EXHIBIT 10.2
TAX SHARING AGREEMENT
by and between
WESTERN ATLAS INC.
and
UNOVA, INC.
dated as of October 31, 1997
TAX SHARING AGREEMENT
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS
1997 Stub Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Accounting Firm. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Calendar Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Carryback Item . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Distribution Agreement . . . . . . . . . . . . . . . . . . . . . . . . 3
Distribution Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Filed UNOVA Group Separate Tax Liability . . . . . . . . . . . . . . . 3
Filed UNOVA Group Separate Joint Tax Liability . . . . . . . . . . . . 3
Final Determination. . . . . . . . . . . . . . . . . . . . . . . . . . 3
IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Joint Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
▇▇▇▇▇▇ Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Norand Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notification Date. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Other Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Pre-Distribution Year. . . . . . . . . . . . . . . . . . . . . . . . . 5
Restructuring Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . 5
Tax. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Tax Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Tax Detriment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Tax Item . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Tax Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
UNOVA Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
UNOVA Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 8
UNOVA Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
UNOVA Group Separate Joint Tax Liability . . . . . . . . . . . . . . . 8
UNOVA Group Separate Taxable Income. . . . . . . . . . . . . . . . . . 8
UNOVA Group Separate Tax Liability . . . . . . . . . . . . . . . . . . 9
UNOVA Indemnity Issue. . . . . . . . . . . . . . . . . . . . . . . . . 9
UNOVA Issue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
UNOVA Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Unrelated Person . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Western Atlas Adjustment . . . . . . . . . . . . . . . . . . . . . . . 10
Western Atlas Business . . . . . . . . . . . . . . . . . . . . . . . . 10
Western Atlas Consolidated Group . . . . . . . . . . . . . . . . . . . 10
Western Atlas Group. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Western Atlas Issue. . . . . . . . . . . . . . . . . . . . . . . . . . 11
Western Atlas Revision . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE II - FILING OF TAX RETURNS
Section 2.1 - Manner of Filing . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.2 - Pre-Distribution Tax Returns . . . . . . . . . . . . . . . . 13
Section 2.3 - Post-Distribution Tax Returns. . . . . . . . . . . . . . . . 14
ARTICLE III - PAYMENT OF TAXES
Section 3.1 - Unfiled Federal Taxes for Pre-Distribution Periods . . . . . 15
Section 3.2 - Unfiled Joint Returns for Pre-Distribution Periods . . . . . 22
Section 3.3 - Change in Federal Returns and Joint Returns. . . . . . . . . 26
Section 3.4 - Change in Other Pre-Distribution Year State, Local or
Other Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.5 - Change in Pre-Distribution Year Foreign Return . . . . . . . 33
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Section 3.6 - Restructuring Taxes. . . . . . . . . . . . . . . . . . . . . 34
Section 3.7 - Dual Consolidated Loss Closing Agreement . . . . . . . . . . 36
Section 3.8 - Liability for Taxes with Respect to Post-Distribution
Periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 3.9 - Carrybacks . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 3.10 - Statutes of Limitations . . . . . . . . . . . . . . . . . . 41
Section 3.11 - Earnings and Profits. . . . . . . . . . . . . . . . . . . . 42
Section 3.12 - Liability for Norand Taxes. . . . . . . . . . . . . . . . . 42
Section 3.13 - Breach. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE IV - INDEMNITY: COOPERATION AND EXCHANGE OF INFORMATION
Section 4.1 - Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 4.2 - Cooperation and Exchange of Information. . . . . . . . . . . 45
Section 4.3 - Reliance on Exchanged Information. . . . . . . . . . . . . . 49
ARTICLE V - MISCELLANEOUS
Section 5.1 - Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Section 5.2 - Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 5.3 - Payments . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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Section 5.4 - Entire Agreement; Termination of Prior Agreements Other
Than ▇▇▇▇▇▇ Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 50
Section 5.5 - Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 5.6 - Application to Present and Future Subsidiaries . . . . . . . 52
Section 5.7 - Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 5.8 - Titles and Headings. . . . . . . . . . . . . . . . . . . . . 53
Section 5.9 - Legal Enforceability . . . . . . . . . . . . . . . . . . . . 53
Section 5.10 - Further Assurances. . . . . . . . . . . . . . . . . . . . . 54
Section 5.11 - Parties in Interest . . . . . . . . . . . . . . . . . . . . 55
Section 5.12 - Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Section 5.13 - Change of Law . . . . . . . . . . . . . . . . . . . . . . . 55
Section 5.14 - Governing Law and Interpretation. . . . . . . . . . . . . . 56
Section 5.15 - Resolution of Certain Disputes. . . . . . . . . . . . . . . 56
Section 5.16 - Confidentiality . . . . . . . . . . . . . . . . . . . . . . 60
Section 5.17 - Limitation on Waivers . . . . . . . . . . . . . . . . . . . 61
Section 5.18 - Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 61
Section 5.19 - Fair Meaning. . . . . . . . . . . . . . . . . . . . . . . . 61
Section 5.20 - Construction. . . . . . . . . . . . . . . . . . . . . . . . 62
Section 5.21 - Termination . . . . . . . . . . . . . . . . . . . . . . . . 62
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TAX SHARING AGREEMENT
This Tax Sharing Agreement (the "Agreement") is being entered into this
31st day of October, 1997, in connection with a Distribution and Indemnity
Agreement (the "Distribution Agreement") dated as of October 31, 1997 by and
between Western Atlas Inc., a Delaware corporation ("Western Atlas"), and UNOVA,
Inc., a Delaware corporation ("UNOVA"), pursuant to which, among other things,
Western Atlas will distribute to holders of its common stock all the issued and
outstanding common stock of UNOVA (the "UNOVA Distribution"). Western Atlas, on
behalf of itself and its present and future subsidiaries (the "Western Atlas
Group"), and UNOVA on behalf of itself and its present and future subsidiaries
(the "UNOVA Group"), are entering into this Agreement to provide for the
allocation between the Western Atlas Group and the UNOVA Group of all
responsibilities, liabilities and benefits relating to or affecting Taxes (as
hereinafter defined) paid or payable by either of them for all taxable periods,
whether beginning before or after the Distribution Date (as hereinafter defined)
and to provide for certain other matters.
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and the plural forms of the terms defined):
"1997 Stub Period" shall have the meaning assigned to such term in
Section 3.1(a) of this Agreement.
"Accounting Firm" shall have the meaning assigned to such term in
Section 3.1(b)(2)(B) of this Agreement.
"Acquisition" shall have the meaning assigned to such term in Section
3.6(b) of this Agreement.
"Calendar Year" means the 52-53 week year ending on the Sunday nearest
December 31.
"Carryback Item" shall have the meaning assigned to such term in
Section 3.8(b) of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute, and shall include corre-
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sponding provisions of any subsequently enacted federal tax laws.
"Distribution Agreement" shall have the meaning assigned to such term
in the preface to this Agreement.
"Distribution Date" means the date determined by Western Atlas Board
of Directors as of which the UNOVA Distribution shall be effected, which is
presently contemplated to be October 31, 1997.
"Filed UNOVA Group Separate Tax Liability" means the amount determined
pursuant to Section 3.1(b) for the 1997 Stub Period.
"Filed UNOVA Group Separate Joint Tax Liability" means that amount
determined pursuant to Section 3.2(b) for the 1997 Stub Period.
"Final Determination" shall mean the final resolution of liability for
any tax for a taxable period (i) by IRS Form 870 or 870-AD (or any successor
forms thereto), on the date of acceptance by or on behalf of the IRS, or by a
comparable form under the laws of other jurisdictions; except that a Form 870 or
870-AD or comparable form that reserves
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(whether by its terms or by operation of law) the right of the
taxpayer to file a claim for refund and/or the right of the taxing
authority to assert a further deficiency shall not constitute a Final
Determination; (ii) by a decision, judgment, decree, or other order by
a court of competent jurisdiction, which has become final and
unappealable; (iii) by a closing agreement or accepted offer in
compromise under Section 7121 or 7122 of the Code, or comparable
agreements under the laws of other jurisdictions; (iv) by any
allowance of a refund or credit in respect of an overpayment of Tax,
but only after the expiration of all periods during which such refund
may be recovered (including by way of offset) by the Tax imposing
jurisdiction; or (v) by any other final disposition of liability in
respect of a Tax provided for under applicable law, including by
reason of the expiration of the applicable statute of limitations.
"IRS" means the Internal Revenue Service.
"Joint Return" means a state income tax return, including, but not
limited to, a unitary, combined or consolidated state income tax return, that
includes at least one Western Atlas Business and at least one UNOVA Business.
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"▇▇▇▇▇▇ Agreement" shall have the meaning assigned to such term in
Section 5.4 of this Agreement.
"Norand Tax" shall have the meaning assigned to such term in Section
3.11 of this Agreement.
"Notification Date" shall have the meaning assigned to such term in
Section 3.1(b)(2)(B) of this Agreement.
"Other Tax Return" means any Tax Return other than (1) a federal
income tax return, (2) a state or local tax return and (3) a foreign tax return.
"Pre-Distribution Year" means any taxable year beginning before the
Distribution Date during which any member of the UNOVA Group was included in the
Western Atlas Consolidated Group.
"Restructuring Taxes" means any Taxes, including related interest,
penalties and additions to Tax and reasonable attorneys' fees, resulting from
(1) the failure of the UNOVA Distribution to qualify as a distribution described
in Sections 355 and/or 368(a)(1)(D) of the Code or corresponding provisions of
state tax law or (2) the application of Sections 355(e) of the Code to the UNOVA
Distribution.
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"Tax" means any of the Taxes.
"Taxes" means all forms of taxation, whenever created or imposed, and
whether of the United States or elsewhere, and whether imposed by a local,
municipal, governmental, state, federation or other body, and without limiting
the generality of the foregoing, shall include income, sales, use, ad valorem,
gross receipts, value added, franchise, transfer, recording, withholding,
payroll, employment, excise, occupation, premium and property taxes, together
with any related interest, penalties and additions to any such tax, or
additional amounts imposed by any taxing authority (domestic or foreign) upon
the UNOVA Group, the Western Atlas Group or any of their respective members or
divisions or branches.
"Tax Benefit" means any item of loss, deduction, credit or any other
Tax Item which decreases Taxes paid or payable, other than Tax Items resulting
from an adjustment pursuant to Section 3.1(d) or 3.2(c).
"Tax Detriment" means any item of income, gain, recapture of credit or
any other Tax Item which increases Taxes paid or payable, including taxes paid
or payable to
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▇▇▇▇▇▇ pursuant to the ▇▇▇▇▇▇ Agreement, other than Tax Items
previously taken into account pursuant to Section 3.1(d) and/or 3.2(c).
"Tax Item" means any item of income, gain, loss, deduction, credit,
recapture of credit or any other item which increases or decreases Taxes paid or
payable, including an adjustment under Code Section 481 resulting from a change
in accounting method.
"Tax Reserves" shall have the meaning assigned to such term in Section
5.1 of this Agreement.
"Tax Return" means any return, filing, questionnaire or other document
required to be filed, including requests for extensions of time, filings made
with estimated tax payments, claims for refund and amended returns that may be
filed, for any period with any taxing authority (whether domestic or foreign) in
connection with any Tax or Taxes (whether or not a payment is required to be
made with respect to such filing).
"UNOVA Business" means any present or future subsidiary, division or
business of any member of the UNOVA Group which is not, or is not contemplated
by the Distribu-
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tion Agreement to be, part of the Western Atlas Group immediately
after the UNOVA Distribution. UNOVA Business shall include any
subsidiary, division or business listed on Schedule A hereto.
"UNOVA Distribution" shall have the meaning assigned to such term in
the preface to this Agreement.
"UNOVA Group" shall have the meaning assigned to such term in the
preface to this Agreement.
"UNOVA Group Separate Joint Tax Liability" shall have the meaning
assigned to such term in Section 3.2(b) of this Agreement.
"UNOVA Group Separate Taxable Income" means, with respect to Calendar
Year 1996 or the 1997 Stub Period, the sum of (i) the consolidated federal
taxable income of the UNOVA Group members that were members of the Western Atlas
Consolidated Group at any time during Calendar Year 1996 or Calendar Year 1997,
determined as though such UNOVA Group members constituted a separate
consolidated group of which UNOVA was the common parent and (ii) the UNOVA
Group's portion of the federal taxable income of the FSC.
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"UNOVA Group Separate Tax Liability" means, with respect to Calendar
Year 1996 or the 1997 Stub Period, the sum of (i) the consolidated federal
income tax liability of UNOVA Group members that were members of the Western
Atlas Consolidated Group at any time during such year, determined as though such
UNOVA Group members constituted a separate consolidated group of which UNOVA was
the common parent, reduced by the tax benefit of any loss or credit that is
limited at the UNOVA level but utilized at the Western Atlas Consolidated Group
level and increased by the tax benefit of any loss or credit that is limited at
the Western Atlas Consolidated Group level but utilized at the UNOVA level; and
(ii) the UNOVA Group's portion of the federal income tax liability of the FSC.
"UNOVA Indemnity Issue" shall have the meaning assigned to such term
in Section 4.1(a) of this Agreement.
"UNOVA Issue" shall have the meaning assigned to such term in Section
3.4(a) of this Agreement.
"UNOVA Notice" shall have the meaning assigned to such term in Section
3.1(b)(2)(B) of this Agreement.
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"Unrelated Person" means any person (within the meaning of Section
7701(a)(1) of the Code) other than a party hereto or a corporation that is a
controlled subsidiary (within the meaning of Section 368(c) of the Code) of such
party immediately prior to the Acquisition of such party's stock or assets.
"Western Atlas Adjustment" shall have the meaning assigned to such
term in Section 3.1(b)(2)(A) of this Agreement.
"Western Atlas Business" means any present or future subsidiary,
division or business of any member of the Western Atlas Group, other than a
present or future subsidiary, division or business of any member of the UNOVA
Group. Western Atlas Business also shall include any former subsidiary,
division or business of Western Atlas not listed on Schedule A hereto.
"Western Atlas Consolidated Group" means with respect to any taxable
period, the affiliated group of corporations of which Western Atlas is the
common parent (within the meaning of Section 1504 of the Code).
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"Western Atlas Group" shall have the meaning assigned to such term in
the preface to this Agreement.
"Western Atlas Issue" shall have the meaning assigned to such term in
Section 3.4(a) of this Agreement.
"Western Atlas Revision" shall have the meaning ascribed to such term
in Section 3.1(e) of this Agreement.
ARTICLE II
FILING OF TAX RETURNS
Section 2.1. MANNER OF FILING. All Tax Returns filed after the
Distribution Date shall be prepared on a basis which is consistent with any
opinion of counsel obtained by Western Atlas in connection with the UNOVA
Distribution and shall be filed on a timely basis (including extensions) by the
party responsible for such filing under this Agreement. In the absence of a
change in controlling law, all Tax Returns filed after the date of this
Agreement 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 Tax Returns involving similar Tax Items have been
filed, except to the extent that an inconsistent position would not result
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in a Tax Detriment to the other party; provided, however, that any
deduction attributable to the exercise after the Distribution Date of
a stock option (with respect to either Western Atlas stock or ▇▇▇▇▇▇
Industries, Inc. Stock) under section 83(h) of the Code or Treasury
Regulation section 1.83-6, or any deduction attributable to the
disqualifying disposition of incentive stock option stock (with
respect to either Western Atlas stock or ▇▇▇▇▇▇ Industries, Inc.
stock) or the disqualifying disposition of stock acquired through the
Western Atlas Inc. 1996 Employee Stock Purchase Plan (with respect to
either Western Atlas stock or UNOVA stock) under Section 421(b) of the
Code, shall be claimed on the Tax Return of the UNOVA Group in the
case of an employee, independent contractor, or director (other than a
director who is an employee of Western Atlas) of any member of the
UNOVA Group and on the Tax Return of the Western Atlas Group in the
case of an employee, independent contractor or director (other than a
director who is an employee of UNOVA) of any member of the Western
Atlas Group. Subject to the provisions of this Agreement, all
decisions relating to the preparation of Tax Returns shall be made in
the sole
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discretion of the party responsible under this Agreement for such
preparation.
Section 2.2. PRE-DISTRIBUTION TAX RETURNS.
(a) Except as otherwise provided in this Section 2.2, all Tax Returns
required to be filed for periods beginning before the Distribution Date shall be
filed by UNOVA or the appropriate UNOVA Business.
(b) State and local tax returns (other than Joint Returns) and Other
Tax Returns for all taxable periods beginning before the Distribution Date
shall be filed by the Western Atlas Business or UNOVA Business, as the case
may be, which had responsibility for filing such return for the last taxable
period ending prior to the Distribution Date.
(c) All foreign Tax Returns for taxable periods beginning before the
Distribution Date shall be filed by the legal entity which had responsibility
for filing such return for the last taxable period ending prior to the
Distribution Date, regardless of whether such entity was a member of the Western
Atlas Group or the UNOVA Group before or after the Distribution Date.
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(d) The United States consolidated federal income Tax Return for the
Western Atlas Consolidated Group for the 1996 Calendar Year, if not filed before
the Distribution Date, shall be filed by UNOVA. The United States consolidated
federal income Tax Return for the Western Atlas Consolidated Group for the 1997
Calendar Year shall be filed by Western Atlas. All Joint Returns for the 1996
Calendar Year, if not filed before the Distribution Date, shall be filed by
Western Atlas, and all Joint Returns for the 1997 Calendar Year shall be filed
by Western Atlas.
(e) IRS Form 8697, Interest Computation Under the Look-Back Method
for Completed Long-Term Contracts, and any comparable state forms, for the
Western Atlas Consolidated Group for the 1997 Calendar Year shall be prepared
by UNOVA and filed by Western Atlas.
Section 2.3. POST-DISTRIBUTION TAX RETURNS. All Tax Returns of the
UNOVA Group for periods beginning after the Distribution Date shall be filed by
UNOVA or the appropriate UNOVA Business and all Tax Returns of the Western Atlas
Group for periods beginning after the Distribution Date shall be filed by
Western Atlas or the appropriate Western Atlas Business.
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ARTICLE III
PAYMENT OF TAXES
Section 3.1. UNFILED FEDERAL TAXES FOR PRE-DISTRIBUTION PERIODS.
(a) On or about October 15, 1997, Western Atlas shall pay to or receive from,
as appropriate, the UNOVA Group a sum equal to the difference between (i) the
UNOVA Group Separate Tax Liability for Calendar Year 1996, and (ii) an amount
equal to all payments previously made by the UNOVA Group or any member thereof.
On or about March 31, 1998, UNOVA shall deliver to Western Atlas an estimate of
the UNOVA Group Separate Taxable Income for the period beginning on December 30,
1996 and ending on the last day in which the members of the UNOVA Group are
includible in the Western Atlas Consolidated Group (the "1997 Stub Period"). On
or about April 30, 1998, UNOVA shall pay to Western Atlas, or Western Atlas
shall pay to UNOVA, as appropriate, a sum equal to the difference (if any)
between (i) Western Atlas's estimate of the UNOVA Group Separate Tax Liability
for the 1997 Stub Period, and (ii) an amount equal to all payments previously
made by the UNOVA Group or any member thereof. Not later than one business day
before April 15, 1998, Western Atlas shall deliver to UNOVA a schedule showing
its estimate
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of the UNOVA Group Separate Tax Liability for the 1997 Stub Period and
the amount payable by UNOVA to Western Atlas, or by Western Atlas to
UNOVA, as the case may be, pursuant to this Section 3.1(a).
(b) UNOVA shall pay to Western Atlas, or Western Atlas shall pay to
UNOVA, as appropriate, an amount reflecting the difference (if any) between (i)
the Filed UNOVA Group Separate Tax Liability for the 1997 Stub Period and (ii)
an amount equal to all federal income tax payments made by the UNOVA Group with
respect to such period. Such payment shall be made on or before November 15,
1998. Amounts due or refunds receivable from IRS Form 8697 and any comparable
state forms which relate to the UNOVA Group shall be allocated to UNOVA for all
periods. The Filed UNOVA Group Separate Tax Liability for the 1997 Stub Period
shall be determined pursuant to the following procedures:
(1) On or before June 30, 1998, UNOVA shall deliver to Western Atlas
all information (including without limitation, Federal Form 1120, prepared
on a separate basis in accordance with past practice, together with
schedules, statements and supporting documentation) as Western Atlas may
reasonably request from
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time to time, with respect to each member of the UNOVA Group that was a
member of the Western Atlas Consolidated Group at any time in Calendar
Year 1997, for the preparation of the federal income Tax Return of the
Western Atlas Consolidated Group for Calendar Year 1997. All
information provided by UNOVA pursuant to this paragraph shall
correctly reflect the facts regarding the income, properties,
operations and status of each such member of the UNOVA Group and shall
be prepared applying elections and methods of accounting that are
consistent with those made or used by such member in prior taxable
periods or such other elections and methods as may be reasonably agreed
upon by the parties.
(2) (A) Western Atlas shall make any adjustments to the information
so submitted that it deems appropriate (individually, a "Western Atlas
Adjustment") and shall prepare and file the consolidated federal income Tax
Return for the Western Atlas Consolidated Group for Calendar Year 1997.
Western Atlas shall determine, in good faith, the UNOVA Group Separate Tax
Liability for 1997 Stub Year, including amounts due or refunds receivable
with respect to IRS Form 8697. Western Atlas
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shall notify UNOVA in writing of the amount of such liability no later
than October 15, 1998. Such notification shall include an explanation
of the basis for any Western Atlas Adjustments and a copy of the
calculations of the UNOVA Group Separate Tax Liability.
(B) On or before November 15, 1998, UNOVA shall provide Western Atlas with
written notice (the "UNOVA Notice") of all Western Atlas Adjustments with which
UNOVA disagrees, together with the grounds for such disagreement and any
supporting documentation.
If and to the extent that any Western Atlas Adjustments remain in
dispute, Western Atlas shall provide to any branch of a nationally recognized
accounting firm not then engaged by either party as its primary auditor
(hereinafter, "Accounting Firm") all portions of the UNOVA Notice pertaining to
the disputed Western Atlas Adjustments, together with a statement of Western
Atlas's position with respect to each such adjustment and any supporting
documentation. Accounting Firm's fees and expenses shall be borne equally by
Western Atlas and UNOVA. Western Atlas shall provide such information to
Accounting Firm no later than December 15, 1998. Accounting Firm shall resolve
all
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disputed Western Atlas Adjustments and shall notify the parties of such
resolution, which shall be binding on the parties hereto. Such notification
shall be given on or before January 15, 1999 (the "Notification Date"). Any
communication by either party with Accounting Firm prior to the applicable
Notification Date shall be in writing, with a copy simultaneously furnished to
the other party. If Accounting Firm cannot resolve a disputed Western Atlas
Adjustment by the applicable Notification Date, Western Atlas shall use its sole
discretion in reflecting such disputed Western Atlas Adjustment on its federal
income Tax Return. Accounting Firm shall be directed to proceed to a resolution
of such disputed Western Atlas Adjustment as soon as practicable, and, if such
resolution differs from the manner in which the disputed Western Atlas
Adjustment was reflected on Western Atlas's federal income Tax Return, Western
Atlas shall file an amended return reflecting such difference within two months
of such resolution. Western Atlas shall make the appropriate adjustments to the
amount of the Filed UNOVA Group Separate Tax Liability for the 1997 Stub Period,
and shall promptly pay UNOVA any balance otherwise due UNOVA within three months
of such resolution.
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(c) Either party may extend any date referenced in this Section 3.1
with the consent of the other party, and such consent shall not be unreasonably
withheld and shall be deemed to be given unless the other party objects to such
extension in writing within a reasonable time after the request therefor.
(d) For all known tax adjustments, including credits, for the UNOVA
Group for which an amended federal return has not been filed as of the
Distribution Date, UNOVA shall notify Western Atlas within 90 days of the
Distribution Date of these known adjustments and resulting tax liabilities or
refunds. The resulting tax liabilities or refunds shall be an amount by which
the actual Taxes paid or payable Western Atlas shall increase or decrease.
Within 30 days of such notification, Western Atlas shall pay to UNOVA, or UNOVA
shall pay to Western Atlas, as appropriate, such liability or refund as the case
may be.
(e) (A) Western Atlas shall make any revisions to the known
adjustments so submitted that it deems appropriate (individually, a "Western
Atlas Revision") and shall determine, in good faith, a resulting tax liability
of the known adjustments including any Western Atlas Revisions.
-▇▇-
▇▇▇▇▇▇▇ ▇▇▇▇▇ shall notify UNOVA of the amount of such liability including an
explanation for any Western Atlas Revision no later than 180 days from the
Distribution Date.
(B) Within 30 days of such notice from Western Atlas, UNOVA
shall provide Western Atlas with a response of all Western Atlas Revisions with
which UNOVA disagrees, together with an explanation.
If and to the extent that any Western Atlas Revisions remain in
dispute, Western Atlas and UNOVA shall jointly meet with Accounting Firm. The
parties shall discuss all explanations, notices and calculations provided under
this Subsection. Accounting Firm's fees and expenses shall be borne equally by
Western Atlas and UNOVA. Accounting Firm shall resolve all disputed Western
Atlas Revisions and shall notify the parties of such resolution, which shall be
binding on the parties hereto. Such notification shall be given within 30 days
of such meeting. Any communication with the Accounting Firm will include
Western Atlas and UNOVA. If Accounting Firm cannot resolve a disputed Western
Atlas Revision within the applicable period, an extension of time may be granted
upon agreement of all parties. Western Atlas shall make the appropriate
adjustments to the resulting tax
-21-
liability, and Western Atlas or UNOVA, as the case may be, shall promptly pay
any balance otherwise due UNOVA or Western Atlas, as appropriate, within 30
days of such resolution.
Section 3.2. UNFILED JOINT RETURNS FOR PRE-DISTRIBUTION PERIODS. (a)
On or about November 15, 1997, Western Atlas shall pay to or receive from, as
appropriate, the UNOVA Group a sum equal to the difference between (i) the UNOVA
Group Separate Joint Tax Liability for Calendar Year 1996, and (ii) an amount
equal to all payments previously made by the UNOVA Group or any member thereof.
On or about April 30, 1998, UNOVA shall pay to Western Atlas, or Western Atlas
shall pay to UNOVA, as appropriate, a sum equal to the difference (if any)
between (i) Western Atlas's estimate of the UNOVA Group Separate Joint Tax
Liability for the 1997 Stub Period, computed using 1996 apportionment factors
and the taxable income numbers supplied in Section 3.1(a), and (ii) an amount
equal to all payments previously made by the UNOVA Group or any member thereof.
Not later than one business day before April 15, 1998, Western Atlas shall
deliver to UNOVA a schedule showing its estimate of the UNOVA Group Separate
Joint Tax Liability for the 1997 Stub Period and the amount payable by UNOVA to
Western Atlas, or by
-▇▇-
▇▇▇▇▇▇▇ ▇▇▇▇▇ to UNOVA, as the case may be, pursuant to this Section 3.2(a).
(b) UNOVA shall pay to Western Atlas, or Western Atlas shall pay to
UNOVA, as appropriate, an amount reflecting the difference (if any) between (i)
the Filed UNOVA Group Separate Joint Tax Liability for the 1997 Stub Period and
(ii) an amount equal to all tax payments made by the UNOVA Group with respect to
such period. Such payment shall be made on or before December 15, 1998.
Amounts due or refunds receivable from any state or other taxing jurisdiction
with regard to the interest computations under the look-back method for
completed long-term contracts which relate to the UNOVA Group shall be allocated
to UNOVA for all periods. The Filed UNOVA Group Separate Joint Tax Liability
for the 1997 Stub Period shall be determined pursuant to the following
procedures:
(1) On or before July 31, 1998, UNOVA shall deliver to Western Atlas
all information (including without limitation, schedules, statements and
supporting documentation) as Western Atlas may reasonably request from time
to time, with respect to each member of the UNOVA Group that Western Atlas,
in its sole discretion,
-23-
deems includible in the filing of a Joint Return for Calendar Year
1997. All information provided by UNOVA pursuant to this paragraph
shall correctly reflect the facts regarding the income, properties,
operations and status of each such member of the UNOVA Group and shall
be prepared applying elections and methods of accounting that are
consistent with those made or used by such member in prior taxable
periods or such other elections and methods of accounting as may be
reasonably agreed upon by the parties.
(2) (A) Western Atlas shall adjust the information so submitted in
good faith and shall prepare and file all Joint Returns for Calendar Year
1997. Western Atlas shall determine, in good faith, the UNOVA Group
Separate Joint Tax Liability of the UNOVA Group for each state in which
UNOVA is included in a Joint Return for Calendar Year 1997, reduced by the
tax benefit of any loss or credit that is limited at the UNOVA level but
utilized in the Joint Return and increased by the tax benefit of any loss
or credit that is limited at the Western Atlas Consolidated Group level but
utilized at the UNOVA level (the "UNOVA Group Separate Joint Tax
Liability").
-▇▇-
▇▇▇▇▇▇▇ ▇▇▇▇▇ shall notify UNOVA in writing of the amount of such
liability no later than November 30, 1998. Such notification shall
include an explanation of the basis for any Western Atlas Adjustments
and a copy of the calculations of the UNOVA Group Separate Joint Tax
Liability.
(B) Any adjustments made by Western Atlas under Section 3.2(b)(2)(A)
shall be revised in the manner set forth in Section 3.1(b)(2)(B) in
accordance with the procedures set forth therein and moving the dates
specified therein one month forward or substituting for the dates specified
therein such other dates as may be mutually agreed upon by the parties.
(c) For all known tax adjustments, including credits, for the UNOVA
Group for which an amended Joint Return has not been filed as of the
Distribution Date, UNOVA shall notify Western Atlas within 120 days of the
Distribution Date of those known adjustments and resulting tax liabilities or
refunds. The resulting tax liabilities or refunds shall be an amount by which
actual Taxes paid or payable by Western Atlas shall increase or decrease or, if
both parties agree, an amount calculated using an agreed-upon
-25-
effective state tax rate. Within 30 days after such notification, Western
Atlas shall pay to UNOVA, or UNOVA shall pay to Western Atlas, as
appropriate, such liability or refund, as the case may be. The known tax
adjustments so submitted shall be revised in the manner described in Section
3.1(e) in accordance with the procedures set forth therein.
(d) Either party may extend any date referenced in this Section 3.2
with the consent of the other party, and such consent shall not be unreasonably
withheld and shall be deemed to be given unless the other party objects in
writing within a reasonable time after the request therefor.
Section 3.3. CHANGE IN FEDERAL RETURNS AND JOINT RETURNS. (a) The
parties acknowledge that there has not yet been a Final Determination of the
federal income tax liability of the Western Atlas Group for any taxable year
after the fiscal year ended August 1, 1982 and that certain members of the UNOVA
Group were included in the Western Atlas Consolidated Group from March 18, 1994
through the Distribution Date. Except as otherwise provided in this Agreement,
Western Atlas and each member of the Western Atlas Group shall jointly and
severally indemnify UNOVA and each member of the UNOVA Group against and hold
them harmless from
-26-
federal income taxes and all Taxes with respect to Joint Returns for all
periods beginning before the Distribution Date and shall be entitled to
receive and retain all refunds of federal income taxes and Taxes with respect
to Joint Returns with respect to periods beginning before the Distribution
Date.
(b) Except as otherwise provided in this Agreement, if as a result of
any audit, amendment or other change in a federal income tax return or a Joint
Return as filed by Western Atlas or UNOVA with respect to any period, the Final
Determination of an adjustment to any Tax Item generates a Tax Detriment to
Western Atlas or any Western Atlas Business for any period and a corresponding
Tax Benefit for UNOVA or any of the UNOVA Businesses for any period (a
"Reimbursable Adjustment"), then Western Atlas shall notify UNOVA of such
Reimbursable Adjustment.
(c) If UNOVA receives a notice of a Reimbursable Adjustment, UNOVA
shall use reasonable efforts to have the Tax Benefit to UNOVA flow through to
Western Atlas.
(d) If UNOVA is unable to have a Tax Benefit flow through to Western
Atlas as described in Section 3.3(c),
-27-
within ninety (90) days of receiving notice of a Reimbursable Adjustment that
generates a Tax Benefit for UNOVA or any member of the UNOVA Group for any
taxable period(s) with respect to which (i) a federal income tax return or a
Joint Return has been filed, and (ii) the applicable statute of limitations
has not expired, UNOVA (or the appropriate member of the UNOVA Group) shall
file a refund claim pursuant to Code Section 6511 reflecting such Tax Benefit
(or a comparable provision of state law in the case of a Joint Return).
UNOVA shall, within 30 days after receipt, pay to Western Atlas any refunds
received by UNOVA resulting from the filing of a refund claim pursuant to the
preceding sentence, together with any interest refunded with respect thereto.
In the event that UNOVA would have received a refund with respect to such
claim had such refund not been offset by the United States Government (or the
relevant state government in the case of a Joint Return) against
deficiencies, interest or penalties assessed against UNOVA or any member of
the UNOVA Group, UNOVA shall pay to Western Atlas, within 30 days after
receipt of written notice of such offset, an amount equal to the amount of
such offset, together with interest at the overpayment rate established under
Section 6621 of the Code.
-28-
If, for any taxable year, UNOVA is required to and does make a repayment to
the IRS (or a state governmental authority in the case of a Joint Return) of
any portion of a refund described herein, then Western Atlas shall pay to
UNOVA, within 30 days following the date UNOVA notifies Western Atlas of such
repayment, the amount of such repayment, including related interest.
(e) In the event that UNOVA receives notice of a Reimbursable
Adjustment that generates a Tax Benefit for UNOVA or any member of the UNOVA
Group for any taxable period(s) with respect to which a federal income tax
return or a Joint Return has not been filed and UNOVA is unable to have such Tax
Benefit flow through to Western Atlas as described in Section 3.3(c), then UNOVA
(or the appropriate member of the UNOVA Group) shall file federal Form 1120(s)
(or corresponding form under relevant state law in the case of a Joint Return)
reflecting such Tax Benefit and shall pay to Western Atlas, no later than thirty
(30) days after the filing of such return(s), the amount by which such Tax
Benefit actually reduces the federal income taxes and/or Taxes with respect to a
Joint Return payable by UNOVA or such member of the UNOVA Group with respect to
such taxable
-29-
period(s), using the appropriate statutory income tax rate applicable to such
period(s). If, pursuant to a Final Determination for any taxable year, UNOVA
is required to and does make a payment to the IRS (or a state governmental
authority in the case of a Joint Return) representing any portion of the
amount paid to Western Atlas pursuant to the preceding sentence, then Western
Atlas shall pay to UNOVA, within 30 days following the date UNOVA notifies
Western Atlas of such payment to the IRS (or a state governmental authority
in the case of a Joint Return), the amount of such payment, including related
interest.
(f) Western Atlas may notify UNOVA of a Reimbursable Adjustment prior
to the Final Determination of such adjustment if Western Atlas, in its sole
discretion, determines that such Reimbursable Adjustment may, upon Final
Determination, generate a Tax Benefit for UNOVA with respect to which a refund
claim may be barred by the applicable statute of limitations. If Western Atlas
so requests, UNOVA shall file a refund claim for the appropriate taxable
period(s) reflecting such Tax Benefit, and shall pay to Western Atlas any Tax
and interest refunded with respect thereto under the terms and conditions set
forth in subsection (c) of
-30-
this Section 3.3. All refund claims filed by UNOVA pursuant to this Section
3.3(e) shall be prepared in cooperation with Western Atlas, shall fully
explain the circumstances giving rise to the claim and shall be identified
with the notation "Protective Claim".
(g) If as a result of any audit, amendment or other change in a
federal income Tax Return or a Joint Return filed by Western Atlas or UNOVA with
respect to any period beginning after the Distribution Date, the Final
Determination of an adjustment to any Tax Item generates a Tax Detriment to
UNOVA or any UNOVA Business and a corresponding Tax Benefit for Western Atlas or
any Western Atlas Business for any period, then the provisions of subsections
(b), (c), (d), (e) and (f) of this Section 3.3 shall be applied by substituting
Western Atlas for UNOVA and UNOVA for Western Atlas, as the context requires.
(h) Any payment not made on or before the last day on which such
payment could be timely made under this Section 3.3 shall thereafter bear
interest at the rate established for large corporate underpayments pursuant to
Section 6621(c)(1) of the Code.
-31-
(i) Notwithstanding any provision of this Agreement to the contrary,
the total amount payable by UNOVA to Western Atlas with respect to any
Reimbursable Adjustment pursuant to subsections (c), (d) and/or (e) of this
Section 3.3 shall not exceed the amount of the Taxes paid by Western Atlas
with respect to such adjustment.
Section 3.4. CHANGE IN OTHER PRE-DISTRIBUTION YEAR STATE, LOCAL OR
OTHER RETURN. (a) Except as otherwise provided in this Section 3.4, if as a
result of any audit, amendment or other change in a state or local tax return
(other than a Joint Return) or any Other Tax Return filed with respect to any
period beginning before the Distribution Date, there is an adjustment to any Tax
Item, then Western Atlas shall be responsible for and shall hold UNOVA harmless
from any such adjustment generated by or attributable to Western Atlas or any
Western Atlas Business (a "Western Atlas Issue"), and UNOVA shall be responsible
for and shall hold Western Atlas harmless from any such adjustment generated by
or attributable to UNOVA or any UNOVA Business (a "UNOVA Issue"). Upon request
by Western Atlas, UNOVA or any member of the UNOVA Group shall use its
reasonable best efforts to cooperate in any contest of such UNOVA Issue.
-32-
(b) Any payment required to be made under this Section 3.4 shall be
inclusive of interest and penalties and shall be made no later than 30 days
after the party required to make such payment receives written notice of a Final
Determination of the Western Atlas Issue or UNOVA Issue, as the case may be,
giving rise to such payment; provided, however, that no payment shall be due
under this Section 3.4 unless the total amount payable with respect to any
individual state or local return (other than a Joint Return) or Other Tax Return
by Western Atlas or by UNOVA, as the case may be, equals or exceeds $10,000
exclusive of interest and penalties. Any payment not made within the 30-day
period described in the preceding sentence shall thereafter bear interest at the
rate established for large corporate underpayments pursuant to Section
6621(c)(1) of the Code.
Section 3.5. CHANGE IN PRE-DISTRIBUTION YEAR FOREIGN RETURN. Any
legal entity responsible for filing a foreign Tax Return with respect to any
taxable period beginning prior to the Distribution Date shall be responsible for
the payment of all Taxes, penalties and interest whenever assessed, due or
payable in connection therewith and shall be entitled to all refunds, whenever
granted, attributable
-33-
thereto, regardless of whether such legal entity is a
member of the Western Atlas Group or the UNOVA Group before or after the
Distribution Date. Notwithstanding the foregoing, if a decrease in foreign
Taxes results in a Tax Detriment to Western Atlas and a corresponding Tax
Benefit to UNOVA or any of the UNOVA Businesses, UNOVA shall pay Western Atlas
an amount equal to such Tax Detriment. In the event that an increase in foreign
Taxes results in a Tax Benefit to Western Atlas and a corresponding Tax
Detriment to UNOVA or any of the UNOVA Businesses, Western Atlas shall pay UNOVA
an amount equal to the amount by which such Tax Benefit actually reduces the
Taxes of Western Atlas.
Section 3.6. RESTRUCTURING TAXES. (a) Notwithstanding any other
provision of this Agreement to the contrary, and except as otherwise provided in
this Section 3.6, Western Atlas shall pay fifty percent (50%) of all
Restructuring Taxes and UNOVA shall pay fifty percent (50%) of all Restructuring
Taxes. UNOVA and each member of the UNOVA Group will jointly and severally
indemnify Western Atlas and each member of the Western Atlas Group against and
hold them harmless from any payment of Restructuring Taxes in excess of fifty
percent (50%) of such taxes, and Western Atlas and each
-34-
member of the Western Atlas Group will jointly and severally indemnify UNOVA
and each member of the UNOVA Group against and hold them harmless from any
payment of Restructuring Taxes in excess of fifty percent (50%) of such taxes.
(b) In the event that any Restructuring Taxes are attributable to the
acquisition ("Acquisition") of fifty percent (50%) or more of the stock or
assets of Western Atlas or UNOVA by an Unrelated Person, then the party so
acquired, or the party whose assets were so acquired, as the case may be, shall
pay and shall indemnify and hold harmless the other party to this Agreement from
and against any and all Restructuring Taxes and from and against any costs
whatsoever connected with such Restructuring Taxes. For purposes of this
Section 3.6(b), a Restructuring Tax is attributable to an Acquisition if the
Acquisition occurs prior to the assessment of such Restructuring Tax.
(c) Any payment required to be made pursuant to this Section 3.6
shall be made no later than 30 days after the payor receives written notice of a
Final Determination of such Restructuring Taxes. Any payment not so made within
30 days shall thereafter bear interest at the rate established
-35-
for large corporate underpayments pursuant to Section 6621(c)(1) of the Code.
(d) Neither Western Atlas nor UNOVA shall engage in any acts, other
than an Acquisition, which would result in any Restructuring Taxes. In the
event that any Restructuring Taxes are attributable to such acts, the party so
engaged shall pay and shall indemnify and shall hold harmless the other party to
this Agreement from and against any such Restructuring Taxes.
Section 3.7. DUAL CONSOLIDATED LOSS CLOSING AGREEMENT. Prior to
the filing of the 1997 federal income tax return of the Western Atlas
Consolidated Group, in accordance with Treasury Regulation section
1.1503-2(g)(2)(iv)(B)(2)(i), WAI and UNOVA will enter into a closing
agreement with the IRS providing that WAI and UNOVA will be jointly and
severally liable for the total amount of the recapture of dual consolidated
loss and interest charge required in Treasury Regulation section
1.1503-2(g)(2)(vii) related to Norand's dual consolidated losses, if there is
a triggering event described in Treasury Regulation section
1.1503-2(g)(2)(iii).
-36-
In accordance with Treasury Regulation section
1.1503-2(g)(2)(iv)(B)(2)(ii), WAI will agree with the IRS to treat any
potential recapture amount under Treasury Regulation section
1.1503-2(g)(2)(vii) related to Norand's dual consolidated losses as
unrealized built in gain for purposes of Section 384(a) of the Code, subject
to any applicable exceptions thereunder.
In accordance with Treasury Regulation section
1.1503-2(g)(2)(iv)(B)(2)(iii), WAI will file, with the timely filed 1997 federal
income tax return of the Western Atlas Consolidated Group, the agreement
described in Treasury Regulation section 1.1503-2(g)(2)(i).
Prior to the filing of the 1997 federal income tax return of the
Western Atlas Consolidated Group, in accordance with Treasury Regulation section
1.1503-2(g)(2)(iv)(B)(2)(i), WAI and UNOVA will enter into a closing agreement
with the IRS providing that WAI and UNOVA will be jointly and severally liable
for the total amount of the recapture of dual consolidated loss and interest
charge required in Treasury Regulation section 1.1503-2(g)(2)(vii) related to
UNOVA Business' dual consolidated losses, if there is a
-37-
triggering event described in Treasury Regulation section
1.1503-2(g)(2)(iii).
In accordance with Treasury Regulation section
1.1503-2(g)(2)(iv)(B)(2)(ii), UNOVA will agree with the IRS to treat any
potential recapture amount under Treasury Regulation section 1.1503-2(g)(2)(vii)
related to Norand's and UNOVA Business' dual consolidated losses as unrealized
built-in gain for purposes of Section 384(a) of the Code, subject to any
applicable exceptions thereunder.
In accordance with Treasury Regulation section
1.1503-2(g)(2)(iv)(B)(2)(iii), UNOVA will file, with its 1997 UNOVA Group
consolidated Tax Return for the short period beginning the day after the
Distribution Date and ending on December 28, 1997, the agreement described in
Treasury Regulation section 1.1503-2(g)(2)(i).
Section 3.8. LIABILITY FOR TAXES WITH RESPECT TO POST-DISTRIBUTION
PERIODS. Unless otherwise provided in this Agreement, the Western Atlas Group
shall pay all Taxes and shall be entitled to receive and retain all refunds of
Taxes with respect to periods beginning after the Distribution Date which are
attributable to Western Atlas Businesses. Unless
-38-
otherwise provided in this Agreement, the UNOVA Group shall pay all Taxes and
shall be entitled to receive and retain all refunds of Taxes with respect to
periods beginning after the Distribution Date which are attributable to UNOVA
Businesses.
Section 3.9. CARRYBACKS. (a) If, for any taxable year beginning on
or after the Distribution Date, a member of the UNOVA Group (or a successor to
such member) incurs a net operating loss that may be carried back to a
Pre-Distribution Year in which such member was a member of the Western Atlas
Consolidated Group, such member shall make an election pursuant to Section
172(b)(3) of the Code, unless Western Atlas, in its sole discretion, consents to
treat such net operating loss as a Carryback Item pursuant to paragraph (b) of
this Section 3.9.
(b) If, for any taxable year beginning on or after the Distribution
Date, a member of the UNOVA Group (or a successor to such member) incurs a net
capital loss, business tax credit, or foreign tax credit (each a "Carryback
Item") that may be carried back to a consolidated federal income tax return
which was filed by the Western Atlas Consolidated Group, UNOVA (or such member
of the UNOVA Group) may file a refund claim pursuant to Code section 6411
reflecting such
-39-
Carryback Item. In the event that UNOVA (or such member of the UNOVA Group)
shall not elect to file such a claim (or shall not be eligible to file such
claim under applicable law), Western Atlas shall, at the request and expense
of UNOVA, file amended returns or refund claims reflecting such Carryback
Item. Western Atlas shall, within 30 days after receipt, pay to UNOVA any
refunds received by Western Atlas resulting from the filing of a refund claim
pursuant to the foregoing provisions of this Section 3.9(b) (without regard
to whether the income or tax in the Pre-Distribution Year was earned or paid,
as the case may be, by Western Atlas or by UNOVA), together with any interest
refunded with respect thereto. In the event that Western Atlas would have
received a refund with respect to such claim had such refund not been offset
by the United States Government against deficiencies, interest or penalties
assessed against the Western Atlas Consolidated Group or any member thereof
(other than deficiencies, interest or penalties attributable to (i) the
operations of the UNOVA Group and with respect to which the UNOVA Group would
otherwise be responsible under the terms of this Agreement or (ii) a taxable
year of the Western Atlas Consolidated Group for which the statute of
limitations has
-40-
expired), Western Atlas shall pay to UNOVA, within 30 days after receipt of
notice of such offset, an amount equal to the amount of such offset, together
with interest at the overpayment rate established under Section 6621 of the
Code. To the extent that a member of the Western Atlas Group or a member of
the UNOVA Group receives a double benefit as a result of this Section 3.9(b)
and the operation of the Code, Western Atlas or UNOVA, respectively, will
compensate UNOVA or Western Atlas, respectively, for the duplication of the
benefit. If, for any taxable year, Western Atlas is required to and does
make a repayment to the IRS of any portion of a refund described herein, then
UNOVA shall pay to Western Atlas, within 30 days following the date Western
Atlas notifies UNOVA of such repayment, the amount of such repayment,
including interest.
(c) Rules similar to those provided in Sections 3.9(a) and 3.9(b)
with respect to federal income Tax Returns shall be applied to Joint Returns.
Section 3.10. STATUTES OF LIMITATIONS.
(a) Except as otherwise provided in this Agreement, UNOVA or Western
Atlas may allow a statute of limita-
-41-
tions to expire, extend a statute, or make exceptions for any Tax Item in a
final agreement with the IRS or other taxing authority in respect of any
taxable period ending after the Distribution Date, as UNOVA or Western Atlas
in its sole discretion may determine.
(b) At least six months prior to the expiration of the statute of
limitations with respect to any consolidated federal income Tax Return or any
Joint Return of UNOVA for any taxable period, UNOVA shall advise Western Atlas
in writing of the date of such expiration.
Section 3.11. EARNINGS AND PROFITS. The allocation of earnings and
profits described in Section 312(h) of the Code and Treasury Regulation section
1.312-10 shall be made by Western Atlas in its sole discretion and its good
faith determination shall be binding on the parties hereto. Western Atlas shall
provide such allocation to UNOVA on or before the second anniversary of the
Distribution Date.
Section 3.12. LIABILITY FOR NORAND TAXES. Notwithstanding any other
provision of this Agreement to the contrary, UNOVA shall represent Norand
Corporation in connection with, and shall pay and hold harmless Western Atlas
from
-42-
and against any and all Taxes, together with related penalties and interest,
assessed in respect of any audit, amendment or other change in a Tax Return
filed by or on behalf of Norand Corporation for any taxable period ending
prior to the date upon which Norand Corporation became a member of the
Western Atlas Consolidated Group (hereinafter, "Norand Taxes").
Section 3.13. BREACH. Western Atlas shall indemnify and hold
harmless each member of the UNOVA Group and UNOVA shall indemnify and hold
harmless each member of the Western Atlas Group from and against any Taxes,
penalties or interest required to be paid as a result of the breach by a member
of the Western Atlas Group or the UNOVA Group, as the case may be, of any
obligation under this Agreement.
-43-
ARTICLE IV
INDEMNITY: COOPERATION AND EXCHANGE OF INFORMATION
Section 4.1. INDEMNITY.
(a) Western Atlas shall have full responsibility and discretion in
the handling of any federal income tax controversy or controversy with respect
to a Joint Return, including, without limitation, any audit, protest to the
Appeals Division of the IRS, or litigation in Tax Court or any other court of
competent jurisdiction or comparable state governmental authority in the case of
any Joint Return of the Western Atlas Consolidated Group. Upon request by
Western Atlas, UNOVA or any member of the UNOVA Group shall use its reasonable
best efforts to cooperate in a defense in any such federal income tax
controversy or Joint Return controversy with respect to any Reimbursable
Adjustment, or any Restructuring Tax, for which UNOVA could be liable under
Section 3.3 or 3.6 of this Agreement (hereinafter, a "UNOVA Indemnity Issue").
(b) Western Atlas shall (i) promptly notify UNOVA of any inquiries by
any taxing authority or any other administrative, judicial or other governmental
authority that
-44-
relate to any UNOVA Indemnity Issue or any liability of any member of the
UNOVA Group that might arise under this Agreement, (ii) shall provide UNOVA
with such notice and information as is necessary to keep UNOVA reasonably
apprised of the progress of any audit or proceeding involving a UNOVA
Indemnity Issue and (iii) shall in good faith consider all reasonable
suggestions of UNOVA with respect to the contest of such issue. UNOVA shall
promptly notify Western Atlas of any inquiries by any taxing authority or any
other administrative, judicial or other governmental authority that relate to
any Tax that may be imposed on any member of the Western Atlas Group or any
liability of any member of the Western Atlas Group that might arise under
this Agreement.
Section 4.2. COOPERATION AND EXCHANGE OF INFORMATION. (a) Western
Atlas, on behalf of itself and each member of the Western Atlas Group, agrees to
provide the UNOVA Group, and UNOVA, on behalf of itself and each member of the
UNOVA Group, agrees to provide the Western Atlas Group, with such cooperation
and information as the other shall reasonably request in connection with the
preparation or filing of any Tax Return or claim for refund contemplated by this
Agreement or in conducting any audit or other proceeding in
-45-
respect of Taxes. Such cooperation and information shall include without
limitation promptly forwarding copies of appropriate notices and forms or
other communications received from or sent to any taxing authority which
relate to Western Atlas Businesses in the case of the UNOVA Group and UNOVA
Businesses in the case of the Western Atlas Group, or which relate to any Tax
Item for which the other party may bear responsibility under the terms of
this Agreement, and providing copies of all relevant Tax Returns, together
with accompanying schedules and related workpapers, documents relating to
rulings or other determinations by taxing authorities, including, without
limitation, foreign taxing authorities, and records concerning the ownership
and tax basis of property, which either party may possess. Western Atlas
shall make available to UNOVA any information in Western Atlas's possession
that would enable UNOVA to compute the tax basis of its assets or stock.
UNOVA shall collect and make available to Western Atlas foreign tax receipts
with respect to periods beginning before the Distribution Date, regardless of
when such foreign tax receipts are issued. Each party shall make its
employees and facilities available on a mutually convenient basis to provide
explanation of any
-46-
documents or information provided hereunder. However, neither party or its
employees shall make any voluntary disclosures to any taxing authority,
respecting any taxable period or Tax Item for which the other party may bear
responsibility under the terms of this Agreement, without the specific prior
consent of such other party, which consent shall not be unreasonably withheld.
(b) Subject to subsection (d) of this Section 4.2, UNOVA and Western
Atlas agree to retain all Tax Returns, related schedules and workpapers, and all
material records and other documents relating thereto existing on the date
hereof or created through or with respect to periods ending on or before the
first anniversary of the Distribution Date, until the expiration of the statute
of limitations (including extensions) of the taxable years to which such Tax
Returns and other documents relate and until the Final Determination of any
payments which may be required in respect of such years under this Agreement.
Western Atlas and UNOVA agree to advise each other promptly of any such Final
Determination.
(c) If any member of the Western Atlas Group or the UNOVA Group, as
the case may be, fails to provide any information requested pursuant to Section
3.1(b)(1), Section
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3.2(a) or this Section 4.2 by (i) the date(s) specified in such Section or
(ii) if no date is specified, within a reasonable period, as determined in
good faith by the party requesting the information, then the requesting party
shall have the right to engage a public accountant of its choice to gather
such information. UNOVA and Western Atlas, as the case may be, agree upon 24
hours' notice, in the case of a failure to provide information pursuant to
Section 3.1(b)(1) or Section 3.2(a) of this Agreement, and otherwise upon 30
days' notice after the expiration of such reasonable period, to permit any
such public accountant full access to all appropriate records or other
information in the possession of any member of the Western Atlas Group or the
UNOVA Group, as the case may be, during reasonable business hours and to
reimburse or pay directly all costs and expenses in connection with the
engagement of such public accountant.
(d) Upon the expiration of any statute of limitations, the
documentation of Western Atlas or UNOVA or any member of their respective
groups, including, without limitation, books, records, Tax Returns and all
supporting schedules and information relating thereto, may be destroyed or
disposed of unless (i) the other party requests that such
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documentation be retained, by written notice describing in reasonable detail
the documentation to be retained, and (ii) the recipient of such notice
agrees in writing to such retention. If the recipient of such notice
objects, then the party proposing the retention shall promptly offer to take
delivery of such materials from the objecting party at the expense of the
objecting party.
Section 4.3. RELIANCE ON EXCHANGED INFORMATION. If either Western
Atlas or UNOVA, or a member of their respective groups, supplies information
to another party upon such party's request, and an officer of the requesting
party intends to sign a statement or other document under penalties of
perjury in reliance upon the accuracy of such information, then a duly
authorized officer of the party supplying such information shall certify, to
the best of such party's knowledge, the accuracy and completeness of the
information so supplied.
ARTICLE V
MISCELLANEOUS
Section 5.1. RESERVES. The parties agree that all accrued taxes,
tax reserves and other tax balances in the
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balance sheet accounts of Western Atlas and its subsidiaries as of the
Distribution Date, including but not limited to Financial Consolidations
accounts (hereinafter, "Tax Reserves"), shall remain with the Western Atlas
Group after the UNOVA Distribution, except for those Tax Reserves which shall
belong to the UNOVA Group upon the UNOVA Distribution, as set forth by
company and division on Schedule B hereto.
Section 5.2. EXPENSES. Unless otherwise expressly provided in this
Agreement or in the Distribution Agreement, each party shall bear any and all
expenses that arise from their respective obligations under this Agreement.
Section 5.3. PAYMENTS. All payments to be made under this Agreement
shall be made in immediately available funds.
Section 5.4. ENTIRE AGREEMENT; TERMINATION OF PRIOR AGREEMENTS OTHER
THAN ▇▇▇▇▇▇ AGREEMENT. Except for that certain Tax Sharing Agreement dated as
of March 17, 1994 by and between ▇▇▇▇▇▇ Industries, Inc. and Western Atlas (the
"▇▇▇▇▇▇ Agreement"), this Agreement constitutes the entire agreement of the
parties concerning the subject matter hereof and supersedes all other
agreements, whether or not written,
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in respect of any Tax between or among any member or members of the Western
Atlas Group, on the one hand, and any member or members of the UNOVA Group,
on the other hand. All such agreements other than the ▇▇▇▇▇▇ Agreement are
hereby canceled and any rights or obligations existing thereunder are hereby
fully and finally settled without any payment by any party thereto. This
Agreement may not be amended except by an agreement in writing, signed by the
parties hereto. Anything in this Agreement or the Distribution Agreement to
the contrary notwithstanding, in the event and to the extent that there shall
be a conflict between the provisions of this Agreement and the Distribution
Agreement, the provisions of this Agreement shall control. In the event and
to the extent that there shall be a conflict between the provisions of this
Agreement and the ▇▇▇▇▇▇ Agreement, the provisions of the ▇▇▇▇▇▇ Agreement
shall control.
Section 5.5. NOTICES. All notices and other communications
hereunder shall be in writing and shall be personally delivered (provided a
receipt is obtained therefor); or mailed by registered or certified mail (return
receipt requested); transmitted by telex or telecopy; or sent by private
messenger or carrier that issues delivery receipts, to
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the parties at the following addresses (or at such other addresses for a
party as shall be specified by like notice) and shall be deemed given on the
date on which such notice is received:
To Western Atlas or any member of the Western Atlas Group:
General Counsel
Western Atlas Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
To UNOVA or any member of the UNOVA Group:
General Counsel
UNOVA Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Section 5.6. APPLICATION TO PRESENT AND FUTURE SUBSIDIARIES. This
Agreement is being entered into by Western Atlas and UNOVA on behalf of
themselves and each member of the Western Atlas Group and UNOVA Group,
respectively. This Agreement shall constitute a direct obligation of each such
member and shall be deemed to have been readopted and affirmed on behalf of any
corporation which becomes a member of the Western Atlas Group and UNOVA Group in
the future. Western Atlas and UNOVA hereby guarantee the performance of all
actions, agreements and obligations provided for under
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this Agreement of each member of the Western Atlas Group and the UNOVA Group,
respectively. Western Atlas and UNOVA shall, upon the written request of the
other, cause any of their respective group members formally to execute this
Agreement. This Agreement shall be binding upon, and shall inure to the
benefit of, the successors, assigns and persons controlling any of the
corporations bound hereby for so long as such successors, assigns or
controlling persons are members of the Western Atlas Group or the UNOVA Group
or their successors and assigns.
Section 5.7. TERM. This Agreement shall commence on the date of
execution indicated below and shall continue in effect until otherwise agreed to
in writing by Western Atlas and UNOVA or their successors.
Section 5.8. TITLES AND HEADINGS. Titles and headings to sections
herein are inserted for the convenience of reference only and are not intended
to be a part or to affect the meaning or interpretation of this Agreement.
Section 5.9. LEGAL ENFORCEABILITY. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective
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to the extent of such prohibition or unenforceability without invalidating
the remaining provisions hereof. Any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provisions
in any other jurisdiction. Without prejudice to any rights or remedies
otherwise available to any party hereto, each party hereto acknowledges that
damages would be an inadequate remedy for any breach of the provisions of
this Agreement and agrees that the obligations of the parties hereunder shall
be specifically enforceable.
Section 5.10. FURTHER ASSURANCES. Subject to the provisions hereof,
the parties hereto shall make, execute, acknowledge and deliver such other
instruments and documents, and take all such other actions, as may be reasonably
required in order to effectuate the purposes of this Agreement and to consummate
the transactions contemplated hereby. Subject to the provisions hereof, each of
the parties shall, in connection with entering into this Agreement, perform its
obligations hereunder and take any and all actions relating hereto, comply with
all applicable laws, regulations, orders, and decrees, obtain all required
consents and approvals and make all required filings with any governmental
agency, other
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regulatory or administrative agency, commission or similar authority and
promptly provide the other parties with all such information as they may
reasonably request in order to be able to comply with the provisions of this
sentence.
Section 5.11. PARTIES IN INTEREST. Except as herein otherwise
specifically provided, nothing in this Agreement expressed or implied is
intended to confer any right or benefit upon any person, firm or corporation
other than the parties and their respective successors and permitted assigns.
Section 5.12. SETOFF. All payments to be made under this Agreement
shall be made without setoff, counterclaim or withholding, all of which are
expressly waived.
Section 5.13. CHANGE OF LAW. If, due to any change in applicable law
or regulations or the interpretation thereof by any court of law or other
governing body having jurisdiction subsequent to the date of this Agreement,
performance of any provision of this Agreement or any transaction contemplated
thereby shall become impracticable or impossible, the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
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or substantially the same result as that contemplated by such provision.
Section 5.14. GOVERNING LAW AND INTERPRETATION. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware applicable to agreements made and to be performed in the State of
Delaware, without regard to conflict of laws principles thereof.
Section 5.15. RESOLUTION OF CERTAIN DISPUTES.
(a) Disagreements between Western Atlas, on the one hand, and the
members of the UNOVA Group, on the other, with respect to amounts that Western
Atlas claims are owed by the UNOVA Group, or that the UNOVA Group claims are
owed by Western Atlas, under Sections 3.3, 3.4 or 3.6 of this Agreement shall be
resolved as follows: No later than the last day on which a disputed payment
could be timely made pursuant to Section 3.3, 3.4 or 3.6 of this Agreement, as
the case may be, the complaining party shall provide written notice to the other
party of the amount of the payment with which it disagrees and the basis for
such disagreement. Any disagreement that is not resolved by mutual agreement
within 30 days of such notice shall be resolved by arbitration pursuant to this
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Section 5.15. Upon the commencement of the 30-day dispute resolution period
specified in the preceding sentence until the time of a final resolution by
the arbitrator, the applicable time period for making a disputed payment
pursuant to Section 3.3, 3.4 or 3.6 shall be tolled. Such tolling shall not
affect the accrual of interest pursuant to Section 3.3(h), 3.4(b) or 3.6(c).
(b) Any arbitrator selected pursuant to this Section 5.15 shall have
at least five years of experience in the field of corporate taxation, shall be
an attorney licensed to practice law in any state of the United States and shall
not be or have been employed by or affiliated with either party. The parties
shall first attempt to agree on a mutually satisfactory arbitrator. If the
parties are unable to agree on a mutually satisfactory arbitrator within 15 days
after expiration of the 30-day dispute resolution period specified in subsection
(a) of this Section 5.15, such arbitrator shall be selected by the American
Arbitration Association. If the position of an arbitrator is vacated, the
person or persons who originally selected the arbitrator to fill such position
shall select a new arbitrator to fill the position. The
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arbitrator's fees and expenses shall be borne equally by Western Atlas and
UNOVA.
(c) Arbitration Procedure.
(i) The arbitration shall be conducted in accordance with the rules set
forth in Exhibit A. The arbitration shall not be conducted under the
auspices of the American Arbitration Association.
(ii) Each party within 30 days after engagement of the arbitrator shall
submit to the arbitrator a written statement of the party's position
(including the total net amount it asserts is owed by it or is due to it)
regarding the total amount in dispute, which position shall be consistent
with any notice provided by such party pursuant to subsection (a) of this
Section 5.15, together with a copy of such notice.
(iii) The arbitrator shall base his decision on the following standards.
In the case of a factual dispute between the parties, the arbitrator shall
make a determination of the correct facts. In the case of a dispute
regarding a legal issue or a settlement amount, the arbitrator shall consider
the strength of Western Atlas's and UNOVA's litigation positions (with
respect to all issues
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raised by the taxing authority with whom the settlement was made in a Revenue
Agent's Report or similar document) relative to the costs and risks of
litigation. Upon making determinations with respect to all issues in dispute
the arbitrator shall find in favor of the party whose statement submitted
pursuant to paragraph (ii) above proposed the amount closest to the aggregate
of the amounts so determined.
(iv) The arbitrator shall render a written decision stating only the
amount of such decision as soon as practicable. The arbitrator shall also
orally explain the bases of such decision to both parties as soon as
practicable. If and only if both parties request, the arbitrator shall state
the bases of such decision in writing. The arbitrator's decision shall be in
an amount equal to one of the total amounts asserted by one of the parties in
the written statements submitted pursuant to paragraph (ii) above. The
arbitrator shall not, and is not authorized to, render a decision in any
other amount.
(v) The arbitrator's decision shall be final and binding on the parties.
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Section 5.16. CONFIDENTIALITY. Each party shall hold and shall
cause its consultants and advisors to hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the
opinion of its counsel, by other requirements of law, all information (other
than any such information relating solely to the business or affairs of such
party) concerning the other parties hereto furnished it by such other party
or its representatives pursuant to this Agreement (except to the extent that
such information can be shown to have been (i) previously known by the party
to which it was furnished, (ii) in the public domain through no fault of such
party, or (iii) later lawfully acquired from other sources by the party to
which it was furnished), and each party shall not release or disclose such
information to any other person, except its auditors, attorneys, financial
advisors, bankers and other consultants and advisors who shall be advised of
the provisions of this Agreement. Each party shall be deemed to have
satisfied its obligation to hold confidential information concerning or
supplied by the other party if it exercises the same care as it takes to
preserve confidentiality for its own similar information.
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Section 5.17. LIMITATION ON WAIVERS. The provisions of this
Agreement may be waived only if the waiver is in writing and signed by the
party making the waiver. No delay or omission in exercising any right under
this Agreement will operate as a waiver of the right on any further occasion.
No waiver of any particular provision of this Agreement will be treated as a
waiver of any other provision, and no waiver of any rights will be deemed a
continuing waiver of the same right with respect to subsequent occurrences
that give rise to it. All rights given by this Agreement are cumulative to
other rights provided for in this Agreement and to any other rights available
under applicable law.
Section 5.18. COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.
Section 5.19. FAIR MEANING. This Agreement shall be construed in
accordance with its fair meaning and shall not be construed strictly against
the drafter.
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Section 5.20. CONSTRUCTION. In this Agreement, unless the context
otherwise requires, the terms "herein," "hereof," "hereto," and "hereunder"
refer to this Agreement.
Section 5.21. TERMINATION. This Agreement may be terminated at any
time prior to the Distribution Date, without the approval of UNOVA, by and in
the sole discretion of the Western Atlas Board of Directors. In the event of
such termination, no party shall have any liability to the other party from
or for the terminated Agreement, except that expenses incurred in connection
with the preparation of this Agreement shall be paid as provided in Section
5.2 hereof.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
WESTERN ATLAS INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
UNOVA, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
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EXHIBIT "A"
TO THE TAX SHARING AGREEMENT
ARBITRATION PROCEDURAL RULES
1. Administration and Conduct of Arbitration.
(a) At the discretion of the Arbitrator, an administrative conference with
the Arbitrator and the parties and/or their representatives will be scheduled
in appropriate cases to expedite the Arbitration proceedings.
(b) It is intended that the Arbitration be conducted in an expeditious manner
and without evidentiary hearing or oral presentation and argument, unless the
Arbitrator determines, at any time, that an evidentiary hearing, and/or oral
presentation or argument is desired by the Arbitrator for the rendition of an
award or a decision. However, the Arbitrator shall fix limits on the
duration of any such evidentiary hearing and/or oral presentation and
argument, in advance, with time equally divided between the parties.
(c) On such schedule as may be established by the Arbitrator, each of the
parties shall submit simultaneous briefs, including exhibits, to the
Arbitrator supporting their respective positions. There shall be no limit to
the
number of pages included in such briefs or to the number of exhibits. Each
party shall have a reasonable opportunity, as determined by the Arbitrator,
to reply to the brief of the other. The Arbitrator shall have the right to
request additional written statements of all or any of the parties; provided
that each party shall have the reasonable opportunity to reply to any such
additional statements submitted in response to the request of the Arbitrator.
2. Fixing of Locale.
The parties may mutually agree to the locale where the Arbitration is to
be held. If the parties cannot agree on the locale, the Arbitrator shall
have the power to determine the locale and its decision shall be final and
binding.
3. Date, Time and Place of Hearing.
The Arbitrator shall set the date, time, and place for any hearing. The
Arbitrator shall mail to each party notice thereof at least ten days in
advance, unless the
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parties by mutual agreement waive such notice or modify the terms thereof.
4. Postponements.
The Arbitrator for good cause show may postpone any
hearing upon the request of a party or upon the Arbitrator's own initiative,
and shall also grant such postponement when all of the parties agree thereto.
5. Oaths.
Before proceeding with the first hearing, the Arbitrator
may take an oath of office and, if required by law, shall do so. The
Arbitrator may require witnesses to testify under oath administered by any
duly qualified person and, if it is required by law, shall do so.
6. Order of Proceedings and Communication with Arbitrator.
(a) A hearing shall be opened by the filing of the oath of the
Arbitrator, where required, and by the recording of the date, time, and place
of the hearing, and the presence of the Arbitrator, the parties, and their
representatives, if any.
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(b) The Arbitrator may, at the beginning of the hearing, ask for
statements clarifying the issues involved.
(c) The complaining party shall then present evidence and/or
argument, as required by the Arbitrator, to support its claim. The defending
party shall then present evidence and/or argument supporting its position and
responding to the position of the other. Witnesses, if any, for each party
shall submit to questions or other examination. The Arbitrator has the
discretion to vary this procedure but, within the time limits specified
above, shall afford a full and equal opportunity to all parties for the
presentation of any material and relevant evidence.
(d) Exhibits, when offered by either party, may be received in
evidence by the Arbitrator. The names and addresses of any witnesses and a
description of the exhibits in the order received shall be made a part of the
record.
(e) There shall be no direct communication between the parties and
the Arbitrator other than at oral hearing, unless the parties and the
Arbitrator agree in writing.
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7. Arbitration in the Absence of a Party or Representative.
Unless the law provides to the contrary, the Arbitration may proceed in
the absence of any party or representative who, after due notice, fails to be
present or fails to obtain a postponement ("absence in default"). An award
shall not be made solely on the default of a party. The Arbitrator shall
require the party who is present to submit such evidence as the Arbitrator
may require for the making of an award.
8. Evidence.
(a) The parties may offer such evidence as is relevant and material to the
dispute and shall produce such evidence as the Arbitrator may deem necessary
to an understanding and determination of the dispute.
(b) The Arbitrator shall be the judge of the relevance and materiality of the
evidence offered, and conformity to legal rules of evidence shall not be
necessary. All evidence shall be taken in the presence of the Arbitrator and
all of the
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parties, except where any of the parties is absent in default or has waived
the right to be present.
9. Evidence by Affidavit and Post-Hearing Filing of
Documents or Other Evidence.
(a) The Arbitrator may receive and consider the evidence of witnesses by
affidavit, but shall give it only such weight as the Arbitrator deems it to
be entitled to after consideration of any objection made to its admission.
(b) If the parties agree or the Arbitrator directs that documents or other
evidence be submitted to the Arbitrator after the hearing, the documents or
other evidence shall be filed with the Arbitrator. All parties shall be
afforded an opportunity to examine such documents or other evidence.
10. Closing of Hearing.
If satisfied that the record is complete, the Arbitrator shall declare the
hearing closed and a minute thereof shall be recorded. If briefs are to be
filed, the hearing shall be declared closed as of the final date set by the
Arbitrator for the receipt of briefs. If documents are
-6-
to be filed as provided in Section 9 and the date set for their receipt is
later than that set for the receipt of briefs, the later date shall be the
date of closing of the hearing.
11. Reopening of Hearing.
The hearing may be reopened on the Arbitrator's initiative at any time
before the award is made. If reopening the hearing would prevent the making
of the award within the specified time limit, the matter may not be reopened
unless the parties agree on an extension of time.
12. Waiver of Oral Hearing.
The parties may provide, by written agreement, for the waiver of oral
hearing in any case.
13. Waiver of Rules.
Any party who proceeds with the Arbitration after knowledge that any
provision or requirement of these rules has not been complied with and who
fails to state an objec-
-7-
tion thereto in writing shall be deemed to have waived the right to object.
14. Extensions of Time.
The parties may modify any period of time by mutual agreement. The
Arbitrator may for good cause extend any period of time established by these
rules, except the time for making the award. The Arbitrator shall notify the
parties of any extension.
15. Serving of Notice.
Each party shall be deemed to have consented that any papers, notices, or
process necessary or proper for the initiation or continuation of an
Arbitration under these rules, for any court action in connection therewith,
or for the entry of judgment on any award made under these rules may be
served on a party by mail addressed to the party or its representative at the
last known address or by personal service, in or outside the state where the
Arbitration is to be held, provided that reasonable opportunity to be heard
with regard thereto has been granted to the party.
-8-
16. Time of the Award.
The award shall be made promptly by the Arbitrator and, unless otherwise
agreed by the parties in writing or specified by law, no later than thirty
days from the date of closing the hearing, or, if oral hearings have not been
held, from the date of the transmittal of the final briefs, statements and
proofs to the Arbitrator.
17. Award upon Settlement.
If the parties settle their dispute during the course of the Arbitration,
the Arbitrator may set forth the terms of the agreed settlement in an award.
Such an award is referred to as a consent award.
18. Deliver of Award to Parties.
Parties shall accept as legal delivery of the award the placing of the
award or a true copy thereof in the mail addressed to a party or its
representative at the last known address, personal service of the award, or
the filing of the award in any other manner that is permitted by law.
-9-
19. Applications to Court and Exclusion of Liability.
(a) No judicial proceeding by a party relating to the subject matter of the
Arbitration shall be deemed a waiver of the party's right to arbitrate.
(b) Parties to these rules shall be deemed to have consented that judgment
upon the Arbitration award may be entered in any federal or state court
having jurisdiction thereof.
20. Interpretation and Application of Rules.
The Arbitrator shall interpret and apply these rules insofar as they
relate to the Arbitrator's powers and duties. If there is more than one
Arbitrator and a difference arises among them concerning the meaning or
application of these rules, it shall be decided by a majority vote.
21. Complex Procedures.
Notwithstanding the foregoing, if the parties mutually agree, any
Arbitration to be conducted between the parties may be concluded in the
manner provided for in the Supplementary Procedure for Large Complex Disputes
of the
-10-
American Arbitration Association, with such modification as
the parties may agree upon.
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