaware corporation and a wholly owned
subsidiary of Parent, “SMCS Holdco II”) has distributed or will distribute,
prior to the Contribution and Distribution, stock possessing at least eighty
percent (80%) of the combined voting power of all classes of stock of American
Home Shield Corporation (a Delaware corporation and a wholly owned subsidiary of
Parent, “AHS”) to The ServiceMaster Company, LLC (a Delaware limited liability
company disregarded as separate from Parent for U.S. federal income tax
purposes) in a transaction intended to qualify as generally tax-free for U.S.
federal income tax purposes under Section 355 of the Code (the “Internal
Distribution”);

 

WHEREAS, in order to effectuate the Separation and the Distribution, Parent and
SpinCo have entered into that certain Separation and Distribution Agreement,
dated as of September 28, 2018 (together with the Schedules, Exhibits and
Appendices thereto, the “Separation and Distribution Agreement”);

 

WHEREAS, as of the date hereof, Parent is the common parent of an affiliated
group of corporations, including SpinCo, which affiliated group has elected to
file consolidated U.S. federal income tax returns;

 

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WHEREAS, pursuant to the Separation and Distribution Agreement, Parent and
SpinCo have agreed to separate the SpinCo Business from Parent by means of,
among other actions, (i) the Internal Distribution, (ii) the Contribution and
(iii) the Distribution;

 

WHEREAS, as a result of the Distribution, SpinCo and its subsidiaries will cease
to be members of the affiliated group (as that term is defined in Section 1504
of the Code) of which Parent is the common parent (the “Deconsolidation”);

 

WHEREAS, the parties desire to provide for and agree upon the allocation between
the Companies of liabilities for Taxes arising prior to, as a result of, and
subsequent to the Distribution, and to provide for and agree upon other matters
relating to Taxes; and

 

WHEREAS, the Companies acknowledge that this Agreement, the Separation and
Distribution Agreement and the other Ancillary Agreements represent the
integrated agreement of Parent and SpinCo relating to the Separation and the
Distribution, are being entered into together, and would not have been entered
into independently.

 

NOW THEREFORE, in consideration of the mutual agreements contained herein, the
parties hereby agree as follows:

 

Section 1.                                          Definition of Terms.  For
purposes of this Agreement (including the recitals hereof), the following terms
have the following meanings, and capitalized terms used but not otherwise
defined herein shall have the meaning ascribed to them in the Separation and
Distribution Agreement:

 

“Accounting Cutoff Date” means, with respect to SpinCo and any member of the
SpinCo Group the Tax Items of which are included in the Parent Federal
Consolidated Income Tax Return, any date as of the end of which there is a
closing of the financial accounting records for such entity.

 

“Active Trade or Business” means the active conduct (as defined in
Section 355(b)(2) of the Code and the regulations thereunder) by SpinCo and its
“separate affiliated group” (as defined in Section 355(b)(3)(B) of the Code) of
the AHS Business.

 

“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 (a) any amended Tax Return
claiming adjustment to the Taxes as reported on the Tax Return or, if
applicable, as previously adjusted, (b) any claim for equitable recoupment or
other offset, and (c) any claim for refund or credit of Taxes previously paid.

 

“Affiliate” means any entity that is directly or indirectly “controlled” by
either the person in question or an Affiliate of such person.  “Control”, for
purposes of the definition of Affiliate, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a person, whether through ownership of voting securities, by
contract or otherwise.  The term Affiliate shall refer to Affiliates of a person
as determined immediately after the Distribution.

 

“Agreement” means this Tax Matters Agreement.

 

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“AHS” shall have the meaning set forth in the Recitals.

 

“AHS Business” means the business, operations and activities of providing home
warranty plans for household systems and appliances in the United States, as
conducted by AHS immediately prior to the Internal Distribution.

 

“AHS Capital Stock” means all classes or series of capital stock of AHS,
including (i) the shares of common stock of AHS, (ii) all options, warrants and
other rights to acquire such stock and (iii) all instruments properly treated as
stock in AHS for U.S. federal income tax purposes.

 

“Board Certificate” shall have the meaning set forth in Section 7.02(e) of this
Agreement.

 

“Business Day” means any day other than a Saturday, a Sunday or a day on which
banking institutions are generally authorized or required by law to close in the
United States or New York, New York.

 

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

 

“Companies” and “Company” shall have the meaning provided in the first sentence
of this Agreement.

 

“Contribution” means the transfer by Parent (or an entity disregarded as
separate from Parent for U.S. federal income tax purposes) directly to SpinCo,
pursuant to the Separation and Distribution Agreement, of certain SpinCo Assets
in actual or constructive exchange for (i) the issuance by SpinCo to Parent (or
such disregarded entity) of SpinCo Shares, (ii) the assumption by SpinCo of
certain SpinCo Liabilities and (iii) the issuance by SpinCo to Parent (or such
disregarded entity) of the SpinCo Debt.

 

“Controlling Party” shall have the meaning set forth in Section 9.02(f) of this
Agreement.

 

“Deconsolidation” shall have the meaning provided in the Recitals.

 

“Deconsolidation Date” means the last date on which SpinCo qualifies as a member
of the affiliated group (as defined in Section 1504 of the Code) of which Parent
is the common parent.

 

“DGCL” means the Delaware General Corporation Law.

 

“Distribution” shall have the meaning set forth in the Recitals.

 

“Due Date” means with respect to a Tax Return, the date (taking into account all
valid extensions) on which such Tax Return is required to be filed under
applicable Law.

 

“Employee Matters Agreement” has the meaning set forth in the Separation and
Distribution Agreement.

 

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“Federal Income Tax” means any Tax imposed by Subtitle A of the Code, and any
interest, penalties, additions to tax, or additional amounts in respect of the
foregoing.

 

“Federal Other Tax” means any Tax imposed by the federal government of the
United States of America (other than any Federal Income Taxes), and any
interest, penalties, additions to tax, or additional amounts in respect of the
foregoing.

 

“Fifty-Percent or Greater Interest” shall have the meaning ascribed to such term
for purposes of Sections 355(d) and (e) of the Code.

 

“Filing Date” shall have the meaning set forth in Section 7.05(d) of this
Agreement.

 

“Final Determination” means the final resolution of liability for any Tax, which
resolution may be for a specific issue or adjustment or for a Tax Period, (a) 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
Tax Period (as the case may be); (b) by a decision, judgment, decree, or other
order by a court of competent jurisdiction, which has become final and
unappealable; (c) 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; (d) by any allowance of a refund
or credit in respect of an overpayment of Income Tax or Other 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 Income Tax or
Other Tax; (e) by a final settlement resulting from a treaty-based competent
authority determination; or (f) 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.

 

“Foreign Other 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, other than any Foreign Income Taxes, and
any interest, penalties, additions to tax, or additional amounts in respect of
the foregoing.

 

“Foreign Tax” means any Foreign Income Taxes or Foreign Other Taxes.

 

“Group” means the Parent Group or the SpinCo Group, or both, as the context
requires.

 

“Income Tax” means any Federal Income Tax, State Income Tax or Foreign Income
Tax.

 

“Indemnitee” shall have the meaning set forth in Section 12.03 of this
Agreement.

 

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“Indemnitor” shall have the meaning set forth in Section 12.03 of this
Agreement.

 

“Internal Distribution” shall have the meaning set forth in the Recitals.

 

“Internal Restructuring” means (i) any internal restructuring (including by
making or revoking any election under Treasury Regulations Section 301.7701-3)
involving SpinCo and/or any of its subsidiaries or (ii) any direct or indirect
contribution, sale or other transfer by SpinCo to any of its subsidiaries of any
of the assets contributed or transferred to SpinCo as part of the Contribution
or pursuant to the Separation and Distribution Agreement.

 

“IRS” means the United States Internal Revenue Service.

 

“Joint Return” shall mean any Return of a member of the Parent Group or the
SpinCo Group that is not a Separate Return.

 

“Non-Controlling Party” shall have the meaning set forth in Section 9.02(f) of
this Agreement.

 

“Notified Action” shall have the meaning set forth in Section 7.04(a) of this
Agreement.

 

“Other Tax” means any Federal Other Tax, State Other Tax, or Foreign Other Tax.

 

“Parent” shall have the meaning provided in the first sentence of this
Agreement.

 

“Parent Adjustment” means any proposed adjustment by a Tax Authority or claim
for refund asserted in a Tax Contest to the extent Parent would be exclusively
liable for any resulting Tax under this Agreement or exclusively entitled to
receive any resulting Tax Benefit under this Agreement.

 

“Parent Affiliated Group” shall have the meaning provided in the definition of
“Parent Federal Consolidated Income Tax Return.”

 

“Parent Board” shall have the meaning set forth in the Recitals.

 

“Parent Business” shall have the meaning provided in the Separation and
Distribution Agreement.

 

“Parent Federal Consolidated Income Tax Return” means any United States Federal
Income Tax Return for the affiliated group (as that term is defined in
Section 1504 of the Code and the regulations thereunder) of which Parent is the
common parent (the “Parent Affiliated Group”).

 

“Parent Foreign Combined Income Tax Return” means a consolidated, combined or
unitary or other similar Foreign Income Tax Return or any Foreign Income Tax
Return with respect to any profit and/or loss sharing group, group payment or
similar group or fiscal unity that actually includes, by election or otherwise,
one or more members of the Parent Group together with one or more members of the
SpinCo Group.

 

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“Parent Group” means Parent and its Affiliates, excluding any entity that is a
member of the SpinCo Group.

 

“Parent Group Transaction Returns” shall have the meaning set forth in
Section 4.04(b) of this Agreement.

 

“Parent Separate Return” means any Separate Return of Parent or any member of
the Parent Group.

 

“Parent State Combined Income Tax Return” means a consolidated, combined or
unitary State Income Tax Return that actually includes, by election or
otherwise, one or more members of the Parent Group together with one or more
members of the SpinCo Group.

 

“Past Practices” shall have the meaning set forth in Section 4.04(a) of this
Agreement.

 

“Payment Date” means (i) with respect to any Parent Federal Consolidated Income
Tax Return, the due date for any required installment of estimated taxes
determined under Section 6655 of the Code, the due date (determined without
regard to extensions) for filing the return determined under Section 6072 of the
Code, and the date the return is filed, and (ii) with respect to any other Tax
Return, the corresponding dates determined under the applicable Tax Law.

 

“Payor” shall have the meaning set forth in Section 5.03(a) 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.

 

“Post-Deconsolidation Period” means any Tax Period beginning after the
Deconsolidation Date, and, in the case of any Straddle Period, the portion of
such Straddle Period beginning the day after the Deconsolidation Date.

 

“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.

 

“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 SpinCo management or
shareholders (or AHS management or shareholders), is a hostile acquisition, or
otherwise, as a result of which SpinCo or AHS would merge or consolidate with

 

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any other Person or as a result of which any Person or any group of Persons
would (directly or indirectly) acquire, or have the right to acquire, (I) from
SpinCo and/or one or more holders of outstanding shares of SpinCo Capital Stock,
a number of shares of SpinCo Capital Stock that would, when combined with any
other changes in ownership of SpinCo Capital Stock pertinent for purposes of
Section 355(e) of the Code, comprise 40% or more of (a) the value of all
outstanding shares of stock of SpinCo 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 (b) the total combined voting power of all outstanding shares of
voting stock of SpinCo 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) from AHS and/or one or more holders of outstanding shares of AHS Capital
Stock, a number of shares of AHS Capital Stock that would, when combined with
any other changes in ownership of AHS Capital Stock pertinent for purposes of
Section 355(e) of the Code, comprise 40% or more of (a) the value of all
outstanding shares of stock of AHS 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 (b) the total combined voting power of all outstanding shares of
voting stock of AHS 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 (A) the adoption by SpinCo of a shareholder rights plan or (B) issuances
by SpinCo that satisfy Safe 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 Regulations
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 representation letters and any other
materials (including, without limitation, a Ruling Request and any related
supplemental submissions to the IRS) delivered or deliverable by, or on behalf
of, Parent, SpinCo and others in connection with the rendering by Tax Advisors
and/or the issuance by the IRS of the Tax Opinions/Rulings.

 

“Required Party” shall have the meaning set forth in Section 5.03(a) 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.

 

“Ruling” means a private letter ruling (including a supplemental private letter
ruling) issued by the IRS to Parent pertaining to or in connection with the
Internal Distribution, the Contribution and/or the Distribution.

 

“Ruling Request” means any letter filed by Parent with the IRS requesting a
ruling regarding certain tax consequences of the Transactions (including all
attachments, exhibits, and other materials submitted with such ruling request
letter) and any amendment or supplement to such ruling request letter.

 

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“Section 2.03(c) Return” means any  Separate Tax Return of one Company (or its
Affiliates) in respect of which the other Company could reasonably be expected
to be responsible, pursuant to Section 2.03(c), for some or all of any State
Other Taxes due with respect to or required to be reported on such Return.

 

“Section 336(e) Election” has the meaning set forth in Section 7.06.

 

“Section 7.02(e) 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) in the case of any Tax Return of any member of the
SpinCo Group (including any consolidated, combined or unitary return), any such
Tax Return that does not include any member of the Parent Group and (b) in the
case of any Tax Return of any member of the Parent Group (including any
consolidated, combined or unitary return), any such Tax Return that does not
include any member of the SpinCo Group.

 

“Separation” shall have the meaning set forth in the Recitals.

 

“Separation and Distribution Agreement” shall have the meaning set forth in the
Recitals.

 

“SMCS Holdco II” shall have the meaning set forth in the Recitals.

 

“SpinCo” shall have the meaning provided in the first sentence of this
Agreement, and references herein to SpinCo shall include any entity treated as a
successor to SpinCo.

 

“SpinCo Adjustment” means any proposed adjustment by a Tax Authority or claim
for refund asserted in a Tax Contest to the extent SpinCo would be exclusively
liable for any resulting Tax under this Agreement or exclusively entitled to
receive any resulting Tax Benefit under this Agreement.

 

“SpinCo Business” has the meaning set forth in the Separation and Distribution
Agreement.

 

“SpinCo Capital Stock” means all classes or series of capital stock of SpinCo,
including (i) the shares of common stock of SpinCo, (ii) all options, warrants
and other rights to acquire such stock and (iii) all instruments properly
treated as stock in SpinCo for U.S. federal income tax purposes.

 

“SpinCo Carryback” means any net operating loss, net capital loss, excess tax
credit, or other similar Tax item of any member of the SpinCo Group which may or
must be carried from one Tax Period to another prior Tax Period under the Code
or other applicable Tax Law.

 

“SpinCo Federal Consolidated Income Tax Return” means any United States federal
Income Tax Return for the affiliated group (as that term is defined in
Section 1504 of the Code) of which SpinCo is the common parent.

 

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“SpinCo Group” means SpinCo and its Affiliates, as determined immediately after
the Distribution.

 

“SpinCo Separate Return” means any Separate Return of SpinCo or any member of
the SpinCo Group.

 

“State Income Tax” means any Tax imposed by any State of the United States (or
by any political subdivision of any such State) or the District of Columbia, in
each case, which is imposed on or measured by net income, including state and
local franchise or similar Taxes 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) or the District of Columbia, in
each case, other than any State Income Taxes, and any interest, penalties,
additions to tax, or additional amounts in respect of the foregoing.

 

“State Tax” means any State Income Taxes or State Other Taxes.

 

“Straddle Period” means any Tax Period that begins on or before and ends after
the Deconsolidation Date.

 

“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, stamp, excise,
escheat, severance, occupation, service, sales, use, license, lease, transfer,
import, export, value added, 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, penalties, additions to tax, or additional amounts in respect
of the foregoing.

 

“Tax Advisor” means a United States tax counsel or accountant of recognized
national standing.

 

“Tax Attribute” or “Attribute” shall mean a net operating loss, net capital
loss, unused investment credit, unused foreign tax credit, excess charitable
contribution, general business credit or any other Tax Item that could reduce a
Tax.

 

“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
Tax payments.

 

“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).

 

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“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 (I) the Contribution and
Distribution, taken together, (a) as a reorganization described in
Sections 355(a) and 368(a)(1)(D) of the Code, (b) 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 (c) as a transaction in
which the holders of Parent Shares recognize no income or gain for U.S. federal
income tax purposes pursuant to Section 355 and (II) the Internal Distribution
(a) as a transaction described in Section 355(a) of the Code, (b) as a
transaction in which the stock of AHS distributed thereby is “qualified
property” for purposes of Sections 355(d), 355(e) and 361(c) of the Code and
(c) as a transaction in which Parent recognizes no income or gain for U.S.
federal income tax purposes pursuant to Section 355.

 

“Tax Item” means, with respect to any Income Tax, any item of income, gain,
loss, deduction, credit, recapture of credit or any other item which increases
or decreases Taxes paid or payable.

 

“Tax Law” means the law of any governmental entity or political subdivision
thereof relating to any Tax.

 

“Tax Opinions/Rulings” means (i) the opinions of Wachtell, Lipton, Rosen & Katz
and of PwC deliverable to Parent pertaining to or in connection with, and
regarding the Federal Income Tax treatment of, the Internal Distribution, the
Contribution and/or the Distribution and (ii) any Rulings.

 

“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-Related Losses” means (i) all federal, state, local and foreign Taxes
(including interest and penalties thereon) imposed (or that would be imposed)
pursuant to any settlement, Final Determination, judgment or otherwise, (ii) all
accounting, legal and other professional fees, and court costs incurred in
connection therewith, and (iii) all costs, expenses and damages associated with
stockholder litigation or controversies and any amount paid by Parent (or any
Parent Affiliate) or SpinCo (or any SpinCo Affiliate) in respect of the
liability of shareholders, whether paid to shareholders or to the IRS or any
other Tax Authority, in the case of each of clauses (i) through (iii), resulting
from the failure of the Internal Distribution, the Contribution or the
Distribution to have Tax-Free Status.

 

“Tax Return” or “Return” means any report of Taxes due, any claim for refund of
Taxes paid, any information return with respect to Taxes, or any other similar
report, statement, questionnaire, declaration, or document filed or required to
be filed under the Code or other Tax Law, including any attachments, exhibits,
or other materials submitted with any of the foregoing, and including any
amendments or supplements to any of the foregoing.

 

“Transactions” means the Internal Distribution, the Contribution, the
Distribution and the other transactions contemplated by the Separation and
Distribution Agreement.

 

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“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 Parent, on which Parent may rely to the
effect that a transaction will not affect the Tax-Free Status of the
Contribution and the Distribution (taken together) and the Internal
Distribution; provided, that (i) any tax opinion obtained in connection with a
proposed acquisition of SpinCo Capital Stock entered into on or before the
two-year anniversary of the Distribution Date shall not qualify as an
Unqualified Tax Opinion unless such tax opinion also concludes that such
proposed acquisition (a) will not be treated as “part of a plan (or series of
related transactions),” within the meaning of Section 355(e) of the Code and the
Treasury Regulations promulgated thereunder, that includes the Distribution and
(b) will not be treated as “part of a plan (or series of related transactions),”
within the meaning of Section 355(e) of the Code and the Treasury Regulations
promulgated thereunder, that includes the Internal Distribution and (ii) any tax
opinion obtained in connection with a proposed acquisition of AHS Capital Stock
entered into on or before the two-year anniversary of the Distribution Date
shall not qualify as an Unqualified Tax Opinion unless such tax opinion also
concludes that such proposed acquisition will not be treated as “part of a plan
(or series of related transactions),” within the meaning of Section 355(e) of
the Code and the Treasury Regulations promulgated thereunder, that includes the
Internal Distribution.  Any such opinion must assume that the Contribution and
Distribution (taken together) and the Internal Distribution would have qualified
for Tax-Free Status if the transaction in question did not occur.

 

Section 2.                                          Allocation of Tax
Liabilities.

 

Section 2.01                            General Rule.

 

(a)                                 Parent Liability.  Parent shall be liable
for, and shall indemnify and hold harmless the SpinCo Group from and against any
liability for, Taxes which are allocated to Parent under this Section 2.

 

(b)                                 SpinCo Liability.  SpinCo shall be liable
for, and shall indemnify and hold harmless the Parent Group from and against any
liability for, Taxes which are allocated to SpinCo under this Section 2.

 

Section 2.02                            Allocation of United States Federal
Income Tax and Federal Other Tax.  Except as otherwise provided in Section 2.05,
Federal Income Tax and Federal Other Tax shall be allocated as follows:

 

(a)                                 Allocation of Tax Relating to Parent Federal
Consolidated Income Tax Returns.  With respect to any Parent Federal
Consolidated Income Tax Return, Parent shall be responsible for any and all
Federal Income Taxes due 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 the absence of doubt, Parent shall be responsible for any
and all Federal Income Taxes resulting from Section 965 of the Code with respect
to any deferred foreign income corporations (as defined in Section 965 of the
Code) owned directly or indirectly by Parent prior to the Distribution
(regardless of

 

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when the inclusion under Section 965 occurs and regardless of when the tax is
paid or required to be paid).

 

(b)                                 Allocation of Tax Relating to Federal
Separate Income Tax Returns.  (i) Parent shall be responsible for any and all
Federal Income Taxes due with respect to or required to be reported on any
Parent Separate Return (including any increase in such Tax as a result of a
Final Determination); (ii) SpinCo shall be responsible for any and all Federal
Income Taxes due with respect to or required to be reported on any SpinCo
Separate Return (including any increase in such Tax as a result of a Final
Determination).

 

(c)                                  Allocation of Federal Other Tax. 
(i) Parent shall be responsible for any and all Federal Other Taxes due with
respect to or required to be reported on any Parent Separate Return (including
any increase in such Tax as a result of a Final Determination) or otherwise
imposed on any member of the Parent Group; (ii) SpinCo shall be responsible for
any and all Federal Other Taxes due with respect to or required to be reported
on any SpinCo Separate Return (including any increase in such Tax as a result of
a Final Determination) or otherwise imposed on any member of the SpinCo Group.

 

Section 2.03                            Allocation of State Income and State
Other Taxes.  Except as otherwise provided in Section 2.05, State Income Tax and
State Other Tax shall be allocated as follows:

 

(a)                                 Allocation of Tax Relating to Parent State
Combined Income Tax Returns.  Parent shall be responsible for any and all State
Income Taxes due with respect to or required to be reported on any Parent State
Combined Income Tax Return (including any increase in such Tax as a result of a
Final Determination).

 

(b)                                 Allocation of State Income Tax Relating to
Separate Returns.  (i) Parent shall be responsible for any and all State Income
Taxes due with respect to or required to be reported on any Parent Separate
Return (including any increase in such Tax as a result of a Final
Determination); (ii) SpinCo shall be responsible for any and all State Income
Taxes due with respect to or required to be reported on any SpinCo Separate
Return (including any increase in such Tax as a result of a Final
Determination).

 

(c)                                  Allocation of State Other Tax.  (i) Parent
shall be responsible for any and all State Other Taxes attributable to, or
arising with respect to, assets or activities of the Parent Business (as
determined by Parent) due with respect to or required to be reported on any
SpinCo Separate Return, including any increase in such Taxes (as determined by
Parent) as a result of a Final Determination; (ii) other than State Other Taxes
for which Parent is responsible in accordance with clause (i) above, SpinCo
shall be responsible for any and all State Other Taxes due with respect to or
required to be reported on any SpinCo Separate Return; (iii) SpinCo shall be
responsible for any and all State Other Taxes attributable to, or arising with
respect to, assets or activities of the SpinCo Business (as determined by
Parent) due with respect to or required to be reported on any Parent Separate
Return, including any increase in such Taxes (as determined by Parent) as a
result of a Final Determination; and (iv) other than State Other Taxes for which
SpinCo is responsible in accordance with clause (iii) above, Parent shall be
responsible for any and all State Other Taxes due with respect to or required to
be reported on any Parent Separate Return.

 

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Section 2.04                            Allocation of Foreign Taxes.  Except as
otherwise provided in Section 2.05, Foreign Income Tax and Foreign Other Tax
shall be allocated as follows:

 

(a)                                 Allocation of Tax Relating to Parent Foreign
Combined Income Tax Returns.  Parent shall be responsible for any and all
Foreign Income Taxes due with respect to or required to be reported on any
Parent Foreign Combined Income Tax Return (including any increase in such Tax as
a result of a Final Determination).

 

(b)                                 Allocation of Foreign Income Tax Relating to
Separate Returns.  (i) Parent shall be responsible for any and all Foreign
Income Taxes due with respect to or required to be reported on any Parent
Separate Return (including any increase in such Foreign Income Tax as a result
of a Final Determination); (ii) SpinCo shall be responsible for any and all
Foreign Income Taxes due with respect to or required to be reported on any
SpinCo Separate Return (including any increase in such Foreign Income Tax as a
result of a Final Determination).

 

(c)                                  Allocation of Foreign Other Tax. 
(i) Parent shall be responsible for any and all Foreign Other Taxes due with
respect to or required to be reported on any Parent Separate Return (including
any increase in such Tax as a result of a Final Determination) or otherwise
imposed on any member of the Parent Group; (ii) SpinCo shall be responsible for
any and all Foreign Other Taxes due with respect to or required to be reported
on any SpinCo Separate Return (including any increase in such Tax as a result of
a Final Determination) or otherwise imposed on any member of the SpinCo Group.

 

Section 2.05                            Certain Transaction and Other Taxes.

 

(a)                                 SpinCo Liability.  SpinCo shall be liable
for, and shall indemnify and hold harmless the Parent Group from and against any
liability for:

 

(i)                                     Any stamp, sales and use, gross
receipts, value-added or other transfer Taxes imposed by any Tax Authority on
any member of the SpinCo Group (if such member is primarily liable for such Tax)
on the transfers occurring pursuant to the Transactions;

 

(ii)                                  Any Tax resulting from a breach by SpinCo
of any representation or covenant in this Agreement, the Separation and
Distribution Agreement, any Ancillary Agreement, any Representation Letter or
any Tax Opinion/Ruling; and

 

(iii)                               Any Tax-Related Losses for which SpinCo is
responsible pursuant to Section 7.05 of this Agreement.

 

(b)                                 Parent Liability.  Parent shall be liable
for, and shall indemnify and hold harmless the SpinCo Group from and against any
liability for:

 

(i)                                     Any stamp, sales and use, gross
receipts, value-added or other transfer Taxes imposed by any Tax Authority on
any member of the Parent Group (if such member is primarily liable for such Tax)
on the transfers occurring pursuant to the Transactions;

 

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(ii)                                  Any Tax resulting from a breach by Parent
of any representation or covenant in this Agreement, the Separation and
Distribution Agreement, any Ancillary Agreement, any Representation Letter or
any Tax Opinion/Ruling; and

 

(iii)                               Any Tax-Related Losses for which Parent is
responsible pursuant to Section 7.05 of this Agreement.

 

Section 3.                                          Proration of Taxes for
Straddle Periods.

 

(a)                                 General Method of Proration.  In the case of
any Straddle Period, Tax Items shall be apportioned between Pre-Deconsolidation
Periods and Post-Deconsolidation Periods in accordance with the principles of
Treasury Regulation Section 1.1502-76(b) as reasonably interpreted and applied
by Parent.  With respect to the Parent Federal Consolidated Income Tax Return
for the taxable year that includes the Distribution, no election shall be made
under Treasury Regulations Section 1.1502-76(b)(2)(ii) (relating to ratable
allocation of a year’s items).  If the Deconsolidation Date is not an Accounting
Cutoff Date, the provisions of Treasury Regulations
Section 1.1502-76(b)(2)(iii) will be applied to ratably allocate the items
(other than extraordinary items) for the month which includes the
Deconsolidation Date.

 

(b)                                 Transactions Treated as Extraordinary Item. 
In determining the apportionment of Tax Items between Pre-Deconsolidation
Periods and Post-Deconsolidation Periods, any Tax Items relating to the
Transactions shall be treated as extraordinary items described in Treasury
Regulations Section 1.1502-76(b)(2)(ii)(C) and shall (to the extent occurring on
or prior to the Deconsolidation Date) be allocated to Pre-Deconsolidation
Periods, and any Taxes related to such items shall be treated under Treasury
Regulations Section 1.1502-76(b)(2)(iv) as relating to such extraordinary item
and shall (to the extent occurring on or prior to the Deconsolidation Date) be
allocated to Pre-Deconsolidation Periods.

 

Section 4.                                          Preparation and Filing of
Tax Returns.

 

Section 4.01                            General.  Except as otherwise provided
in this Section 4, Tax Returns shall be prepared and filed on or before their
Due Date by the Person obligated to file such Tax Returns under the Code or
applicable Tax Law.  The Companies shall provide, and shall cause their
Affiliates to provide, assistance and cooperation to one another in accordance
with Section 8 with respect to the preparation and filing of Tax Returns,
including by providing information required to be provided pursuant to
Section 8.

 

Section 4.02                            Parent’s Responsibility.  Parent has the
exclusive obligation and right to prepare and file, or to cause to be prepared
and filed:

 

(a)                                 Parent Federal Consolidated Income Tax
Returns for any Tax Periods ending on, before or after the Deconsolidation Date;

 

(b)                                 Parent State Combined Income Tax Returns,
Parent Foreign Combined Income Tax Returns and any other Joint Returns which
Parent reasonably determines are required to be filed (or which Parent chooses
to be filed) by the Companies or any of their Affiliates for Tax Periods ending
on, before or after the Deconsolidation Date; and

 

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(c)                                  Parent Separate Returns and SpinCo Separate
Returns which Parent reasonably determines are required to be filed by the
Companies or any of their Affiliates for Tax Periods ending on, before or after
the Deconsolidation Date (limited, in the case of SpinCo Separate Returns, to
such Returns for which the Due Date is on or before the Deconsolidation Date).

 

Section 4.03                            SpinCo’s Responsibility.  SpinCo shall
prepare and file, or shall cause to be prepared and filed, all Tax Returns
required to be filed by or with respect to members of the SpinCo Group other
than those Tax Returns which Parent is required or entitled to prepare and file
under Section 4.02.  The Tax Returns required to be prepared and filed by SpinCo
under this Section 4.03 shall include (a) any SpinCo Federal Consolidated Income
Tax Return for Tax Periods ending after the Deconsolidation Date and (b) SpinCo
Separate Returns for which the Due Date is after the Deconsolidation Date.

 

Section 4.04                            Tax Accounting Practices.

 

(a)                                 General Rule.  Except as otherwise provided
in Section 4.04(b), with respect to any Tax Return that SpinCo has the
obligation and right to prepare and file, or cause to be prepared and filed,
under Section 4.03, (i) for any Pre-Deconsolidation Period or any Straddle
Period (or any taxable period beginning after the Deconsolidation Date to the
extent items reported on such Tax Return could reasonably be expected to affect
items reported on any Tax Return that Parent has the obligation or right to
prepare and file for any Pre-Deconsolidation Period or any Straddle Period) or
(ii) that is Section 2.03(c) Return, such Tax Return shall be prepared in
accordance with past practices, accounting methods, elections or conventions
(“Past Practices”) used with respect to the Tax Returns in question (unless
there is no reasonable basis for the use of such Past Practices or unless there
is no adverse effect to Parent), and to the extent any items are not covered by
Past Practices (or in the event that there is no reasonable basis for the use of
such Past Practices or there is no adverse effect to Parent), in accordance with
reasonable Tax accounting practices selected by SpinCo.  Except as otherwise
provided in Section 4.04(b), Parent shall prepare any Tax Return which it has
the obligation and right to prepare and file, or cause to be prepared and filed,
under Section 4.02, in accordance with reasonable Tax accounting practices
selected by Parent.

 

(b)                                 Reporting of Transactions.  The Tax
treatment reported on any Tax Return of the Transactions shall be consistent
with the treatment thereof in the Ruling Requests and the Tax Opinions/Rulings,
unless there is no reasonable basis for such Tax treatment.  The Tax treatment
of the Transactions reported on any Tax Return for which SpinCo is the
Responsible Company shall be consistent with that on any Tax Return filed or to
be filed by Parent or any member of the Parent Group or caused or to be caused
to be filed by Parent, in each case with respect to periods prior to the
Distribution Date or with respect to Straddle Periods (“Parent Group Transaction
Returns”), unless there is no reasonable basis for such Tax treatment.  To the
extent the Tax treatment relating to any aspect of the Transactions is not
covered by the Ruling Requests, the Tax Opinions/Rulings or Parent Group
Transaction Returns, the Companies shall report such Tax treatment on any and
all Tax Returns in a manner that is consistent with Parent’s intention or
determination with respect thereto.

 

Section 4.05                            Consolidated or Combined Tax Returns. 
SpinCo will elect and join, and will cause its respective Affiliates to elect
and join, in filing any Parent State Combined Income

 

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Tax Returns, Parent Foreign Combined Income Tax Returns and any Joint Returns
that Parent determines are required to be filed or that Parent chooses to file
pursuant to Section 4.02(b).  With respect to any SpinCo Separate Returns
relating to any Tax Period (or portion thereof) ending on or prior to the
Distribution Date, SpinCo will elect and join, and will cause its respective
Affiliates to elect and join, in filing consolidated, unitary, combined, or
other similar joint Tax Returns, to the extent each entity is eligible to join
in such Tax Returns, if Parent reasonably determines that the filing of such Tax
Returns is consistent with past reporting practices, or, in the absence of
applicable past practices, will result in the minimization of the net present
value of the aggregate Tax to the entities eligible to join in such Tax Returns.

 

Section 4.06                            Right to Review Tax Returns.

 

(a)                                 General.  The Responsible Company with
respect to any Tax Return shall make such Tax Return (or the relevant portions
thereof) and related workpapers available for review by the other Company, if
requested, to the extent (i) such Tax Return relates to Taxes for which the
requesting party is or could reasonably be expected to be liable, (ii) the
requesting party would reasonably be expected to be liable in whole or in part
for any additional Taxes owing as a result of material adjustments to the amount
of Taxes reported on such Tax Return, (iii) such Tax Return relates to Taxes for
which the requesting party would reasonably be expected to have a claim for
material Tax Benefits under this Agreement, (iv) reasonably necessary for the
requesting party to confirm compliance with the terms of this Agreement or
(v) such Tax Return is required by the requesting party to comply with its
reporting obligations to the Securities and Exchange Commission.  The
Responsible Company shall use reasonable efforts to make such Tax Return
available for review as required under this paragraph sufficiently in advance of
the Due Date of such Tax Return to provide the requesting party with a
meaningful opportunity to analyze and comment on such Tax Return and shall use
reasonable efforts to have such Tax Return modified before filing, taking into
account the person responsible for payment of the Tax (if any) reported on such
Tax Return and whether the amount of Tax liability with respect to such Tax
Return is material.  The Companies shall attempt in good faith to resolve any
disagreement arising out of the review of such Tax Return and, failing that,
such disagreement shall be resolved in accordance with the disagreement
resolution provisions of Section 13 as promptly as practicable.

 

(b)                                 Execution of Returns Prepared by Other
Party.  In the case of any Tax Return which is required to be prepared and filed
by one Company under this Agreement and which is required by law to be signed by
the other Company (or by its authorized representative), the Company which is
legally required to sign such Tax Return shall not be required to sign such Tax
Return under this Agreement if there is no reasonable basis for the Tax
treatment of any item reported on the Tax Return.

 

(c)                                  Section 2.03(c) Returns.  In furtherance of
and without limiting Section 4.06(a), SpinCo shall provide Parent, at least 30
days in advance of the relevant Due Date, any Section 2.03(c) Return that is a
SpinCo Separate Return (and any related workpapers) for Parent’s review and
comment.

 

Section 4.07                            SpinCo Carrybacks and Claims for
Refund.  SpinCo hereby agrees that, unless Parent consents in writing, (i) no
Adjustment Request with respect to any Joint Return

 

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shall be filed and (ii) any available elections to waive the right to claim in
any Pre-Deconsolidation Period with respect to any Joint Return any SpinCo
Carryback arising in a Post-Deconsolidation Period shall be made, and no
affirmative election shall be made to claim any such SpinCo Carryback; provided,
however, that the parties agree that any such Adjustment Request shall be made
with respect to any SpinCo Carryback related to U.S. federal or State Taxes,
upon the reasonable request of SpinCo, if (a) such SpinCo Carryback is necessary
to prevent the loss of the federal and/or State Tax Benefit of such SpinCo
Carryback, (b) such Adjustment Request, based on Parent’s sole determination,
will cause no Tax detriment to any member of the Parent Group and (c) such
Adjustment Request, based on Parent’s sole determination, will not result in any
unreimbursed expense for any member of the Parent Group.  Any Adjustment Request
which Parent consents to make under this Section 4.07 shall be prepared and
filed by the Responsible Company for the Tax Return to be adjusted.

 

Section 4.08                            Apportionment of Earnings and Profits
and Tax Attributes.  Parent shall be entitled in good faith to instruct SpinCo
in writing of the portion, if any, of any earnings and profits, previously taxed
earnings and profits, Tax Attribute, basis, overall foreign loss or any
consolidated, combined, unitary or comingled attribute which Parent determines
shall be allocated to, apportioned to or adjusted by the SpinCo Group under
applicable law in connection with the Transactions.  SpinCo and all members of
the SpinCo Group shall prepare all Tax Returns in accordance with (and shall not
take any Tax position that is inconsistent with) such written instructions.  As
soon as practicable after receipt of a written request from SpinCo, Parent shall
provide copies of any studies, reports, and workpapers supporting the earnings
and profits, previously taxed earnings and profits, basis, overall foreign loss
and other Tax Attributes allocable to SpinCo.  In the event of a subsequent
adjustment to the earnings and profits, previously taxed earnings and profits,
basis, overall foreign loss or any Tax Attributes determined by Parent pursuant
to this Section 4.08, Parent or SpinCo, as the case may be, shall promptly
notify the other Company in writing of such adjustment.  For the absence of
doubt, Parent shall not be liable to SpinCo or any member of the SpinCo Group
for any failure of any determination under this Section 4.08 to be accurate
under applicable law.

 

Section 5.                                          Tax Payments.

 

Section 5.01                            Payment of Taxes With Respect to Joint
Returns.  In the case of any Joint Return reflecting Taxes for which both Parent
and SpinCo are responsible under Section 2:

 

(a)                                 Computation and Payment of Tax Due.  At
least three Business Days prior to any Payment Date for any Tax Return, the
Responsible Company shall compute the amount of Tax required to be paid to the
applicable Tax Authority (taking into account the requirements of Section 4.04
relating to consistent accounting practices, as applicable) with respect to such
Tax Return on such Payment Date.  The Responsible Company shall pay such amount
to such Tax Authority on or before such Payment Date (and provide notice and
proof of payment to the other Company).

 

(b)                                 Computation and Payment of Liability With
Respect To Tax Due.  Within 30 days following the earlier of (i) the Due Date
for filing any such Tax Return (excluding any Tax Return with respect to payment
of estimated Taxes or Taxes due with a request for extension of time to file) or
(ii) the date on which such Tax Return is filed (excluding any Tax Return with

 

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respect to payment of estimated Taxes or Taxes due with a request for extension
of time to file), if Parent is the Responsible Company, then SpinCo shall pay to
Parent the amount allocable to the SpinCo Group under the provisions of
Section 2, and if SpinCo is the Responsible Company, then Parent shall pay to
SpinCo the amount allocable to the Parent Group under the provisions of
Section 2, in each case, plus interest computed at the Prime Rate on the amount
of the payment based on the number of days from the earlier of (i) the Due Date
of the Tax Return or (ii) the date on which such Tax Return is filed, to the
date of payment.

 

(c)                                  Adjustments Resulting in Underpayments.  In
the case of any adjustment pursuant to a Final Determination with respect to any
such Tax Return, the Responsible Company shall pay to the applicable Tax
Authority when due any additional Tax due with respect to such Return required
to be paid as a result of such adjustment pursuant to a Final Determination.  If
the Responsible Company is Parent, Parent shall compute the amount attributable
to the SpinCo Group in accordance with Section 2 and SpinCo shall pay to Parent
any amount due to Parent (or, if the Responsible Company is SpinCo, SpinCo shall
compute the amount attributable to the Parent Group in accordance with Section 2
and Parent shall pay to SpinCo any amount due to SpinCo) under Section 2 within
30 days following the later of (i) the date the additional Tax was paid by the
Responsible Company or (ii) the date of receipt of a written notice and demand
from the Responsible Company for payment of the amount due, accompanied by
evidence of payment and a statement detailing the Taxes paid and describing in
reasonable detail the particulars relating thereto.  Any payments required under
this Section 5.01(c) shall include interest computed at the Prime Rate based on
the number of days from the date the additional Tax was paid by the Responsible
Company to the date of the payment under this Section 5.01(c).

 

Section 5.02                            Payment of Taxes With Respect to
Section 2.03(c) Returns.  In the case of any Section 2.03(c) Return:

 

(a)                                 Computation and Payment of Tax Due.  At
least three Business Days prior to any Payment Date for any
Section 2.03(c) Return, the Responsible Company shall compute the amount of Tax
required to be paid to the applicable Tax Authority (taking into account the
requirements of Section 4.04 relating to consistent accounting practices, as
applicable) with respect to such Tax Return on such Payment Date.  The
Responsible Company shall pay such amount to such Tax Authority on or before
such Payment Date (and provide notice and proof of payment to the other
Company).

 

(b)                                 Computation and Payment of Liability With
Respect To Tax Due.  Within 30 days following the earlier of (i) the Due Date
for filing any such Section 2.03(c) Return or (ii) the date on which such
Section 2.03(c) Return is filed, if Parent is the Responsible Company, then
SpinCo shall pay to Parent the amount for which SpinCo is responsible under the
provisions of Section 2.03(c), and if SpinCo is the Responsible Company, then
Parent shall pay to SpinCo the amount for which Parent is responsible under the
provisions of Section 2.03(c), in each case, plus interest computed at the Prime
Rate on the amount of the payment based on the number of days from the earlier
of (i) the Due Date of the Section 2.03(c) Return or (ii) the date on which such
Section 2.03(c) Return is filed, to the date of payment.

 

(c)                                  Adjustments Resulting in Underpayments.  In
the case of any adjustment pursuant to a Final Determination with respect to any
such Section 2.03(c) Return, the Responsible

 

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Company shall pay to the applicable Tax Authority when due any additional Tax
due with respect to such Return required to be paid as a result of such
adjustment pursuant to a Final Determination.  If the Responsible Company is
Parent, Parent shall compute the amount attributable to the assets or activities
of the SpinCo Business in accordance with Section 2.03(c) and SpinCo shall pay
to Parent such amount within 30 days of the later of (i) the date the additional
Tax was paid by Parent or (ii) the date of receipt of a written notice and
demand from Parent for payment of the amount due, accompanied by evidence of
payment and a statement detailing the Taxes paid and describing in reasonable
detail the particulars relating thereto.  If the Responsible Company is SpinCo,
(x) SpinCo shall, within 15 days of payment of such additional Tax to the
applicable Tax Authority, provide Parent with written notice thereof accompanied
by evidence of payment and a statement detailing the Taxes paid and describing
in reasonable detail the particulars relating thereto and (y) Parent shall,
within 45 days of receipt of such statement, compute the amount attributable to
the assets or activities of the Parent Business in accordance with
Section 2.03(c) and pay to SpinCo such amount.

 

Section 5.03                            Indemnification Payments.

 

(a)                                 Subject to Section 7.05(d) and 7.05(e), 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 Agreement, the Required Party shall reimburse the Payor within 30 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 5.03.

 

(b)                                 All indemnification payments under this
Agreement shall be made by Parent directly to SpinCo and by SpinCo directly to
Parent, as applicable; provided, however, that if the Companies mutually agree
with respect to any such indemnification payment, any member of the Parent
Group, on the one hand, may make such indemnification payment to any member of
the SpinCo Group, on the other hand, and vice versa.

 

Section 6.                                          Tax Benefits.

 

Section 6.01                            Tax Benefits.

 

(a)                                 Except as set forth below, Parent shall be
entitled to any refund (and any interest thereon received from the applicable
Tax Authority) of Income Taxes and Other Taxes for which Parent is liable
hereunder, SpinCo shall be entitled to any refund (and any interest thereon
received from the applicable Tax Authority) of Income Taxes and Other Taxes for
which SpinCo is liable hereunder and a Company (the first Company) receiving a
refund to which another Company (the second Company) is entitled hereunder shall
pay over such refund to the second Company within 30 days after such refund is
received (together with interest computed at the Prime Rate based on the number
of days from the date the refund was received to the date the refund was paid
over).  The second Company, upon the request of the first Company, shall
promptly repay the first Company the amount paid over pursuant to the preceding
sentence

 

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(together with any penalties, interest or other charges imposed by the relevant
Tax Authority) in the event that the first Company is required to repay such
refund to such Tax Authority.

 

(b)                                 If a member of the SpinCo Group actually
realizes in cash any Tax Benefit as a result of an adjustment  pursuant to a
Final Determination to any Taxes for which a member of the Parent Group is
liable hereunder (or to the tax basis or any Tax Attribute of a member of the
Parent Group) (a “Parent Final Determination Adjustment”) and such Tax Benefit
would not have arisen but for such adjustment (determined on a “with and
without” basis), or if a member of the Parent Group actually realizes in cash
any Tax Benefit as a result of an adjustment pursuant to a Final Determination
to any Taxes for which a member of the SpinCo Group is liable hereunder (or to
the tax basis or any Tax Attribute of a member of the SpinCo Group) and such Tax
Benefit would not have arisen but for such adjustment (determined on a “with and
without” basis), SpinCo or Parent, as the case may be, shall make a payment to
either Parent or SpinCo, as appropriate, within 30 days following such actual
realization of the Tax Benefit, in an amount equal to such Tax Benefit actually
realized in cash (including any Tax Benefit actually realized as a result of the
payment), plus interest on such amount computed at the Prime Rate based on the
number of days from the date of such actual realization of the Tax Benefit to
the date of payment of such amount under this Section 6.01(b).  In the case of a
Parent Final Determination Adjustment, then, upon the written request of and at
the expense of Parent, SpinCo shall (and, if applicable, shall cause the
relevant member of the SpinCo Group to) amend any Tax Return thereof to the
extent such amendment would result in a corresponding or correlative Tax Benefit
(which shall include, without limitation, any step-up in tax basis).

 

(c)                                  No later than 30 days after a Tax Benefit
described in Section 6.01(b) is actually realized in cash by a member of the
Parent Group or a member of the SpinCo Group, Parent (if a member of the Parent
Group actually realizes such Tax Benefit) or SpinCo (if a member of the SpinCo
Group actually realizes such Tax Benefit) shall provide the other Company with a
written calculation of the amount payable to such other Company by Parent or
SpinCo pursuant to this Section 6.  In the event that Parent or SpinCo disagrees
with any such calculation described in this Section 6.01(c), Parent or SpinCo
shall so notify the other Company in writing within 30 days of receiving the
written calculation set forth above in this Section 6.01(c).  Parent and SpinCo
shall endeavor in good faith to resolve such disagreement, and, failing that,
the amount payable under this Section 6 shall be determined in accordance with
the disagreement resolution provisions of Section 13 as promptly as practicable.

 

(d)                                 SpinCo shall be entitled to any refund that
is attributable to, and would not have arisen but for, a SpinCo Carryback
pursuant to, and in accordance with, the proviso set forth in Section 4.07.  Any
such payment of such refund made by Parent to SpinCo pursuant to this
Section 6.01(d) shall be recalculated in light of any Final Determination (or
any other facts that may arise or come to light after such payment is made, such
as a carryback of a Parent Group Tax Attribute to a Tax Period in respect of
which such refund is received) that would affect the amount to which SpinCo is
entitled, and an appropriate adjusting payment shall be made by SpinCo to Parent
such that the aggregate amounts paid pursuant to this Section 6.01(d) equals
such recalculated amount (with interest computed at the Prime Rate).

 

Section 6.02                            Parent and SpinCo Income Tax Deductions
in Respect of Certain Equity Awards and Incentive Compensation. To the extent
permitted by applicable law, solely the

 

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member of the Group for which the relevant individual is employed at the time of
the vesting, exercise, disqualifying disposition, payment or other relevant
taxable event, as appropriate, in respect of the equity awards and other
incentive compensation described in Article IV of the Employee Matters Agreement
(or, if such individual is not then employed by a member of any Group, the Group
member at which such individual was most recently employed) shall be entitled to
claim any Income Tax deduction in respect of such equity awards and other
incentive compensation on its respective Tax Return associated with such event.

 

Section 7.                                          Tax-Free Status.

 

Section 7.01                            Tax Opinions/Rulings and Representation
Letters.

 

(a)                                 Each of SpinCo and Parent hereby represents
and agrees that (A) it has carefully reviewed or will carefully review the
Representation Letters prior to the date submitted and (B) subject to any
qualifications therein, all information, representations and covenants contained
in such Representation Letters that concern or relate to such Company or any
member of its Group are and will be true, correct and complete.

 

(b)                                 If any Representation Letters have not yet
been submitted, SpinCo and Parent shall use their commercially reasonable
efforts and shall cooperate in good faith to finalize (or cause to be finalized)
the same as soon as possible and to cause the same to be submitted to the Tax
Advisors, the IRS or such other governmental authorities as Parent shall deem
necessary or desirable.  SpinCo and Parent shall take such other commercially
reasonable actions as may be necessary or desirable, to obtain any Tax
Opinions/Rulings that have not yet been obtained.

 

(c)                                  SpinCo hereby represents and warrants that
it has no plan or intention to take any action or to fail to take any action (or
to cause or permit any member of its Group to take or fail to take any action),
in each case, from and after the date hereof, that could reasonably be expected
to cause any representation or statement made in this Agreement, the Separation
and Distribution Agreement, the Representation Letters, or any of the Ancillary
Agreements to be untrue.

 

(d)                                 SpinCo hereby represents and warrants that,
during the period beginning two years before the date of the consummation of the
Internal Distribution and ending on the Distribution Date, there was no
“agreement,” “understanding,” “arrangement,” “substantial negotiations” or
“discussions” (as such terms are defined in Treasury Regulations
Section 1.355-7(h)) by any one or more officers or directors of any member of
the SpinCo Group or by any other person or persons with the implicit or explicit
permission of one or more of such officers or directors regarding an
acquisition, directly or indirectly, of all or a significant portion of the
SpinCo Capital Stock (or any predecessor) or the AHS Capital Stock; provided,
however, that no representation is made regarding any “agreement,”
“understanding,” “arrangement,” “substantial negotiations” or “discussions” (as
such terms are defined in Treasury Regulations Section 1.355-7(h)) by any one or
more officers or directors of Parent.

 

Section 7.02                            Restrictions on SpinCo.

 

(a)                                 SpinCo agrees that it will not take or fail
to take, or cause or permit any SpinCo Affiliate to take or fail to take, any
action where such action or failure to act would be

 

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inconsistent with or cause to be untrue any material, information, statement,
covenant or representation in this Agreement, the Separation and Distribution
Agreement, any of the Ancillary Agreements, any Representation Letters or any
Tax Opinions/Rulings.  SpinCo agrees that it will not take or fail to take, or
permit any SpinCo Affiliate to take or fail to take, any action which prevents
or could reasonably be expected to prevent (A) the Tax-Free Status (including
the issuance of any SpinCo Capital Stock or AHS Capital Stock that would prevent
the Distribution or the Internal Distribution from qualifying as a tax-free
distribution under Section 355 of the Code) or (B) any transaction contemplated
by the Separation and Distribution Agreement, to the extent such transaction is
intended by Parent to be tax-free or tax-advantaged, from so qualifying (it
being agreed and understood that SpinCo shall not agree, and shall prevent any
SpinCo Affiliate from agreeing, in any Tax Contest to any position that is
inconsistent with the Tax treatment, as intended or determined by Parent, of the
Transactions).

 

(b)                                 Pre-Distribution Period.  During the period
from the date hereof until the completion of the Distribution, SpinCo shall not
take any action (including the issuance of SpinCo Capital Stock) or permit any
SpinCo Affiliate to take any action (including the issuance of AHS Capital
Stock) if, as a result of taking such action, (i) SpinCo could have a number of
shares of SpinCo Capital Stock (computed on a fully diluted basis or otherwise)
issued and outstanding, including by way of the exercise of stock options
(whether or not such stock options are currently exercisable) or the issuance of
restricted stock, that could cause Parent to cease to have Tax Control of SpinCo
or (ii) AHS could have a number of shares of AHS Capital Stock (computed on a
fully diluted basis or otherwise) issued and outstanding, including by way of
the exercise of stock options (whether or not such stock options are currently
exercisable) or the issuance of restricted stock, that could cause SMCS Holdco
II to cease to have Tax Control of SpinCo.

 

(c)                                  SpinCo agrees that, from the date hereof
until the first day after the two-year anniversary of the 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) cause AHS to
maintain AHS’s status as a company engaged in the Active Trade or Business for
purposes of Section 355(b)(2) of the Code, (iii) not engage in any transaction
that would result in SpinCo or AHS ceasing to be a company engaged in the Active
Trade or Business for purposes of Section 355(b)(2) of the Code and (iv) cause
AHS not to engage in any transaction that would result in AHS ceasing to be a
company engaged in the Active Trade or Business for purposes of
Section 355(b)(2) of the Code, in the case of each of clauses (i) through (iv),
taking into account Section 355(b)(3) of the Code.

 

(d)                                 SpinCo agrees that, from the date hereof
until the first day after the two-year anniversary of the Distribution Date, it
will not (and it will cause AHS not to, where applicable) (i) enter into any
Proposed Acquisition Transaction or, to the extent SpinCo has the right to
prohibit (or cause to be prohibited) any Proposed Acquisition Transaction,
permit any Proposed Acquisition Transaction to occur (whether by (I) redeeming
rights under a shareholder rights plan, (II) 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, or (III) 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 SpinCo or AHS’s charter or bylaws or
otherwise), (ii) merge or consolidate with any other

 

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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, directly or indirectly, to SpinCo pursuant to the
Separation and Distribution Agreement or pursuant to the Contribution, or sell
or transfer 60% or more of the gross assets of the Active Trade or Business or
60% or more of the consolidated gross assets of SpinCo and its Affiliates or AHS
(such percentages to be measured based on fair market value as of the date of
the Internal Distribution or the External Distribution, as applicable),
(iv) redeem or otherwise repurchase (directly or through an Affiliate) any
SpinCo stock or AHS stock, or rights to acquire stock, except (in the case of
repurchases of SpinCo stock) 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 SpinCo Capital Stock or AHS Capital Stock (including, without
limitation, through the conversion of one class of stock into another class of
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 or covenant 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 SpinCo or AHS or otherwise jeopardize the
Tax-Free Status, unless, in each case, prior to taking any such action set forth
in the foregoing clauses (i) through (vi), (A) SpinCo shall have requested that
Parent obtain a Ruling in accordance with Section 7.04(b) and (d) of this
Agreement to the effect that such transaction will not affect the Tax-Free
Status and Parent shall have received such a Ruling in form and substance
satisfactory to Parent in its sole and absolute discretion, which discretion
shall be exercised in good faith solely to preserve the Tax-Free Status (and in
determining whether a Ruling is satisfactory, Parent may consider, among other
factors, the appropriateness of any underlying assumptions and management’s
representations made in connection with such Ruling), or (B) SpinCo shall
provide Parent with an Unqualified Tax Opinion in form and substance
satisfactory to Parent in its sole and absolute discretion, which discretion
shall be exercised in good faith solely to preserve the Tax-Free Status (and in
determining whether an opinion is satisfactory, Parent may consider, among other
factors, the appropriateness of any underlying assumptions and management’s
representations if used as a basis for the opinion, and Parent may determine
that no opinion would be acceptable to Parent) or (C) Parent shall have waived
the requirement to obtain such Ruling or Unqualified Tax Opinion.

 

(e)                                  Certain Issuances of SpinCo Capital Stock
or AHS Capital Stock.  If SpinCo or AHS proposes to enter into any
Section 7.02(e) Acquisition Transaction or if SpinCo, to the extent SpinCo has
the right to prohibit (or cause to be prohibited) any
Section 7.02(e) Acquisition Transaction, proposes to permit any
Section 7.02(e) Acquisition Transaction to occur, in each case, during the
period from the date hereof until the first day after the two-year anniversary
of the Distribution Date, SpinCo shall provide Parent, no later than ten days
following the signing of any written agreement (by SpinCo, any SpinCo Affiliate
or AHS) with respect to the Section 7.02(e) Acquisition Transaction, with a
written description of such transaction (including the type and amount of SpinCo
Capital Stock or AHS Capital Stock, as the case may be, to be issued in such
transaction) and a certificate of the Board of Directors of

 

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SpinCo to the effect that the Section 7.02(e) Acquisition Transaction is not a
Proposed Acquisition Transaction or any other transaction to which the
requirements of Section 7.02(d) apply (a “Board Certificate”).

 

(f)                                    SpinCo Internal Restructuring.  SpinCo
shall not engage in, cause or permit any Internal Restructuring during or with
respect to any Tax Period (or portion thereof) ending on or prior to the
Distribution Date without obtaining the prior written consent of Parent (such
prior written consent not to be unreasonably withheld).  SpinCo shall provide
written notice to Parent describing any Internal Restructuring proposed to be
taken during or with respect to any Tax Period (or portion thereof) beginning
after the Distribution Date and ending on or prior to the two-year anniversary
of the Distribution Date and shall consult with Parent regarding any such
proposed actions reasonably in advance of taking any such proposed actions and
shall consider in good faith any comments from Parent relating thereto.

 

Section 7.03                            Restrictions on Parent.  Parent agrees
that it will not take or fail to take, or cause or permit any member of the
Parent Group 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 material, information,
statement, covenant or representation in this Agreement, the Separation and
Distribution Agreement, any of the Ancillary Agreements, any Representation
Letters or any Tax Opinions/Rulings.  Parent agrees that it will not take or
fail to take, or cause or permit any member of the Parent Group to take or fail
to take, any action which prevents or could reasonably be expected to prevent
(A) the Tax-Free Status or (B) any transaction contemplated by the Separation
and Distribution Agreement, to the extent such transaction is intended by Parent
as of the date hereof to be tax-free or tax-advantaged, from so qualifying;
provided, however, that this Section 7.03 shall not be construed as obligating
Parent to consummate the Distribution without the satisfaction or waiver of all
conditions set forth in Section 3.3 of the Separation and Distribution Agreement
nor shall it be construed as preventing Parent from terminating the Separation
and Distribution Agreement pursuant to Section 9.1 thereof.

 

Section 7.04                            Procedures Regarding Opinions and
Rulings.

 

(a)                                 If SpinCo notifies Parent that it desires to
take one of the actions described in clauses (i) through (vi) of
Section 7.02(d) (a “Notified Action”), Parent and SpinCo shall reasonably
cooperate to attempt to obtain the Ruling or Unqualified Tax Opinion referred to
in Section 7.02(d), unless Parent shall have waived the requirement to obtain
such Ruling or Unqualified Tax Opinion.

 

(b)                                 Rulings or Unqualified Tax Opinions at
SpinCo’s Request.  Parent agrees that at the reasonable request of SpinCo
pursuant to Section 7.02(d), Parent shall cooperate with SpinCo and use its
reasonable efforts to seek to obtain, as expeditiously as possible, a Ruling
from the IRS or an Unqualified Tax Opinion for the purpose of permitting SpinCo
to take the Notified Action.  Further, in no event shall Parent be required to
file a request for any such Ruling under this Section 7.04(b) unless SpinCo
represents that (A) it has read such request, and (B) all information and
representations, if any, relating to any member of the SpinCo Group, contained
in such request (or in any documents relating thereto) are (subject to any
qualifications therein) true, correct and complete.  SpinCo shall reimburse
Parent for all reasonable costs and expenses incurred by the Parent Group in
preparing and filing any such request and in obtaining a Ruling

 

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or Unqualified Tax Opinion requested by SpinCo within ten Business Days after
receiving an invoice from Parent therefor.

 

(c)                                  Rulings or Unqualified Tax Opinions at
Parent’s Request.  Parent shall have the right to obtain a Ruling or an
Unqualified Tax Opinion at any time in its sole and absolute discretion.  If
Parent determines to obtain a Ruling or an Unqualified Tax Opinion, SpinCo shall
(and shall cause each Affiliate of SpinCo to) cooperate with Parent and take any
and all actions reasonably requested by Parent in connection with obtaining the
Ruling or Unqualified Tax Opinion (including, without limitation, by making any
representation or covenant or providing any materials or information requested
by the IRS or Tax Advisor; provided that SpinCo shall not be required to make
(or cause any Affiliate of SpinCo to make) any representation or covenant that
is inconsistent with historical facts or as to future matters or events over
which it has no control).  Parent and SpinCo shall each bear its own costs and
expenses in obtaining a Ruling or an Unqualified Tax Opinion requested by
Parent.

 

(d)                                 SpinCo hereby agrees that Parent shall have
sole and exclusive control over the process of obtaining any Ruling, and that
only Parent shall apply for a Ruling.  In connection with obtaining a Ruling
pursuant to Section 7.04(b), (A) Parent shall keep SpinCo informed in a timely
manner of all material actions taken or proposed to be taken by Parent in
connection therewith; (B) Parent shall (1) reasonably in advance of the
submission of any documents relating to the request for such Ruling, provide
SpinCo with a draft copy thereof, (2) reasonably consider SpinCo’s comments on
such draft copy, and (3) provide SpinCo with a final copy; and (C) Parent shall
provide SpinCo with notice reasonably in advance of, and SpinCo 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 SpinCo nor any SpinCo
Affiliate directly or indirectly controlled by SpinCo shall seek any guidance
from the IRS or any other Tax Authority (whether written, verbal or otherwise)
at any time concerning the Internal Distribution, the Contribution or the
Distribution (including the impact of any transaction on the Internal
Distribution, the Contribution or the Distribution) or the Transactions.

 

Section 7.05                            Liability for Tax-Related Losses.

 

(a)                                 Notwithstanding anything in this Agreement
or the Separation and Distribution Agreement to the contrary, subject to
Section 7.05(c), SpinCo shall be responsible for, and shall indemnify and hold
harmless Parent and its Affiliates (and, for the absence of doubt, SMCS Holdco
II) 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 Internal Distribution, the Contribution
or the Distribution), by any means whatsoever or by any Person, of all or a
portion of (i) SpinCo Capital Stock, (ii) AHS Capital Stock, and/or
(iii) Spinco’s assets, AHS’s assets, or any of their subsidiaries’ assets,
(B) any “agreement,” “understanding,” “arrangement,” “substantial negotiations”
or “discussions” (as such terms are defined in Treasury Regulations
Section 1.355-7(h)) by (i) any one or more officers or directors of any member
of the SpinCo Group or by any other person or persons with the implicit or
explicit permission of one or more of such officers or directors regarding
transactions or events that cause the Internal Distribution or the Distribution
to be treated as part of a plan pursuant to which one or more Persons acquire,
directly or indirectly, stock of SpinCo, stock of AHS, or stock of any
Subsidiary of SpinCo or

 

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AHS, in each case, representing a Fifty-Percent or Greater Interest therein or
(ii) any one or more officers or directors of AHS or by any other person or
persons with the implicit or explicit permission of one or more of such officers
or directors regarding transactions or events that cause the Internal
Distribution to be treated as part of a plan pursuant to which one or more
Persons acquire, directly or indirectly, stock of AHS or stock of any Subsidiary
of AHS, in each case, representing a Fifty-Percent or Greater Interest therein,
(C) any action or failure to act by SpinCo after the Distribution (including,
without limitation, any amendment to SpinCo’s or AHS’s certificate of
incorporation (or other organizational documents), whether through a stockholder
vote or otherwise) affecting the voting rights of SpinCo stock (including,
without limitation, through the conversion of one class of SpinCo Capital Stock
into another class of SpinCo Capital Stock) or AHS stock (including, without
limitation, through the conversion of one class of SpinCo Capital Stock into
another class of SpinCo Capital Stock), (D) any act or failure to act by SpinCo,
any member of the SpinCo Group or AHS described in Section 7.02 (regardless of
whether such act or failure to act is covered by a Ruling, Unqualified Tax
Opinion or waiver, as applicable, described in Section 7.02(d) or by a Board
Certificate described in Section 7.02(e) or a consent described in
Section 7.02(f)), or (E) any breach by SpinCo of its agreement and
representations set forth in Section 7.01.

 

(b)                                 Notwithstanding anything in this Agreement
or the Separation and Distribution Agreement to the contrary, subject to
Section 7.05(c), Parent shall be responsible for, and shall indemnify and hold
harmless SpinCo 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 Transactions) of
all or a portion of Parent’s stock and/or its or its subsidiaries’ assets by any
means whatsoever by any Person, (B) any “agreement,” “understanding,”
“arrangement,” “substantial negotiations” or “discussions” (as such terms are
defined in Treasury Regulations Section 1.355-7(h)) by any one or more officers
or directors of any member of the Parent Group or by any other person or persons
with the implicit or explicit permission of one or more of such officers or
directors regarding transactions or events that cause the Distribution or the
Internal Distribution respectively to be treated as part of a plan pursuant to
which one or more Persons acquire, directly or indirectly, stock of Parent or
stock of SMCS Holdco II, in each case, representing a Fifty-Percent or Greater
Interest therein, (C) any act or failure to act by Parent or a member of the
Parent Group described in Section 7.03 or (D) any breach by Parent of its
agreement and representations set forth in Section 7.01(a).

 

(c)                                  Notwithstanding anything in
Section 7.05(b) or any other provision of this Agreement or the Separation and
Distribution Agreement to the contrary:

 

(i)                                     SpinCo shall be responsible for, and
shall indemnify and hold harmless Parent and its Affiliates and each of their
respective officers, directors and employees from and against, one hundred
percent (100%) of (I) any Tax-Related Losses resulting from the application of
Section 355(e) or Section 355(f) of the Code (other than as a result of an
acquisition of a Fifty-Percent or Greater Interest in Parent or any member of
the Parent Group) and (II) any other Tax-Related Losses resulting (for the
absence of doubt, in whole or in part) from an acquisition after the
Distribution of any stock or assets of SpinCo, any SpinCo Affiliate or AHS by
any means whatsoever by any Person or any

 

26

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action or failure to act by SpinCo affecting the voting rights of SpinCo stock,
the stock of any SpinCo Affiliate, or AHS stock; and

 

(ii)                                  For purposes of calculating the amount and
timing of any Tax-Related Losses for which SpinCo is responsible under this
Section 7.05, Tax-Related Losses shall be calculated by assuming that Parent,
the Parent Affiliated Group and each member of the Parent 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.

 

(d)                                 SpinCo shall pay Parent the amount of any
Tax-Related Losses for which SpinCo is responsible under this Section 7.05: 
(A) in the case of Tax-Related Losses described in clause (i) of the definition
of Tax-Related Losses, no later than ten Business Days prior to the Due Date of
the Tax Return that Parent files, or causes to be filed, for the year of the
Contribution or the 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 SpinCo shall pay Parent 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 ten Business Days prior
to the Filing Date through the date of such Final Determination (but not in
duplication of interest charged by the applicable Tax Authority)) 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 the later of (x) the date that is two
Business Days after the date Parent pays such Tax-Related Losses and (y) the
date that is five Business Days after SpinCo receives notification from Parent
of the amount of such Tax-Related Losses due.

 

(e)                                  Parent shall calculate in good faith and
notify SpinCo of the amount of any Tax-Related Losses for which SpinCo is
responsible under this Section 7.05.  Such calculation shall be binding on
SpinCo absent manifest error.  At SpinCo’s reasonable request, Parent shall make
available to SpinCo the portion of any Tax Return or other documentation and
related workpapers that are relevant to the determination of the Tax-Related
Losses attributable to SpinCo pursuant to this Section 7.05.

 

Section 7.06                            Section 336(e) Election.  If Parent
determines, in its sole discretion, that a protective election under
Section 336(e) of the Code (a “Section 336(e) Election”) shall be made with
respect to the Distribution (or the Internal Distribution), SpinCo shall (and
shall cause AHS or any relevant member of the SpinCo Group to) join with Parent
(or SMCS Holdco II or any relevant member of the Parent Group) in the making of
such election and shall take any action reasonably requested by Parent or that
is otherwise necessary to give effect to such election (including making any
other related election).  If a Section 336(e) Election is made with respect to
the Distribution (or the Internal Distribution), then (a) in the event the
Contribution or the Distribution (or the Internal Distribution) fails to have
Tax-Free Status and Parent is not entitled to indemnification for the
Tax-Related Losses arising from such failure, SpinCo shall pay over to Parent
any Tax Benefit arising from the step-up in Tax basis resulting from the
Section 336(e) Election within 30 days of SpinCo (or AHS or any member of the
SpinCo Group) realizing such Tax Benefit in cash and (b) this Agreement shall be
amended in such a manner as is determined by Parent in good faith to take into
account such Section 336(e) Election.

 

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Section 8.                                          Assistance and Cooperation.

 

Section 8.01                            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
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 Taxes assessed or proposed to be assessed. 
Each of the Companies 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
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 Taxes.

 

(b)                                 Any information or documents provided under
this Section 8 shall be kept confidential by the Company receiving such
information or documents, except as may otherwise be necessary in connection
with the filing of Tax Returns or in connection with any Tax Contest. 
Notwithstanding any other provision of this Agreement or any other agreement,
(i) neither Parent nor any Parent Affiliate shall be required to provide SpinCo
or any SpinCo 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 solely to SpinCo, the business or
assets of SpinCo or any SpinCo Affiliate and (ii) in no event shall Parent or
any Parent Affiliate be required to provide SpinCo, any SpinCo 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 Parent determines that the provision of any information to
SpinCo or any SpinCo 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 8 in a
manner that avoids any such harm or consequence.

 

Section 8.02                            Income Tax Return Information.  SpinCo
and Parent acknowledge that time is of the essence in relation to any request
for information, assistance or cooperation made by Parent or SpinCo pursuant to
Section 8.01 or this Section 8.02.  SpinCo and Parent acknowledge that failure
to conform to the deadlines set forth herein or reasonable deadlines otherwise
set by Parent or SpinCo could cause irreparable harm.

 

(a)                                 Each Company shall provide to the other
Company information and documents relating to its Group required by the other
Company to prepare Tax Returns.  Any information or documents the Responsible
Company requires to prepare such Tax Returns shall be provided in such form as
the Responsible Company reasonably requests and in sufficient time for the
Responsible Company to file such Tax Returns on a timely basis.

 

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(b)                                 At SpinCo’s sole expense, SpinCo shall
provide such information as is reasonably requested in writing by Parent in
connection with the preparation of Tax Returns in accordance with the reasonable
deadlines set forth in such written request.

 

(c)                                  At Parent’s sole expense, Parent shall
provide such information as is reasonably requested in writing by SpinCo in
connection with the preparation of Tax Returns in accordance with the reasonable
deadlines set forth in such written request.

 

Section 8.03                            Reliance by Parent.  If any member of
the SpinCo Group supplies information to a member of the Parent Group in
connection with Taxes and an officer of a member of the Parent Group signs a
statement or other document under penalties of perjury in reliance upon the
accuracy of such information, then upon the written request of such member of
the Parent Group identifying the information being so relied upon, the chief
financial officer of SpinCo (or any officer of SpinCo as designated by the chief
financial officer of SpinCo) shall certify in writing that to his or her
knowledge (based upon consultation with appropriate employees) the information
so supplied is accurate and complete.  SpinCo agrees to indemnify and hold
harmless each member of the Parent Group and its directors, officers and
employees from and against any fine, penalty, or other cost or expense of any
kind attributable to a member of the SpinCo Group having supplied, pursuant to
this Section 8, a member of the Parent Group with inaccurate or incomplete
information in connection with Taxes.

 

Section 8.04                            Reliance by SpinCo.  If any member of
the Parent Group supplies information to a member of the SpinCo Group in
connection with Taxes and an officer of a member of the SpinCo Group signs a
statement or other document under penalties of perjury in reliance upon the
accuracy of such information, then upon the written request of such member of
the SpinCo Group identifying the information being so relied upon, the chief
financial officer of Parent (or any officer of Parent as designated by the chief
financial officer of Parent) shall certify in writing that to his or her
knowledge (based upon consultation with appropriate employees) the information
so supplied is accurate and complete.  Parent agrees to indemnify and hold
harmless each member of the SpinCo Group and its directors, officers and
employees from and against any fine, penalty, or other cost or expense of any
kind attributable to a member of the Parent Group having supplied, pursuant to
this Section 8, a member of the SpinCo Group with inaccurate or incomplete
information in connection with Taxes.

 

Section 9.                                          Tax Contests.

 

Section 9.01                            Notice.  Each of the Companies shall
provide prompt notice to the other Company of any written communication from a
Tax Authority regarding any pending or threatened Tax Contest or assessment
related to Taxes of which it becomes aware related to Taxes for which it could
reasonably expect to be indemnified by the other Company hereunder.  Such notice
shall attach copies of the pertinent portion of any written communication from a
Tax Authority and contain factual information (to the extent known) describing
any asserted Tax liability in reasonable detail and shall be accompanied by
copies of any notice and other documents received from any Tax Authority in
respect of any such matters.  If an indemnified party has knowledge of an
asserted Tax liability with respect to a matter for which it is to be
indemnified hereunder and such party fails to give the indemnifying party prompt
notice of such asserted Tax liability, then such failure shall not relieve the
indemnifying party of any obligation

 

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which it may have to the indemnified party under this Agreement except to the
extent that the indemnifying party is actually prejudiced by such failure.

 

Section 9.02                            Control of Tax Contests.

 

(a)                                 Separate Company Taxes;
Section 2.03(c) Returns.  In the case of any Tax Contest with respect to any
Separate Return (other than a Section 2.03(c) Return), the Company having
liability for the Tax shall have exclusive control over the Tax Contest,
including exclusive authority with respect to any settlement of such Tax
liability, subject to Section 9.02(f).  In the case of any Tax Contest with
respect to any SpinCo Separate Return that is a Section 2.03(c) Return, (i) if
Parent so notifies SpinCo in writing within 30 days after receiving notice from
SpinCo about such Tax Contest, Parent shall have exclusive control over the Tax
Contest, including exclusive authority with respect to any settlement of such
Tax liability, subject to Section 9.02(f), and (ii) if Parent does not so notify
SpinCo, SpinCo shall have exclusive control over the Tax Contest, including
exclusive authority with respect to any settlement of such Tax liability,
subject to Section 9.02(f).  In the case of any Tax Contest with respect to any
Parent Separate Return that is a Section 2.03(c) Return, Parent shall have
exclusive control over the Tax Contest (including exclusive authority with
respect to any settlement of such Tax liability, subject to Section 9.02(f)),
unless Parent provides SpinCo with written notice that SpinCo shall be the
Controlling Party with respect to such Tax Contest.  Any reasonable costs and
expenses incurred by Parent or SpinCo relating to any Tax Contest with respect
to a Section 2.03(c) Return shall be borne by (i) SpinCo, to the extent such
costs and expenses are attributable (as determined by Parent) to Taxes for which
SpinCo is or would be responsible or (ii) Parent, to the extent such costs and
expenses are attributable (as determined by Parent) to Taxes for which Parent is
or would be responsible.

 

(b)                                 Parent Federal Consolidated Income Tax
Return.  In the case of any Tax Contest with respect to any Parent Federal
Consolidated Income Tax Return, Parent shall have exclusive control over the Tax
Contest, including exclusive authority with respect to any settlement of such
Tax liability, subject to Section 9.02(f).

 

(c)                                  Parent State Combined Income Tax Return. In
the case of any Tax Contest with respect to any Parent State Combined Income Tax
Return, Parent shall have exclusive control over the Tax Contest, including
exclusive authority with respect to any settlement of such Tax liability,
subject to Section 9.02(f).

 

(d)                                 Parent Foreign Combined Income Tax Return.
In the case of any Tax Contest with respect to any Parent Foreign Combined
Income Tax Return, Parent shall have exclusive control over the Tax Contest,
including exclusive authority with respect to any settlement of such Tax
liability, subject to Section 9.02(f).

 

(e)                                  Joint Returns.  In the case of any Tax
Contest with respect to any Joint Return (other than any Parent Federal
Consolidated Income Tax Return, any Parent State Combined Income Tax Return or
any Parent Foreign Combined Income Tax Return), Parent shall have exclusive
control over the Tax Contest (including exclusive authority with respect to any
settlement of such Tax liability, subject to Section 9.02(f)), unless Parent
provides SpinCo with written notice that SpinCo shall be the Controlling Party
with respect to such Tax Contest.

 

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(f)                                    Settlement Rights.  The Controlling Party
shall have the sole right to contest, litigate, compromise and settle any Tax
Contest without obtaining the prior consent of the Non-Controlling Party. 
Unless waived by the parties in writing, in connection with any potential
adjustment in a Tax Contest as a result of which adjustment the Non-Controlling
Party may reasonably be expected to become liable to make any indemnification
payment (or any payment under Section 6) to the Controlling Party under this
Agreement:  (i) the Controlling Party shall keep the Non-Controlling Party
informed in a timely manner of all actions taken or proposed to be taken by the
Controlling Party with respect to such potential adjustment in such Tax Contest;
(ii) the Controlling Party shall 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; and (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.  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 or obligation which it may
have to the Controlling Party under this Agreement in respect of such
adjustment, 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 under this Agreement.  In the case of any Tax Contest
described in this Section 9.02, “Controlling Party” means the Company entitled
to control the Tax Contest under such Section and “Non-Controlling Party” means
the other Company.

 

(g)                                 Power of Attorney.  Each member of the
SpinCo Group shall execute and deliver to Parent (or such member of the Parent
Group as Parent shall designate) any power of attorney or other similar document
reasonably requested by Parent (or such designee) in connection with any Tax
Contest (as to which Parent is the Controlling Party) described in this
Section 9.  Each member of the Parent Group shall execute and deliver to SpinCo
(or such member of the SpinCo Group as SpinCo shall designate) any power of
attorney or other similar document reasonably requested by SpinCo (or such
designee) in connection with any Tax Contest (as to which SpinCo is the
Controlling Party) described in this Section 9.

 

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Section 10.                                   Effective Date; Termination of
Prior Intercompany Tax Allocation Agreements.  This Agreement shall be effective
as of the date hereof.  As of the date hereof or on such other date (on or prior
to the Distribution Date) as Parent may determine, (i) all prior intercompany
Tax allocation agreements or arrangements solely between or among Parent and/or
any of its Subsidiaries, on the one hand, and SpinCo and/or any of its
Subsidiaries, on the other hand, shall be terminated, and (ii) amounts due under
such agreements as of the date hereof shall be settled.  Upon such termination
and settlement, no further payments by or to Parent or by or to SpinCo, with
respect to such agreements shall be made, and all other rights and obligations
resulting from such agreements between the Companies and their Affiliates shall
cease at such time.  Any payments pursuant to such agreements shall be
disregarded for purposes of computing amounts due under this Agreement.

 

Section 11.                                   Survival of Obligations.  The
representations, warranties, covenants and agreements set forth in this
Agreement shall be unconditional and absolute and shall remain in effect without
limitation as to time.

 

Section 12.                                   Treatment of Payments; Tax Gross
Up.

 

Section 12.01                     Treatment of Tax Indemnity and Tax Benefit
Payments.  In the absence of any change in Tax treatment under the Code or other
applicable Tax Law, for all Income Tax purposes, the Companies agree to treat,
and to cause their respective Affiliates to treat:

 

(a)                                 any indemnity payments made by a Company
under this Agreement or the Separation and Distribution Agreement (and any
payment of the Final Adjustment Amount made by a Company under the Separation
and Distribution Agreement) as distributions or capital contributions, as
appropriate, occurring immediately before the Distribution (but only to the
extent the payment does not relate to a Tax allocated to the payor in accordance
with Section 1552 of the Code or the regulations thereunder or Treasury
Regulations Section 1.1502-33(d) (or under corresponding principles of other
applicable Tax Laws)) or as payments of an assumed or retained liability,

 

(b)                                 any payment of interest or State Income
Taxes by or to a Tax Authority, as taxable or deductible, as the case may be, to
the Company entitled under this Agreement to retain such payment or required
under this Agreement to make such payment; and

 

(c)                                  any Tax Benefit payments made by a Company
under Sections 6 or 7.06, as distributions or capital contributions, as
appropriate, occurring immediately before the Distribution (but only to the
extent the payment does not relate to a Tax allocated to the payor in accordance
with Section 1552 of the Code or the regulations thereunder or Treasury
Regulation Section 1.1502-33(d) (or under corresponding principles of other
applicable Tax Laws)) or as payments of an assumed or retained liability.

 

Section 12.02                     Tax Gross Up.  If notwithstanding the manner
in which payments described in Section 12.01(a) and (c) were reported, there is
an adjustment to the Tax liability of a Company as a result of its receipt of a
payment pursuant to this Agreement or the Separation and Distribution Agreement,
such payment shall be appropriately increased so that the amount of such
payment, reduced by the amount of all Income Taxes payable with respect to the
receipt

 

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thereof (but taking into account all correlative Tax Benefits resulting from the
payment of such Income Taxes), shall equal the amount of the payment which the
Company receiving such payment would otherwise be entitled to receive.  For
purposes of this Section 12.02, the amount of any Income Taxes payable with
respect to the receipt of a payment pursuant to this Agreement or the Separation
and Distribution Agreement shall be calculated by assuming that the recipient or
the Group of which it is a member, as applicable, (I) pays Tax at the highest
marginal corporate Tax rates in effect in each relevant taxable year and
(II) has no Tax Attributes in any relevant taxable year.

 

Section 12.03                     Interest Under This Agreement.  Anything
herein to the contrary notwithstanding, to the extent one Company (“Indemnitor”)
makes a payment of interest to another Company (“Indemnitee”) under this
Agreement with respect to the period from the date that the Indemnitee made a
payment of Tax to a Tax Authority to the date that the Indemnitor reimbursed the
Indemnitee for such Tax payment, the interest payment shall be treated as
interest expense to the Indemnitor (deductible to the extent provided by law)
and as interest income by the Indemnitee (includible in income to the extent
provided by law).  The amount of the payment shall not be adjusted to take into
account any associated Tax Benefit to the Indemnitor or increase in Tax to the
Indemnitee.

 

Section 13.                                   Disagreements.

 

Section 13.01                     Interaction with Article VII of the Separation
and Distribution Agreement.  In the event of any dispute between any member of
the Parent Group and any member of the SpinCo Group as to any matter covered by
this Agreement, the Companies shall agree as to whether such dispute shall be
governed by the procedures set forth in Section 13.02 of this Agreement or in
Article VII of the Separation and Distribution Agreement.  If the Parties cannot
agree within thirty (30) days from the time such dispute arises as to which
procedure will govern such dispute, such disagreement shall be resolved pursuant
to Article VII of the Separation and Distribution Agreement.

 

Section 13.02                     Dispute Resolution.  With respect to any
dispute governed by this Section 13.02, the Companies shall appoint a nationally
recognized “Big Four” independent public accounting firm (other than the current
auditing firm of Parent or SpinCo) (the “Accounting Firm”) to resolve such
dispute.  The Companies shall cooperate in good faith in jointly selecting the
Accounting Firm.  In this regard, the Accounting Firm shall make determinations
with respect to the disputed items based solely on representations made by
Parent and SpinCo and their respective Representatives, and not by independent
review, shall function only as an expert and not as an arbitrator and shall be
required to make a determination in favor of one Company only.  The Companies
shall require the Accounting Firm to resolve all disputes no later than fifteen
(15) days after the submission of such dispute to the Accounting Firm, but in no
event later than the relevant Payment Date, and agree that all decisions by the
Accounting Firm with respect thereto shall be final and conclusive and binding
on the Companies.  The Accounting Firm shall resolve all disputes in a manner
consistent with this Agreement.  To the extent not inconsistent with this
Agreement, the Accounting Firm shall resolve all disputes in a manner consistent
with the Past Practices of Parent and the members of the Parent Group, except as
otherwise required by applicable Law.  The Companies shall require the
Accounting Firm to render all determinations in writing and to set forth, in
reasonable detail, the basis for such

 

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determination.  The fees and expenses of the Accounting Firm shall be paid by
the non-prevailing Company.  Notwithstanding the foregoing provisions of this
Section 13, a Party may seek preliminary provisional or injunctive judicial
relief with respect to  any dispute under this Agreement without first complying
with the procedures set forth in this Section 13 (or Article VII of the
Separation and Distribution Agreement) if such action is reasonably necessary to
avoid irreparable damage.

 

Section 14.                                   Late Payments.  Any amount owed by
one party to another party under this Agreement which is not paid when due shall
bear interest at the Prime Rate plus two percentage points, compounded
semiannually, from the due date of the payment to the date paid.  To the extent
interest required to be paid under this Section 14 duplicates interest required
to be paid under any other provision of this Agreement, interest shall be
computed at the higher of the interest rate provided under this Section 14 or
the interest rate provided under such other provision.

 

Section 15.                                   Expenses.  Except as otherwise
provided in this Agreement, each party and its Affiliates shall bear their own
expenses incurred in connection with the preparation of Tax Returns, Tax
Contests, and other matters related to Taxes under the provisions of this
Agreement.

 

Section 16.                                   General Provisions.

 

Section 16.01                     Addresses and Notices.  Each party giving any
notice required or permitted under this Agreement will give the notice in
writing and use one of the following methods of delivery to the party to be
notified, at the address set forth below or another address of which the sending
party has been notified in accordance with this Section 16.01:  (a) personal
delivery; (b) commercial overnight courier with a reasonable method of
confirming delivery; or (c) pre-paid, United States of America certified or
registered mail, return receipt requested.  Notice to a party is effective for
purposes of this Agreement only if given as provided in this Section 16.01 and
shall be deemed given on the date that the intended addressee actually receives
the notice.

 

If to Parent:

with a copy to:

 

 

ServiceMaster Global Holdings, Inc.

ServiceMaster Global Holdings, Inc.

150 Peabody Place

150 Peabody Place

Memphis, Tennessee 38103

Memphis, Tennessee 38103

Attention:

Vice President, Tax

Attention:

Chief Financial Officer

E-mail:

Shannon.Sparks@servicemaster.com

E-mail:

tony.dilucente@servicemaster.com

 

 

If to SpinCo:

with a copy to:

 

 

frontdoor, inc.

frontdoor, inc.

150 Peabody Place

150 Peabody Place

Memphis, Tennessee 38103

Memphis, Tennessee 38103

Attention: Chief Financial Officer

Attention: General Counsel

E-mail: brian.turcotte@frontdoorhome.com

E-mail: jeffrey.fiarman@frontdoorhome.com

 

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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.

 

Section 16.02                     Binding Effect.  This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their successors
and assigns.  None of the parties hereto may assign its rights or delegate its
obligations under this Agreement without the express prior written consent of
the other parties hereto.

 

Section 16.03                     Waiver.  The parties may waive a provision of
this Agreement only by a writing signed by the party intended to be bound by the
waiver.  A party is not prevented from enforcing any right, remedy or condition
in the party’s favor because of any failure or delay in exercising any right or
remedy or in requiring satisfaction of any condition, except to the extent that
the party specifically waives the same in writing.  A written waiver given for
one matter or occasion is effective only in that instance and only for the
purpose stated.  A waiver once given is not to be construed as a waiver for any
other matter or occasion.  Any enumeration of a party’s rights and remedies in
this Agreement is not intended to be exclusive, and a party’s rights and
remedies are intended to be cumulative to the extent permitted by law and
include any rights and remedies authorized in law or in equity.

 

Section 16.04                     Severability.  If any provision of this
Agreement is determined to be invalid, illegal or unenforceable, the remaining
provisions of this Agreement remain in full force, if the essential terms and
conditions of this Agreement for each party remain valid, binding and
enforceable.

 

Section 16.05                     Authority.  Each of the parties represents to
the other that (a) it has the corporate or other requisite power and authority
to execute, deliver and perform this Agreement, (b) the execution, delivery and
performance of this Agreement have been duly authorized by all necessary
corporate or other action, (c) it has duly and validly executed and delivered
this Agreement, and (d) this Agreement is a legal, valid and binding obligation,
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors’ rights generally and general equity principles.

 

Section 16.06                     Further Action.  The parties shall execute and
deliver all documents, provide all information, and take or refrain from taking
action as may be necessary or appropriate to achieve the purposes of this
Agreement, including the execution and delivery to the other parties and their
Affiliates and representatives of such powers of attorney or other authorizing
documentation as is reasonably necessary or appropriate in connection with Tax
Contests (or portions thereof) under the control of such other parties in
accordance with Section 9.

 

Section 16.07                     Integration.  This Agreement, together with
any exhibits and schedules appended hereto, constitutes the final agreement
between the parties, and is the complete and exclusive statement of the parties’
agreement on the matters contained herein.  All prior and contemporaneous
negotiations and agreements between the parties with respect to the matters

 

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contained herein are superseded by this Agreement, as applicable.  In the event
of any conflict or inconsistency between this Agreement and the Separation and
Distribution Agreement, or any other agreements relating to the transactions
contemplated by the Separation and Distribution Agreement, with respect to
matters addressed herein, the provisions of this Agreement shall control.

 

Section 16.08                     Construction.  The language in all parts of
this Agreement shall in all cases be construed according to its fair meaning and
shall not be strictly construed for or against any party.  The captions, titles
and headings included in this Agreement are for convenience only, and do not
affect this Agreement’s construction or interpretation.  Unless otherwise
indicated, all “Section” references in this Agreement are to sections of this
Agreement.  This Agreement shall be deemed to be the joint work product of the
parties hereto and any rule of construction that a document shall be interpreted
or construed against a drafter of such document shall not be applicable.

 

Section 16.09                     No Double Recovery.  No provision of this
Agreement shall be construed to provide an indemnity or other recovery for any
costs, damages, or other amounts for which the damaged party has been fully
compensated under any other provision of this Agreement or under any other
agreement or action at law or equity.  Unless expressly required in this
Agreement, a party shall not be required to exhaust all remedies available under
other agreements or at law or equity before recovering under the remedies
provided in this Agreement.

 

Section 16.10                     Counterparts.  The parties may execute this
Agreement in multiple counterparts, each of which constitutes an original as
against the party that signed it, and all of which together constitute one
agreement.  This Agreement is effective upon delivery of one executed
counterpart from each party to the other party.  The signatures of the parties
need not appear on the same counterpart.  The delivery of signed counterparts by
facsimile or email transmission that includes a copy of the sending party’s
signature is as effective as signing and delivering the counterpart in person.

 

Section 16.11                     Governing Law.  The internal laws of the State
of Delaware (without reference to its principles of conflicts of law) govern the
construction, interpretation and other matters arising out of or in connection
with this Agreement and any exhibits and schedules hereto and thereto (whether
arising in contract, tort, equity or otherwise).

 

Section 16.12                     Jurisdiction.  If any dispute arises out of or
in connection with this Agreement, except as expressly contemplated by another
provision of this Agreement, the parties irrevocably (and the parties will cause
each other member of their respective Group to irrevocably) (a) consent and
submit to the exclusive jurisdiction of federal and state courts located in
Delaware, (b) waive any objection to that choice of forum based on venue or to
the effect that the forum is not convenient, and (c) WAIVE TO THE FULLEST EXTENT
PERMITTED BY LAW ANY RIGHT TO TRIAL OR ADJUDICATION BY JURY.

 

Section 16.13                     Amendment.  The parties may amend this
Agreement only by a written agreement signed by each party to be bound by the
amendment and that identifies itself as an amendment to this Agreement.

 

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Section 16.14                     SpinCo Subsidiaries.  If, at any time, SpinCo
acquires or creates one or more subsidiaries that are includable in the SpinCo
Group (or that would be so includable if membership in the SpinCo Group were
measured after such acquisition or creation), they shall be subject to this
Agreement and all references to the SpinCo Group herein shall thereafter include
a reference to such subsidiaries.

 

Section 16.15                     Successors.  This Agreement shall be binding
on and inure to the benefit of any successor by merger, acquisition of assets,
or otherwise, to any of the parties hereto (including but not limited to any
successor of Parent or SpinCo succeeding to the Tax attributes thereof under
Section 381 of the Code), to the same extent as if such successor had been an
original party to this Agreement.

 

Section 16.16                     Injunctions.  The parties acknowledge that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with its specific terms or were
otherwise breached.  The parties hereto shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in any court having
jurisdiction, such remedy being in addition to any other remedy to which they
may be entitled at law or in equity.

 

[Remainder of page intentionally left blank; signature page follows]

 

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IN WITNESS WHEREOF, each party has caused this Agreement to be executed on its
behalf by a duly authorized officer on the date first set forth above.

 

“Parent”

“SpinCo”

 

 

SERVICEMASTER GLOBAL HOLDINGS, INC.

FRONTDOOR, INC.

 

 

By:

/s/ Anthony D. Dilucente

 

By:

/s/ Rexford J. Tibbens

Name:

Anthony D. Dilucente

Name:

Rexford J. Tibbens

Title:

Senior Vice President and Chief Financial Officer

Title:

President and Chief Executive Officer

 

[Signature Page to Tax Matters Agreement]

 

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