AbbVie 2013 Annual Report Download - page 28

In addition, AbbVie and Abbott entered into long-term arrangements under a special products
master agreement relating to certain product rights and into an ex-U.S. transition services agreement
for Abbott to provide AbbVie with back office functions and other services in certain markets outside
the United States until AbbVie has established sufficient back office infrastructure to conduct
operations in such markets. These arrangements could lead to disputes between Abbott and AbbVie
over AbbVie’s rights to certain intellectual property and territorial commercialization rights and over
the allocation of costs and revenues for AbbVie’s products and operations outside of the United States.
If AbbVie does not have in place its own systems and services, or if AbbVie does not have
agreements with other providers of these services when the transaction or long-term agreements
terminate, AbbVie may not be able to operate its business effectively and its profitability may decline.
AbbVie is in the process of creating its own, or engaging third parties to provide, systems and services
to replace many of the systems and services Abbott currently provides to it. AbbVie may not be
successful in effectively or efficiently implementing these systems and services or in transitioning data
from Abbott’s systems to AbbVie’s. These systems and services may also be more expensive or less
efficient than the systems and services Abbott is expected to provide during the transition period.
AbbVie will be developing and implementing its own back office functions, administrative systems,
personnel, and processes for markets outside the United States where Abbott will initially provide such
functions. There can be no assurance that AbbVie will be able to implement such functions effectively
and without disrupting its business in those markets.
Potential indemnification liabilities to Abbott pursuant to the separation agreement could materially adversely
affect AbbVie.
The separation agreement with Abbott provides for, among other things, the principal corporate
transactions required to effect the separation, certain conditions to the separation and provisions
governing the relationship between AbbVie and Abbott with respect to and resulting from the
separation. Among other things, the separation agreement provides for indemnification obligations
designed to make AbbVie financially responsible for substantially all liabilities, except certain tax
liabilities, that may exist relating to its business activities, whether incurred prior to or after AbbVie’s
separation from Abbott, as well as those obligations of Abbott assumed by AbbVie pursuant to the
separation agreement, including those relating to Depakote. If AbbVie is required to indemnify Abbott
under the circumstances set forth in the separation agreement, AbbVie may be subject to substantial
liabilities.
AbbVie may not be able to engage in certain corporate transactions during the two-year period following the
distribution.
To preserve the tax-free treatment to Abbott of the separation and the distribution, under the tax
sharing agreement that AbbVie entered into with Abbott, AbbVie is restricted from taking any action
that prevents the distribution and related transactions from being tax-free for United States federal
income tax purposes. Under the tax sharing agreement, for the two-year period following the
distribution, AbbVie is prohibited, except in certain circumstances, from:
• entering into any transaction resulting in the acquisition of 25 percent or more of its stock or
substantially all of its assets, whether by merger or otherwise;
• merging, consolidating, or liquidating;
• issuing equity securities beyond certain thresholds;
• repurchasing its capital stock; and
• ceasing to actively conduct its business.
24