1
EXHIBIT 10.11
TAX ALLOCATION AGREEMENT
BY AND BETWEEN
▇▇▇▇▇▇▇▇▇▇▇ INTERNATIONAL, INC.
AND
GRANT PRIDECO, INC.
APRIL 14, 2000
2
TABLE OF CONTENTS
1. Grant Group............................................................................................-2-
2. Tax Returns............................................................................................-2-
3. Obligation for Payment of Taxes........................................................................-4-
4. No Weatherford Tax Payments............................................................................-5-
5. Grant Tax Payments.....................................................................................-5-
6. Tax Credits; Deferred Intercompany Gains...............................................................-7-
7. Grant Tax Carryovers; Payment by Grant.................................................................-7-
8. Tax Audits.............................................................................................-8-
9. Proposed Adjustments...................................................................................-8-
10. Notice of Settlement or Compromise.....................................................................-9-
11. Grant's Right to Contest...............................................................................-9-
12. Subsequent Adjustments or Refunds.....................................................................-10-
13. Grant Spin-Off Tax Indemnity..........................................................................-10-
14. Future Actions........................................................................................-11-
15. Combined, Consolidated or Unitary Basis Returns.......................................................-11-
16. Earnings and Profits Information......................................................................-11-
17. Tax Interpretation....................................................................................-12-
18. Consistent Tax Treatment..............................................................................-12-
19. Retention of Records..................................................................................-12-
20. Expenses..............................................................................................-13-
21. Definitions...........................................................................................-13-
"After-Tax Basis".....................................................................................-13-
"Agreed Rate".........................................................................................-13-
-i-
3
"Code"................................................................................................-13-
"Distribution Agreement"..............................................................................-13-
"Grant" .............................................................................................-13-
"Grant Group".........................................................................................-13-
"Interim Period"......................................................................................-13-
"Returns".............................................................................................-14-
"Ruling" .............................................................................................-14-
"Short Period"........................................................................................-14-
"Spin-Off"............................................................................................-14-
"Spin-Off Date".......................................................................................-14-
"Spin-Off Tax"........................................................................................-14-
"Tax Authority".......................................................................................-14-
"Taxes" .............................................................................................-14-
"Transfer Tax"........................................................................................-15-
"Weatherford".........................................................................................-15-
"Weatherford Group"...................................................................................-15-
"WEI".................................................................................................-15-
22. Notices...............................................................................................-15-
23. Binding Effect; Successors............................................................................-15-
24. Severability..........................................................................................-16-
25. Entire Agreement......................................................................................-16-
26. Governing Law.........................................................................................-17-
27. Arbitration...........................................................................................-17-
EXHIBIT A - MEMBERS OF THE GRANT GROUP
-ii-
4
EXHIBIT 10.11
TAX ALLOCATION AGREEMENT
THIS TAX ALLOCATION AGREEMENT, made and entered into as of the 14th day
of April, 2000, by and between ▇▇▇▇▇▇▇▇▇▇▇ INTERNATIONAL, INC., a Delaware
corporation ("Weatherford"), and GRANT PRIDECO, INC., a Delaware corporation
("Grant").
W I T N E S S E T H:
WHEREAS, Weatherford is the common parent of an affiliated group of
corporations (hereinafter referred to as the "Weatherford Group") within the
meaning of Section 1504(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), which affiliated group includes (x) corporations owned by Weatherford
(formerly known as EVI, Inc.) and (y) corporations owned by Weatherford Enterra,
Inc., a Delaware corporation ("WEI"), on May 27, 1998, the date on which WEI
merged with and into Weatherford, and (z) corporations acquired by Weatherford
or other members of the Weatherford Group subsequent to May 27, 1998, and the
members of the Weatherford Group have heretofore joined in filing consolidated
Federal income Tax Returns;
WHEREAS, prior to May 27, 1998, Weatherford and its eligible
subsidiaries joined in filing consolidated Federal income Tax Returns as an
affiliated group and WEI and its eligible subsidiaries joined in filing
consolidated Federal income Tax Returns as an affiliated group;
WHEREAS, Grant and its subsidiaries have been members of the
Weatherford Group;
WHEREAS, on or about April 12, 2000, certain assets associated with the
drilling products business conducted by the Weatherford Group, including the
stock of certain subsidiaries included in the Weatherford Group and engaged in
the drilling products business, will be contributed to the capital of Grant or
otherwise acquired by Grant or one or more of its subsidiaries;
WHEREAS, Weatherford, on or about April 14, 2000 (the "Spin-Off Date"),
will distribute to its stockholders all of the outstanding stock of Grant (the
"Spin-Off"), and thereafter Grant and
-1-
5
its subsidiaries will no longer be members of the Weatherford Group for Federal
income Tax purposes; and
WHEREAS, the parties desire to provide for the sharing of the Federal,
state, local and foreign income Tax liabilities and benefits accrued prior to
the Spin-Off between Weatherford and its subsidiaries and Grant and its
subsidiaries;
NOW, THEREFORE, the parties hereto agree as follows:
1. Grant Group. For purposes of this Agreement, the "Grant Group" shall
mean (i) Grant, (ii) Grant's subsidiaries, and (iii) those corporations and
other entities whose stock or ownership interests will be contributed to Grant
prior to the Spin-Off Date, all of such subsidiaries of Grant and such
corporations and other entities being listed on Exhibit A attached hereto.
Unless otherwise specified, whenever items of income, gain, loss, deduction,
credit, or other Tax attributes of Grant are referred to in this Agreement, the
reference shall be to the collective amounts of such items for the Grant Group.
2. Tax Returns. Weatherford shall prepare and file or cause to be
prepared and filed timely all appropriate Returns in respect of Grant and the
other members of the Grant Group that (i) are required to be filed on or before
the Spin-Off Date; or (ii) are required to be filed after the Spin-Off Date that
(A) are required to include, on a consolidated, combined or unitary basis, the
operations of Grant or any other member of the Grant Group for any Tax period or
portion thereof ending on or before the Spin-Off Date; or (B) are required to be
filed by Grant or any other member of the Grant Group on a separate return basis
for any Tax period ending on or before the Spin-Off Date. To the extent
requested by ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ shall participate in the filing of and shall
file any required Returns with respect to any Tax period that ends on or before
the Spin-Off Date. Grant shall prepare or cause to be prepared the schedules in
respect of Grant and other members of the
-2-
6
Grant Group containing the information necessary for Weatherford to prepare any
consolidated, combined or unitary Returns. If Weatherford, after consulting with
Grant, files any such consolidated, combined or unitary Return using information
with respect to Grant and the other members of the Grant Group that is different
from the information prepared and furnished by Grant and Weatherford and ▇▇▇▇▇
thereafter are unable to resolve such difference, such difference shall
constitute a claim for purposes of Paragraph 27 of this Agreement. Grant shall
also prepare or cause to be prepared and shall file or cause to be filed all
other Returns required of Grant or any other members of the Grant Group, or in
respect of its or any of their activities, for any Tax period ending after the
Spin-Off Date that includes the operations of Grant or any other member of the
Grant Group prior to the Spin-Off Date. The parties hereto will, to the extent
permitted by applicable law, elect with the relevant Tax Authority to treat for
all purposes the Spin-Off Date as the last day of a Tax period of Grant and the
other members of the Grant Group, and such period shall be treated as a "Short
Period" for purposes of this Agreement. In any case where applicable law does
not permit Grant to treat the Spin-Off Date as the last day of a Short Period,
then for purposes of this Agreement, the portion of such Taxes that is
attributable to the operations of Grant and the other members of the Grant Group
for such Interim Period (as defined below) shall be (i) in the case of Taxes
that are not based in whole or in part on income or gross receipts, the total
amount of such Taxes for the period in question multiplied by a fraction, the
numerator of which is the number of days in the Interim Period, and the
denominator of which is the total number of days in the entire period in
question, and (ii) in the case of Taxes that are based in whole or in part on
income or gross receipts, the Taxes that would be due with respect to the
Interim Period, if such Interim Period were a Short Period. "Interim Period"
means with respect to any Taxes imposed on Grant or any other members of the
Grant Group for which the Spin-Off Date is not the last day of a Short Period,
the
-3-
7
period of time beginning on the first day of the actual Tax period that includes
(but does not end on) the Spin-Off Date and ending on and including the Spin-Off
Date. Any franchise Tax shall be allocated to the Tax period or portion thereof
during which the right to do business obtained by the payment of such franchise
Tax relates, regardless of whether such franchise Tax is measured by income,
operations, assets or capital relating to another Tax period.
3. Obligation for Payment of Taxes. Weatherford shall be entitled to
receive from Grant amounts calculated in accordance with Paragraphs 5, 7 and 12
hereof. Except as otherwise provided in Paragraph 5, the amounts, if any, that
Grant shall be obligated to pay Weatherford pursuant to Paragraph 5, with
respect to Tax periods of the Weatherford Group ending on or prior to the Spin-
Off Date, shall be paid (i) within 120 days after the Spin-Off Date where the
Taxes were paid by Weatherford on or before the Spin-Off Date and shall include
interest thereon calculated for the period from the Spin-Off Date to the date of
payment at a per annum rate of interest (computed on the basis of the actual
number of days elapsed (including the Spin-Off Date but excluding the payment
date) over a year of 365 or 366 days, as the case may be) equal to 10 percent,
or (ii) within 30 days after the date of payment where the Taxes are paid by
Weatherford after the Spin-Off Date. This initial settlement shall be based on
the Returns as they have been filed and shall include any amendments of or
adjustments to such Returns that have been finally settled. Except as otherwise
provided in Paragraph 5, any amounts that Grant shall be obligated to pay
Weatherford pursuant to Paragraph 5 with respect to Tax periods of the
Weatherford Group ending after the Spin-Off Date shall be paid within 30 days
after filing of the Returns for such Tax periods. In the event of an adjustment
to the amount of payment for any Tax period as determined under Paragraph 12,
Weatherford shall be entitled to receive from Grant such payment within 30 days
after payment of a deficiency to or receipt of a refund from the Tax Authority.
In the event of an adjustment under
-4-
8
Paragraph 12 resulting in no additional payment to or receipt of a refund from
the Tax Authority, settlement shall be made within 30 days after filing of the
amended Return or final settlement of the adjustment. In the event that Grant is
delinquent in paying to Weatherford any amount due pursuant to this Paragraph 3,
including any interest accrued thereon pursuant to this Paragraph 3, or
Paragraph 7 hereof, such unpaid amount shall bear interest from the original due
date until paid at a per annum rate equal to the lesser of (a) 12 percent and
(b) the maximum lawful non-usurious rate of interest, if any, which under
applicable law Weatherford is permitted to charge Grant thereon from time to
time.
4. No Weatherford Tax Payments. Except as otherwise provided in
Paragraph 12 hereof, Weatherford shall not be obligated to pay Grant for any Tax
credits of the Grant Group or any losses or deductions of the Grant Group used
by the Weatherford Group to reduce its Federal income Tax liability or Federal
taxable income for any Tax period ending on or before the Spin-Off Date. For
purposes of these computations, the allocation of Tax attributes to the Grant
Group and absorption thereof by the Weatherford Group for each Tax period shall
be determined in accordance with the Treasury Regulations under ss.1502 of the
Code, applied in a manner consistent with practices and methods followed in
reporting the Federal income Tax liability of the Weatherford Group for such Tax
periods. In any instance where a Tax attribute must be characterized, the
characterization prescribed by the aforementioned Treasury Regulations will
control.
5. Grant Tax Payments. For each Tax period of the Weatherford Group
which includes income of the Grant Group, Grant shall be obligated to pay
Weatherford an amount equal to the product of (i) the net taxable income of the
Grant Group included in the consolidated Federal income Tax Return of the
Weatherford Group for such period, multiplied by (ii) the highest marginal
statutory Federal corporate income Tax rate applicable to such income for such
period; provided,
-5-
9
however, that no payment shall be required pursuant to this Paragraph 5 to the
extent such payments have previously been made by the Grant Group to members of
the Weatherford Group other than the Grant Group under any Tax sharing agreement
or arrangement (whether written or oral) or any other similar system of payments
with respect to Federal income Taxes of the Weatherford Group in existence prior
to the Spin-Off Date, including, but not limited to, any estimated Tax payments.
For purposes of these computations, the allocation of Tax attributes to the
Weatherford Group and absorption thereof by the Grant Group for each Tax period
shall be determined in accordance with the Treasury Regulations under ss.1502 of
the Code, applied in a manner consistent with practices and methods followed in
reporting the Federal income Tax liability of the Weatherford Group for such Tax
periods. In any instance where a Tax attribute must be characterized, the
characterization prescribed by the aforementioned Treasury Regulations will
control. To the extent, if any, that the amount of Taxes Weatherford is required
to pay with respect to the net taxable income of the Grant Group for a Tax
period is less than the amount calculated as owed by Grant to Weatherford under
this Paragraph 5, the amount owed by Grant to Weatherford shall be (i) reduced
to the extent that such difference is attributable to Tax benefits of the
Weatherford Group used which would have otherwise expired unused but for the
fact that the Grant Group had net taxable income for such Tax period, or (ii)
deferred to the extent such difference is attributable to Tax benefits of the
Weatherford Group used which would have otherwise carried forward to a
subsequent year or years but for the fact that the Grant Group had net taxable
income for such Tax period. In the event an amount otherwise payable by Grant to
Weatherford is deferred pursuant to clause (ii) of the immediately preceding
sentence, such amount shall be paid by Grant to Weatherford within 30 days after
the filing of the Tax Return for the Tax period in which such Tax benefits of
the Weatherford Group previously used would have been used. Any amount payable
by Grant to Weatherford pursuant to
-6-
10
the immediately preceding sentence shall not be greater than the amount of Tax
paid by Weatherford as a consequence of the Tax benefits of the Weatherford
Group previously having been used to offset taxable income of the Grant Group.
6. Tax Credits; Deferred Intercompany Gains. For purpose of the
calculations under this Agreement, any loss of Tax credits resulting from or
attributable to the transfer of assets to Grant or any other member of the Grant
Group in connection with the Spin-Off shall be ignored and all calculations
shall be made as though all such tax credits were available for use by the
Weatherford Group. In the event any deferred intercompany gain attributable to
assets transferred to Grant or any other members of the Grant Group by other
members of the Weatherford Group is recognized by the Weatherford Group by
reason of the Spin-Off, such deferred intercompany gain, if any, shall be deemed
to be a gain of the Grant Group for its taxable year ending on the Spin-Off Date
for purposes of all calculations under this Agreement, including the calculation
of Taxes owed by Grant to Weatherford pursuant to Paragraphs 3 and 5 hereof.
7. Grant Tax Carryovers; Payment by Grant. Notwithstanding anything in
this Agreement to the contrary, with respect to items of loss or other Tax
benefits apportioned to and carried over by the Grant Group after the Spin-Off
(under the Treasury Regulations governing Federal consolidated income Tax
Returns) and regardless of whether such Tax benefits (x) are used by the Grant
Group to reduce its Federal income Tax liability after the Spin-Off or (y)
expire unused by the Grant Group, Grant shall pay to Weatherford an amount equal
to any such item of loss or other Tax benefit multiplied by the highest marginal
statutory Federal corporate income Tax rate in effect on the Spin-Off Date. Any
payment due from Grant to Weatherford pursuant to this Paragraph 7 shall be
payable on the earlier of 30 days after (x) the date of filing of the Return
which includes such item of loss or other Tax benefit or (y) the end of the Tax
year in which such item of loss or
-7-
11
other Tax benefit expires unused. Weatherford agrees to cooperate with Grant in
determining the amount of such items of loss or other Tax benefits apportioned
to and carried over by the Grant Group after the Spin-Off.
8. Tax Audits. In the event of an audit by any Tax Authority of a
Return filed by Weatherford for any Tax period ending prior to or on the
Spin-Off Date (or any Tax period thereafter in which a carryforward of the Grant
Group's Tax benefits is used), Weatherford shall give Grant timely and
reasonable notice of such audit proceedings and Grant shall have the right to
participate in any such audit; provided, however, that Weatherford shall have
the full power and authority to control such audit. In connection with any such
audit, Grant will provide all necessary information and other assistance
reasonably requested by Weatherford with respect to issues concerning the
activities of the Grant Group. All communications with any such Tax Authority
and its employees concerning any such audit will be made by Weatherford unless
otherwise agreed between the parties hereto. In connection with its
participation in any audit, Grant shall be given reasonable notice of all
material meetings, investigations, field examinations and similar events and
copies of all relevant material correspondence between the Tax Authority
conducting the audit and Weatherford.
9. Proposed Adjustments. Weatherford shall give prompt notice to Grant
of any adjustment or adjustments proposed by any Tax Authority relating to the
activities of the Grant Group for any Tax period ending prior to or on the
Spin-Off Date. After consulting with Grant, Weatherford shall determine in its
sole discretion the nature of all action to be taken to contest such proposed
adjustment, including whether any such action shall initially be contested by
way of judicial or administrative proceedings, or both, whether any such
proposed adjustment shall be contested by resisting payment thereof or by paying
the same and seeking a refund thereof, and if Weatherford shall undertake to
contest such proposed adjustment, the court or other judicial body
-8-
12
before which such action will be commenced. Weatherford shall have full control
over any contest or administrative proceeding pursuant to this Paragraph, but
Grant, at its expense and subject to approval by Weatherford, which approval
shall not be unreasonably withheld, may participate in any proceedings
contesting any proposed adjustment relating to the activities of the Grant
Group.
10. Notice of Settlement or Compromise. Weatherford shall give prompt
notice to Grant of any proposal made to it at the time of an audit or otherwise,
to settle or compromise issues relating to the Tax liabilities of the Grant
Group for any Tax period ending prior to or on the Spin-Off Date. Weatherford
will not accept or offer any settlement or compromise of such issues without the
consent of Grant, and such consent shall not be unreasonably withheld. If, in
▇▇▇▇▇▇▇▇▇▇▇'▇ opinion, Grant unreasonably withholds such consent, Weatherford
shall have the right to settle or compromise such issues on the basis contained
in the notice to Grant. If Grant thereafter desires to dispute such settlement
or compromise, Grant's claim with respect thereto shall constitute a claim for
purposes of Paragraph 27 of this Agreement.
11. Grant's Right to Contest. Should Weatherford decline or cease to
contest any proposed adjustment relating to the activities of the Grant Group
for any Tax period ending prior to or on the Spin-Off Date, Weatherford shall so
notify Grant. Grant, at its expense and upon providing reasonable assurances to
Weatherford of ▇▇▇▇▇'▇ ability to pay any Taxes resulting from any such proposed
adjustment, may contest such proposed adjustment; but in no event shall Grant be
permitted to accept or offer any settlement or compromise that would require the
settlement or compromise of issues relating to the Tax liabilities of members of
the Weatherford Group other than the Grant Group.
12. Subsequent Adjustments or Refunds. With respect to any Tax period
of the Weatherford Group for which Weatherford received from Grant a payment
pursuant to ▇▇▇▇▇▇▇▇▇ ▇,
-▇-
▇▇
▇▇▇▇▇▇▇▇▇ 7 or this Paragraph 12, if the filing of an amended income Tax Return,
final determination of any adjustment made by any Tax Authority or the receipt
of a refund by Weatherford occurs with respect to such period and such event
would cause a difference in the amount of payment required for such period as
previously calculated pursuant to Paragraph , Paragraph 7 or this Paragraph 12,
Weatherford shall give Grant prompt notice of such difference and Weatherford
shall be obligated to pay or entitled to receive from Grant the amount of such
difference. Any amount required to be paid pursuant to this Paragraph 12 shall
include any interest imposed by or received from the Tax Authority if the
adjustment results in the payment of Tax to or receipt of Tax from the Tax
Authority.
13. Grant Spin-Off Tax Indemnity. Notwithstanding any other provision
of this Agreement to the contrary, Grant shall be liable for, shall pay and
shall indemnify and hold Weatherford and the other members of the Weatherford
Group harmless, on an After-Tax Basis, against (A) any Transfer Taxes and other
Taxes which may be imposed or assessed as a result of the contribution by
Weatherford to the capital of Grant or the acquisition (by sale or purchase or
otherwise) by Grant or one or more of the other members of the Grant Group of
assets associated with the drilling products business conducted by the
Weatherford Group, including the stock of certain subsidiaries included in the
Weatherford Group and engaged in the drilling products business, (B) any Taxes
resulting from the recognition of deferred intercompany gains as contemplated by
Paragraph 6 hereof and (C) any Spin-Off Tax. In determining the amount of, and
the time of payment of, any such Transfer Taxes, other Taxes or Spin-Off Tax
owed by Grant to Weatherford, the principles set forth in the last three
sentences of Paragraph 5 shall apply.
14. Future Actions. Grant agrees that, during the three-year period
following the Spin- Off, it will not engage in any transaction that could
adversely affect the tax treatment of the Spin-Off
-10-
14
without the prior written consent of Weatherford, which consent may be withheld
in ▇▇▇▇▇▇▇▇▇▇▇'▇ discretion, unless Grant delivers to Weatherford a supplemental
ruling from the Internal Revenue Service or a tax opinion acceptable to
Weatherford of nationally recognized tax counsel to the effect that the proposed
transaction would not adversely affect the tax treatment of the Spin-Off.
Weatherford agrees to cooperate with and provide reasonable assistance to Grant
in the event that Grant requests a supplemental ruling from the Internal Revenue
Service.
15. Combined, Consolidated or Unitary Basis Returns. The parties
acknowledge that certain state, local or foreign Tax Authorities may require, or
one of the parties may desire, to file amended or original state, local or
foreign income Tax Returns on a combined, consolidated or unitary basis. Such
filing may result in an aggregate decrease in the state, local or foreign income
Tax of both parties; however, one party may suffer a Tax increase compared to
its state, local or foreign income Tax liability calculated on a separate
company basis, while the other party enjoys a Tax decrease. In any such event,
the parties intend that the required calculations for determining which party
owes Taxes to the other with respect thereto be made by utilizing the principles
set forth in Paragraphs 3, 4, 5, 7 and 12 hereof.
16. Earnings and Profits Information. The parties agree to share such
information as is necessary to properly allocate the earnings and profits of the
Grant Group in accordance with the Code and Treasury Regulations for Tax periods
prior to or ending on the Spin-Off Date. After the Spin-Off, Weatherford agrees
to provide Grant and Grant's independent auditors with such information as is
necessary to verify amounts received or receivable or paid or payable by Grant
under this Agreement. Grant agrees to make available to Weatherford, upon
request, all Federal, state, local and foreign Tax Returns, work papers and
other documents pertaining to the activities of the Grant Group prior to the
Spin-Off.
-11-
15
17. Tax Interpretation. For all Tax purposes and notwithstanding any
other provision of this Agreement, to the extent permitted by applicable law,
the parties hereto shall treat any payment made pursuant to this Agreement as a
capital contribution or dividend distribution, as the case may be, immediately
prior to the Spin-Off Date and, accordingly, as not includible in the taxable
income of the recipient. If it is finally determined that the receipt or accrual
of any payment made under this Agreement is taxable to the recipient, the payor
shall pay to the recipient, on an After-Tax Basis, an amount equal to any
increase in the Taxes of the recipient as a result of receiving the payment from
the payor.
18. Consistent Tax Treatment. To the extent that assets are assigned,
sold, transferred or conveyed by a member of the Weatherford Group to Grant or
another member of the Grant Group in contemplation of the Spin-Off and any such
transaction is treated as a sale for Tax purposes, the aggregate purchase price
shall be allocated among the assets assigned, sold, transferred or conveyed as
determined by Weatherford in its sole discretion. Each of Weatherford and Grant
agrees to report and, where applicable, to cause the members of their respective
groups to report, the purchase prices of such assets as determined by
Weatherford.
19. Retention of Records. Each party hereto agrees, to the extent
potentially relevant to the other party, to (1) retain records, documents,
accounting and other information (including computer data) necessary for the
preparation and filing of all Returns or the audit of such Returns, and (2) give
to the other party reasonable access to such records, documents, accounting
data, Returns and related books and records and other information (including
computer data) and to its personnel (insuring their cooperation) and premises,
for purposes of the review or audit of such Returns to the extent relevant to an
obligation or liability of a party under this Agreement.
-12-
16
20. Expenses. Each party will bear its own expenses in complying with
this Agreement, including but not limited to the cost of employee work hours.
The sharing of fees and expenses of nonemployees and independent contractors
mutually engaged by the parties shall be agreed upon before such persons are
engaged.
21. Definitions.
(a) "After-Tax Basis" means, with respect to any payment, an
amount calculated by taking into account the Tax consequences of the receipt of
such payment, as well as any Tax benefit associated with the liability giving
rise to the payment, in each case calculated on a present value basis using the
Agreed Rate.
(b) "Agreed Rate" means the annual rate of interest quoted,
from time to time, by Chase Bank of Texas, N.A. in Houston, Texas as its prime
rate of interest for the purpose of determining the interest rates charged by it
for United States dollar commercial loans made in the United States.
(c) "Code" has the meaning set forth in the first recital
hereof.
(d) "Distribution Agreement" means that certain Distribution
Agreement dated as of March 22, 2000, by and between Weatherford and ▇▇▇▇▇, as
the same may be amended or otherwise modified from time to time pursuant to the
terms thereof.
(e) "Grant" has the meaning set forth in the preamble hereto.
(f) "Grant Group" has the meaning set forth in Section 1
hereof.
(g) "Interim Period" has the meaning set forth in Section 2
hereof.
(h) "Returns" means all returns, declarations, reports,
statements and other documents required to be filed in respect of Taxes, and the
term "Return" means any one of the foregoing Returns.
-13-
17
(i) "Ruling" means the private letter ruling to be issued by
the Internal Revenue Service with respect to the Spin-Off and relating to the
tax consequences associated with the distribution of all outstanding shares of
Grant common stock.
(j) "Short Period" has the meaning set forth in Section 2
hereof.
(k) "Spin-Off" has the meaning set forth in the fifth recital
hereof.
(l) "Spin-Off Date" has the meaning set forth in the fifth
recital hereof.
(m) "Spin-Off Tax" means any Tax to which Weatherford or any
member of the Weatherford Group is subject as a result of the application of any
provision of the Code to the Spin- Off, including without limitation, Section
311(b), Section 355(c)(2), Section 355(e) or Section 361(c)(2) of the Code (or
any corresponding or similar provision of state, local or foreign law), other
than any such Tax which results solely from the fact that one or more persons
acquire after the Spin- Off Date directly or indirectly stock representing a
50-percent or greater interest in Weatherford and such acquisition is subject to
Section 355(e) of the Code.
(n) "Tax Authority" means the United States Internal Revenue
Service or any other comparable state, local or foreign governmental authority.
(o) "Taxes" means all federal, state, local, foreign and other
taxes, duties, levies, imposts, customs or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, profit share, license, value added,
withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, premium, property, windfall profits, or other taxes, of any kind
whatsoever, together with any interest, penalties, additions to tax, fines or
other additional amounts imposed thereon or related thereto, and the term "Tax"
means any one of the foregoing Taxes.
-14-
18
(p) "Transfer Tax" means any excise, sales, use, transfer,
documentary, filing, recordation or other similar tax or fee, together with any
interest, additions or penalties with respect thereto and any interest in
respect of such additions or penalties.
(q) "Weatherford" has the meaning set forth in the preamble
hereto.
(r) "Weatherford Group" has the meaning set forth in the first
recital hereto.
(s) "WEI" has the meaning set forth in the first recital
hereto.
22. Notices. All notices and other communications to be given or made
hereunder shall be in writing and shall be (a) personally delivered with signed
receipt obtained acknowledging delivery; (b) transmitted by postage prepaid
registered mail, return receipt requested (air mail if international); or (c)
transmitted by facsimile; to a party at the address set out below (or at such
other address as it may have provided notification for the purposes hereof to
the other party hereto in accordance with this Section).
If to Grant: Grant Prideco, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
If to Weatherford: ▇▇▇▇▇▇▇▇▇▇▇ International, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Fax number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
23. Binding Effect; Successors. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties hereto and any
successor, by merger, acquisition of substantially all of a party's assets or
otherwise, to either of the parties hereto (including but not limited to any
successor of Weatherford or Grant succeeding to the Tax attributes of
Weatherford or ▇▇▇▇▇ under Section 381 of the Code), to the same extent as if
such successor had been an original
-15-
19
party to this Agreement. In addition, in the event of an acquisition of
substantially all of the assets of Grant in which gain or loss is not
recognized, in whole or in part, for Federal income Tax purposes, Grant shall
ensure that any purchaser of such assets shall assume the obligations set forth
in this Agreement.
24. Severability. Any provision of this Agreement that is determined by
arbitration as provided herein or a court of competent jurisdiction to be
invalid, illegal or unenforceable shall be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or any other
provision of this Agreement invalid, illegal or unenforceable, so long as the
material purposes of this Agreement can be determined and effectuated. Should
any provision of this Agreement be so declared invalid, illegal or
unenforceable, the parties shall agree on a valid provision to substitute for
it.
25. Entire Agreement. This Agreement, including the exhibit and other
writings referred to herein or delivered pursuant hereto and the Distribution
Agreement, as well as the other agreements entered into by and between
Weatherford and ▇▇▇▇▇ in connection with the Spin-Off, constitutes the entire
agreement between Weatherford and Grant with respect to the subject matter
hereof and supersedes all other agreements, representations, warranties,
statements, promises and undertakings, whether oral or written, with respect to
the subject matter hereof, including, without limitation, any and all Tax
sharing agreements or arrangements (whether oral or written) between Weatherford
and the other members of the Weatherford Group (other than the Grant Group) on
the one hand and Grant and the other members of the Grant Group on the other
hand, that require payments or indemnities to be made with respect to Taxes.
This Agreement may not be amended, altered or modified except by a writing
signed by duly authorized officers of Weatherford and ▇▇▇▇▇.
-16-
20
26. Governing Law. All questions arising out of this Agreement and the
rights and obligations created herein, or its validity, existence,
interpretation, performance or breach, shall be governed by and construed in
accordance with the internal laws of the State of Texas, without regard to or
the application of the rules of conflicts of laws set forth in such laws.
27. Arbitration. The parties agree that any claim arising out of or
related to this Agreement shall be governed by the dispute resolution,
arbitration and choice of forum provisions set forth in Section 8.3 of the
Distribution Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
▇▇▇▇▇▇▇▇▇▇▇ INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇
Executive Vice President, Chief Financial
Officer, General Counsel and Secretary
GRANT PRIDECO, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
President
-17-
21
EXHIBIT A
MEMBERS OF THE GRANT GROUP
%
Name Incorporation Jurisdiction Controlled
------------------------------------------------------------------------ ------------------------------ -------------
------------------------------------------------------------------------ ------------------------------ -------------
Channelview Real Property, Inc. Delaware 100
------------------------------------------------------------------------ ------------------------------ -------------
Citra Grant Prideco Marketing Ltd. Jersey Islands 100
------------------------------------------------------------------------ ------------------------------ -------------
Drill Tube International, Inc. Texas 100
------------------------------------------------------------------------ ------------------------------ -------------
Enerpro de Mexico, S.A. de C.V. Mexico 100
------------------------------------------------------------------------ ------------------------------ -------------
EVI Oil Tools Ltd. Scotland 100
------------------------------------------------------------------------ ------------------------------ -------------
Grant Austria, Inc. Delaware 100
------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco (Singapore) Pte Ltd. Singapore 100
------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco Canada Ltd. Alberta, Canada 100
------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco de Venezuela, S.A. Venezuela 100
------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco Holding, L.L.C. Delaware 100
------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco Limited Scotland 100
------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco Technology, Inc. Delaware 100
------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco U.S., L.L.C. Delaware 100
------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco, Inc. Delaware 100
------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco, L.P. Delaware 100
------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco, S.A. Switzerland 99
------------------------------------------------------------------------ ------------------------------ -------------
Grant Prideco, S.A. de C.V. Mexico 100
------------------------------------------------------------------------ ------------------------------ -------------
Inmobiliaria Industrial de Veracruz, S.A. de C.V. Mexico 100
------------------------------------------------------------------------ ------------------------------ -------------
Jiangsu ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Prideco Tubular Company Peoples Republic of China 21.48
------------------------------------------------------------------------ ------------------------------ -------------
Petro-Drive, Inc. Louisiana 100
------------------------------------------------------------------------ ------------------------------ -------------
Petroleum Equipment Supply Company Louisiana 100
------------------------------------------------------------------------ ------------------------------ -------------
Pridecomex Holding, S.A de C.V. Mexico 100
------------------------------------------------------------------------ ------------------------------ -------------
PT H-Tech Oilfield Equipment Indonesia 54.03
------------------------------------------------------------------------ ------------------------------ -------------
TA Industries, Inc. Delaware 100
------------------------------------------------------------------------ ------------------------------ -------------
Texas Arai, Inc. Delaware 100
------------------------------------------------------------------------ ------------------------------ -------------
TF de Mexico, S.A de C.V. Mexico 95.36
------------------------------------------------------------------------ ------------------------------ -------------
Tube Alloy Capital Corporation Texas 100
------------------------------------------------------------------------ ------------------------------ -------------
Tube Alloy Corporation Louisiana 100
------------------------------------------------------------------------ ------------------------------ -------------
Tube Alloy Corporation International Texas 100
------------------------------------------------------------------------ ------------------------------ -------------
Voest-Alpine ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ 50
------------------------------------------------------------------------ ------------------------------ -------------
Voest-Alpine South America, S.A. Venezuela 50
------------------------------------------------------------------------ ------------------------------ -------------
Voest-Alpine Stahlrohr Kindberg GmbH Austria 50
------------------------------------------------------------------------ ------------------------------ -------------
Voest-Alpine Stahlrohr Kindberg GmbH & Co. KG Austria 51
------------------------------------------------------------------------ ------------------------------ -------------
Weatherford Mauritius Limited Mauritius 100
------------------------------------------------------------------------ ------------------------------ -------------
XL Systems International, Inc. Delaware 100
------------------------------------------------------------------------ ------------------------------ -------------
XL Systems, Inc. Texas 100
------------------------------------------------------------------------ ------------------------------ -------------
XLS Holding, Inc. Texas 100
------------------------------------------------------------------------ ------------------------------ -------------
XLS Systems Antilles, N.V. Netherlands Antilles 100
------------------------------------------------------------------------ ------------------------------ -------------
XLS Systems Europe, ▇.▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇
------------------------------------------------------------------------ ------------------------------ -------------
-18-