EXHIBIT 10.12
3/17/97
AMENDED AND RESTATED TAX DISAFFILIATION AGREEMENT, dated as of by
and between Praxair, Inc., a Delaware corporation having its principal
offices at 00 Xxx Xxxxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxxxx 00000-0000 ("PX") and
Chicago Bridge & Iron Company, a Delaware corporation having its principal
offices at 0000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000 ("Old CBIC")
and BIMV, Inc., a Delaware corporation to be renamed Chicago Bridge & Iron
Company ("New CBIC").
WHEREAS, Old CBIC was a wholly-owned subsidiary of, and a member of the
affiliated group under Section 1504 of the Internal Revenue Code of 1986 as
amended ("Section 1504") of CBI Industries, Inc., a Delaware corporation
("Industries"); and
WHEREAS, on January 12, 1996 PX acquired a majority of the common stock
of Industries and as a result Industries and its subsidiaries (including Old
CBIC) became members of PX's affiliated group under Section 1504; and
WHEREAS, in December 1996 Industries was merged into PX; and
WHEREAS, PX's wholly-owned subsidiary, Chi Bridge Holdings, a Delaware
corporation ("Holdings") owns all the outstanding shares of Old CBIC, and
Whereas, Old CBIC has declared a distribution of its Domestic Stock (as
defined in the Assignment Agreement #5) to Holdings; and
Whereas, Holdings owns all of the outstanding capital stock of New CBIC
and makes an additional capital contribution of certain assets to New CBIC (as
defined in the Contribution and Assumption Agreement #6); and
WHEREAS, PX intends to cause Chi Bridge to divest all or a majority of
its interest in New CBIC; and, as a consequence, New CBIC and the New CBIC
subsidiaries will no longer be members of PX's affiliated group under Section
1504; and
WHEREAS, PX and New CBIC desire to set forth their rights and
obligations with respect to taxes due for periods both before and after the date
on which New CBIC ceases to be a member of Praxair's affiliated group under
Section 1504.
NOW THEREFORE, for and in consideration of the premises and the mutual
covenants herein, the parties hereto agree as follows:
3/17/97
Article I
Definitions
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For the purpose of this Agreement,
1.01 "affiliated group" shall have the meaning set forth in Section
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1504 of the Code.
1.02 the "amount" of any liability for, or refund of, taxes shall be
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determined in accordance with applicable tax principles (and without regard to
the amount recorded for financial statement purposes) and shall mean the amount
in United States dollars or, if expressed in foreign currency, its value in
United States dollars at the translation rate based on the noon spot rates of
exchange quoted by Chase Manhattan Bank, New York, New York (or its successor),
on the last business day which is five business days prior to the date of the
settlement for such item.
1.03 "CB&I Companies" shall have the meaning as given to such term in
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the Separation Agreement.
1.04 "New CBIC Retained Tax Liabilities" shall mean the liabilities of
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New CBIC set out in Section 2.02.
1.05 "Code" shall mean the Internal Revenue Code of 1986, as amended.
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1.06 "Date of Transfer" shall mean the last day on which New CBIC is a
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member of the affiliated group of which PX is the common parent within the
meaning of Section 1504(a) of the Code, such membership ceasing because of the
Transfer. The close of the Date of Transfer shall be 11:59 PM on the date of
transfer.
1.07 "Deemed Dividend" shall mean any income generated under Section 951
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of the Code.
1.08 "Final Determination" shall mean with respect to any issue (1) a
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decision, judgment, decree or other order by any court of competent
jurisdiction, which decision, judgment, decree or other order has become final
and not subject to further appeal, (2) a closing agreement entered into under
Section 7121 of the Code or any other binding settlement agreement (whether or
not with the Internal Revenue Service) entered into in connection with or in
contemplation of an administrative or judicial proceeding, or (3) the completion
of the highest level of administrative proceedings if a judicial contest is not
or is no longer available.
1.09 "Formula" shall have the meaning set forth in Section 3.02(b)
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hereof.
1.10 "Other Party" shall have the meaning set forth in Section 5.01
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hereof.
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1.11 "Period After Transfer" shall mean any taxable year or other
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taxable period beginning after the close of the Date of Transfer and, in the
case of any taxable year or other taxable period that includes the Date of
Transfer but does not end on such date, that part of the taxable year or other
taxable period that begins after the close of the Date of Transfer.
1.12 "Period Before Transfer" shall mean any taxable year or other
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taxable period that ends on or before the Date of Transfer and, in the case of
any taxable year or other taxable period that includes the Date of Transfer,
that part of the taxable year or other taxable period through the close of the
Date of Transfer.
1.13 "PX Retained Tax Liabilities" shall mean the liabilities of PX set
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out in Section 2.04.
1.14 "Responsible Party" shall have the meaning set forth in Section
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5.01 hereof.
1.15 "Reverse Timing Adjustment" shall mean an audit or other adjustment
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with respect to the CB&I Companies for a Period Before Transfer that is
available to reduce the taxes of Old CBIC or a Subsidiary of Old CBIC for any
Period Before Transfer (whether or not the affiliated group of which PX is the
common parent is actually able to use such adjustment to reduce the affiliated
group's tax for any period) and which may increase the taxes of New CBIC or a
Subsidiary of New CBIC for any Period After Transfer.
1.16 "Separation Agreement" shall mean the Separation Agreement of even
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date herewith by and between PX and Old CBIC and other persons who become
party thereto, as from time to time amended.
1.17 "Subsidiary" shall mean a corporation, partnership, joint venture
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for other business entity if 10% or more of the outstanding equity or voting
power of the entity is owned directly or indirectly by the corporation with
respect to which such term is used. For purposes of this Agreement, (i) MQS
Inspections, Inc., Cooperheat, Inc. and Ershigs, Inc. shall not be considered to
be Subsidiaries of Old CBIC or New CBIC; instead, each of those three companies
shall be deemed, with respect to the Period Before Transfer when any is a member
of the affiliated group under Section 1504 of either PX or Industries, to be a
wholly-owned subsidiary of Chi Bridge and (ii) except as otherwise specifically
stated the Subsidiaries of PX shall not include Old CBIC or New CBIC or their
Subsidiaries.
1.18 "tax" or "taxes" whether used in the form of a noun or adjective
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shall mean taxes on or measured by income, franchise, gross receipts, sales,
use, excise, payroll, personal property, real property, ad-valorem, value-added,
leasing, leasing use or other taxes, levies, imposts, duties, charges or
withholdings of any nature. Whenever
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the term "tax" or "taxes" is used, whether modified or not, it shall include
penalties, fines, additions to tax and interest thoreon.
1.19 "Tax Sharing Practice" means the practice of sharing the tax
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liabilities of PX, Industries, Old CBIC, New CBIC and their respective
Subsidiaries for taxes on, or measured by, income that are reported on a
consolidated, combined, unitary or similar basis, as more fully described in
Section 2.01 hereof.
1.20 "Timing Adjustment" shall mean an audit or other adjustment with
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respect to the CB&I Companies for a Period Before Transfer that is available to
reduce the taxes of New CBIC or a Subsidiary of New CBIC for any Period After
Transfer (whether or not New CBIC or a Subsidiary of New CBIC is actually able
to use such adjustment to reduce its tax liability currently or in the future),
including without limitation a disallowance of foreign tax credits claimed for
a Period Before Transfer that are eligible to be carried forward and used by New
CBIC or a Subsidiary of New CBIC in a Period After Transfer.
1.21. "Transfer" shall mean Chi Bridge's transfer of sufficient shares
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of New CBIC to cause New CBIC to no longer be a member of PX's affiliated group
under Section 1504.
Article II
Liabilities for, and Refunds of, Taxes
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2.01 Tax Sharing Practice. Payments and Termination.
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(a) PX and New CBIC acknowledge that the Tax Sharing Practice
requires New CBIC in the case of consolidated, combined, unitary or similar tax
returns to pay to PX the amount of taxes on, or measured by income, for which
Old CBIC would be liable if it filed such a return as the common parent (or
similar agent) for its affiliated (or similar) group, except that
(i) dividends or Deemed Dividends from Old CBIC's foreign
Subsidiaries are not includible in income of Old CBIC or any
Subsidiaries of Old CBIC;
(ii) New CBIC is liable for that proportion of the
consolidated alternative minimum tax liability of the affiliated
group of which PX or Industries is the common parent that the
alternative minimum taxable income of Old CBIC and its Subsidiaries
(determined under the terms of the Tax Sharing Practice as modified
by this Article II) bears to the consolidated alternative minimum
taxable income of the affiliated group of which PX or Industries is
the common parent;
(iii) New CBIC is liable for that proportion of environmental
tax liability, as defined in and pursuant to Code Section 59A, of
the affiliated group of which PX is the common parent that the
modified alternative
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minimum taxable income of Old CBIC and its Subsidiaries (determined
under the terms of the Tax Sharing Practice as modified by this
Article II) bears to the consolidated modified alternative minimum
taxable income of the affiliated group of which PX or Industries is
the common parent;
(iv) PX pays New CBIC thirty five percent (35%) of any net
operating losses or capital losses of Old CBIC (determined under
the terms of the Tax Sharing Practice as modified by this Article
II) which actually reduce the amount of tax liability of the
affiliated group of which PX or Industries is the common parent;
(v) PX pays New CBIC for any general business credits (as
defined in Code Section 38) of Old CBIC (determined under the terms
of the Tax Practice as modified by this Article II) that actually
reduce the tax liability of the affiliated group of which PX or
Industries is the common parent; and
(vi) minimum tax credit (as defined in Code Section 53) is
allocated to New CBIC in the same proportion as the allocation of
consolidated alternative minimum tax liability; and
(vii) Old CBIC's taxable income shall not include any item of
income arising out of (A) any disposition or other transfer of MQS
Inspections, Inc., Cooperheat, Inc. or Ershigs, Inc., (B) any
disposition or other transfer in connection with the
Reorganization, as defined in the Form S-1 Registration Statement
of Chicago Bridge & Iron Company N.V., as amended or (C) New CBIC's
ceasing to be a member of a consolidated, combined, unitary or
similar tax group as a result of the Transfer; and
(viii) PX shall receive the tax benefit related to Industries
restricted stock and stock options held by the employees of Old
CBIC and its Subsidiaries.
(b) Subject to the provisions of Article 7, PX, with cooperation of
New CBIC, shall initially determine the amount owed to PX or New CBIC under the
Tax Sharing Practice as modified by this Article II for the last two Periods
Before Transfer within 30 (thirty) calendar days after the filing of the tax
returns that include those periods, based upon the tax shown as due on PX tax
returns as originally filed and taking into account any prior estimated taxes
paid by either. PX and New CBIC acknowledge that PX and Old CBIC have made
quarterly estimated payments pursuant to the Tax Sharing Practices through the
Date of Transfer. If such payment exceed Old CBIC's liability pursuant to the
Tax Sharing Practice with respect to any applicable Period Before Transfer, PX
shall refund such excess to New CBIC. After returns are filed by PX or
Industries with respect to any Period Before Transfer, Sections 2.02, 2.03,
2.04, 2.06 and 3.01 shall be the sections of this Agreement governing the
consequences of adjustments to such returns.
(c) Except as set forth in this Section 2.01(c), any and all prior
tax sharing agreements or practices between Old CBIC or any of its Subsidiaries
with PX or Industries or any of their Subsidiaries, shall be terminated with
respect to New CBIC
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and its Subsidiaries as of the Date of Transfer and, from and after the Date of
Transfer, neither New CBIC or any of its Subsidiaries nor PX or any of its
Subsidiaries shall have any further rights or liabilities thereunder. The Tax
Sharing Practice as described in Section 2.01 (a) shall continue in effect as
set forth in Sections 2.01(b), 2.02(c) and 2.04(b) of this Agreement. Nothing
in this Section 2.01(c) shall be construed to terminate the Separation
Agreement.
2.02 "Liability of New CBIC" New CBIC shall be liable for, and shall
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indemnify, defend and hold PX (on its own behalf and as the successor of
Industries) and its Subsidiaries, harmless against,
(a) in the case of any Period Before Transfer;
(i) any liability for federal income taxes caused by a (A)
computational error in reporting items of income, gain, loss,
deduction or credit (such as an unintentional erroneous exclusion
of an item of income or a double inclusion of the same item of
deduction) of Old CBIC or its Subsidiaries for federal income tax
purposes, (B) Timing Adjustments with respect to the CB&I
Companies, whether operated by Old CBIC or its Subsidiaries, (C)
disallowance of research and development credits for federal income
tax purposes claimed by Old CBIC or its Subsidiaries (after giving
effect to any deduction for research and development expenses
allowed, if any, as a direct result of the disallowance of such
research and development credits) to the extent such credits were
actually utilized in a consolidated tax return filed by PX or
Industries;
(ii) any liability for state or local taxes on or measured by
income caused by an item described in (a)(i)(A) or (B) above if for
purposes of such tax a consolidated, combined or unitary return
that included Old CBIC or a Subsidiary of Old CBIC and PX (or
Industries) or a subsidiary of PX (or Industries) was filed;
(iii) any liability with respect to separate returns for state
or local taxes on or measured by income filed by PX (or Industries)
or any of PX (or Industries) Subsidiaries to the extent caused by a
Timing Adjustment with respect to the CB&I Companies (such as the
disallowance of a deduction claimed by PX (or Industries) or any of
PX (or Industries) Subsidiary that is available to New CBIC or a
New CBIC Subsidiary in a Period After Transfer);
(iv) any sales, use, property, transfer, value added, excise
and similar taxes with respect to the CB&I Companies;
(v) any payroll taxes with respect to employees of Old CBIC and
its Subsidiaries;
(vi) any liability for taxes attributable to fraudulent acts of
Old CBIC or any Old CBIC Subsidiaries, or an employee of the CB&I
Companies while acting as an employee of the CB&I Companies; and
(vii) any liability for taxes in foreign jurisdictions incurred
by any foreign Subsidiaries of Old CBIC.
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(b) in the case of any Periods After Transfer, any liabilities of
New CBIC and its Subsidiaries for taxes; and
(c) in the case of the last two Periods Before Transfer, the amount
(if any) owed by New CBIC under the Tax Sharing Practice as modified by Section
2.01 and Section 2.01(b).
The foregoing liabilities of New CBIC as set forth in paragraphs (a) through (c)
above (hereinafter referred to as "New CBIC Retained Tax Liabilities") shall
apply regardless of when they arose or arise or whether the facts on which they
are based occurred prior or subsequent to the Transfer and regardless of where
or against whom they are asserted or determined or whether they are asserted or
determined prior or subsequent to the Transfer and regardless of whether they
are known or unknown, fixed or contingent, accrued or unaccrued, asserted or
unasserted. Provided, however, that New CBIC shall have no liability pursuant to
this Section 2.02, except to the extent arising out of adjustments determined as
a result of an audit or other official examination made by a taxing authority.
2.03 Refunds of Taxes.
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(a) New CBIC shall be entitled to any refunds, credits, losses,
deductions or other tax items in favor of Old CBIC or a Subsidiary of Old CBIC
or attributable to the CB&I Companies which are related to or associated with
New CBIC Retained Tax Liabilities and are received by PX or its Subsidiaries
other than refunds of taxes on, or measured by, income for periods for which Old
CBIC or the Subsidiary of Old CBIC was included in a consolidated, combined or
unitary return that included PX (or Industries) or a Subsidiary of PX (or
Industries). The amount of any refund due New CBIC for any Period Before
Transfer shall be determined through a recalculation of New CBIC Retained Tax
Liabilities under the principles of Section 2.02. With respect to taxes on, or
measured by, income for Periods Before Transfer for which consolidated, combined
or unitary returns that included Old CBIC or a Subsidiary of Old CBIC and PX (or
Industries) or a Subsidiary of PX (or Industries) were filed, New CBIC shall be
entitled to any refund of taxes, without regard to actual receipt by PX,
attributable to (i) a computational error in reporting items of income, gain,
loss, deduction or credit (such as an unintentional erroneous double inclusion
of the same item of income or an exclusion of an item of deduction) of Old CBIC
or its Subsidiaries, (ii) a Reverse Timing Adjustment with respect to the CB&I
Companies, whether operated by Old CBIC or its Subsidiaries, or (iii) any
increase in research and development credits for federal income tax purposes of
Old CBIC or its Subsidiaries (after giving effect to any deduction for research
and development expenses disallowed, if any, as a direct result of the increase
of the allowance of such research and development credits). New CBIC shall be
entitled to any refund of taxes of New CBIC or its Subsidiaries for any Period
After Transfer.
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(b) Except as otherwise provided in Section 2.03(a) or 3.01, PX
shall have the sole and exclusive right to receive, retain and use all refunds,
credits, losses, deductions or other tax items associated with or related to
taxes for Periods Before Transfer regardless of when or by whom they are
received, regardless of when or in favor of whom they arise or arose, regardless
of whether the facts on which they are based occurred before or after the
Transfer, regardless of whether they are attributable to carrybacks or
otherwise, and regardless of whether they are determined prior or subsequent to
the Date of Transfer.
2.04 Liability of PX. PX shall be liable for, and shall indemnify,
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defend and hold New CBIC and its Subsidiaries harmless against,
(a) any liability for taxes of PX and Subsidiaries or of Old CBIC
and its Subsidiaries for Periods Before Transfer other than the New CBIC
Retained Tax; Liabilities;
(b) in the case of the last two Periods Before Transfer, the amount
(if any) owed by PX and its Subsidiaries other than Old CBIC and Old CBIC
Subsidiaries' liability under the Tax Sharing Practice and Section 2.01(b);
(c) any liability for taxes attributable to fraudulent acts of PX
or Industries or any Subsidiary of PX or Industries, or to any employees
thereof; except to the extent such acts result from or are done by any employee
of the CB&I Companies or are based upon information provided by any employee of
the CB&I Companies; and
(d) in the case of any Periods After Transfer, any liabilities of
PX and its Subsidiaries for taxes;
(e) any tax liability arising out of any of the events described
in Section 2.01(a)(vii); and
(f) any transactional tax liability generated by the transfer of
the interest of CMP Holdings B.V. held by New CBIC's wholly owned subsidiary CBI
Na-Con, Inc.
The foregoing tax liabilities of PX as set forth in paragraphs (a) through (e)
above (hereinafter referred to as "PX Retained Tax Liabilities") shall apply
regardless of when they arose or arise or whether the facts on which they are
based occurred subsequent to the Transfer and regardless of where or against
whom they are asserted or determined or whether they are asserted or determined
prior or subsequent to the Transfer and regardless of whether they are known or
unknown, fixed or contingent, accrued or unaccrued, asserted or unasserted.
2.05 Period that Includes the Date of Transfer. Whenever it is necessary
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for purposes of this Agreement or the Tax Sharing Practice to determine the
income tax
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liability of New CBIC or Old CBIC or a Subsidiary of New CBIC for a taxable year
that begins on or before and ends after the Date of the Transfer, the
determination shall be made by assuming that New CBIC or Old CBIC or their
Subsidiaries had a taxable year which ended at the close of the Date of the
Transfer, except that exemptions, allowances or deductions that are calculated
on an annual basis shall be apportioned on a time basis.
2.06 Payments After Tax. Any payment required to be made by New CBIC or
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PX under this Agreement (other than under Section 9.01 ) shall be increased so
that the net amount retained by the corporation to which payment is due, after
deduction of any tax due thereon (taking into account any available deduction or
exclusion), shall be equal to the amount otherwise due. In determining the
amount of any adjustment required under this Section 2.06, a rate equal to the
then maximum federal marginal corporate income tax rate plus five (5) percentage
points shall be used. All parties agree to report payments to each other
hereunder as non-includible and non-deductible to the extent permitted under
applicable law.
Article III
Carrybacks and Carryovers
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3.01 Carrybacks. If New CBIC or any Subsidiary of New CBIC has an US
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Federal net operating or capital loss or unused foreign tax or other credit for
a Period After Transfer, it shall not, and shall not permit any of its
subsidiaries to, without the prior written consent of PX, claim, use or apply
any carryback from Periods After Transfer to Periods Before Transfer if such
claim, use or application would, in PX's sole judgment, affect PX's tax
liabilities for any period. Notwithstanding the foregoing, if the Code or other
applicable statute requires such an item first to be carried back to a Period
Before Transfer (and such item cannot by the making of an election or otherwise
be carried forward without first being carried back), or if PX shall give New
CBIC prior written consent to claim, use or apply any carryback to a Period
Before Transfer for which an election to waive the carryback is available, such
item shall be so carried back and, when and to the extent that such carryback
shall result in a decrease in PX's cumulative income taxes paid, PX will pay to
New CBIC or the Subsidiary of New CBIC fifty percent (50%) of the amount of such
decrease at the time such decrease is realized by refund or otherwise plus any
interest that is received on any decrease realized by refund or that would have
been received had such decrease not resulted in a reduction in a liability for
income taxes. If the carryback is subsequently disallowed on audit, New CBIC
shall reimburse PX in an amount equal to the amount of carryback refund and
interest PX paid to New CBIC plus interest thereon at the rate under applicable
statute paid by PX thereon.
3.02 Carryovers.
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(a) If PX and its Subsidiaries (including for these purposes Old
CBIC and its Subsidiaries) or if Industries and its Subsidiaries (including for
these purposes
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Old CBIC and its Subsidiaries) have a federal consolidated net operating loss,
capital loss, excess foreign tax paid or other unused credits for a Period
Before Transfer, the amount of any carryover of such item that is apportioned to
New CBIC or a Subsidiary of New CBIC for a Period After Transfer shall be
determined in accordance with Treasury Regulations section 1.1502-79 or any
similar provisions of state or local law. If New CBIC or a Subsidiary of New
CBIC is permitted pursuant to this Section 3.02 to carry over any net operating
losses, tax credits or similar items from a Period Before Transfer to Periods
After Transfer for which PX has previously given credit to, or paid, Old CBIC or
Old CBIC has previously received the benefit thereof, under the Tax Sharing
Practice as modified hereby, New CBIC shall reimburse PX in the amount of such
previous credit or payment (or benefit)
(b) New CBIC and its Subsidiaries shall carryover their share of
consolidated unused minimum tax credits for any Period Before Transfer
determined by the proportion that the alternative minimum taxable income of Old
CBIC and its Subsidiaries (determined as though Old CBIC filed a consolidated
federal income tax return as the common parent of an affiliated group) bears to
the consolidated alternative minimum taxable income of the affiliated group of
which PX or Industries is the common parent (the "Formula").
Article IV
Returns: Payments of Liabilities
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4.01 Obligations to File. New CBIC shall file or cause to be filed when
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due all returns in respect of taxes of New CBIC and its Subsidiaries falling due
(taking into account all extensions), except that PX shall file or cause to be
filed, for any taxable year or period that begins on or before the Date of
Transfer, consolidated federal income tax returns for the affiliated group of
corporations of which PX is the common parent and any combined, consolidated or
unitary state or local tax return that includes Old CBIC or any of its
Subsidiaries and PX or any of its Subsidiaries. Consistent with the Tax Sharing
Practice (as modified hereby), New CBIC and its Subsidiaries shall agree to any
election or consent reasonably requested by PX in connection with such returns
and further agree not to elect to be excluded from any such return and PX shall
include in any return the income, activities, operations and transactions of New
CBIC and/or any Subsidiary or Subsidiaries that is eligible to be included.
4.02 Cooperation When Filing Returns. PX and New CBIC shall cooperate
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with each other in the filing of any returns and shall execute such documents,
consent to such elections and make available such documents as are necessary to
carry out the provisions of this Agreement.
4.03 Payments. Payments under Sections 2.02(c) or 2.04(b) shall be due
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in the case of a payment by PX not later than five (5) business days prior to
the filing of the tax return to which the payment relates, and in the case of a
payment by New CBIC upon twenty (20) business days' notice (but not earlier than
twenty (20) business days
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prior to the filing of the tax return to which the payment relates). Other
payments under Sections 2.02 and 2.04 shall be due not later than twenty (20)
business days after receipt of notice of a Final Determination that the
indemnified party is liable for an indemnified cost. Payments under Sections
2.03, 3.01 and 3.02 shall be due not later than twenty (20) business days after
the applicable benefit is realized by refund or otherwise.
4.04 Notice. PX and New CBIC shall give each other prompt notice of any
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payment that may be due under this Agreement. However, failure to give prompt
notice of any payment that may be due under this Agreement shall not be
considered justifiable reason for nonpayment or forgiveness of any obligation
under this Agreement.
Article V
Tax Audits
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5.01 Conduct. Subject to Section 5.02 hereof, New CBIC shall have
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responsibility for all audits or other proceedings involving New CBIC Retained
Tax Liabilities, except that PX shall be solely responsible for and solely
control any audit or other proceeding involving a return which was (or which the
taxing authority alleges should have been) filed on a consolidated, combined or
unitary basis and included Old CBIC or a Subsidiary of Old CBIC and PX or a
Subsidiary of PX, including, but not limited to, the consolidated federal income
tax return to be filed by Industries for the year ended December 31, 1995 and
prior years, the consolidated federal income tax return to be filed by PX for
the year ending December 31, 1996 and a return of PX or Subsidiary of PX for any
period which included any part of the CB&I Companies. The party responsible for
the audit or other proceeding (hereafter, the "Responsible Party") shall use all
reasonable efforts to resist any deficiency assertions by any taxing authority
regardless of the party who is ultimately responsible for any such tax under
this Agreement. The Responsible Party shall be entitled to receive, at least
twenty (20) business days in advance of any payment that it makes in connection
with the settlement or other disposition of such proceeding, the part of any
such payment for which the other party (hereafter, the "Other Party") is liable
under Article II hereof.
5.02 Notification, etc. The Responsible Party shall give the Other Party
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prompt notice of any proposed adjustment and any discussions that are likely to
result in a proposed adjustment to a return that may result in an aggregate
liability of the Other Party under Article II of this Agreement of more than $1
million for any taxable year in the case of federal income taxes, $500,000 for
any taxable year in the case of state and local income or franchise taxes, and
$100,000 for any taxable year in the case of sales and use taxes, payroll taxes
and property taxes. Once the Other Party is entitled to notice pursuant to the
preceding sentence, the Responsible Party shall involve the Other Party in the
disposition of the matter by, among other things, providing the Other Party with
information about the nature and amounts of the proposed adjustments (including
as they are revised from time to time), permitting the Other Party to prepare
submissions to the taxing authority or court which may propose such an
adjustment
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and, in the sole discretion of the Responsible Party, permitting the Other Party
to take up the proposed adjustment directly with such taxing authority. The
Responsible Party will not agree, without the consent of the Other Party, to any
proposed adjustment to a return that would result in an aggregate liability of
the Other Party under Article II of more than $1 million for any taxable year in
the case of federal income taxes, $250,000 for any taxable year in the case of
state and local income and franchise taxes, and $100,000 for any taxable year in
the case of sales and use taxes, payroll taxes and property taxes. The Other
Party shall have 30 business days after receipt of notice from the Responsible
Party that the tax authority has formally proposed an adjustment within which to
consent or not to consent thereto, and if the Other Party, acting reasonably and
in good faith, notifies the Responsible Party within such 30 day period that it
does not consent to such proposed adjustment, it shall assume the conduct of any
such audit, with counsel selected by it (and satisfactory to Responsible Party),
at Other Party's sole expense, insofar as the audit relates to items for which
the Other Party may incur a liability under Article II, and thereafter the Other
Party and the Responsible Party shall jointly be responsible for the conduct of
such audit and any further proceedings with respect to such items. Failure to
respond to the Responsible Party within such 30 day period or thereafter to
assume responsibility for the conduct of the audit or other proceeding shall
entitle the Responsible Party to agree to the proposed adjustment. If the Other
Party has assumed responsibility for the conduct of the audit or other
proceeding, no payment shall be required under Article II until there is a Final
Determination; provided, however, if the Other Party desires to conduct the
-------- -------
proceeding or contest in a manner requiring payment of the proposed tax
deficiency, the Other Party must advance the appropriate amount of funds to the
Responsible Party on an interest-free basis.
5.03 Cooperation. PX and New CBIC shall cooperate with each other in the
-----------
conduct of any audit or other proceeding and each shall execute and deliver such
powers of attorney and make available such other documents as are necessary to
carry out the provisions of this Agreement. Each party agrees to notify the
other party of any audit adjustments which do not result in tax liability but
can be reasonably expected to affect tax returns of the other party, or any of
the Subsidiaries, for a Period After Transfer.
Article VI
Retention of Records: Access
----------------------------
In accordance with its then current record retention policy, both PX and
its Subsidiaries, and New CBIC and its Subsidiaries shall (a) retain records,
documents, accounting data and other information (including computer data)
necessary for the preparation and filing of all returns in respect of taxes of
PX, Old CBIC and New CBIC or for the audit of such returns; and (b) give to the
other reasonable access to such records, documents, accounting data and other
information (including computer data) and to its personnel (insuring their
cooperation) and premises, for the purpose of the review or audit of such
returns. Each party shall make available, at no cost to the other, such forms
and other information as are necessary to enable the other to meet
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3/17/97
its obligations under Article IV on time and to file accurate and timely income
tax returns that the other is required to file under Article IV.
Article VII
Disputes
--------
If PX and New CBIC cannot agree on any calculation of PX Retained Tax
Liabilities or New CBIC Retained Tax Liabilities required under this Agreement,
such calculation shall be made by any independent public accounting firm
acceptable to both PX and New CBIC. The decision of such firm shall be final and
binding. The fees and expenses incurred in connection with such calculation
shall be borne equally by PX and New CBIC.
Article VIII
Termination of Liabilities
--------------------------
Notwithstanding any other provision in this Agreement, any PX Retained
Tax Liabilities and New CBIC Retained Tax Liabilities determined under this
Agreement shall not terminate any earlier than the expiration of the applicable
statute of limitation for such liability. A11 covenants under this Agreement
shall survive indefinitely.
Article IX
Miscellaneous Provisions
------------------------
9.01 Certain Expenses. Except as otherwise provided in this
----------------
Agreement, each party agrees to pay its own expenses, fees, costs (including
without limitation, legal, accounting and consulting expenses) incurred in
connection with the execution and performance of this Agreement.
9.02 Notices. All notices required or permitted to be given
-------
pursuant to this Agreement shall be given in writing, shall be transmitted by
personal delivery, by registered or certified mail, return receipt requested, or
by telecopier or other electronic means and shall be addressed as follows:
When PX is the intended recipient:
Praxair, Inc.
Director of Taxes
00 Xxx Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxx X0000-0000
Telecopy No. (000) 000-0000
When New CBIC is the intended recipient:
Chicago Bridge & Iron Company
Director of Taxes
0000 Xxxxx Xxxxxxxx Xxxxxx
-00-
0/00/00
Xxxxxxxxxx, Xxxxxxxx 00000
Telecopy No. (000) 000-0000
A party may designate a new name or a new address to which notices required or
permitted to be given pursuant to this Agreement shall thereafter be transmitted
by giving written notice to that effect to the other party. Each notice
transmitted in the manner described in this Section 9.02 shall be deemed to have
been given, received and become effective for all purposes at the time it shall
have been (i) delivered to the addressee as indicated by the return receipt (if
transmitted by mail), the receipt of the messenger (if transmitted by personal
delivery) or the answer back or call back (if transmitted by telecopier or other
electronic means) or (ii) presented for delivery to the addressee as so
indicated during normal business hours, if such delivery shall have been refused
for any reason.
9.03 Governing Law.
-------------
The validity, interpretation, performance and enforcement of this
Agreement shall be governed by the law of the state of New York, without regard
to its conflict of law provisions.
9.04 Binding Effect; No Assignment; Third Party Beneficiaries.
--------------------------------------------------------
This Agreement shall be binding on the parties and their respective
successors and assigns and shall inure to the benefit of the parties and their
respective successors and assigns. Neither PX nor New CBIC shall assign any of
its rights or delegate any of its duties under this Agreement without the prior
written consent of the other party. No person (including, without limitation,
any employee of a party or any stockholder of a party) shall be, or shall be
deemed to be, a third party beneficiary of this Agreement.
9.05 Duplicate Liability.
-------------------
Notwithstanding anything herein to the contrary, no party shall be
liable to pay twice to the other party for the same liability incurred by the
other party.
9.06 Entire Understanding
--------------------
This Agreement constitutes the entire understanding of the parties
hereto concerning the tax liabilities of the parties and their Subsidiaries. No
modification of this Agreement or waiver of the terms, conditions and rights
hereunder will be binding on either party unless signed in writing by an
authorized representative of such party.
This Agreement supercedes and replaces the Tax Disaffiliation
Agreement dated January 1, 1997 by and between PX and Old CBIC. Each of PX and
Old CBIC and New CBIC, by executing this Agreement (i) agree and acknowledge
that the agreement being superceded and replaced shall be null and void as if it
had not been executed and delivered by each of them and (ii) hereby waive all of
their respective rights pursuant to the agreement being superceded and replaced
and release each other from all obligations thereunder.
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3/17/97
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement.
PRAXAIR, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
CHICAGO BRIDGE & IRON CO.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
taxdisaf.xxx/wfm
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