Form Of Tax Allocation And Indemnification Agreement

Exhibit 10.4


TAX ALLOCATION AND INDEMNIFICATION AGREEMENT


TAX ALLOCATION AND INDEMNIFICATION AGREEMENT (this "Agreement") dated as of ______________ __, 2004, among E-Z-EM, INC. ("E-Z-EM"), a Delaware corporation, and ANGIODYNAMICS, INC. ("AngioDynamics"), a Delaware corporation, and the direct and indirect subsidiaries of E-Z-EM other than AngioDynamics (the "Remaining Subsidiaries").


WHEREAS, the parties to this Agreement are currently members ("Members") of an affiliated group (the "Group") within the meaning of Section 1504(a) of the Internal Revenue Code of 1986 (the "Code"), of which E-Z-EM is the common parent;


WHEREAS, E-Z-EM, as the common parent of the Group, has filed and will file consolidated federal income tax returns ("Group Tax Returns") and other tax returns on behalf of the Group for certain periods relevant hereto;


WHEREAS, as a result of the proposed distribution by E-Z-EM of its entire stockholdings in AngioDynamics to the E-Z-EM shareholders in a transaction intended to qualify as a tax-free spin-off under section 355 of the Internal Revenue Code (the "Distribution"), AngioDynamics and its subsidiaries will cease to be Members of the Group as of the end of the closing date of the proposed Distribution (the "Distribution Date");


WHEREAS, Members of the Group may be subject to state income and franchise tax liabilities on a combined or consolidated basis for periods both before and after the aforementioned transactions; and


WHEREAS, E-Z-EM and its Remaining Subsidiaries (the "E-Z-EM Subgroup" as constituted following the Distribution) and AngioDynamics and its subsidiaries (the "AngioDynamics Subgroup" as constituted following the Distribution) desire to set forth their rights and obligations with respect to certain tax liabilities.


NOW THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties agree as follows:


1. Applicable Period; Tax Period. For purposes of this Agreement, the term "Applicable Period" shall refer to the period June 1, 2003 through the date on which AngioDynamics ceases to be a Member of the Group. The term "Tax Period" shall refer to all taxable periods beginning or ending in the Applicable Period.


2. Return Filing Responsibilities.


a. E-Z-EM shall be responsible for preparing and filing the Group Tax Returns for the 2003 and 2004 taxable years (taxable years ended May 29, 2004 and May


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28, 2005, respectively) in a manner which fairly reflects the interests of AngioDynamics. AngioDynamics will be responsible for providing to E-Z-EM, by no later than 75 days prior to the extended due date for filing each Tax Return, the information relating to the AngioDynamics Subgroup which is needed for the preparation of such return. Such information shall include the general ledger and audit file for AngioDynamics. The information so provided will be included in the Group Tax Return without modification, provided that positions taken by the AngioDynamics Subgroup have a realistic possibility of being sustained on their merits. AngioDynamics will determine the items of income, gain, loss, deduction and credit of the AngioDynamics Subgroup to be included on the Group Tax Return for taxable year in which Angio Dynamics ceases to be a member of the Group by using the "ratable allocation " method described in Treas. Reg. ss. 1.1502-76(b)(2)(ii). AngioDynamics shall provide such assistance and documents, without charge, as may reasonably be requested by E-Z-EM in the preparation of the 2003 and 2004 Group Tax Returns. E-Z-EM shall commission an earnings and profits allocation study by an outside consultant, in accordance with Treas. Reg. ss. 1.312-10, and AngioDynamics shall provide whatever information is necessary to complete the study and shall bear 50 percent of the cost of the study. E-Z-EM shall provide to AngioDynamics a copy of each Group Tax Return as filed for each Tax Period. In the event of a dispute between the parties regarding the treatment of a particular item relating to the AngioDynamics Subgroup on the 2003 or 2004 Group Tax Return, the issue will be submitted to the law firm of Caplin & Drysdale, whose decision shall be binding on both parties.


b. All Group Tax Returns filed after the date of this Agreement, in the absence of a controlling change in law or circumstances, shall be prepared on a basis consistent with the elections, accounting methods, conventions and principles of taxation used for the most recent taxable periods for which Group Tax Returns have been filed, and in a manner that does not unreasonably accelerate deductions or defer income to the advantage of one Subgroup and corresponding disadvantage of the other Subgroup.


3. Group Tax Liability; Group AMT Liability. For purposes of this Agreement, the term "Group Tax Liability" shall mean the consolidated Federal income tax liability, if any, reported on the Group Tax Return (as adjusted under Section 8 of this Agreement). For purposes of this Agreement, the term "Group AMT Liability" shall mean the alternative minimum tax liability under Section 55 of the Code, if any, reported on the Group Tax Return (as adjusted under Section 8 of this Agreement).


4. Allocation of Group Tax Liability to Members. The Group Tax Liability for each Tax Period shall be allocated among the Members as provided in this Section 4.


a. The separate Federal income tax liability of each Member with Federal income tax liability for each Tax Period shall first be ascertained under the applicable provisions of the Code and the Consolidated Return Regulations. Any gain or loss that is treated as recognized by one or more members of an affiliated group under the Internal Revenue Code and regulations shall be treated as attributable to that member for purposes of


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this Agreement. In computing the Federal income tax liability of each Member having taxable income on a separate return basis (a "Profit Member") (i) the surtax exemption to which the Group as a whole is entitled shall be apportioned among the Profit Members in proportion to their respective separate taxable incomes, and (ii) the consolidated research and development credit ("R&D Credit") to which the Group as a whole is entitled shall be apportioned among the Profit and Loss Members in proportion to their respective qualified research and development expenditures for the taxable year.


b. The separate Federal income tax liabilities of all of the Profit Members computed under Section 4(a) for each Tax Period shall then be aggregated into a single sum.


c. Each Profit Member shall then be allocated a portion of the Group Tax Liability, if any, for each Tax Period equal to the product of (i) the Group Tax Liability for such Tax Period and (ii) a fraction, the numerator of which is the separate Federal income tax liability of such Profit Member for such Tax Period determined under Section 4(a) and the denominator of which is the aggregate sum for such Tax Period determined under Section 4(b).


d. The portion of the Group Tax Liability allocated in the manner described in this Section 4 to the AngioDynamics Subgroup shall be a joint and several liability of each member of the AngioDynamics Subgroup to E-Z-EM.


5. Allocation of Group AMT Liability to Members. The Group AMT Liability, if any, for each Tax Period shall be allocated among the Members as p ...