<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-13279
UNOVA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4647021
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
360 NORTH CRESCENT DRIVE
BEVERLY HILLS, CALIFORNIA 90210-4867
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 888-2500
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] No [X]
On October 31, 1997 there were 54,510,193 shares of Common Stock outstanding.
Page 1 of 17
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UNOVA, INC.
INDEX
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Combined Statements of Operations
Nine months ended September 30, 1997 (unaudited)
and September 30, 1996 (unaudited) 3
Combined Statements of Operations
Three months ended September 30, 1997 (unaudited)
and September 30, 1996 (unaudited) 4
Combined Balance Sheets
September 30, 1997 (unaudited) and December 31, 1996 5
Combined Statements of Cash Flows
Nine months ended September 30, 1997 (unaudited)
and September 30, 1996 (unaudited) 6
Notes to Combined Financial Statements (unaudited) 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 13
Signature 17
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNOVA INC.
COMBINED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1997 1996
----------- ---------
Sales and Service Revenues $ 1,094,104 $ 814,502
----------- ---------
Costs and Expenses
Cost of sales 753,329 582,670
Selling, general and administrative 234,942 160,624
Depreciation and amortization 30,517 19,584
In-process research and development charge 203,300
Interest, net 12,771 5,131
----------- ---------
Total Costs and Expenses 1,234,859 768,009
----------- ---------
(Loss) Earnings before Taxes on Income (140,755) 46,493
Taxes on Income (25,018) (18,597)
----------- ---------
Net (Loss) Earnings $ (165,773) $ 27,896
----------- ---------
----------- ---------
Net (Loss) Earnings Per Share $ (3.07) $ 0.52
----------- ---------
----------- ---------
Shares used in computing net (loss) earnings
per share 53,920,058 53,891,534
See accompanying notes to combined financial statements.
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<PAGE>
UNOVA INC.
COMBINED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1997 1996
--------- ---------
Sales and Service Revenues $ 361,761 $ 310,031
--------- ---------
Costs and Expenses
Cost of sales 240,813 226,138
Selling, general and administrative 82,271 56,841
Depreciation and amortization 13,482 6,695
Interest, net 5,672 2,056
--------- ---------
Total Costs and Expenses 342,238 291,730
--------- ---------
Earnings before Taxes on Income 19,523 18,301
Taxes on Income (7,810) (7,320)
--------- ---------
Net Earnings $ 11,713 $ 10,981
--------- ---------
--------- ---------
Net Earnings Per Share $ 0.22 $ 0.20
--------- ---------
--------- ---------
Shares used in computing net earnings
per share 53,962,845 53,891,534
See accompanying notes to combined financial statements.
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<PAGE>
UNOVA, INC.
COMBINED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
ASSETS
Current Assets
Cash and cash equivalents $ 13,368 $ 149,467
Accounts receivable, net 493,654 394,572
Inventories (less progress billings) 138,964 94,452
Deferred tax assets 102,966 53,636
Other current assets 7,318 3,664
----------- -----------
Total Current Assets 756,270 695,791
Property, Plant and Equipment, at cost 378,425 293,985
Less: Accumulated Depreciation (217,339) (161,477)
----------- -----------
Property, Plant and Equipment, Net 161,086 132,508
Goodwill and Other Intangibles, Net 365,986 178,810
Other Assets 66,879 66,684
----------- -----------
Total Assets $ 1,350,221 $ 1,073,793
----------- -----------
----------- -----------
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 293,522 $ 242,168
Payrolls and related expenses 74,611 50,567
Due to Western Atlas Inc. 230,000 109,574
Notes payable and current portion
of long-term obligations 44,043 27,461
----------- -----------
Total Current Liabilities 642,176 429,770
Long-term Obligations 17,133 14,507
Deferred Tax Liabilities 18,248 22,727
Other Long-term Liabilities 53,126 32,281
Equity - Investment by Western Atlas Inc. 619,538 574,508
----------- -----------
Total Liabilities and Equity $ 1,350,221 $ 1,073,793
----------- -----------
----------- -----------
See accompanying notes to combined financial statements.
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<PAGE>
UNOVA, INC.
COMBINED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1997 1996
--------- ---------
Cash and Cash Equivalents at Beginning of Period $ 149,467 $ 103,501
--------- ---------
Cash Flows from Operating Activities:
Net (loss) earnings (165,773) 27,896
Adjustments to reconcile net (loss) earnings
to net cash used in operating activities:
Charge for acquired in-process research and
development costs 203,300
Depreciation and amortization 30,517 19,584
Deferred taxes 1,165 (1,139)
Change in accounts receivable (8,183) (108,160)
Change in inventories (1,068) 12,392
Change in other current assets 10,179 (63)
Change in accounts payable (70,935) 26,792
Other operating activities (5,207) (12,839)
--------- ---------
Net Cash Used in Operating Activities (6,005) (35,537)
--------- ---------
Cash Flows from Investing Activities:
Acquisition of businesses, net of cash acquired (385,247)
Capital expenditures (20,254) (16,406)
Other investing activities (204) 569
--------- ---------
Net Cash Used in Investing Activities (405,705) (15,837)
--------- ---------
Cash Flows from Financing Activities
Net transactions with Western Atlas Inc. 214,490 (12,185)
Due to Western Atlas Inc. 120,426 1,586
Repayment of borrowings (62,375) (253)
Short-term obligations, net 3,069 (809)
Other financing activities 1 1,792
--------- ---------
Net Cash Provided by (Used in) Financing Activities 275,611 (9,869)
--------- ---------
Resulting in Decrease in Cash and Cash Equivalents (136,099) (61,243)
--------- ---------
Cash and Cash Equivalents at End of Period $ 13,368 $ 42,258
--------- ---------
--------- ---------
Supplemental disclosure of cash flow information
Interest paid $ 4,343 $ 1,731
Income taxes paid $ 47,520 $ 16,196
See accompanying notes to combined financial statements.
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<PAGE>
UNOVA, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
1. UNOVA, Inc. ("UNOVA" or the "Company") became an independent public company
on October 31, 1997 (the "Distribution Date"), when all of the UNOVA
common stock was distributed to holders of common stock of Western Atlas
Inc. ("WAI"), in the form of a dividend. Every WAI shareholder of record
on October 24, 1997, was entitled to receive one share of UNOVA common
stock for each WAI share of common stock held of record.
The financial statements included in this report contain the historical
accounts and operations of the former WAI businesses that now comprise
the Company. The amounts included in this report are unaudited; however
in the opinion of management, all adjustments necessary for a fair
presentation of results of operations, financial position and cash flows
for the stated periods have been included. These adjustments are of a
normal recurring nature. It is suggested that these combined financial
statements be read in conjunction with the audited financial statements
and notes thereto included in the Company's Registration Statement on
Form 10 (File No. 001-13279) under the Securities Exchange Act of 1934 as
originally filed with the Securities and Exchange Commission on August
18, 1997, and as amended on October 1, 1997 and October 22, 1997. The
results of operations for the interim periods presented are not
necessarily indicative of operating results for the entire year.
2. The Company acquired Norand Corporation ("Norand") on March 3, 1997, and
United Barcode Industries ("UBI") on April 4, 1997. Norand designs,
manufactures and markets mobile computing systems and wireless data
communications networks using radio frequency technology. UBI is a
European based automated data collection company headquartered in Sweden.
These companies are currently being integrated into the Automated Data
Systems segment. Both transactions were funded using a combination of
WAI committed credit facilities, short-term uncommitted credit lines and
excess cash, and are being accounted for under the purchase method of
accounting. Accordingly, the acquisition costs (approximately $280
million and $107 million for Norand and UBI, respectively) have been
allocated to the net assets acquired based upon their relative fair
values. Such allocation resulted in $203 million assigned to acquired
in-process research and development activities; $156 million assigned to
goodwill (to be amortized over 25 years using the straight-line method);
and $29 million assigned to other intangibles (to be amortized over
periods ranging from 4 to 18 years using the straight-line method).
During the second quarter, the Company expensed the amounts assigned to
in-process research and development in accordance with Financial
Accounting Standards Board Interpretation No. 4.
The following unaudited pro forma financial information for the Company
reflects the Norand acquisition as if it had occurred on January 1, 1996,
after giving effect to certain pro forma adjustments, including
amortization of goodwill and other intangibles, and interest associated
with the increase in allocated WAI debt. The 1997 pro forma information
excludes the $203.3 million charge for acquired in-process research and
development activities. The unaudited pro forma information is not
necessarily indicative of the results that would have been reported if the
combination had occurred on the above-mentioned date. Pro forma sales and
service revenues, net earnings and earnings per share for the nine months
ended September 30, 1997 are $1,130.9 million, $32.6 million and $0.60,
respectively. Pro forma sales and service revenues, net earnings and
earnings per share for the nine months ended September 30, 1996 are
$1,000.2 million, $15.2 million and $0.28, respectively.
-7-
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. (continued)
The Company acquired the remaining 51% of Honsberg, a German machine tool
maker, in the second quarter of 1997. The original 49% of Honsberg was
acquired during 1995. The Company acquired the stamping, engineering and
prototyping division of Modern Prototype Company in September 1997.
These acquisitions are integral to the Company's goals, though not
currently material in the aggregate to UNOVA's combined financial
statements.
The fair values of Norand, UBI, Honsberg and Modern Prototype assets and
liabilities at their respective acquisition dates are presented below for
supplemental cash flow disclosure purposes:
(in thousands of dollars)
-------------------------
Current assets $ 156,198
Net property, plant & equipment 28,746
Goodwill and intangibles 193,459
Other non-current assets 55,399
Total debt (84,163)
Other current liabilities (145,451)
Other non-current liabilities (11,642)
In-process research and development 203,300
----------
Purchase price 395,846
Less: Cash acquired (10,599)
----------
Purchase price, net of cash acquired $ 385,247
----------
----------
3. General and administrative costs include allocated charges from WAI
of $12.9 million and $16.3 million for the nine months ended September
30, 1997 and 1996, respectively and $3.8 million and $5.5 million for the
three months ended September 30, 1997 and 1996, respectively.
4. The components of inventory balances are summarized below:
SEPTEMBER 30, DECEMBER 31,
1997 1996
---------------------------
(THOUSANDS OF DOLLARS)
Raw materials and work in process $115,694 $100,078
Finished goods 36,912 18,697
Less progress billings (13,642) (24,323)
-------- --------
Net inventories $138,964 $ 94,452
-------- --------
-------- --------
5. Net interest expense is composed of the following:
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
---------------------- ----------------------
(THOUSANDS OF DOLLARS) (THOUSANDS OF DOLLARS)
Interest expense $15,736 $8,614 $6,472 $2,850
Interest income (2,965) (3,483) (800) (794)
------- ------ ------ ------
Net interest expense $12,771 $5,131 $5,672 $2,056
------- ------ ------ ------
------- ------ ------ ------
-8-
<PAGE>
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
5. (continued)
Interest expense includes allocated charges from WAI of $10.3 and $6.3
million for the nine months ended September 30, 1997 and 1996,
respectively and $4.0 million and $2.1 million for the three months ended
September 30, 1997 and 1996, respectively.
6. The Company has obtained credit facilities with a group of banks which
permit the Company to borrow in excess of $450 million. These credit
facilities consist of a $400 million committed credit facility and other
uncommitted credit facilities. On October 31, 1997, funds borrowed under
the committed facility were used to pay a $230 million dividend to WAI
in connection with the spin-off.
In November 1997, the Company entered into a three-month agreement to
purchase $100 million of ten-year U.S. treasury securities at a forward
rate, as the Company plans to extend the maturing of some existing
short-term debt.
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<PAGE>
UNOVA, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
UNOVA, Inc. ("UNOVA" or the "Company") is an industrial technologies company
providing global customers with solutions for improving their efficiency and
productivity. The Company is engaged in the industrial automation and
automated data systems businesses. The Company became an independent public
company on October 31, 1997 (the "Distribution Date"), when all of the UNOVA
common stock was distributed to holders of common stock of Western Atlas Inc.
("WAI"), the previous owner of the Company. The distribution is expected to
be tax-free to WAI.
Sales and service revenues and segment operating profit for the three and
nine months ended September 30, 1997 and 1996 are summarized below. The $203
million second quarter charge for acquired in-process research and
development has been excluded from the operating profit of the Automated Data
Systems segment in the 1997 nine-month period presented below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
---------------------- ----------------------
(THOUSANDS OF DOLLARS) (THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
SALES AND SERVICE REVENUES
Industrial Automation Systems $ 633,064 $ 547,605 $ 182,707 $ 218,149
Automated Data Systems 461,040 266,897 179,054 91,882
---------- --------- --------- ---------
Total Sales and Service Revenues $1,094,104 $ 814,502 $ 361,761 $ 310,031
---------- --------- --------- ---------
---------- --------- --------- ---------
SEGMENT OPERATING PROFIT
Industrial Automation Systems $ 74,548 $ 46,909 $ 25,385 $ 17,573
Automated Data Systems 16,322 21,400 4,815 8,682
---------- --------- --------- ---------
Total Segment Operating Profit $ 90,870 $ 68,309 $ 30,200 $ 26,255
---------- --------- --------- ---------
---------- --------- --------- ---------
</TABLE>
Total sales and service revenues increased $279.6 million or 34% for the nine
months ended September 30, 1997 compared with the corresponding prior period.
Total segment operating profit increased $22.6 million or 33% for the nine
months ended September 30, 1997 compared with the corresponding prior period.
For the three months ended September 30, 1997, total sales and service
revenues increased $51.7 million or 17% compared with the corresponding prior
period. Total segment operating profit increased $3.9 million or 15% for the
three months ended September 30, 1997 compared with the corresponding prior
period.
INDUSTRIAL AUTOMATION SYSTEMS
Industrial Automation Systems segment ("IAS") sales increased $85.5 million or
16% and related operating profit increased $27.6 million or 59% for the nine
months ended September 30, 1997 compared with the corresponding prior period.
The increase in sales for 1997 was tempered due to the sale of the Company's
Material Handling Systems division in the fourth quarter of 1996. IAS
experiences lower profit margins in the early stages of long-term contracts
(until the development risks have been mitigated). During the first several
months of 1997, the integrated manufacturing systems operations experienced
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
a higher level of sales and profits from contracts in the final delivery and
installation phase. These projects (as well as the factors described below for
the three month period) contributed to an increase in operating margins for IAS
from 8.6% in 1996 to 11.8% in 1997. Accordingly, IAS backlog declined from
$545.2 million at December 31, 1996 to $379.4 million at September 30, 1997.
For the three months ended September 30, 1997, IAS sales decreased $35.4 million
or 16% and related operating profit increased $7.8 million or 44% compared with
the corresponding prior period. The decrease in IAS sales for the three-month
period is primarily attributable to the sale of the Material Handling Systems
division in the fourth quarter of 1996. The increase in the three-month
operating profit is primarily due to the factors describing the nine-month
increase above. Also contributing to the increased operating profit are
nonrecurring costs recorded in the third quarter of 1996 associated with the
sale of the Material Handling Systems division and the reorganization of the
Company's European and grinding businesses.
AUTOMATED DATA SYSTEMS
Automated Data Systems segment ("ADS") sales increased $194.1 million or 73%
while operating profit decreased $5.1 million or 24% for the nine months
ended September 30, 1997 compared with the corresponding prior period. For
the three months ended September 30, 1997, sales increased $87.2 million or
95% while operating profit decreased $3.9 million or 45% compared with the
corresponding prior period. The sales increase is attributable to the
acquisitions of Norand and UBI. However, the process of integrating the
formerly separate organizations and the restructuring of these operations to
focus on core technology areas has caused a temporary negative impact on the
operating profit of the combined entities. ADS operating margins, which
declined from 8.0% for the nine months ended September 31, 1996 to 3.5% for
the nine months ended September 30, 1997, are expected to improve beginning
in 1998 following the completion of the integration and restructuring efforts.
The Company acquired Norand Corporation ("Norand") on March 3, 1997, and
United Barcode Industries ("UBI") on April 4, 1997. Norand designs,
manufactures and markets mobile computing systems and wireless data
communications networks using radio frequency technology. Norand's fiscal
1996 revenues were approximately $235 million. UBI is a European based
automated data collection company headquartered in Sweden, and had fiscal
1996 sales of approximately $100 million. These companies are currently being
integrated into the Automated Data Systems segment. Both transactions were
funded using a combination of WAI committed credit facilities, short-term
uncommitted credit lines and excess cash, and are being accounted for under
the purchase method of accounting. Accordingly, the acquisition costs
(approximately $280 million and $107 million for Norand and UBI,
respectively) have been allocated to the net assets acquired based upon their
relative fair values. Such allocation resulted in $203 million assigned to
acquired in-process research and development activities; $156 million
assigned to goodwill (to be amortized over 25 years using the straight-line
method); and $29 million assigned to other intangibles (to be amortized over
periods ranging from 4 to 18 years using the straight-line method). During
the second quarter, the Company expensed the amounts assigned to in-process
research and development in accordance with Financial Accounting Standards
Board Interpretation No. 4.
The Company acquired the remaining 51% of Honsberg, a German machine tool maker,
in the second quarter of 1997. The original 49% of Honsberg was acquired during
1995. The Company acquired the stamping, engineering, and prototyping division
of Modern Prototype Company in September 1997.
-11-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Net interest expense was $12.8 million and $5.1 million for the nine months
ended September 30, 1997 and 1996, respectively. The increase is primarily
attributable to an increase in the level of WAI allocated debt from $114.0
million at September 30, 1996 to $230.0 million at September 30, 1997. The
increase in allocated debt is primarily due to the 1997 acquisitions of Norand
and UBI.
LIQUIDITY AND CAPITAL RESOURCES
The Company has obtained credit facilities with a group of banks which permit
the Company to borrow in excess of $450 million. These credit facilities
consist of a $400 million committed credit facility and other uncommitted credit
facilities. On October 31, 1997, funds borrowed under the committed facility
were used to pay a $230 million dividend to WAI in connection with the spin-off.
At November 21, 1997, the Company had approximately $250 million available
under its committed and uncommitted credit facilities.
Cash and cash equivalents decreased from $149.5 at December 31, 1996 to $13.4
at September 30, 1997 primarily as a result of the Norand acquisition.
Total debt increased from $151.5 million at December 31, 1996 to $291.2
million at September 30, 1997 due primarily to an increase in the WAI
allocated debt attributable to the use of a combination of Western Atlas'
committed credit facilities and short-term uncommitted credit lines to fund
the Norand and UBI acquisitions. The remaining increase is primarily
attributable to capital expenditures and working capital needs of the
operations.
In November 1997, the Company entered into a three-month agreement to
purchase $100 million of ten-year U.S. treasury securities at a forward
rate, as the Company plans to extend the maturing of some existing
short-term debt.
The Company expects that cash flow from operations, along with available
borrowing capacity, will be adequate to meet working capital requirements. The
Company does not anticipate any material adverse decline in cash flow from
operations nor any significant changes in capital expenditures required to
support ongoing operations.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K: No reports on Form 8-K have been filed by the
Registrant during the quarter ended September 30, 1997.
(b) See Exhibit Index included herein on page 14.
-13-
<PAGE>
UNOVA, INC.
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
4.1 $400,000,000 Credit Agreement dated September 24, 1997, among
UNOVA, Inc., the Banks listed therein, and Morgan Guaranty Trust
Company of New York, as Agent, filed on October 1, 1997 as
Exhibit 10M to Amendment No. 1 to the Company's Registration
Statement on Form 10 No. 001-13279 and incorporated herein by
reference.
4.2 Rights Agreement dated September 24, 1997, between UNOVA, Inc.
and The Chase Manhattan Bank, as Rights Agent, to which is
annexed the form of Right Certificate as Exhibit A, filed on
October 22, 1997 as Exhibit 3C to Amendment No. 2 to the
Company's Registration Statement on Form 10 No. 001-13279.
Pursuant to the Rights Agreement, printed Right Certificates will
not be issued until the Distribution Date as that term is
defined in the Rights Agreement.
4.3 Instruments defining the rights of holders of long-term debt of
the Company are not filed as exhibits because the amount of debt
authorized under any such instrument does not exceed 10% of the
total assets of the Company and its consolidated subsidiaries.
The Company hereby undertakes to furnish a copy of any such
instrument to the Commission upon request.
10.1 Distribution and Indemnity Agreement dated October 31, 1997,
between Western Atlas Inc. and UNOVA, Inc.*
10.2 Tax Sharing Agreement dated October 31, 1997, between Western
Atlas Inc., and UNOVA, Inc.*
10.3 Employee Benefits Agreement dated October 31, 1997, between
Western Atlas Inc., and UNOVA Inc.*
10.4 Intellectual Property Agreement dated October 31, 1997, between
Western Atlas Inc., and UNOVA, Inc.*
10.5 Change in Control Employment Agreements with Alton J. Brann,
Michael E. Keane, Norman L. Roberts, Charles A. Cusumano and
certain other officers of the Company, dated as of October 31,
1997.*
10.6 Employment Agreement between Intermec Corporation and Michael
Ohanian, dated May 18, 1995, as amended, filed on August 18, 1997
as exhibit 10J to the Company's Registration Statement on Form 10
No. 001-13279 and incorporated herein by reference.
-14-
<PAGE>
INDEX TO EXHIBITS, (CONTINUED)
10.7 UNOVA, Inc. Director Stock Option and Fee Plan.*
10.8 UNOVA, Inc. Restoration Plan, filed on August 18, 1997 as Exhibit
10I to the Company's Registration Statement on Form 10
No. 001-13279 and incorporated herein by reference.
10.9 UNOVA, Inc. Supplemental Executive Retirement Plan, filed on
October 1, 1997 as Exhibit 10H to Amendment No. 1 to the
Company's Registration Statement on Form 10 No. 001-13279 and
incorporated herein by reference.
10.10 Supplemental Retirement Agreement between UNOVA, Inc. and Alton
J. Brann, filed on October 1, 1997 as Exhibit 10L to Amendment
No. 1 to the Company's Registration Statement on Form 10
No. 001-13279 and incorporated herein by reference.
10.11 Employment Agreement dated August 1997, between UNOVA, Inc., and
Clayton A. Williams, filed on October 1, 1997 as exhibit 10K to
Amendment No. 1 to the Company's Registration Statement on Form
10 No. 001-13279 and incorporated herein by reference.
10.12 UNOVA, Inc. 1997 Stock Incentive Plan.*
10.13 UNOVA, Inc. Executive Severance Plan.*
10.14 Form of Promissory Notes in favor of the Company given by
certain officers and key employees.*
10.15 Board Resolution dated September 24, 1997 establishing the
UNOVA, Inc. Incentive Loan Program.*
11 Statement of Computation of Earnings per share included herein on
page 16.
27 Financial Data Schedule (filed only electronically with the
Securities and Exchange Commission).
* Copies of these documents have been included in this Quarterly
Report on Form 10-Q filed with the Securities and Exchange
Commission.
-15-
<PAGE>
UNOVA, INC.
PRIMARY EARNINGS PER SHARE AND FULLY DILUTED EARNINGS PER SHARE
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
EARNINGS PER SHARE
Net (Loss) Earnings $ (165,773) $ 27,896 $ 11,713 $ 10,981
---------- --------- ---------- ---------
---------- --------- ---------- ---------
Primary (loss) earnings
per share ($ 3.07) $ 0.52 $ 0.22 $ 0.20
---------- --------- ---------- ---------
---------- --------- ---------- ---------
Fully diluted (loss)
earnings per share ($ 3.07) $ 0.52 $ 0.22 $ 0.20
---------- --------- ---------- ---------
---------- --------- ---------- ---------
SHARES USED IN EARNINGS
PER SHARE COMPUTATION
Shares used in computing
earnings per share(3) 53,920,058(1) 53,891,534(2) 53,962,845(1) 53,891,534(2)
</TABLE>
(1) Shares were computed using the weighted average balance of the WAI
common stock outstanding for the nine- and three-month periods of 1997.
(2) Shares used to calculate earnings per share were based on the
outstanding WAI common stock outstanding at June 30, 1997.
(3) Historical WAI common stock equivalents arising from various stock
option plans have been excluded from the Company's earnings per share
calculation as such options will not be converted into UNOVA stock options.
-16-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNOVA, INC.
(Registrant)
By /s/ Michael E. Keane
----------------------
Michael E. Keane
Senior Vice President and
Chief Financial Officer
November 21, 1997
-17-
<PAGE>
EXHIBIT 10.1
DISTRIBUTION AND INDEMNITY AGREEMENT
BETWEEN
WESTERN ATLAS INC.
AND
UNOVA, INC.
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DISTRIBUTION AND INDEMNITY AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II.
THE DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.1 The Distribution. . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.2 Cooperation Prior to the Distribution . . . . . . . . . . . . 4
Section 2.3 Conditions to Distribution. . . . . . . . . . . . . . . . . . 5
ARTICLE III.
TRANSACTIONS RELATING TO THE DISTRIBUTION. . . . . . . . . . . . . . . . . . 6
Section 3.1 Intercorporate Reorganization . . . . . . . . . . . . . . . . 6
Section 3.2 Dividend; Cancellation of Intercompany
Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.3 Other Agreements. . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.4 The UNOVA Board . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.5 UNOVA Charter and By-laws . . . . . . . . . . . . . . . . . . 7
Section 3.6 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.7 Western Atlas Employees Good Government Fund. . . . . . . . . 10
Section 3.8 Western Atlas Foundation. . . . . . . . . . . . . . . . . . . 10
ARTICLE IV.
INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.1 Indemnification by Western Atlas. . . . . . . . . . . . . . . 11
Section 4.2 Indemnification by UNOVA. . . . . . . . . . . . . . . . . . . 11
Section 4.3 Limitations on Indemnification Obligations. . . . . . . . . . 12
Section 4.4 Procedures for Indemnification of Third-Party Claims. . . . . 12
Section 4.5 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . 16
Section 4.6 Survival of Indemnities . . . . . . . . . . . . . . . . . . . 16
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Page
ARTICLE V.
ACCESS TO INFORMATION; SERVICES. . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.1 Access to Information . . . . . . . . . . . . . . . . . . . . 16
Section 5.2 Production of Witnesses . . . . . . . . . . . . . . . . . . . 17
Section 5.3 Retention of Records. . . . . . . . . . . . . . . . . . . . . 17
Section 5.4 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.5 Provision of Services . . . . . . . . . . . . . . . . . . . . 18
Section 5.6 Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VI.
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 6.1 Complete Agreement; Construction. . . . . . . . . . . . . . . 19
Section 6.2 Survival of Agreements. . . . . . . . . . . . . . . . . . . . 19
Section 6.3 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.6 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.7 Successors and Assigns. . . . . . . . . . . . . . . . . . . . 21
Section 6.8 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 6.9 No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . 21
Section 6.10 Titles and Headings . . . . . . . . . . . . . . . . . . . . . 22
Section 6.11 Legal Enforceability. . . . . . . . . . . . . . . . . . . . . 22
Section 6.12 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . 22
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DISTRIBUTION AND INDEMNITY AGREEMENT
DISTRIBUTION AND INDEMNITY AGREEMENT (this "Agreement"), dated as
of October 31, 1997, between WESTERN ATLAS INC., a Delaware corporation
("Western Atlas"), and UNOVA, INC., a Delaware corporation and, as of the
date hereof, a wholly owned subsidiary of Western Atlas ("UNOVA").
WHEREAS, the Western Atlas Board has determined that it is
appropriate and desirable to spin off its holdings of UNOVA by distributing
all outstanding shares of UNOVA Common Stock on a pro rata basis to holders
of Western Atlas Common Stock; and
WHEREAS, Western Atlas and UNOVA have determined that it is
appropriate and desirable to set forth the principal corporate transactions
required to effect such distribution and certain other agreements that will
govern certain matters relating to such distribution and the relationships
thereafter between Western Atlas and UNOVA; and
WHEREAS, Western Atlas and UNOVA are entering into this Agreement
in the spirit of mutual benefit and good faith.
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, and the benefits to be
derived from the distribution by Western Atlas and UNOVA, the parties hereby
agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1 GENERAL. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
ACTION: any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
AFFILIATE: as defined in Rule 12b-2 under the Exchange Act,
including, with respect to Western Atlas, any Western Atlas Subsidiary and,
with respect to UNOVA, any UNOVA Subsidiary.
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AGENT: ChaseMellon Shareholder Services, L.L.C., as distribution
agent.
BENEFITS AGREEMENT: the Benefits Agreement between UNOVA and
Western Atlas, the form of which is attached hereto as Annex A.
CODE: the Internal Revenue Code of 1986, as amended.
COMMISSION: the Securities and Exchange Commission.
DISTRIBUTION: the distribution to holders of Western Atlas Common
Stock of the shares of UNOVA Common Stock owned by Western Atlas on the
Distribution Date.
DISTRIBUTION DATE: the date determined by the Western Atlas Board
on which the Distribution shall be effected.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended.
FORM 10: the registration statement on Form 10 filed by UNOVA with
the Commission to effect the registration of the UNOVA Common Stock pursuant
to the Exchange Act.
INFORMATION STATEMENT: the information statement to be sent to the
holders of Western Atlas Common Stock in connection with the Distribution.
INSURANCE PROCEEDS: those monies (i) received by an insured from
an insurance carrier on an insurance claim or (ii) paid by an insurance
carrier on behalf of the insured on an insurance claim, in either case net of
any applicable deductibles, retentions, or costs paid by such insured, but
such term does not refer to proceeds received from an insurer on an employee
benefits group insurance policy.
INTELLECTUAL PROPERTY AGREEMENT: the Intellectual Property
Agreement between UNOVA and Western Atlas, the form of which is attached
hereto as Annex B.
IRS: the Internal Revenue Service.
LIABILITIES: any and all debts, liabilities and obligations,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising and whether or not
the same would be reflected on a bal-
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ance sheet (unless otherwise specified in this Agreement), including all
costs and expenses relating thereto, and including, without limitation, those
debts, liabilities and obligations arising under any law, rule, regulation,
Action, threatened Action, order or consent decree of any governmental entity
or any award of any arbitrator of any kind, and those arising under any
contract, commitment or undertaking.
LOSSES: any and all losses, Liabilities, claims, damages,
obligations, fines, penalties, payments, costs and expenses, matured or
unmatured, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, known or unknown (including, without limitation, the costs and
expenses of any and all Actions, threatened Actions, demands, assessments,
judgments, settlements and compromises relating thereto and attorneys' fees
and any and all expenses whatsoever reasonably incurred in investigating,
preparing or defending against any such Actions or threatened Actions).
RECORD DATE: the close of business on the date to be determined by
the Western Atlas Board as the record date for the Distribution.
SUBSIDIARIES: the term "subsidiaries" as used herein with respect
to any entity shall be deemed to refer to other entities in which such entity
owns or controls a majority of the voting power and shall, unless otherwise
indicated, be deemed to refer to both direct and indirect subsidiaries of
such entity.
TAX SHARING AGREEMENT: the Tax Sharing Agreement between UNOVA and
Western Atlas, the form of which is attached hereto as Annex C.
UNOVA COMMON STOCK: the Common Stock, par value $.01 per share, of
UNOVA.
UNOVA SUBSIDIARY: any direct or indirect subsidiary of UNOVA that
will remain a direct or indirect subsidiary of UNOVA immediately following
the Distribution Date, and any other direct or indirect subsidiary of UNOVA
that thereafter may be organized or acquired.
WAI INSURANCE PROGRAM: the insurance policies and self-insurance
program of Western Atlas referred to in Section 3.6 hereof.
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WESTERN ATLAS BOARD: the Board of Directors of Western Atlas.
WESTERN ATLAS COMMON STOCK: the Common Stock, $1.00 par value, of
Western Atlas.
WESTERN ATLAS SUBSIDIARY: any direct or indirect subsidiary of
Western Atlas other than UNOVA or any UNOVA Subsidiary.
ARTICLE II.
THE DISTRIBUTION
Section 2.1 THE DISTRIBUTION. Subject to Section 2.3 hereof, on
the Distribution Date, Western Atlas will deliver to the Agent, for the
benefit of holders of record of Western Atlas Common Stock on the Record
Date, a single stock certificate, endorsed by Western Atlas in blank,
representing all of the then outstanding shares of UNOVA Common Stock owned
by Western Atlas, and shall instruct the Agent to distribute on the
Distribution Date (or as soon as practicable thereafter) the appropriate
number of such shares of UNOVA Common Stock to each such holder or designated
transferee or transferees of such holder. The Distribution shall be
effective on the Distribution Date. UNOVA will provide to the Agent all
information or documents necessary to effect direct registration, and Western
Atlas will provide to the Agent any information required in order to complete
the Distribution on the basis of one share of UNOVA Common Stock for each
share of Western Atlas Common Stock outstanding on the Record Date.
Section 2.2 COOPERATION PRIOR TO THE DISTRIBUTION.
(a) Western Atlas and UNOVA have prepared, and Western Atlas
shall mail, prior to the Distribution Date, to the holders of Western Atlas
Common Stock, the Information Statement, which shall set forth appropriate
disclosure concerning UNOVA, the Distribution and other matters. Western
Atlas and UNOVA have prepared, and UNOVA has filed with the Commission, the
Form 10, which includes or incorporates by reference the Information
Statement. Western Atlas and UNOVA shall use reasonable efforts to cause the
Form 10 to become effective under the Exchange Act as soon as practicable.
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(b) Western Atlas and UNOVA shall cooperate in preparing,
filing with the Commission and causing to become effective any registration
statements or amendments thereof which are required to reflect the
establishment of, or amendments to, any employee benefit and other plans
contemplated by the Benefits Agreement.
(c) Western Atlas and UNOVA shall take all such action as may
be necessary or appropriate under the securities or blue sky laws of states
or other political subdivisions of the United States, in connection with the
transactions contemplated by this Agreement.
(d) Western Atlas and UNOVA have prepared, and UNOVA has filed
in preliminary form and shall seek to make effective, applications to list
the UNOVA Common Stock on the New York Stock Exchange (the "NYSE").
Section 2.3 CONDITIONS TO DISTRIBUTION. This Agreement and the
consummation of each of the transactions provided for herein shall be subject
to approval of the Western Atlas Board. The Western Atlas Board shall in its
discretion establish the Record Date and the Distribution Date and all
appropriate procedures in connection with the Distribution, but in no event
shall the Distribution Date occur prior to such time as each of the following
have occurred or have been waived by the Western Atlas Board in its sole
discretion: (i) the Western Atlas Board shall have formally approved the
Distribution; (ii) the Form 10 shall have been declared effective by the
Commission; (iii) Western Atlas shall have received a statement from the
Staff of the Commission that the Distribution may be effected without
registration of the UNOVA Common Stock under the Securities Act of 1933;
(iv) the Western Atlas Board shall have received opinions of counsel
satisfactory to it that the Distribution will be a tax-free "spin-off" under
Sections 355 and/or 368(a)(1)(D) of the Code; (v) the Board of Directors of
UNOVA, constituted as contemplated by Section 3.4, shall have been duly
elected, and the Certificate of Incorporation and the By-laws of UNOVA, as
described in Section 3.5, shall have been adopted and be in effect; (vi) the
UNOVA Common Stock shall have been authorized for listing on the NYSE; (vii)
the transactions contemplated by Sections 3.1, 3.2 and 3.3 shall have been
consummated in all material respects; (viii) UNOVA shall have arranged for a
bank credit facility or comparable source of funding for its capital needs;
and (ix) no preliminary or permanent injunction or other order,
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decree or ruling issued by a court of competent jurisdiction or by a
government, regulatory or administrative agency or commission, and no
statute, rule, regulation or executive order promulgated or enacted by any
governmental authority, shall be in effect preventing the payment of the
Distribution; PROVIDED that the satisfaction of such conditions shall not
create any obligation on the part of Western Atlas or any other party hereto
to effect the Distribution or in any way limit Western Atlas' power of
termination set forth in Section 6.8 or alter the consequences of any such
termination from those specified in such Section.
ARTICLE III.
TRANSACTIONS RELATING TO THE DISTRIBUTION
Section 3.1 INTERCORPORATE REORGANIZATION.
(a) At or prior to the Distribution, there shall have been
contributed to Honsberg Lamb Sonderwerkzeugmachinen Gmbh, as additional
paid-in capital, a shareholder loan in the amount of DM 2.8 million (U.S.
$1,546,961). At or prior to the Distribution, there shall have been
transferred to UNOVA Industrial Automation Systems, Inc. all of the assets
and liabilities of Western Atlas Landis USA Division (MIS # M02610),
including all the assets and liabilities of Gardner Division and CITCO
Division; all the assets and liabilities of Western Atlas Lamb Technicon Body
& Assembly Division (MIS # M02415), including all outstanding shares of Grand
Design, Inc. and J.S. McNamara Company; all the assets and liabilities of
Western Atlas Lamb Technicon Machining Systems Division (MIS # M02410); and
all the outstanding shares of M M & E, Inc. At or prior to the Distribution,
there shall have been transferred to UNOVA all of the outstanding shares of
UNOVA Industrial Automation Systems, Inc., Standard Components Corp., Limited
Partner I Corporation, General Partner I Corporation, Stanko UNOVA
Corporation, UNOVA Canada, Inc., UNOVA U.K. Limited, Intermec Technologies
Corporation, Lamb-Unima Maschinenbau Gmbh and Honsberg Lamb
Sonderwerkzeugmachinen Gmbh. At or prior to the Distribution, there shall
have been transferred to UNOVA certain assets and liabilities of Western
Atlas Corporate Division (MIS # Z00050 and MIS # Z00900), and all the assets
and liabilities of Western Atlas IAS Administration Division (MIS # M09010).
The transfer of capital stock shall be effected by means of delivery of stock
certificates duly endorsed or accompanied by duly executed stock powers and
notation on the stock record books of the corporations or other legal
entities in-
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volved. Following the Distribution Date, Western Atlas and UNOVA shall
cooperate and, if requested, assist each other in perfecting title to various
properties referred to in this paragraph, at the expense of the party
requesting such assistance.
(b) Prior to the Distribution Date, Western Atlas and UNOVA
shall take all steps necessary to increase the outstanding shares of UNOVA
Common Stock so that immediately prior to the Distribution, Western Atlas
will hold a number of shares of UNOVA Common Stock equal to the number of
shares of Western Atlas Common Stock outstanding on the Record Date.
Section 3.2 DIVIDEND; CANCELLATION OF INTERCOMPANY INDEBTEDNESS.
Immediately prior to the Distribution, UNOVA shall pay a dividend to Western
Atlas in the amount of $230 million, which amount shall be utilized by
Western Atlas to repay short-term debt. Any intercompany indebtedness owed
by UNOVA and the UNOVA Subsidiaries to Western Atlas and the Western Atlas
Subsidiaries shall be canceled as a contribution to the capital of UNOVA.
Section 3.3 OTHER AGREEMENTS. On or prior to the date of the
Distribution, Western Atlas and UNOVA will execute and deliver agreements
substantially in the form of Annexes A through C.
Section 3.4 THE UNOVA BOARD. Western Atlas and UNOVA shall take
all actions that may be required to elect or otherwise appoint as directors
of UNOVA, on or prior to the Distribution Date, the persons named in the Form
10 to constitute the Board of Directors of UNOVA on the Distribution Date.
Section 3.5 UNOVA CHARTER AND BY-LAWS. Prior to the Distribution
Date, (a) Western Atlas shall cause the Certificate of Incorporation of
UNOVA, substantially in the form of Annex B to the Form 10, to be filed with
the Secretary of State of Delaware and to be in effect on the Distribution
Date, and (b) the Board of Directors of UNOVA shall adopt the By-laws of
UNOVA substantially in the form of Annex C to the Form 10.
Section 3.6 INSURANCE.
(a) Western Atlas will continue to provide coverage for
workers' compensation, general liability, automobile liability, other liability,
property and other insurable business risks and exposures to UNOVA and the UNOVA
Subsidiaries in the same
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manner and to the same extent as in effect on the date of this Agreement (the
"WAI Insurance Program") for incidents, acts, omissions or occurrences
occurring from the date such coverage first commenced until 12:00 midnight on
the Distribution Date or such later date as may be agreed to in writing by
Western Atlas and UNOVA, and UNOVA and the UNOVA Subsidiaries shall pay
Western Atlas the costs, fees and expenses for such coverage in accordance
with the past and current practices established between Western Atlas, UNOVA
and the UNOVA Subsidiaries. Such costs include, but are not limited to,
premiums, deductibles, retrospective rating adjustments, assessments paid and
audit adjustments completed.
(b) Western Atlas shall cooperate and, if requested, shall
assist UNOVA and the UNOVA Subsidiaries in obtaining their own separate
insurance coverage and self-insurance coverage for UNOVA and the UNOVA
Subsidiaries, effective with respect to incidents, acts, omissions or
occurrences occurring from and after the Distribution Date. Following the
Distribution Date, each of the parties shall cooperate with and assist the
other party in the prevention of conflicts or gaps in insurance coverage
and/or collection of Insurance Proceeds.
(c) Western Atlas and UNOVA agree that UNOVA and the UNOVA
Subsidiaries shall have the right to present claims directly to Western
Atlas' insurers under the WAI Insurance Program for insured and self-insured
incidents, acts, omissions or occurrences occurring from the date said
coverage first commenced until the Distribution Date. Any such claims shall
be subject to the terms and conditions of the WAI Insurance Program which for
this purpose shall include the so-called "tail" coverage referred to below in
this subsection (c). All such claims by UNOVA or the UNOVA Subsidiaries
against Western Atlas' insurers shall be presented when known by UNOVA and in
any event by the reporting requirements specified under an insurance policy
with respect to a specific claim. The parties acknowledge that any such
policies written on a "claims made" rather than "occurrence" basis may not,
in their present form, provide coverage to UNOVA and the UNOVA Subsidiaries
for incidents, acts, omissions or occurrences occurring prior to the
Distribution Date but which are first reported after the Distribution Date
and, accordingly, the parties have agreed that Western Atlas shall cooperate
and, if requested, assist UNOVA and the UNOVA Subsidiaries in acquiring
"tail" insurance coverage, effective upon the Distribution Date.
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(d) With respect to any insured Losses or retrospective premium
adjustments relating to assets and/or operations of UNOVA and/or the UNOVA
Subsidiaries prior to the Distribution Date: (i) Western Atlas shall pay
over to UNOVA within 60 days of receipt any Insurance Proceeds it receives on
account of such Losses and any such retrospective premium reductions (all
subject to support documentation); and (ii) UNOVA and the UNOVA Subsidiaries
shall reimburse Western Atlas within 60 days of Western Atlas' request for
all costs, expenses or payments (all subject to support documentation) made
by Western Atlas after the Distribution Date to insurers or incurred by
Western Atlas with respect to self-insurance on account of such Losses and
any such retrospective premium increases, except that self-insured Losses
shall be funded directly by UNOVA through a Western Atlas bank account
maintained to fund such Losses. The defense of and the responsibility for
any litigation or claims pending at the Distribution Date, or commenced after
the Distribution Date (as respects Losses which occurred prior to the
Distribution Date), relating to UNOVA or the UNOVA Subsidiaries and covered
by the WAI Insurance Program shall continue to be managed by UNOVA and the
UNOVA Subsidiaries. UNOVA shall advise Western Atlas when there is a
reasonable expectation that any such litigation will exceed the policy limits
of the current WAI Insurance Program or result in a loss not covered by such
program.
(e) Western Atlas shall maintain as part of the WAI Insurance
Program the Directors and Officers insurance program with the same insurance
carriers, limits of liability, terms and conditions through May 31, 1999.
UNOVA shall obtain and maintain a similar Directors and Officers insurance
program at least through May 31, 1999. Material modification to either
party's Directors and Officers insurance program prior to May 31, 1999 shall
require the prior approval of the other party, which shall not be
unreasonably withheld. Material modifications include adverse changes in
terms and conditions, decreased limits of liability and the substitution of
insurance carriers.
(f) Western Atlas maintains various bonding facilities on
behalf of itself and its various subsidiaries, including UNOVA and the UNOVA
Subsidiaries. UNOVA and the UNOVA Subsidiaries shall have the right to
continue to have the benefit of such bonding facilities after the
Distribution Date until UNOVA is able to arrange its own bonding facilities;
provided, however, that UNOVA shall reimburse Western Atlas for the amount of
any Losses on Western Atlas bonds covering UNOVA and the UNOVA Sub-
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sidiaries and shall also reimburse Western Atlas for all fees and
out-of-pocket costs incurred by Western Atlas with respect to Western Atlas
bonds covering UNOVA and the UNOVA Subsidiaries.
(g) In recognition that premiums, premium adjustments,
retrospective rating adjustments, assessments and audit adjustments have been
paid or charged to UNOVA and the UNOVA Subsidiaries prior to the Distribution
Date, and that similar such payments and charges will be made by and to UNOVA
and the UNOVA Subsidiaries after the Distribution Date, Western Atlas agrees
to cooperate with UNOVA and the UNOVA Subsidiaries in insured litigation.
Furthermore, in insured litigation in which the reasonable expectation is
that UNOVA and/or UNOVA Subsidiaries will be financially responsible for the
entire result in the litigation (a "UNOVA Responsibility Case"), UNOVA shall
have the right to participate and control at its cost the defense of such
litigation, to the extent that Western Atlas would be able to do so. In such
event, Western Atlas shall cooperate with UNOVA in all reasonable respects in
the defense and resolution of such UNOVA Responsibility Case.
(h) For purposes of this Section 3.6, the term Distribution
Date means 12:00 midnight on the later of the date determined by the Western
Atlas Board on which the Distribution shall be effected or the later date
agreed upon pursuant to subsection 3.6(a).
(i) For purposes of this Section 3.6, the terms "self-insured" and
"self-insurance" refer only to those incidents, omissions or occurrences
related to the self-insured portion of the State of Washington Workers'
Compensation exposures.
Section 3.7 WESTERN ATLAS EMPLOYEES GOOD GOVERNMENT FUND. Prior
to the Distribution Date, (i) UNOVA shall undertake to sponsor a political
committee by establishing a nonprofit, unincorporated association in the
State of California (the "UNOVA Fund"), and (ii) the parties shall cause all
moneys in the Western Atlas Inc. Employees Good Government Fund that relate
to the employees of UNOVA or any UNOVA Subsidiary to be transferred to the
UNOVA Fund.
Section 3.8 WESTERN ATLAS FOUNDATION. Prior to the Distribution
Date, the parties shall cause The Western Atlas Foundation, a private
foundation under the Code and a nonprofit public benefit corporation
organized under the laws of the State
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of California, to change its name to "The UNOVA Foundation," and UNOVA will
be substituted for Western Atlas as the sponsor of The UNOVA Foundation from
and after such name change.
ARTICLE IV.
INDEMNIFICATION
Section 4.1 INDEMNIFICATION BY WESTERN ATLAS. Except with respect
to employee benefits or other Liabilities to employees, which shall be
governed by the Benefits Agreement, and except with respect to insurance and
self-insurance claims, which shall be governed by Sections 3.6 and 4.3
hereof, Western Atlas shall indemnify, defend and hold harmless UNOVA, each
Affiliate of UNOVA and each of their respective directors, officers,
employees and agents (in their capacities as directors, officers, employees
and agents of UNOVA and its Affiliates) and each of the heirs, executors,
successors and assigns of any of the foregoing (the "UNOVA Indemnitees") from
and against any and all Losses of the UNOVA Indemnitees arising out of or due
to the failure of Western Atlas or any of its Affiliates to pay, perform or
otherwise discharge in due course any item set forth on Schedule A. Anything
in this Section 4.1 to the contrary notwithstanding, neither Western Atlas
nor any Western Atlas Subsidiary shall have any liability whatsoever to
either UNOVA or any UNOVA Subsidiary in respect of any Tax (as such term is
defined in the Tax Sharing Agreement), except as otherwise provided in
Schedule A hereto or in the Tax Sharing Agreement.
Section 4.2 INDEMNIFICATION BY UNOVA. Except with respect to
employee benefits or other Liabilities to employees, which shall be governed
by the Benefits Agreement, and except with respect to insurance and
self-insurance claims, which shall be governed by Sections 3.6 and 4.3
hereof, UNOVA shall indemnify, defend and hold harmless Western Atlas, each
Affiliate of Western Atlas and each of their respective directors, officers,
employees and agents (in their capacities as directors, officers, employees
and agents of Western Atlas and its Affiliates) and each of the heirs,
executors, successors and assigns of any of the foregoing (the "Western Atlas
Indemnitees") from and against any and all Losses of the Western Atlas
Indemnitees arising out of or due to the failure of UNOVA or any of its
Affiliates to pay, perform or otherwise discharge in due course any item set
forth on Schedule B. Anything in this Section 4.2 to the contrary
notwithstanding, neither UNOVA nor any UNOVA Subsidiary
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shall have any liability whatsoever to either Western Atlas or any Western
Atlas Subsidiary in respect of any Tax, except as otherwise provided in
Schedule B hereto or in the Tax Sharing Agreement.
Section 4.3 LIMITATIONS ON INDEMNIFICATION OBLIGATIONS. The
amount that any party (an "Indemnifying Party") is or may be required to pay
to any other party (an "Indemnitee") pursuant to Section 4.1 or Section 4.2
shall be reduced (including, without limitation, retroactively) by any
Insurance Proceeds or other amounts actually recovered by or on behalf of
such Indemnitee, in reduction of the related Loss. If an Indemnitee shall
have received the payment required by this Agreement from an Indemnifying
Party in respect of any Loss and the Indemnitee shall subsequently actually
receive Insurance Proceeds or other amounts in respect of such Loss, then
such Indemnitee shall pay to such Indemnifying Party a sum equal to the
amount of such Insurance Proceeds or other amounts actually received (up to
but not in excess of the amount of any indemnity payment made hereunder). An
insurer who would otherwise be obligated to pay any claim shall not be
relieved of the responsibility with respect thereto, or, solely by virtue of
the indemnification provisions hereof, have any subrogation rights with
respect thereto, it being expressly understood and agreed that no insurer or
any other third party shall be entitled to a "windfall" (I.E., a benefit they
would not be entitled to receive in the absence of the indemnification
provisions hereof) by virtue of the indemnification provisions hereof.
Section 4.4 PROCEDURES FOR INDEMNIFICATION OF THIRD-PARTY CLAIMS.
Procedures for Indemnification of Third-Party Claims shall be as follows:
(a) If an Indemnitee shall receive notice or otherwise learn of
the assertion or probable assertion by a person (including, without
limitation, any governmental entity) who is not a party to this Agreement or
to any of the agreements in the form of Annexes A through C hereto
(hereinafter referred to as the "Other Agreements") of any claim or of the
commencement by any such person of any Action (a "Third-Party Claim") with
respect to which an Indemnifying Party may be obligated to provide
indemnification pursuant to Section 4.1, 4.2 or any other Section of this
Agreement or pursuant to the Other Agreements, such Indemnitee shall give
such Indemnifying Party written notice thereof promptly after becoming aware
of such Third-Party Claim; PROVIDED
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that the failure of any Indemnitee to give notice as provided in this Section
4.4(a) shall not relieve the related Indemnifying Party of its obligations
under this Article IV, unless the notice was intentionally withheld and such
Indemnifying Party is prejudiced by such failure to give notice. Such notice
shall describe the Third-Party Claim in reasonable detail and, if reasonably
ascertainable, shall indicate the amount (estimated if necessary) of the Loss
that has been or may be sustained by such Indemnitee.
(b) An Indemnifying Party may elect to defend or to seek to
settle or compromise, at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third-Party Claim. Within 30 days of
the receipt of notice from an Indemnitee in accordance with Section 4.4(a)
(or sooner, if the nature of such Third-Party Claim so requires), the
Indemnifying Party shall notify the Indemnitee of its election whether the
Indemnifying Party will assume responsibility for defending such Third-Party
Claim, which election shall specify any reservations or exceptions. After
notice from an Indemnifying Party to an Indemnitee of its election to assume
the defense of a Third-Party Claim, such Indemnifying Party shall not be
liable to such Indemnitee under this Article IV for any legal or other
expenses (except expenses approved in advance by the Indemnifying Party)
subsequently incurred by such Indemnitee in connection with the defense
thereof; PROVIDED that if the defendants in any such claim include both the
Indemnifying Party and one or more Indemnitees and in any Indemnitee's
reasonable judgment a conflict of interest between one or more of such
Indemnitees and such Indemnifying Party exists in respect of such claim or if
the Indemnifying Party shall have assumed responsibility for such claim with
any reservations or exceptions, such Indemnitees shall have the right to
employ separate counsel to represent such Indemnitees and in that event the
reasonable fees and expenses of such separate counsel (but not more than one
separate counsel reasonably satisfactory to the Indemnifying Party) shall be
paid by such Indemnifying Party; provided, however, if and to the extent that
there is a conflict of defenses or positions among the Indemnitees, the
Indemnitees shall have the right to retain such number of additional separate
counsel, reasonably satisfactory to the Indemnifying Party, as is reasonably
necessary to avoid such conflicts, and the Indemnifying Party shall be
responsible for the reasonable fees and expenses of such additional separate
counsel. If an Indemnifying Party elects not to assume responsibility for
defending a Third-Party Claim, or fails to notify an Indemnitee of its
election as provided in this Section 4.4(b), such Indemni-
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<PAGE>
tee may defend or (subject to the remainder of this Section 4.4(b)) seek to
compromise or settle such Third-Party Claim. Notwithstanding the foregoing,
neither an Indemnifying Party nor an Indemnitee may settle or compromise any
claim over the objection of the other; PROVIDED, HOWEVER, that consent to
settlement or compromise shall not be unreasonably withheld or delayed; and
PROVIDED FURTHER, HOWEVER, if the Indemnifying Party has not affirmatively
elected by written notice to the Indemnitee within 30 days of notice from the
Indemnitee to assume the defense of, or to seek to settle or compromise the
Third-Party Claim, and the Indemnifying Party has not similarly acknowledged,
within such 30-day period, its responsibility to indemnify the Indemnitee
against the Third-Party Claim, the Indemnitee may settle or compromise the
Third-Party Claim over the objections of the Indemnifying Party without
prejudice to the Indemnitee's claim against the Indemnifying Party. Neither
an Indemnifying Party nor an Indemnitee shall consent to entry of any
judgment or enter into any settlement of any Third-Party Claim which does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnitee, in the case of a consent or settlement by an
Indemnifying Party, or the Indemnifying Party, in the case of a consent or
settlement by the Indemnitee, of a written release from all liability in
respect to such Third-Party Claim.
(c) If an Indemnifying Party chooses to defend or to seek to
compromise or settle any Third-Party Claim, the related Indemnitee shall make
available to such Indemnifying Party any personnel or any books, records or
other documents within its control or which it otherwise has the ability to
make available that are necessary or appropriate for such defense, settlement
or compromise, and shall otherwise cooperate in the defense, settlement or
compromise of such Third-Party Claims. The Indemnifying Party shall promptly
reimburse the Indemnitee its out-of-pocket costs incurred in providing
assistance pursuant to the foregoing sentence and for the Indemnitee's
personnel costs on any occasion on which personnel of the Indemnitee spend
one full day or more in providing such assistance.
(d) Notwithstanding anything else in this Section 4.4 to the
contrary, if an Indemnifying Party notifies the related Indemnitee in writing
of such Indemnifying Party's desire to settle or compromise a Third-Party
Claim on the basis set forth in such notice (provided that such settlement or
compromise includes as an unconditional term thereof the giving by the
claimant or plaintiff of a written release of the Indemnitee from all liabil-
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ity in respect thereof) and the Indemnitee shall notify the Indemnifying
Party in writing that such Indemnitee declines to accept any such settlement
or compromise, such Indemnitee may continue to contest such Third-Party
Claim, free of any participation by such Indemnifying Party, at such
Indemnitee's sole expense. In such event, the obligation of such
Indemnifying Party to such Indemnitee with respect to such Third-Party Claim
shall be equal to (i) the costs and expenses of such Indemnitee prior to the
date such Indemnifying Party notifies such Indemnitee of the offer to settle
or compromise (to the extent such costs and expenses are otherwise
indemnifiable hereunder) PLUS (ii) the lesser of (A) the amount of any offer
of settlement or compromise that such Indemnitee declined to accept and (B)
the actual out-of-pocket amount such Indemnitee is obligated to pay
subsequent to such date as a result of such Indemnitee's continuing to pursue
such Third-Party Claim.
(e) Any claim on account of a Loss that does not result from a
Third-Party Claim shall be asserted by written notice given by the Indemnitee
to the related Indemnifying Party. Such Indemnifying Party shall have a
period of 30 days after the receipt of such notice within which to respond
thereto. If such Indemnifying Party does not respond within such 30-day
period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such 30-day period or rejects such claim in whole or in part, such
Indemnitee shall be free to pursue such remedies as may be available to such
party under this Agreement or under applicable law except as otherwise
required by Section 6.12.
(f) In addition to any adjustments required pursuant to Section
4.3, if the amount of any Loss shall, at any time subsequent to the payment
required by this Agreement, be reduced by recovery, settlement or otherwise,
the amount of such reduction that has been received by the Indemnitee, less
any expenses incurred in connection therewith, shall promptly be repaid by
the Indemnitee to the Indemnifying Party.
(g) In the event of payment by an Indemnifying Party to any
Indemnitee in connection with any Third-Party Claim, such Indemnifying Party
shall be subrogated to and shall stand in the place of such Indemnitee as to
any events or circumstances in respect of which such Indemnitee may have any
right or claim relating to such Third-Party Claim against any claimant or
plain-
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<PAGE>
tiff asserting such Third-Party Claim or against any other person. Such
Indemnitee shall cooperate with such Indemnifying Party in a reasonable
manner, and at the cost and expense of such Indemnifying Party, in
prosecuting any subrogated right or claim.
Section 4.5 REMEDIES CUMULATIVE. The remedies provided in this
Article IV shall be cumulative and shall not preclude assertion by any
Indemnitee of any other rights or the seeking of any and all other remedies
against any Indemnifying Party under Article IV of this Agreement or under
Western Atlas' directors and officers liability insurance policy.
Section 4.6 SURVIVAL OF INDEMNITIES. The obligations of each of
Western Atlas and UNOVA under this Article IV shall survive the sale or other
transfer by it of any assets, businesses or Liabilities.
ARTICLE AUTONUMOUT
ARTICLE V.
ACCESS TO INFORMATION; SERVICES
Section 5.1 ACCESS TO INFORMATION. From and after the
Distribution Date, Western Atlas shall afford to UNOVA and its authorized
accountants, counsel and other designated representatives (collectively,
"Representatives") reasonable access (including using reasonable efforts to
give access to persons or firms possessing information) and duplicating
rights during normal business hours to all records, books, contracts,
instruments, computer data and other data and information (collectively,
"Information") within Western Atlas' possession relating to UNOVA or any
UNOVA Subsidiary, insofar as such access is reasonably required by UNOVA or
any UNOVA Subsidiary, without cost to UNOVA. Similarly, UNOVA shall afford
to Western Atlas and its Representatives reasonable access (including using
reasonable efforts to give access to persons or firms possessing information)
and duplicating rights during normal business hours to Information within
UNOVA's possession or in the possession of the UNOVA Subsidiaries relating to
Western Atlas or any Western Atlas Subsidiary and insofar as such access is
reasonably required by Western Atlas or any Western Atlas Subsidiary, without
cost to Western Atlas. For purposes of this Section 5.1 only, Information is
limited to information relating to periods ending on or preceding the
Distribution Date. Information may be requested under this Article V for,
without limitation, audit, accounting, claims, litigation and tax purposes,
as well as for purposes of fulfill-
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<PAGE>
ing disclosure and reporting obligations and for performing this Agreement
and the transactions contemplated hereby. After the Distribution Date, (i)
to the extent that Western Atlas has in its possession Information relating
solely to UNOVA or any UNOVA Subsidiary, Western Atlas shall deliver the
originals of such Information to UNOVA within a reasonable time following the
Distribution Date, and (ii) to the extent that UNOVA or any UNOVA Subsidiary
has in its possession Information relating solely to Western Atlas, UNOVA or
such UNOVA Subsidiary shall deliver the originals of such Information to
Western Atlas within a reasonable time following the Distribution Date.
Section 5.2 PRODUCTION OF WITNESSES. After the Distribution
Date, each of Western Atlas and UNOVA and its respective subsidiaries shall
use reasonable efforts to make available to the other party and its
subsidiaries, upon written request, its directors, officers, employees and
agents as witnesses to the extent that any such person may reasonably be
required (giving consideration to business demands of such Representatives)
in connection with any legal, administrative or other proceedings in which
the requesting party may from time to time be involved, without cost to the
requesting party.
Section 5.3 RETENTION OF RECORDS. Except as otherwise required
by law or agreed to in writing, each of Western Atlas and UNOVA shall retain,
and shall cause its subsidiaries to retain following the Distribution Date,
for a period consistent with the document retention policies in effect at
Western Atlas and UNOVA, respectively, all significant Information relating
to the business of the other and the other's subsidiaries, but not less than
the three-year period following the Distribution Date. In addition, such
Information shall not be destroyed or otherwise disposed of if during such
period a party shall request in writing that any of the Information be
retained for additional specific and reasonable periods of time at the
expense of the party so requesting.
Section 5.4 CONFIDENTIALITY. Each of UNOVA and the UNOVA
Subsidiaries on the one hand, and Western Atlas and the Western Atlas
Subsidiaries on the other hand, shall hold, and shall cause its
Representatives to hold, in strict confidence, all Information concerning the
other in its possession or furnished by the other or the other's
Representatives pursuant to this Agreement or any of the Other Agreements
(except to the extent that such Information has been (a) in the public domain
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<PAGE>
through no fault of such party or (b) later lawfully acquired from other
sources by such party or subsequently developed by such party), and each
party shall not release or disclose such Information to any other person,
except to its auditors, attorneys, financial advisors, bankers and other
consultants and advisors, and on terms and conditions substantially the same
as the terms and conditions on which such party releases its own Information,
unless compelled to disclose by judicial or administrative process or, as
advised by its counsel, by other requirements of law.
Section 5.5 PROVISION OF SERVICES.
(a) Western Atlas shall make available to UNOVA, during normal
business hours and in a manner that will not unreasonably interfere with
Western Atlas' business, its tax, internal audit, accounting, treasury,
legal, risk management and similar staff services (collectively "Services")
whenever and to the extent that they may be reasonably required in connection
with the preparation of tax returns, audits, claims or litigation, and
otherwise to assist in effecting an orderly transition following the
Distribution. Western Atlas shall be entitled to receive from UNOVA, upon
the presentation of invoices therefor, reimbursement for all direct costs of
providing the Services, including such amounts relating to supplies,
disbursements and other out-of-pocket expenses.
(b) UNOVA shall make available to Western Atlas, during normal
business hours and in a manner that will not unreasonably interfere with
UNOVA's business, Services whenever and to the extent that they may be
reasonably required in connection with the preparation of tax returns,
audits, claims or litigation, and otherwise to assist in effecting an orderly
transition following the Distribution. UNOVA shall be entitled to receive
from Western Atlas, upon the presentation of invoices therefor, reimbursement
for all direct costs of providing the Services, including such amounts
relating to supplies, disbursements and other out-of-pocket expenses.
(c) UNOVA shall make available to Western Atlas, during normal
business hours and in a manner that will not interfere with UNOVA's business,
risk management Services, similar to the Services currently being provided to
the Oilfield Services group to the extent that they may be reasonably
required in connection with the WAI Insurance Program, and otherwise to
assist in ef-
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<PAGE>
fecting an orderly transition following the Distribution. UNOVA shall be
entitled to receive from Western Atlas, upon presentation of invoices
therefor, reimbursement for all direct costs of providing such Services,
including such amounts relating to supplies, disbursements and other
out-of-pocket expenses.
(d) For a period of not less than one year following the
Distribution, UNOVA shall provide to Western Atlas, during normal business
hours and in a manner that will not interfere with UNOVA's business, stock
option administration services, similar to the services currently being
provided to the executives of Western Atlas and its subsidiaries who
participate in the WAI Stock Option Program, and otherwise to assist in the
administration of such program following the Distribution. UNOVA shall be
entitled to receive from Western Atlas, upon presentation of invoices
therefor, reimbursement for all direct costs of providing such services,
including such amounts relating to personnel, supplies, disbursements and
other out-of-pocket expenses.
Section 5.6 COSTS. Unless otherwise provided in this Agreement,
each party shall bear all costs and expenses of that party in its performance
of its obligations under this Agreement.
ARTICLE VI.
MISCELLANEOUS
Section 6.1 COMPLETE AGREEMENT; CONSTRUCTION. This Agreement,
the Benefits Agreement and the Tax Sharing Agreement, including any schedules
and exhibits hereto or thereto, and other agreements and documents referred
to herein, shall constitute the entire agreement between the parties with
respect to the subject matter hereof and shall supersede all previous
negotiations, commitments and writings with respect to such subject matter.
Notwithstanding any other provisions in this Agreement to the contrary, in
the event and to the extent that there shall be a conflict between the
provisions of this Agreement and the provisions of any of the Other
Agreements, the provisions of the Other Agreements shall control.
Section 6.2 SURVIVAL OF AGREEMENTS. Except as otherwise
contemplated by this Agreement, all covenants and agreements of the parties
contained in this Agreement shall survive the Distribution Date.
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Section 6.3 EXPENSES. Except as otherwise set forth in this
Agreement or any of the Other Agreements, all costs and expenses arising on
or prior to the Distribution Date (whether or not then payable) in connection
with the Distribution (other than the costs incurred in printing the stock
certificates of UNOVA) shall be paid by Western Atlas to the extent that
appropriate documentation concerning such costs and expenses shall be
provided to Western Atlas.
Section 6.4 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, without
regard to the principles of conflicts of laws thereof.
Section 6.5 NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be delivered by
hand, mailed by registered or certified mail (return receipt requested), or
sent by cable, telegram, telex or telecopy (confirmed by regular, first-class
mail), to 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:
if to Western Atlas:
Western Atlas Inc.
10205 Westheimer Road
Houston, Texas 77042
Attention: General Counsel
Fax No.: (713) 266-1717
or to such other person or place as Western Atlas shall have specified to
UNOVA in a notice in accordance with this Section 6.5,
if to UNOVA:
UNOVA, Inc.
360 North Crescent Drive
Beverly Hills, California 90210
Attention: General Counsel
Fax No.: (310) 888-2848
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<PAGE>
or to such other person or place as UNOVA shall have specified to Western
Atlas in a notice in accordance with this Section 6.5.
Section 6.6 AMENDMENTS. This Agreement may not be modified or
amended except by an agreement in writing signed by the parties.
Section 6.7 SUCCESSORS AND ASSIGNS. Neither party shall have the
right to assign this Agreement or any of its rights or interests herein
without the written consent of the other party, and any attempted assignment
without such consent shall be null and void; provided, however, that Western
Atlas shall have the right to assign this Agreement to a purchaser or
acquirer of substantially all of the business, properties, and assets of
Western Atlas or to the survivor of a statutory merger or consolidation to
which Western Atlas is a constituent party; provided, however, that UNOVA
shall have the right to assign this Agreement to a purchaser or acquirer of
substantially all of the business, properties and assets of UNOVA or to the
survivor of a statutory merger or consolidation to which UNOVA is a
constituent party; and provided further, however, that in the event of any
such assignment by Western Atlas or UNOVA, Western Atlas or UNOVA, as the
case may be, shall nevertheless remain liable and obligated under this
Agreement. This Agreement and the Agreements in the form of Annexes A
through C hereof, as the same may be amended or modified, and the provisions
hereof and thereof, shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns.
Section 6.8 TERMINATION. This Agreement may be terminated and
the Distribution abandoned at any time prior to the Distribution Date by and
in the sole discretion of the Western Atlas Board without the approval of
UNOVA or Western Atlas' shareholders. In the event of such termination, no
party shall have any liability of any kind to any other party on account of
such termination except that expenses incurred in connection with the
transactions contemplated hereby shall be paid as provided in Section 6.3.
Section 6.9 NO THIRD-PARTY BENEFICIARIES. Except for the
provisions of Article IV relating to Indemnitees, and except as may be
otherwise provided for in any of the Agreements in the form of Annexes A
through C hereto, as the same may be amended or modified, this Agreement is
solely for the benefit of the parties hereto and their respective Affiliates
and should not be deemed
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to confer upon third parties (including any employee of Western Atlas or
UNOVA or any Western Atlas or UNOVA Subsidiary) any remedy, claim,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.
Section 6.10 TITLES AND HEADINGS. Titles and headings to
sections herein are inserted for the convenience of reference only and are
not intended to be part of or to affect the meaning or interpretation of this
Agreement.
Section 6.11 LEGAL ENFORCEABILITY. Any provision of this
Agreement that is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective 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 provision in any other jurisdiction.
Section 6.12 ARBITRATION. Any dispute hereunder which is not
resolved by agreement of the parties, shall be subject to resolution by
arbitration in accordance with the Rules of the American Arbitration
Association but subject to the procedural stipulation set forth on Schedule
C. Any decision or award in such arbitration shall be legally enforceable
between the parties by any Court of competent jurisdiction. Such arbitration
proceeding shall be conducted before a single arbitrator unless either party
requests a panel of three arbitrators.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.
WESTERN ATLAS INC.
By: /s/ Michael E. Keane
-----------------------------
UNOVA, INC.
By: /s/ Charles A. Cusumano
-----------------------------
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SCHEDULE A
TO THE DISTRIBUTION AND INDEMNITY AGREEMENT
Items with respect to which Western Atlas will indemnify the UNOVA
Indemnitees in accordance with Section 4.1 of the Agreement:
(1) All Losses arising out of the businesses conducted or to be
conducted by Western Atlas or any Western Atlas Subsidiary, whether such
Losses relate to events occurring, or whether such Losses are asserted,
before or after the Distribution Date (excluding the businesses conducted or
to be conducted by UNOVA (whether directly or through a subsidiary or
Affiliate of UNOVA) and the UNOVA Subsidiaries) and all Losses arising out
of, or attributable to, any and all of the businesses or operations of
Western Atlas or any of Western Atlas' current or former subsidiaries which
have been discontinued, designated discontinued (excluding UNOVA's inclusion
in such account), liquidated, sold or otherwise disposed of at any time on or
prior to the Distribution Date and which relate or did relate to the
businesses to be conducted by Western Atlas and the Western Atlas
Subsidiaries following the Distribution Date (the "Western Atlas Discontinued
Operations"), including without limitation the Core Laboratories Division,
the manufacturing operations of the Western Geophysical Division and the
Western Atlas Software Division (except to the extent provided for in the
Benefits Agreement); and
(2) All of Western Atlas' and any Western Atlas Subsidiary's
Liabilities arising out of this Agreement or any of the Other Agreements,
except as otherwise provided for in such Other Agreements;
(3) All Losses arising out of or based upon any untrue statement
or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, with respect to all
information set forth in the following sections of the Information Statement
or any preliminary or final Form 10 or any amendment thereto:
"Introduction"; "The Distribution"; "Arrangements Between Western Atlas and
UNOVA Relating to the Distribution"; "Summary of Certain Information" (only
to the extent that such summary includes information also contained in the
foregoing sections); and any letter to shareholders from an officer of
Western Atlas; and
<PAGE>
(4) Any Liability arising in connection with any Action brought by
or on behalf of any governmental entity for reimbursement, surrender or
delivery to a governmental entity of unclaimed property under the escheat
laws of any State or Country, to the extent that such Liability is
attributable to the businesses conducted or to be conducted by Western Atlas
or any Western Atlas Subsidiary following the Distribution Date (excluding
the businesses conducted or to be conducted by UNOVA (whether directly or
through a subsidiary or Affiliate of UNOVA) and the UNOVA Subsidiaries or to
any of the "UNOVA Discontinued Operations" (as defined in Schedule B)) or to
any of the Western Atlas Discontinued Operations, whether such liability
arose before or arises after the Distribution Date.
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<PAGE>
SCHEDULE B
TO THE DISTRIBUTION AND INDEMNITY AGREEMENT
Items with respect to which UNOVA will indemnify the Western Atlas
Indemnitees in accordance with Section 4.2 of the Agreement:
(1) All Losses arising out of any guarantees, indemnities, or
obligations to third parties including, without limitation, letters of credit
and surety bonds, of Western Atlas or any Western Atlas Subsidiary with
respect to any obligations of UNOVA or any UNOVA Subsidiary to third parties
or with respect to the obligations of Western Atlas to third parties arising
out of or attributable to any and all of the businesses or operations of
Western Atlas or any of Western Atlas' current or former subsidiaries which
have been discontinued, designated discontinued, liquidated, sold or
otherwise disposed of at any time on or prior to the Distribution Date and
which relate or did relate to the businesses to be conducted by UNOVA and the
UNOVA Subsidiaries following the Distribution Date, including without
limitation the Material Handling Systems Division, the VantageWare Division,
the Automated Guided Vehicles Division, Pro-Tac System AB, Lamb-Unima and
Western Atlas Filtration Systems (collectively, the "UNOVA Discontinued
Operations"); and the Liabilities of UNOVA under the Benefits Agreement which
shall be included within UNOVA's indemnity of Western Atlas and the Western
Atlas Subsidiaries;
(2) All Losses arising out of the businesses conducted or to be
conducted by UNOVA (whether directly or through a subsidiary or Affiliate of
UNOVA) and the UNOVA Subsidiaries, and any Liability of UNOVA or of any of
the UNOVA Subsidiaries with respect to the UNOVA Discontinued Operations,
whether such Losses relate to events occurring, or whether such Losses are
asserted before or after the Distribution Date;
(3) The liability and obligation of Western Atlas or of any
Western Atlas Subsidiary under or with respect to any Revenue Bond financing
related to any of the properties and assets utilized by UNOVA or any of the
UNOVA Subsidiaries in their respective businesses, irrespective of whether or
not Western Atlas has suffered actual loss;
(4) All of UNOVA's and any of the UNOVA Subsidiaries' Liabilities
arising out of this Agreement or any of the Other Agreements, except as
otherwise provided for in such Other Agreements; and
<PAGE>
(5) All Losses arising out of or based upon any untrue statement
or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact required to be stated therein or necessary
to make the statements therein not misleading, with respect to all
information contained in the Information Statement or any preliminary or
final Form 10 or any amendment thereto; PROVIDED, HOWEVER, that such
indemnification shall not apply to any Losses that arise out of or are based
upon any statement or omission made in any of the sections of the Information
Statement or Form 10 that are listed in paragraph (3) of Schedule A;
(6) Any Liability arising in connection with any Action brought by
or on behalf of any governmental entity for reimbursement, surrender or
delivery to a governmental entity of unclaimed property under the escheat
laws of any State or Country, to the extent that such Liability is
attributable to the businesses conducted or to be conducted by UNOVA or any
UNOVA Subsidiary or to any of the UNOVA Discontinued Operations, whether such
liability arose before or arises after the Distribution Date.
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<PAGE>
SCHEDULE C
TO THE DISTRIBUTION AND INDEMNITY 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 that an evidentiary hearing,
and/or oral presentation or argument is required for the rendition of an
award or a decision. However, any such evidentiary hearing shall be limited
to not more than fifteen days, and oral presentation and argument shall be
limited to eight hours, 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.
(d) The Arbitrator shall render its award or decision within two
months of the Arbitrator's appointment.
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 parties by
mutual agreement waive such notice or modify the terms thereof.
<PAGE>
4. POSTPONEMENTS. The Arbitrator for good cause shown 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.
(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 either of the
parties and the Arbitrator other than at oral hearing, unless the parties and
the Arbitrator agree in writing.
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 ("absent in default"). An award shall not be
made solely on the default of a party. The Arbitrator shall require the
party
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<PAGE>
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 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 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 and 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.
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<PAGE>
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 objection 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 address specified in Section 6.15 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.
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. DELIVERY 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.
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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
conducted in the manner provided for in the Supplementary Procedure for Large
Complex Disputes of the American Arbitration Association.
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<PAGE>
EXHIBIT 10.2
TAX SHARING AGREEMENT
by and between
WESTERN ATLAS INC.
and
UNOVA, INC.
dated as of October 31, 1997
<PAGE>
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
Litton 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
<PAGE>
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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<PAGE>
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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<PAGE>
Section 5.4 - Entire Agreement; Termination of Prior Agreements Other
Than Litton 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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<PAGE>
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.
<PAGE>
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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<PAGE>
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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<PAGE>
(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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<PAGE>
"Litton 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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<PAGE>
"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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<PAGE>
Litton pursuant to the Litton 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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<PAGE>
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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<PAGE>
"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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<PAGE>
"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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<PAGE>
"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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<PAGE>
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 Litton
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 Litton 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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<PAGE>
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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<PAGE>
(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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<PAGE>
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.
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Western Atlas 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
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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
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Western Atlas 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,
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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").
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Western Atlas 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
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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
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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),
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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.
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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
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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
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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.
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(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.
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(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
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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
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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
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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).
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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
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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
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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
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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
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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-
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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
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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.
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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
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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
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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
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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 LITTON AGREEMENT. Except for that certain Tax Sharing Agreement dated as
of March 17, 1994 by and between Litton Industries, Inc. and Western Atlas (the
"Litton 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 Litton 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 Litton Agreement, the provisions of the Litton 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.
10205 Westheimer Road
Houston, TX 77042
To UNOVA or any member of the UNOVA Group:
General Counsel
UNOVA Inc.
360 North Crescent Drive
Beverly Hills, CA 90210
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/ Michael E. Keane
--------------------------------
UNOVA, INC.
By: /s/ Charles A. Cusumano
--------------------------------
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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
<PAGE>
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
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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-
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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.
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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.
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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
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American Arbitration Association, with such modification as
the parties may agree upon.
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EXHIBIT 10.3
EMPLOYEE BENEFITS AGREEMENT
EMPLOYEE BENEFITS AGREEMENT (the "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"), which, as of the
date hereof, is a direct, wholly-owned subsidiary of Western Atlas.
WHEREAS, the Board of Directors of Western Atlas has decided to
distribute all of the stock of UNOVA to the shareholders of Western Atlas in
a transaction intended to qualify under Section 355 of the Code (the
"Distribution");
WHEREAS, Western Atlas and UNOVA are entering into a Distribution
and Indemnity Agreement (the "Distribution Agreement") which, among other
things, together with the annexes to the Distribution Agreement, sets forth
the principal corporate transactions required to effect the Distribution and
sets forth other agreements that will govern certain other matters following
the Distribution; and
WHEREAS, in connection with the Distribution, Western Atlas and
UNOVA desire to provide for the allocation of assets and liabilities and
other matters relating to employee benefit plans and compensation
arrangements;
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, Western Atlas and UNOVA
agree as follows:
Section 1. DEFINITIONS.
Terms used but not defined in this Agreement shall have the meanings
set forth in the Distribution Agreement. As used in this Agreement the
following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the term defined):
AFFILIATE: with respect to a Person, any Person controlled by,
controlling or under common control with such Person.
<PAGE>
BENEFIT PLAN: any Plan, existing on or prior to the Distribution
Date which was established by any member of the Western Atlas Group or the
UNOVA Group, or any predecessor or Affiliate of any of the foregoing, to
which any member of the Western Atlas Group or the UNOVA Group contributes,
has contributed, is required to contribute or has been required to
contribute, or under which any employee, former employee, director or former
director of any member of the Western Atlas Group or the UNOVA Group or any
beneficiary thereof is covered, is eligible for coverage or has benefits
rights.
CODE: the Internal Revenue Code of 1986, as amended.
CURRENT PLAN YEAR: the plan year during which the Distribution Date
occurs.
DISTRIBUTION DATE: the date on which the Distribution is effected.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended.
EXISTING RETIREMENT PLANS: the Western Atlas Inc. Retirement Plan,
the Landis Tool Pension Plan and the Retirement Plan of the von Gal
Operations of Western Atlas Inc.
GROUP: the Western Atlas Group or the UNOVA Group.
LIABILITY: any debt, liability or obligation, whether absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever arising, and whether or not the same
would properly be reflected on a balance sheet, and all costs and expenses
related thereto.
NONQUALIFIED PLAN: any Plan that provides retirement benefits and
is not intended to qualify under Section 401(a) of the Code.
PERSON: an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization or a government or any department or agency thereof.
PLAN: any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock option, stock purchase, stock
ownership, stock appreciation rights, phan-
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tom stock, leave of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, health (including medical, dental and vision
care), accident, disability, severance, pay in lieu of notice, separation,
workers' compensation, travel or other employee benefit plan, practice,
policy or arrangement of any kind (including, but not limited to, any
"employee benefit plan" (within the meaning of Section 3(3) of ERISA)).
PRIOR PLAN YEAR: to the extent applicable with respect to any Plan,
any plan year that ended on or prior to the Distribution Date.
QUALIFIED PLAN: a Plan which is an employee benefit pension plan
(within the meaning of Section 3(2) of ERISA) and which is intended to
qualify under Section 401(a) of the Code.
SUBSIDIARY: a corporation more than 50% of the voting power of
whose outstanding voting securities are owned directly or indirectly by
another specified corporation.
UNOVA COMMON STOCK: the Common Stock, par value $.01 per share, of
UNOVA.
UNOVA-ONLY DIRECTOR: any director of UNOVA immediately after the
Distribution Date who was a director of Western Atlas immediately prior to
the Distribution Date, but who ceases to be a director of Western Atlas in
connection with the Distribution.
UNOVA EMPLOYEE: any individual who immediately after the
Distribution Date is an officer or employee of the UNOVA Group.
UNOVA FORMER EMPLOYEE: any terminated employee of Western Atlas who
was, as of such employee's termination of employment, principally employed
(i) in the business which will be conducted by the UNOVA Group, (ii) at the
corporate headquarters of Western Atlas or (iii) in one of the "UNOVA
Discontinued Operations" as such term is defined in Schedule B of the
Distribution Agreement, and any beneficiary or dependent of any such
terminated employee.
UNOVA GROUP: UNOVA and the UNOVA Subsidiaries and Affiliates.
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UNOVA INC. PENSION PLAN: the Western Atlas Inc. Retirement Plan
assumed by UNOVA on or prior to the Distribution Date and renamed the UNOVA
Inc. Pension Plan.
UNOVA OPTION PLAN: the UNOVA 1997 Stock Incentive Plan.
UNOVA PARTICIPANT: any individual, with respect to a particular
Plan maintained by the UNOVA Group or the Western Atlas Group, who (i) is a
UNOVA Employee and who is eligible to participate in such Plan, (ii) at any
time after the Distribution Date is or becomes an officer or employee of any
member of the UNOVA Group and is eligible to participate in such Plan or
(iii) is a beneficiary or dependent of any individual described in clause (i)
or (ii).
UNOVA SUBSIDIARIES: any direct or indirect Subsidiary of UNOVA at
or after the Distribution.
WELFARE PLAN: any Plan, other than a Qualified Plan, which provides
medical, health, disability, accident, life insurance, death, dental or other
welfare benefits, including any post-employment benefits or retiree medical,
life insurance or other such benefits.
WESTERN ATLAS BONUS PLAN: the Western Atlas Inc. 1995 Incentive
Compensation Plan and the Western Atlas Inc. Individual Performance Award
Plan, and any other cash incentive plan in which both UNOVA Employees and
Western Atlas Employees participated.
WESTERN ATLAS EMPLOYEE: any individual who immediately after the
Distribution Date is an officer or employee of a member of the Western Atlas
Group.
WESTERN ATLAS FORMER EMPLOYEE: any terminated employee of Western
Atlas other than a UNOVA Former Employee.
WESTERN ATLAS FSSP: the Western Atlas Financial Security and
Savings Program.
WESTERN ATLAS GROUP: Western Atlas and the Subsidiaries and
Affiliates of Western Atlas, other than UNOVA and the UNOVA Subsidiaries and
Affiliates.
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WESTERN ATLAS INDEMNITEE: each member of the Western Atlas Group
and each of their respective directors, officers, employees and agents (but
only in their capacities as such) and each of the heirs, executors,
successors and assigns of any of the foregoing.
WESTERN ATLAS MISCELLANEOUS PLANS: any Benefit Plan, other than any
Qualified Plan, Nonqualified Plan, Welfare Plan, Western Atlas Bonus Plan or
Western Atlas Stock Option Plan.
WESTERN ATLAS NONQUALIFIED PLANS: the Supplemental Retirement
Agreement between Western Atlas Inc. and Alton J. Brann (dated March 17,
1994), the Western Atlas Inc. Restoration Plan, the Western Atlas Inc.
Supplemental Executive Retirement Plan and the Western Atlas Inc. Deferred
Compensation Plan for Directors.
WESTERN ATLAS OPTION: an option to purchase shares of Western Atlas
Common Stock granted pursuant to a Western Atlas Stock Option Plan or assumed
by Western Atlas under Plans of Norand Corporation.
WESTERN ATLAS PARTICIPANT: any individual who is a participant in
any Benefit Plan and is not a UNOVA Participant or UNOVA Former Employee, and
any beneficiary or dependent of such individual.
WESTERN ATLAS STOCK OPTION PLANS: the Western Atlas Inc. Director
Stock Option Plan and the Western Atlas Inc. 1993 Stock Incentive Plan.
Section 2. OFFERS OF EMPLOYMENT; ASSUMPTION OF EMPLOYMENT, SEVERANCE AND
CONSULTING AGREEMENTS.
(a) On or prior to the Distribution Date, the UNOVA Group shall
offer to employ, to the extent required in this Section 2(a), each employee
employed by the Western Atlas Group who is principally employed by Western
Atlas in connection with the Western Atlas industrial automation systems
businesses which will be conducted by the UNOVA Group following the
Distribution and each Western Atlas corporate headquarters employee, except
as may otherwise be agreed upon by Western Atlas and UNOVA with respect to
any particular Western Atlas corporate headquarters employees. The employees
to be offered employment by the UNOVA Group shall include all active and
inactive employees of such businesses, including all employees laid-off,
disabled or on leave of absence, unless their employment with the Western
Atlas Group has been
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terminated. The UNOVA Group is not obligated to employ any such employees of
the Western Atlas Group who decline employment with the UNOVA Group, and
Western Atlas shall not be obligated to continue the employment of such
employees.
(b) Western Atlas and UNOVA agree that with respect to individuals
who, in connection with the Distribution, cease to be employees of the
Western Atlas Group and become employees of the UNOVA Group, such cessation
shall not be deemed a severance of employment from either Group for purposes
of any Plan or agreement that provides for the payment of severance, salary
continuation or similar benefits or stock repurchase rights and, in
connection with the Distribution, if and to the extent appropriate, Western
Atlas and UNOVA shall use their best efforts (without payment of monetary
compensation) to obtain waivers from individuals against any such assertion.
(c) The UNOVA Group shall assume and be solely responsible for, and
shall indemnify the Western Atlas Group against, all liabilities and
obligations whatsoever in connection with claims made by or on behalf of
UNOVA Employees or UNOVA Former Employees in respect of severance pay, salary
continuation and similar obligations relating to the termination or alleged
termination of any such person's employment either before, on or after the
Distribution Date.
Section 3. CASH BONUS PLANS.
(a) Western Atlas shall be responsible for the payment of all
Liabilities for benefits due and payable but unpaid as of and through the
Distribution Date under each Western Atlas Bonus Plan with respect to any
Prior Plan Year (other than the Current Plan Year), other than with respect
to benefits due and payable to UNOVA Participants or UNOVA Former Employees.
(b) Except as provided in paragraph (c) below, under each Western
Atlas Bonus Plan, the UNOVA Group shall be responsible for the payment of all
Liabilities for benefits to UNOVA Participants and UNOVA Former Employees due
and payable after the Distribution Date or due and payable but unpaid as of
and through the Distribution Date, including the portions of awards made
prior to the Distribution Date which are not payable prior to the
Distribution Date.
(c) Prior to the Distribution Date, Western Atlas shall determine
1997 annual bonus awards under the Western Atlas
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Bonus Plans for UNOVA Employees who are Western Atlas corporate headquarters
employees. Such awards shall be pro rated based upon the portion of the 1997
bonus year which had expired as of the Distribution Date. Western Atlas
shall pay a portion of the cash bonus prior to the Distribution Date (the
bonus amount that is up to 50% of the employee's base salary earned for 1997
prior to the Distribution Date), and UNOVA shall pay the balance of the bonus
following the Distribution Date in installments pursuant to the terms of the
Western Atlas Bonus Plans.
(d) Following the end of 1997, UNOVA shall determine 1997 annual
bonus awards for UNOVA Employees who were not Western Atlas corporate
headquarters employees, and shall make such payments to such UNOVA Employees.
(e) For purposes of the Western Atlas Bonus Plans, individuals who,
in connection with the Distribution, cease to be employees of Western Atlas
and become UNOVA Employees shall not be deemed to have terminated employment
under such Plans as a result of becoming UNOVA Employees for purposes of
receiving installments of prior year "Final Awards" under the Western Atlas
Bonus Plans. To the extent applicable, for purposes of receiving payments of
installments of prior year "Final Awards" under the Western Atlas Bonus
Plans, UNOVA Employees must at the time such payment is due (i) be in the
active employ of UNOVA or a Subsidiary or Affiliate of UNOVA, (ii) have
terminated employment with UNOVA by reason of death, or "Disability" or
"Retirement" (as defined in the UNOVA Option Plan) or (iii) be on an
"Approved Leave of Absence" (as determined by the UNOVA Compensation
Committee or, prior to the Distribution, by the Western Atlas Compensation
Committee but including, without limitation, a leave of absence for purposes
of service in the Armed Services of the United States).
Section 4. STOCK OPTIONS.
Western Atlas shall take all action necessary to amend (if
necessary), or otherwise provide for adjustments of outstanding awards under,
the Western Atlas Stock Option Plan, so that each outstanding Western Atlas
Option will be adjusted by (i) multiplying the number of shares of Western
Atlas Common Stock subject to the option by the Adjustment Factor and (ii)
dividing the exercise price per share of the option by the Adjustment Factor.
For these purposes, the "Adjustment Factor" is defined as the quotient
obtained by dividing (x) the Average Market Price of
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the Western Atlas Common Stock plus the Average Market Price of the UNOVA
Common Stock by (y) the Average Market Price of the Western Atlas Common
Stock. The "Average Market Price" of Western Atlas Common Stock or UNOVA
Common Stock, as the case may be, is defined to be the average of the high
and low daily prices of such security as reported on the NYSE Composite Tape
(or, if not listed on such exchange, on any other national securities
exchange on which the Western Atlas Common Stock or the UNOVA Common Stock is
listed or on NASDAQ) on the sixth through tenth trading days, inclusive,
following the Distribution Date. Each Western Atlas Option held by a UNOVA
Employee who, in (a) connection with the Distribution, ceases to be a Western
Atlas Employee and becomes a UNOVA Employee, shall be amended to provide that
(i) service with UNOVA shall be deemed continuous service with Western Atlas
for purposes of vesting, exercisability and the duration of such Western
Atlas Option and (ii) to avoid the potential loss of the opportunity to
exercise such Western Atlas Option following a "Change in Control" of UNOVA
(as defined in the UNOVA Option Plan), such Western Atlas Option held by
UNOVA Employees shall immediately vest and become exercisable upon a Change
in Control of UNOVA. Each Western Atlas Option held by a UNOVA-only Director
shall be vested and exercisable in full on the Distribution Date, and each
such Western Atlas Option shall remain exercisable until the later of (A) ten
years following the date of grant of such option by Western Atlas and (B)
three years following the first to occur of the date of retirement or
resignation of the UNOVA-only Director as a director of UNOVA (or the failure
of such UNOVA-only Director to be re-elected as a director of UNOVA), the
UNOVA-only Director's total or permanent disability or his death.
Section 5. QUALIFIED PLANS.
(a) Effective on or prior to the Distribution Date, UNOVA shall
assume sponsorship of the Existing Retirement Plans. The Western Atlas Inc.
Retirement Plan shall be renamed the UNOVA, Inc. Pension Plan. The other two
Existing Retirement Plans will remain as frozen plans with no further benefit
accruals thereunder. The UNOVA, Inc. Pension Plan shall continue to provide
benefits for all individuals who, immediately prior to the Distribution Date,
were participants in the Western Atlas Inc. Retirement Plan. UNOVA agrees
that each such participant shall be, to the extent applicable, entitled, for
all purposes under the UNOVA, Inc. Pension Plan (including, without
limitation, eligibility, vesting and benefit accrual), to be credited
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<PAGE>
with the term of service credited to such participant as of the Distribution
Date under the terms of the Western Atlas Inc. Retirement Plan as if such
service had been rendered to UNOVA and had originally been credited to such
participant under the UNOVA, Inc. Pension Plan and shall have the same
accrued benefit under the UNOVA, Inc. Pension Plan immediately following the
Distribution Date as was accrued under the Western Atlas Inc. Retirement Plan
as of the Distribution Date. Western Atlas shall, as soon as practicable
after the Distribution Date, provide UNOVA with such additional information
(in the possession of the Western Atlas Group and not already in the
possession of the UNOVA Group) as may be reasonably requested by UNOVA and
necessary in order for the UNOVA Group to establish and administer
effectively the Existing Retirement Plans assumed by UNOVA.
(b) Effective on or prior to the Distribution Date, UNOVA shall
assume sponsorship of the Western Atlas FSSP and the Western Atlas FSSP shall
be renamed the UNOVA, Inc. Financial Security and Savings Program (the "UNOVA
FSSP"). UNOVA agrees that all service credited under the Western Atlas FSSP
as of the Distribution Date with respect to Western Atlas FSSP participants
shall be credited under the UNOVA FSSP for all Plan purposes, including
eligibility and vesting.
(c) From and after the Distribution Date, the Western Atlas Group
shall cease to have any Liability whatsoever with respect to participants
under the Western Atlas Inc. Retirement Plan or the Western Atlas FSSP, and
UNOVA and the UNOVA, Inc. Pension Plan and the UNOVA FSSP, as the case may
be, shall assume or retain sole responsibility for, and shall indemnify the
Western Atlas Indemnitees with respect to, all Liabilities of either Group
with respect to participants under the UNOVA, Inc. Pension Plan and the UNOVA
FSSP.
Section 6. NONQUALIFIED RETIREMENT PLANS.
Effective as of the Distribution Date, UNOVA shall assume, and shall
indemnify the Western Atlas Indemnitees from and against, all Liabilities
with respect to (i) the Supplemental Retirement Agreement between Western
Atlas Inc. and Alton J. Brann (dated March 17, 1994) and all participants
under the Western Atlas Inc. Restoration Plan, (ii) UNOVA Participants and
UNOVA Former Employees under the Western Atlas Inc. Supplemental Executive
Retirement Plan and (iii) UNOVA-only Directors under the Western Atlas Inc.
Deferred Compensation Plan for Directors.
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UNOVA represents that it has established plans on substantially the same
terms as the Western Atlas Nonqualified Plans pursuant to which each
participant for whom UNOVA has assumed Liabilities will be credited with the
term of service credited to such participant as of the Distribution Date
under the Western Atlas Nonqualified Plans, as if such service had been
rendered to UNOVA.
Section 7. DEFERRED COMPENSATION.
Effective as of the Distribution Date, UNOVA shall assume and
indemnify the Western Atlas Indemnitees from and against all Liabilities with
respect to UNOVA Participants and UNOVA Former Employees in connection with
any deferred compensation plans.
Section 8. WELFARE PLANS.
(a) Effective on or prior to the Distribution Date, UNOVA shall
assume the Western Atlas Inc. Employees Welfare Benefit Trust, and such trust
shall be renamed the UNOVA, Inc. Employees Welfare Benefit Trust (the "UNOVA
Trust"). Effective as of the Distribution Date, UNOVA shall be responsible
for and shall indemnify the Western Atlas Indemnitees from and against all
Liabilities arising under any Welfare Plan with respect to claims by UNOVA
Participants or UNOVA Former Employees for benefits incurred prior to or
after the Distribution Date pursuant to the terms of the applicable Plan.
(b) Effective on or prior to the Distribution Date, UNOVA shall
assume sponsorship of the Welfare Plans maintained by Western Atlas in which
UNOVA Employees participate. In connection with the foregoing, Western Atlas
agrees to provide UNOVA or its designated insurance representative with such
information (in the possession of the Western Atlas Group and not already in
the possession of the UNOVA Group) as may be reasonably requested by UNOVA
and necessary for the UNOVA Group to assume or establish any such Welfare
Plan, and UNOVA agrees to provide Western Atlas or its designated insurance
representative with similar information. Split-dollar insurance policies
noted on Exhibit A as UNOVA policies shall be assumed by UNOVA, and
split-dollar insurance policies noted on Exhibit A as Western Atlas policies
shall remain with Western Atlas.
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Section 9. WESTERN ATLAS MISCELLANEOUS PLANS;
POST-DISTRIBUTION LIABILITIES.
(a) The Western Atlas Group shall be solely responsible for the
payment of all Liabilities whatsoever with respect to any Western Atlas
Participant or Western Atlas Former Employee unpaid as of and through the
Distribution Date under any Western Atlas Miscellaneous Plan and the UNOVA
Group shall assume and be solely responsible for the payment of all
Liabilities with respect to any UNOVA Participant or UNOVA Former Employee
unpaid as of and through the Distribution Date under any Western Atlas
Miscellaneous Plan.
(b) Except as otherwise expressly provided herein, the Western
Atlas Group shall be solely responsible for the payment of all Liabilities
whatsoever arising with respect to any Western Atlas Employee or Western
Atlas Former Employee and attributable to any period subsequent to the
Distribution Date and the UNOVA Group shall be solely responsible for the
payment of all Liabilities whatsoever arising with respect to any UNOVA
Employee or UNOVA Former Employee and attributable to any period subsequent
to the Distribution Date.
Section 10. PRESERVATION OF RIGHTS TO AMEND OR TERMINATE PLANS.
No provisions of this Agreement, including the agreement or
representation of Western Atlas or UNOVA that it, or any member of the
Western Atlas Group or the UNOVA Group, will make or has made a contribution
or payment to or under any Plan herein referred to for any period, shall be
construed as a limitation on the right of Western Atlas or UNOVA or any
member of the Western Atlas Group or the UNOVA Group to amend such Plan or
terminate its participation therein which Western Atlas or UNOVA or any
member of the Western Atlas Group or the UNOVA Group would otherwise have
under the terms of such Plan or otherwise, and no provision of this Agreement
shall be construed to create a right in any employee or former employee or
beneficiary of such employee or former employee under a Plan which such
employee or former employee or beneficiary would not otherwise have under the
terms of the Plan itself.
Section 11. REIMBURSEMENT; INDEMNIFICATION.
Each of the parties hereto acknowledges that the Western Atlas
Group, on the
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one hand, and the UNOVA Group, on the other hand, may incur costs and
expenses (including contributions to Plans and the payment of insurance
premiums) arising from or related to any of the Plans which are, as set forth
in this Agreement, the responsibility of the other party hereto.
Accordingly, Western Atlas and UNOVA agree to reimburse each other, as soon
as practicable but in any event within 30 days of receipt from the other
party of appropriate verification, for all such costs and expenses.
Section 12. TRANSFER OF RESERVES.
To the extent that any Liability assumed by any member of the UNOVA
Group hereunder is secured by a reserve on the books of Western Atlas, such
reserve shall be transferred from Western Atlas to the books of UNOVA as soon
as practicable on or following the Distribution Date.
Section 13. FURTHER TRANSFERS.
Western Atlas and UNOVA recognize that there may be UNOVA Employees
who will, after the Distribution Date, become employed by Western Atlas and
there may be Western Atlas Employees who become employed, after the
Distribution Date, by UNOVA and there may be UNOVA Former Employees or
Western Atlas Former Employees who are hired by Western Atlas or UNOVA,
respectively. If Western Atlas and UNOVA so agree with respect to any such
individuals, the assets and liabilities with respect to such employees which
are associated with the plans and programs described in this Agreement may be
transferred and assumed in a manner consistent with this Agreement and such
employees will be treated as Western Atlas Employees or UNOVA Employees, as
the case may be. Any such transfers or assumptions and treatment of
employees will be considered to be governed by the terms of this Agreement
and shall not require the agreement of Western Atlas and UNOVA if they occur
within 3 months following the Distribution Date.
Section 14. OFFICERS AND EMPLOYEES.
Except as otherwise agreed by the parties hereto, effective as of
the Distribution Date, all officers or employees of the UNOVA Group who are
acting as directors or officers of the Western Atlas Group and are UNOVA
Employees shall resign from such positions with the Western Atlas Group.
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Section 15. OTHER LIABILITIES; GUARANTEE OF OBLIGATIONS.
(a) As of the Distribution Date, UNOVA shall assume and be solely
responsible for all Liabilities whatsoever of the Western Atlas Group with
respect to claims made by the UNOVA Employees or UNOVA Former Employees
relating to any Liability not otherwise expressly provided for in this
Agreement, including earned salary, wages, bonus, incentive or severance
payments or other compensation and accrued sick, holiday, vacation, health,
dental or retirement benefits, regardless of whether such Liability was
incurred before or after the Distribution Date. In the event of any claim
pursuant to which UNOVA may be required to indemnify Western Atlas with
respect to any such Liability, UNOVA shall have all of the rights and
obligations of an "Indemnifying Party" that are provided under Section 4.4 of
the Distribution Agreement and Western Atlas shall have all of the rights and
obligations of an Indemnified Party that are provided under Section 4.4 of
the Distribution Agreement.
(b) As of the Distribution Date, Western Atlas shall assume and be
solely responsible for all Liabilities whatsoever of the UNOVA Group with
respect to claims made by the Western Atlas Employees or Western Atlas Former
Employees relating to any Liability not otherwise expressly provided for in
this Agreement, including earned salary, wages, bonus, incentive or severance
payments or other compensation and accrued sick, holiday, vacation, health,
dental or retirement benefits, regardless of whether such Liability was
incurred before or after the Distribution Date. In the event of any claim
pursuant to which Western Atlas may be required to indemnify UNOVA with
respect to any such Liability, Western Atlas shall have all of the rights and
obligations of an "Indemnifying Party" that are provided under Section 4.4 of
the Distribution Agreement and UNOVA shall have all of the rights and
obligations of an Indemnified Party that are provided under Section 4.4 of
the Distribution Agreement.
(c) Effective immediately after the Distribution, and in connection
with the assumption by UNOVA of obligations with respect to employees of the
UNOVA Subsidiaries, UNOVA shall cause each corporation which will become a
UNOVA Subsidiary, to perform, and guarantees the performance of, each and
every obligation of such UNOVA Subsidiaries with respect to the provisions of
this Agreement.
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Section 16. COMPLIANCE.
Notwithstanding anything to the contrary in this Agreement, to the
extent any actions of the parties contemplated in this Agreement are
determined prior to the Distribution Date to violate law or result in
unintended tax liability for Western Atlas Participants or Western Atlas
Former Employees or UNOVA Participants or UNOVA Former Employees, such action
may be modified to avoid such violation of law or unintended tax liability.
SECTION 17. TERMINATION OF PARTICIPATION.
Except as otherwise expressly provided herein, the participation of
UNOVA Participants in any Benefit Plan sponsored or maintained by Western
Atlas shall cease as of the Distribution Date.
Section 18. COMPLETE AGREEMENT.
This Agreement, together with the Distribution Agreement, and the
Annexes and Schedules thereto, shall constitute the entire agreement between
the parties hereto with respect to the subject matter hereof and shall
supersede all previous negotiations, commitments and writings with respect to
such subject matter.
Section 19. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware (other than the laws regarding choice of
laws and conflicts of laws) as to all matters, including matters of validity,
construction, effect, performance and remedies.
Section 20. NOTICES.
All notices, requests, claims, demands and other communications
hereunder (collectively, "Notices") shall be in writing and shall be given
(and shall be deemed to have been duly given upon receipt) by delivery in
person, by cable, telegram, telex, telecopy or other standard form of
telecommunications, or by registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
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If to Western Atlas:
Western Atlas Inc.
10205 Westheimer Road
Houston, Texas 77042
Attention: General Counsel
If to UNOVA:
UNOVA, Inc.
360 North Crescent Drive
Beverly Hills, California 90210
Attention: General Counsel
or to such other address as any party hereto may have furnished to the other
parties by a notice in writing in accordance with this Section 20.
Section 21. AMENDMENT AND MODIFICATION.
This Agreement may be amended, modified or supplemented only by a
written agreement signed by Western Atlas and UNOVA, Inc.
Section 22. SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARIES.
This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto and their successors and
permitted assigns, but neither this Agreement nor any of the rights,
interests and obligations hereunder shall be assigned by any party hereto
without the prior written consent of each of the other parties (which consent
shall not be unreasonably withheld). This Agreement is solely for the
benefit of the parties hereto and their Subsidiaries and is not intended to
confer upon any other Persons any rights or remedies hereunder.
Section 23. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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Section 24. INTERPRETATION.
The Section headings contained in this Agreement are solely for the
purpose of reference, are not part of the agreement of the parties hereto and
shall not in any way affect the meaning or interpretation of this Agreement.
Section 25. TERMINATION.
Notwithstanding any provision hereof, this Agreement may be
terminated at any time prior to the Distribution Date. Any termination of
the Distribution Agreement shall result in the termination of this Agreement.
In the event of such termination, no party hereto shall have any Liability
to any Person by reason of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
WESTERN ATLAS INC.
By: /s/ Michael E. Keane
------------------------------
UNOVA, INC.
By: /s/ Charles A. Cusumano
------------------------------
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EXHIBIT 10.4
INTELLECTUAL PROPERTY AGREEMENT
This Intellectual Property Agreement, dated this 31st day of October,
1997, is entered into by and between Western Atlas Inc., a Delaware
corporation ("WESTERN"), and UNOVA, Inc., a Delaware corporation ("UNOVA").
WHEREAS, WESTERN proposes the distribution (the "Distribution") to its
shareholders in a tax-free spin-off of UNOVA which will own WESTERN's
industrial automation systems business, consisting of the automated data
collection and mobile computing businesses operated by Intermec Corporation,
Norand Corporation and United Barcode Industries and the integrated
manufacturing systems, body welding and assembly systems and precision
grinding and abrasive systems businesses operated by various WESTERN
divisions (collectively, the "UNOVA Business");
WHEREAS, WESTERN will retain its oilfield information services businesses
(the "Western Businesses");
WHEREAS, WESTERN and UNOVA each desire to allocate intellectual property
to the business which is using or holding for use the intellectual property:
WHEREAS, WESTERN became a publicly traded company as a result of a
tax-free spin-off from Litton Industries, Inc., a Delaware corporation
("Litton"), on March 17, 1994;
NOW, THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, receipt of which is hereby acknowledged, WESTERN
and UNOVA agree as follows:
1. Definition:
"Intellectual Property" is defined to mean patents, patent applications,
trademarks, service marks, trade names, copyrights, registrations and
applications for registration of trademarks, service marks, trade names
and copyrights, software, mask works, trade secrets and technical
information and licenses relating thereto.
2. Patents:
WESTERN does hereby sell, assign, transfer and convey unto UNOVA, its
successors and assigns, the entire right, title and interest in and to the
patents and patent applications set forth in Attachment A.1 including any
divisions, continuations or continuations-in-part thereof, and any
re-examinations or re-issues thereof, not only for, to and in the United
States of America, its territories and possessions, but for, to and in all
countries foreign
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thereto, together with the right to recover for past infringement.
3. Trademarks:
3.1 WESTERN does hereby sell, assign, transfer, and convey unto
UNOVA, its successors and assigns, the entire right, title and
interest in and to the trademark or service mark registrations
and applications for registrations set forth in Attachment B.1
including the right to recover for past infringement of said
trademarks and service marks and the good will of the business in
connection with which said trademarks and service marks are used
and which is symbolized thereby.
3.2 UNOVA has adopted and begun to use the name "UNOVA" as a trade
name, trademark and service mark. WESTERN is currently the owner
of trademark, service mark and/or trade name applications for
registration and/or reservations of "UNOVA" in the United States
of America, several States within the United States of America
and countries foreign thereto. WESTERN does hereby sell, assign,
transfer, and convey unto UNOVA, its successors and assigns, the
entire right, title and interest in and to such "UNOVA"
trademark, service mark, and/or trade name applications and
reservations, including the right to recover for past
infringement of said marks and the good will in the business in
connection with which said marks are used and which is symbolized
thereby.
3.3 WESTERN shall retain ownership in the corporate name, trademark
and service mark "WESTERN ATLAS," including the trademark and
service mark applications for registration and registrations of
"WESTERN ATLAS" in the United States of America and countries
foreign thereto listed in Attachment B.5 whose files shall be
transferred from the present corporate headquarters of WESTERN to
the Houston, Texas, offices of WESTERN upon the Distribution.
4. Assistance:
4.1 The distribution on March 17, 1994, by Litton which resulted in
the tax-free spin-off of WESTERN included that certain
Intellectual Property Agreement, Annex C of the Distribution
Agreement, under which Litton was to sell, assign, transfer and
convey unto WESTERN certain patents and trademarks. Some of those
certain patents may still be assigned of record to Litton and/or
its subsidiaries (or a predecessor in interest to Litton and/or
its subsidiaries). Attachments A.2, A.3 and A.4 hereto list,
respectively, patents owned by Litton Industrial Automation
Systems, Inc. (LIAS)(which changed its name to WESTERN); Litton
Industrial Products, Inc.
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(LIPI); and Pratt & Whitney (PW). Some of those certain
trademarks may still be assigned of record to Litton and/or its
subsidiaries. Attachments B.2, B.3 and B.4 hereto list,
respectively, trademarks owned by Litton Industries, Inc. (LII);
Litton Industrial Automation Systems, Inc. (LIAS); and Litton
Industrial Products, Inc. (LIPI). WESTERN, if requested, will
execute documents as reasonably requested by UNOVA, and without
expense to WESTERN, to obtain the sale, assignment, transfer and
conveyance unto UNOVA, its successors and assigns of the entire
right, title and interest in and to the patents and trademarks
set forth in Attachments A.2, A.3, A.4, B.2, B.3 and B.4 hereto.
5. Other Intellectual Property:
The ownership of Intellectual Property not specifically referred to
in Sections 2, 3, 4 and 6 of this Intellectual Property Agreement
shall be as follows:
5.1 Intellectual Property owned by each incorporated subsidiary owned
in whole or in part, directly or indirectly, by WESTERN or UNOVA
will continue to be owned by each such subsidiary.
5.2 Intellectual Property which is used or held for use by a division
or other unit of WESTERN in the Western Businesses, including
Intellectual Property from discontinued operations of the
oilfield information services business, shall continue to be
owned by WESTERN.
5.3 Intellectual Property which is used or held for use by a division
or other unit of WESTERN in the UNOVA Businesses, including
Intellectual Property from discontinued operations of the UNOVA
Businesses, shall be owned by, and all WESTERN's right, title and
interest is hereby assigned by WESTERN to, UNOVA.
5.4 Intellectual Property used jointly by the Western Businesses and
the UNOVA Businesses listed in Attachment C hereto shall be
retained by WESTERN.
5.5 Copyrights, software, software services and licenses and
agreements relating thereto, presently owned by WESTERN,
including e-mail, which have been used at the corporate
headquarters of WESTERN and which relate to or are utilized
primarily or exclusively by the Western Businesses shall remain
the property of WESTERN. Copyrights, software, software services
and licenses and agreements relating thereto, presently owned by
WESTERN, including e-mail, which have been used at the corporate
headquarters of WESTERN, and which relate to or are utilized
primarily or exclusively by the UNOVA Businesses
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shall become the property of UNOVA, to the extent the same may be
transferred to UNOVA. If requested, WESTERN will assist with the
assignment to UNOVA of any transferable right, title and interest
of WESTERN in such copyrights, software, software services and
related licenses and agreements which relate to or are utilized
primarily or exclusively by the UNOVA Businesses. Copyrights,
software, software services and licenses and agreements relating
thereto, presently owned by WESTERN, including e-mail, which have
been used at the corporate headquarters of WESTERN and which
relate to or are utilized by both the Western Businesses and the
UNOVA Businesses and not primarily by the Western Businesses
shall become the property of UNOVA, to the extent the same may be
transferred to UNOVA, provided, however, that UNOVA will
cooperate with and, if requested, assist WESTERN to obtain
similar copyrights, software, software services and licenses and
agreements relating thereto.
6. Licenses:
6.1 In no event shall UNOVA, or any direct or indirect subsidiary or
division of UNOVA have any interest in or rights under the
non-exclusive license granted to Litton under the Amalgamation
Agreement dated April 30, 1987 (including Section ll.9(b),
Exhibit M and Schedule M(b)), among Litton Industries, Inc.
Research Holdings, Inc., a successor-in-interest to Western
Geophysical Company of America, of the first part, Dresser
Industries, Inc., of the second part, and Western Atlas
International, Inc., of the third part, and the Letter Agreement
dated June 10, 1993 among Litton Industries, Inc., Western Atlas
Inc. and Western Atlas International, Inc. ("Non-Exclusive
License"). The foregoing notwithstanding, WESTERN will cause its
subsidiary, Western Atlas International, Inc. (WAII), to enter
into a license agreement with the UNOVA subsidiary, Intermec
Technologies Corporation (Intermec), granting to Intermec a
non-exclusive, nontransferable license under WAII's GPS patents
in a specified field of use under such terms as are mutually
agreeable to Intermec and WAII at a royalty rate not to exceed
five percent (5%), it being understood that this more favorable
royalty rate is being made available to Intermec as company
currently under common ownership with WAII.
6.2 Promptly following the Distribution Date (as defined in the
Distribution and Indemnity Agreement), UNOVA shall cause all
UNOVA subsidiaries with names that include the words "Western
Atlas" or derivations thereof to change their corporate names to
names that do not include such words or derivations. WESTERN
grants to UNOVA and the UNOVA subsidiaries the right to leave the
Western Atlas name on all buildings, vehicles, inventory and
supplies owned by UNOVA or the UNOVA subsidiaries in the form it
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appears thereon on the Distribution Date, until the sooner of the
date on which all inventory and supplies existing on the
Distribution Date have been consumed or sold or six months
following the Distribution Date; provided, however, that UNOVA
shall indemnify WESTERN for any loss incurred by WESTERN in
connection with such use by UNOVA and the UNOVA subsidiaries.
Nothing in this Section 6.2 shall be construed to grant to UNOVA
or the UNOVA subsidiaries any rights whatsoever in the Western
Atlas name.
WESTERN and UNOVA shall, and shall require their subsidiaries to, take such
actions and execute such documents as required to carry out and complete the
transfer of Intellectual Property contemplated under this Agreement. After the
Distribution should a patent or patent application, or a trademark registration
or application for registration of a trademark be discovered which is assigned
directly to WESTERN, and which is a part of the UNOVA Businesses, WESTERN will
assign such patent, patent application, trademark registration or application
for registration of a trademark to UNOVA.
IN WITNESS WHEREOF, the parties hereto affix their respective hands as of
the date indicated above.
WESTERN ATLAS INC.
By: /s/ Michael E. Keane
-------------------------------------
UNOVA, INC.
By: /s/ Charles A. Cusumano
-------------------------------------
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EXHIBIT 10.5
UNOVA, INC.
CHANGE OF CONTROL EMPLOYMENT AGREEMENT
AGREEMENT by and between UNOVA, INC., a Delaware corporation (the
"Company"), and , dated as of the day day of
October 31 Month, 1997.
The Board of Directors of the Company (the "Board"), has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS.
(a) The "Effective Date" shall mean the first date during
the Change of Control Period (as defined in Section 1(b) on which a Change of
Control (as defined in Section 2) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to the date on
which the Change of Control occurs, and if it is reasonably demonstrated by
the Executive that such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect a Change of
Control or (ii) otherwise arose in connection with or anticipation of a
Change of Control, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such termination
of employment.
(b) The "Change of Control Period" shall mean the period
commencing on the date hereof and ending on the third anniversary of the date
hereof; provided, however, that commencing on the date one year after the
date hereof, and on each annual anniversary of such date (such date and each
annual anniversary thereof shall be hereinafter referred to as the "Renewal
Date"), unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give
notice to the Executive that the Change of Control Period shall not be so
extended.
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2. CHANGE OF CONTROL. For the purpose of this Agreement, a
"Change of Control" shall mean:
(a) An acquisition by any individual, entity, or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 30 percent or more of either (i) the then outstanding
shares of common stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); excluding, however,
the following acquisitions of Outstanding Company Common Stock and
Outstanding Company Voting Securities: (i) any acquisition directly from
the Company, other than an acquisition by virtue of the exercise of a
conversion privilege unless the security being so converted was itself
acquired directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company, or (iv) any acquisition by any Person pursuant to a transaction
which complies with clauses (i), (ii), and (iii) of subsection (c) of this
Section 2; or
(b) Individuals who, as of the effective date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that any
individual who becomes a member of the Board subsequent to such effective
date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but provided further, that
any such individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board shall not be so considered as a member of the
Incumbent Board; or
(c) The approval by the shareholders of the Company of a
reorganization, merger, or consolidation or sale or other disposition of all or
substantially all of the assets of the Company ("Business Combination") or if
consummation of such Business Combination is subject, at the time of such
approval by shareholders, to the consent of any government or governmental
agency, obtaining of such consent (either explicitly or implicitly by
consummation); excluding, however, such a Business Combination pursuant to which
(i) all or substantially all of the individuals and entities who are the
beneficial owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Business
Combination will beneficially own, directly or indirectly, more than 60 percent
of, respectively, the outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation resulting from
such Business Combination (including, without limitation, a corporation which as
a result of such transaction owns the Company or all
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or substantially all of the Company's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (other than any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or such
corporation resulting from such Business Combination) will beneficially own,
directly or indirectly, 30 percent or more of, respectively, the outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the outstanding voting securities of
such corporation entitled to vote generally in the election of directors except
to the extent that such ownership existed prior to the Business Combination, and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination will have been members of
the Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board, providing for such Business Combination; or
(d) The approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary of
such date (the "Employment Period").
4. TERMS OF EMPLOYMENT.
(a) POSITION AND DUTIES.
(i) During the Employment Period, (A) the Executive's
position (including status, offices, titles, and reporting requirements),
authority, duties, and responsibilities shall be at least commensurate in all
material respects with the most significant of those held, exercised, and
assigned at any time during the 120-day period immediately preceding the
Effective Date and (B) the Executive's services shall be performed at the
location where the Executive was employed immediately preceding the Effective
Date or any office or location less than 35 miles from such location.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal
business hours to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform
faithfully and efficiently such responsibilities. During the Employment
Period it shall not be a violation of this Agreement for the Executive to (A)
serve on corporate, civic, or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements, or teach at educational institutions,
and (C) manage personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent that any
such activities have been conducted
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by the Executive prior to the Effective Date, the continued conduct of such
activities (or the conduct of activities similar in nature and scope thereto)
subsequent to the Effective Date shall not thereafter be deemed to interfere
with the performance of the Executive's responsibilities to the Company.
(b) COMPENSATION.
(i) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the
month in which the Effective Date occurs. During the Employment Period, the
Annual Base Salary shall be reviewed no more than 12 months after the last
salary increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary shall not
serve to limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such increase
and the term Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased. As used in this Agreement, the term
"affiliated companies" shall include any company controlled by, controlling,
or under common control with the Company.
(ii) ANNUAL BONUS. In addition to Annual Base Salary,
the Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus in cash at least equal to the Executive's
highest award or awards for any fiscal year under the Company's plan or plans
which provide for the grant of annual cash bonuses or other short-term cash
incentive awards during the last three full fiscal years prior to the
Effective Date (any such award shall be annualized for any fiscal year in the
event that the Executive was not employed by the Company for the whole of
such fiscal year) (the "Annual Bonus"). Each such Annual Bonus plus unpaid
but due amounts from prior awards shall be paid in accordance with the terms
of the applicable plan but in no event later than the last day of the
Employment Period.
In the event the Executive has not received an Annual
Bonus during the period of three fiscal years prior to the Effective Date,
the Annual Bonus shall be the maximum amount of the bonus or award the
Executive could earn for the fiscal year during which the Effective Date
occurs under any plan or arrangement in which the Executive participates or
is eligible to participate and assuming: (1) the attainment of any
performance goals or similar criterion applicable to the Executive to the
extent necessary for the Executive to qualify to receive the maximum award;
and (2) the Executive's employment by the Company for the full fiscal year.
(iii) INCENTIVE, SAVINGS, AND RETIREMENT PLANS. During
the Employment Period, the Executive shall be entitled to participate in all
incentive (including stock option or similar incentive plans), savings and
retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies, and programs provide the
Executive with incentive
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opportunities (measured with respect to both regular and special incentive
opportunities, to the extent, if any, that such distinction is applicable),
savings opportunities and retirement benefit opportunities, in each case, less
favorable, in the aggregate, than the most favorable of those provided by the
Company and its affiliated companies for the Executive under such plans,
practices, policies, and programs as in effect at any time during the 120-day
period immediately preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies.
(iv) WELFARE BENEFIT PLANS. During the Employment
Period, the Executive and/or the Executive's family, as the case may be,
shall be eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies, and programs provided by the
Company and its affiliated companies (including, without limitation, medical,
prescription, dental, disability, salary continuance, employee life, group
life, accidental death, and travel accident insurance plans and programs) to
the extent applicable generally to other peer executives of the Company and
its affiliated companies, but in no event shall such plans, practices,
policies, and programs provide the Executive with benefits which are less
favorable, in the aggregate, than the most favorable of such plans,
practices, policies, and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, those provided generally at any time after
the Effective Date to other peer executives of the Company and its affiliated
companies.
(v) EXPENSES. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Executive in accordance with the most
favorable policies, practices, and procedures of the Company and its
affiliated companies in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable
to the Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies.
(vi) FRINGE BENEFITS. During the Employment Period,
the Executive shall be entitled to fringe benefits, including, without
limitation, if applicable, tax and financial planning services, use of an
automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs, and policies of the Company and its
affiliated companies in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable
to the Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies.
(vii) OFFICE AND SUPPORT STAFF. During the Employment
Period, the Executive shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and its affiliated
companies at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the
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Executive, as provided generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(viii) VACATION. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the most
favorable plans, policies, programs, and practices of the Company and its
affiliated companies as in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable
to the Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies.
5. TERMINATION OF EMPLOYMENT.
(a) DEATH OR DISABILITY. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment
Period. If the Company determines in good faith that the Disability of the
Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties.
For purposes of this Agreement, "Disability" shall mean the absence of the
Executive from the Executive's duties with the Company on a full-time basis
for 180 consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or
the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Executive
to perform substantially the Executive's duties with the Company or one of
its affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief Executive
Officer of the Company which specifically identifies the manner in which the
Board or Chief Executive Officer believes that the Executive has not
substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct or gross misconduct which is materially and demonstrably injurious to
the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief Executive
Officer or a senior officer
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of the Company or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before
the Board), finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in subparagraph (i) or (ii)
above, and specifying the particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including status,
offices, titles, and reporting requirements), authority, duties, or
responsibilities as contemplated by Section 4(a) of this Agreement, or any
other action by the Company which results in a diminution in such position,
authority, duties, or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(ii) any failure by the Company to comply with any of
the provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial, and inadvertent failure not occurring in bad faith and which
is remedied by the Company promptly after receipt of notice thereof given by
the Executive;
(iii) the Company's requiring the Executive to be based
at any office or location other than as provided in Section 4(a)(i)(B) hereof
or the Company's requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the Effective
Date;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason during the 30-day period immediately following the first
anniversary of the Effective Date shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
(d) NOTICE OF TERMINATION. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be communicated
by Notice of Termination to the other party
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hereto given in accordance with Section 12(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement
relied upon, (ii) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date shall be not more
than thirty days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact
or circumstance which contributes to a showing of Good Reason or Cause shall
not waive any right of the Executive or the Company, respectively, hereunder
or preclude the Executive or the Company, respectively, from asserting such
fact or circumstance in enforcing the Executive's or the Company's rights
hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company for Cause, or by
the Executive for Good Reason, the date of receipt of the Notice of
Termination or any later date specified therein, as the case may be, (ii) if
the Executive's employment is terminated by the Company other than for Cause
or Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY.
If, during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause or Disability or the Executive shall
terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (2) the product
of (x) the Annual Bonus, and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of Termination,
and the denominator of which is 365, and (3) any compensation previously
deferred by the Executive (together with any accrued interest or earnings
thereon), any awards under the Performance Award Plan or any comparable or
successor plan and any accrued vacation pay, in each case to the extent not
theretofore paid (the sum of the amounts described in clauses (1), (2), and
(3) shall be hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) three and (2) the
sum of (x) the Executive's Annual Base Salary and (y) the Annual Bonus, or if
higher, any bonus paid with respect to any fiscal year during the Employment
Period; and
C. utilizing actuarial assumptions no less favorable to the
Executive than those in effect immediately prior to the Effective Date, an
amount equal to the excess of (a) the
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actuarial equivalent of the benefit under the Company's qualified defined
benefit retirement plan (the "Retirement Plan") and any excess or
supplemental retirement plan in which the Executive participates (together,
the "SERP") which the Executive would receive if the Executive's employment
continued for three years after the Date of Termination assuming for this
purpose that all accrued benefits are fully vested, and, assuming that the
Executive's compensation in each of the three years is that required by
Section 4(b)(i) and Section 4(b)(ii), over (b) the actuarial equivalent of
the Executive's actual benefit (paid or payable), if any, under the
Retirement Plan and the SERP as of the Date of Termination;
(ii) for three years after the Executive's Date of Termination,
or such longer period as may be provided by the terms of the appropriate
plan, practice, policy, or program, the Company shall continue benefits to
the Executive and/or the Executive's family at least equal to those which
would have been provided to them in accordance with the plans, programs,
practices, and policies described in Section 4(b)(iv) of this Agreement if
the Executive's employment had not been terminated or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies and their
families, provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other welfare benefits
under another employer provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the Executive
for retiree benefits pursuant to such plans, practices, programs, and
policies, the Executive shall be considered to have remained employed until
three years after the Date of Termination and to have retired on the last day
of such period;
(iii) the Company shall, at its sole expense as incurred, provide
the Executive with outplacement services the scope and provider of which
shall be selected by the Executive in his or her sole discretion; and
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to receive
under any plan, program, policy, or practice or contract or agreement of the
Company and its affiliated companies (such other amounts and benefits shall
be hereinafter referred to as the "Other Benefits").
(b) DEATH. If the Executive's employment is terminated
by reason of the Executive's death during the Employment Period, this
Agreement shall terminate without further obligations to the Executive's
legal representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive,
benefits at least equal to the most favorable benefits provided by the
Company and affiliated companies to the estates and beneficiaries of peer
executives of the Company and such affiliated companies under such plans,
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programs, practices, and policies relating to death benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at any
time during the 120-day period immediately preceding the Effective Date or,
if more favorable to the Executive's estate and/or the Executive's
beneficiaries, as in effect on the date of the Executive's death with respect
to other peer executives of the Company and its affiliated companies and
their beneficiaries.
(c) DISABILITY. If the Executive's employment is
terminated by reason of the Executive's Disability during the Employment
Period, this Agreement shall terminate without further obligations to the
Executive, other than for payment of Accrued Obligations and the timely
payment or provision of Other Benefits. Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of
Termination. With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 6(c) shall include, and the Executive
shall be entitled after the Disability Effective Date to receive, disability
and other benefits at least equal to the most favorable of those generally
provided by the Company and its affiliated companies to disabled executives
and/or their families in accordance with such plans, programs, practices, and
policies relating to disability, if any, as in effect generally with respect
to other peer executives and their families at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive and/or the Executive's family, as in effect at any time thereafter
generally with respect to other peer executives of the Company and its
affiliated companies and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the
Executive's employment shall be terminated for Cause during the Employment
Period or if the Executive voluntarily terminates employment during the
Employment Period, excluding a termination for Good Reason, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive (x) his or her Annual Base Salary through
the Date of Termination, (y) the amount of any compensation previously
deferred by the Executive, and (z) Other Benefits, in each case to the extent
theretofore unpaid. In such case, all Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of Termination.
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
plan, practice, policy, or program provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor, subject to
Section 12(f), shall anything herein limit or otherwise affect such rights as
the Executive may have under any contract or agreement with the Company or
any of its affiliated companies. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under any plan, policy,
practice, or program of or any contract or agreement with the Company or any
of its affiliated companies at or subsequent to the Date of Termination shall
be payable in accordance with such plan, practice, policy, or program or
contract or agreement except as explicitly modified by this Agreement.
8. FULL SETTLEMENT. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense, or other claim, right, or action which the Company may
have against the Executive or others. In no event shall the Executive be
obligated to seek
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other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement and
such amounts shall not be reduced whether or not the Executive obtains other
employment. The Company agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive may
reasonably incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus
in each case interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986,
as amended (the "Code").
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the event it shall be
determined that any payment or distribution by the Company to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 9) (a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as (the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and
any interest and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by Deloitte & Touche or such other certified public accounting
firm as may be designated by the Executive (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity, or group effecting the Change of Control,
the Executive shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm shall then
be referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. Any Gross-Up
Payment, as determined pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments
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which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of
any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of the Gross-Up Payment. Such notification shall
be given as soon as practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall apprise the Company
of the nature of such claim and the date on which such claim is requested to
be paid. The Executive shall not pay such claim prior to the expiration of
the 30-day period following the date on which it gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim; provided, however, that the Company shall
bear and pay directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and shall indemnify
and hold the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto) imposed as
a result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 9(c), the Company
shall control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Executive to pay
the tax claimed and sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall determine; provided,
however, that if the Company directs the Executive to pay such claim and sue
for a refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect
to such
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advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is limited solely
to such contested amount. Furthermore, the Company's control of the contest
shall be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to settle or contest,
as the case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), the Executive becomes
entitled to receive any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the requirements of Section
9(c)) promptly pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company
pursuant to Section 9(c), a determination is made that the Executive shall
not be entitled to any refund with respect to such claim and the Company does
not notify the Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the
amount of such advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge, or data relating to the Company or any of its
affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law
or legal process, communicate or divulge any such information, knowledge, or
data to anyone other than the Company and those designated by it. In no
event shall an asserted violation of the provisions of this Section 10
constitute a basis for deferring or withholding any amounts otherwise payable
to the Executive under this Agreement.
11. SUCCESSORS.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same
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manner and to the same extent that the Company would be required to perform
it if no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid.
12. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect. This Agreement
may not be amended or modified otherwise than by a written agreement executed
by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: Name
Address1
Address2
If to the Company: UNOVA, Inc.
Attention: General Counsel
360 North Crescent Drive
Beverly Hills, CA 90210-4867
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local, or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate employment for
Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be
deemed to be a waiver of such provision or right or any other provision or
right of this Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written agreement between
the Executive and the Company, the employment of the Executive by the Company
is "at will" and, subject to Section 1(a) hereof,
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prior to the Effective Date, the Executive's employment and/or this Agreement
may be terminated by either the Executive or the Company at any time prior to
the Effective Date, in which case the Executive shall have no further rights
under this Agreement. From and after the Effective Date this Agreement shall
supersede any other agreement between the parties with respect to the subject
matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on its behalf, all as of
the day and year first above written.
------------------------------------
Name
UNOVA, INC.
By
----------------------------------
Virginia S. Young
Vice President and Secretary
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EXHIBIT 10.7
UNOVA, INC.
DIRECTOR STOCK OPTION AND FEE PLAN
1. PURPOSE. The UNOVA, Inc. Director Stock Option and Fee Plan (the "Plan")
is intended to provide an incentive to members of the board of directors of
UNOVA, Inc., a Delaware corporation (the "Company"), who are neither officers
nor employees of the Company, to remain in the service of the Company and
increase their efforts for the success of the Company and to encourage such
directors to own shares of the Company's stock, thereby aligning their interests
more closely with the interests of the Company's shareholders. The Plan is also
intended to assist the Company in attracting experienced and qualified
candidates to become members of the Board. The Plan is being adopted in
connection with the distribution (the "Distribution") of the shares of the
common stock of the Company to the shareholders of Western Atlas Inc.
2. DEFINITIONS.
(a) "Board" means the Board of Directors of the Company.
(b) "Cash Account" means the bookkeeping account established by
the Company for the deferrals of Fees by Directors which will be credited
with interest pursuant to Section 6(d) hereof.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Common Stock" means the common stock, par value $.01 per
share, of the Company.
(e) "Deferral Election" means an election pursuant to Section 6
hereof to defer receipt of Fees into a Share Account or Cash Account.
(f) "Deferred Amounts" mean the amounts credited to a Director's
Share Account or Cash Account pursuant to a Deferral Election or otherwise
pursuant to Section 6(h).
(g) "Director" means a member of the Board who is neither an
officer nor an employee of the Company. A director of the Company shall
not be deemed to be an employee of the Company solely by reason of the
existence of a consulting contract between such director and the Company or
any subsidiary thereof pursuant to which the director agrees to provide
consulting services as an independent consultant to the Company or its
subsidiaries on a regular or occasional basis for a stated consideration.
The term "Director" as used in this Plan shall include any person who may
hereafter become an advisory director of the Company, as that term is used
in the Company's By-laws.
(h) "Distribution" shall have the meaning set forth in Section 1
hereof.
(i) "Distribution Date" means the date on which the Distribution
is effected.
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(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" means, as of any given date, the mean
between the highest and lowest reported sales prices of the Common Stock on
the New York Stock Exchange Composite Tape or, if not listed on such
exchange, on any other national securities exchange on which the Common
Stock is listed or on NASDAQ. If there is no regular public trading market
for such Common Stock, the Fair Market Value of the Common Stock shall be
determined by the Board in good faith.
(l) "Fees" mean the annual retainer scheduled to be paid to a
Director for the calendar year, additional annual fees scheduled to be paid
for serving as chairman of a Board committee and fees scheduled to be paid
for attendance at Board or committee meetings.
(m) "Share Account" means the bookkeeping account established by
the Company for the deferrals of Fees by Directors which will be credited
with Share Units pursuant to Section 6(a) hereof.
(n) "Share Election" means the election by a Director to receive
shares of Common Stock in lieu of Fees as set forth in Section 5(a) hereof.
(o) "Share Unit" means a share of Common Stock credited as a
bookkeeping entry to a Director's Share Account. Each Share Unit shall
represent the right to receive one share of Common Stock.
3. ADMINISTRATION OF THE PLAN. Subject to the express provisions of the Plan,
the Board will have complete authority to interpret the Plan; to prescribe,
amend, and rescind rules and regulations relating to the Plan; to determine the
terms and provisions of the respective option agreements (which need not be
identical); and to make all other determinations necessary or advisable for the
administration of the Plan. The Board's determination on the matters referred
to in this Section 3 shall be conclusive.
4. STOCK RESERVED FOR THE PLAN. The number of shares of Common Stock
authorized for issuance under the Plan is 500,000, subject to adjustment
pursuant to Section 10 hereof. Shares of Common Stock delivered hereunder may
be either authorized but unissued shares or previously issued shares reacquired
and held by the Company.
5. TERMS AND CONDITIONS OF SHARE ELECTIONS.
(a) SHARE ELECTION. Subject to Section 5(c) hereof, each Director may
make an annual election (the "Share Election") to receive in the form of Common
Stock (subject to a Deferral Election) any or all of his or her Fees earned in
each calendar year; PROVIDED, that such Share Election must be made with respect
to at least 50% of the Director's Fees, in multiples of 10%. The shares of
Common Stock (and cash in lieu of fractional shares) issuable pursuant to a
Share Election shall be transferred quarterly in accordance with Section 5(b)
hereof. The Share Election must be in writing and delivered to the Secretary of
the Company on or prior to January 1 of the calendar year in which the
applicable Fees are to be earned; PROVIDED, HOWEVER,
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that any Director who commences service on the Board subsequent to January 1 of
a calendar year may make a Share Election during the thirty-day period
immediately following the commencement of his or her directorship.
Notwithstanding the foregoing, Share Elections for 1997 shall be effective if
made prior to the Distribution Date. A Share Election, once made, shall be
irrevocable for the calendar year with respect to which it is made and shall
remain in effect for future calendar years unless modified or revoked by a
subsequent Share Election in accordance with the provisions hereof.
(b) TRANSFER OF SHARES. Shares of Common Stock Isabel to a Director with
respect to Share Elections shall be transferred to such Director on the first
business day following the end of each calendar quarter. The total number of
shares of Common Stock to be so transferred shall be determined by dividing (x)
the dollar amount of the Director's Fees for the preceding calendar quarter (for
1997, the portion of the final calendar quarter following the Distribution Date)
to which the Share Election applies, by (y) the average of the Fair Market Value
of Common Stock on each trading date of such calendar quarter. In no event
shall the Company be required to issue fractional shares. In the event that a
fractional share of Common Stock would otherwise be required to be issued, an
amount in lieu thereof shall be paid in cash based upon the Fair Market Value of
such fractional share on the last business day of the preceding calendar
quarter.
(c) TERMINATION OF SERVICES. If a Director ceases to be a Board member
before the end of a calendar quarter, the Director shall receive in cash the
Fees such Director would otherwise have been entitled to receive for such
quarter in the absence of this Plan.
6. TERMS AND CONDITIONS OF DEFERRAL ELECTIONS.
(a) IN GENERAL. Each Director may irrevocably elect annually to defer
receiving all or a portion of (i) the shares of Common Stock that would
otherwise be transferred upon a Share Election or (ii) such Director's Fees in
respect of a calendar year (for 1997, the portion of the calendar year following
the Distribution Date) that are not subject to a Share Election (a "Deferral
Election"). A Director who has made a Deferral Election with respect to shares
of Common Stock subject to a Share Election shall have the amount of shares of
Common Stock that are the subject of the Deferral Election credited to a Share
Account in the form of Share Units. A Director who has made a Deferral Election
with respect to Fees that are not subject to a Share Election shall have the
amount of Deferred Fees credited to a Cash Account.
(b) TIMING OF DEFERRAL ELECTION. The Deferral Election shall be in
writing and delivered to the Secretary of the Company prior to January 1 of the
calendar year in which the applicable Fees are to be earned; PROVIDED, HOWEVER,
that a Director who commences service on the Board subsequent to January 1 of a
calendar year may make a Deferral Election during the thirty-day period
immediately following the commencement of his or her directorship.
Notwithstanding the foregoing, Deferral Elections for 1997 shall be effective if
made prior to the Distribution Date. A Deferral Election, once made, shall be
irrevocable for the calendar year with respect to which it is made and shall
remain in effect for future calendar years unless modified or revoked by a
subsequent Deferral Election in accordance with the provisions hereof.
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(c) SHARE ACCOUNTS. Each Share Account shall be deemed to be invested in
shares of Common Stock. Whenever regular cash dividends are paid by the Company
on outstanding Common Stock, there shall be credited to the Director's Share
Account additional Share Units equal to (i) the aggregate dividend that would be
payable on outstanding shares of Common Stock equal to the number of Share Units
in such Share Account on the record date for the dividend, divided by (ii) the
Fair Market Value of the Common Stock on the payment date of the dividend.
(d) CASH ACCOUNTS. Each Director's Cash Account shall be credited with
interest on the last day of each calendar quarter calculated on the basis of the
average daily balance in the Cash Account during the calendar quarter. The
interest rate for any calendar quarter shall be the prime rate as reported by
Morgan Guaranty Trust Company of New York as its prime rate on the first
business day of the calendar quarter.
(e) COMMENCEMENT OF PAYMENTS. Except as otherwise provided in Section
6(g) hereof, a Director's Deferred Amounts shall become payable in the January
following the year in which the Director terminates service as a Director.
Payments from a Share Account shall be made by converting Share Units into
Common Stock on a one-for-one basis, with payment of fractional shares to be
made in cash based upon the Fair Market Value of such fractional share on the
last business day of the preceding calendar quarter.
(f) TIMING OF PAYMENTS. Each Director shall elect in his or her Deferral
Election to receive payment of his or her Deferred Amounts either in a lump sum
or in two to fifteen substantially equal annual installments. In the event of a
Director's death, payment of the remaining portion of the Director's Deferred
Amounts will be made to the Director's beneficiary (or, if no beneficiary has
been designated, to the Director's estate or other legal representative) in a
lump sum as soon as practicable following the Director's death.
(g) HARDSHIP DISTRIBUTION. Notwithstanding any Deferral Election, in the
event of severe financial hardship to a Director resulting from a sudden and
unexpected illness, accident or disability of the Director or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Director, all as determined by the Board, a Director
may withdraw any portion of the Share Units in his or her Share Account (in an
equivalent number of shares of Common Stock) or cash in his or her Cash Account
by providing written notice to the Secretary of the Company.
(h) NO ACCOUNT TRANSFERS. Except as provided in this Section 6(h), a
Director may not transfer or convert a Share Account to a Cash Account or vice
versa. Any current Director participating in the Western Atlas Inc. Deferred
Compensation Plan for Directors (the "Western Atlas Plan") as of the
Distribution Date or receiving a lump sum payment under the Western Atlas
retirement program for non-employee directors as a result of the Distribution (a
"Retirement Payout"), shall automatically have his or her account balance in the
Western Atlas Plan and Retirement Payout, as the case may be, converted into an
account balance in the Cash Account under the Plan. Any such Director may
convert all or a portion of his or her deferred fee account balance in the
Western Atlas Plan and Retirement Payout, as the case may be, to a Share Account
under the Plan, in lieu of a Cash Account, by giving written notice of an
irrevocable
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election to do so to the Secretary of the Company no later than the Distribution
Date. Such election shall be effective on the tenth business day following the
Distribution Date (the "Transfer Date"), and such Director's Share Account shall
be credited as of the Transfer Date with a number of Share Units equal to (a)
the portion of the deferred fee account and/or Retirement Payout subject to the
Share Account election divided by (b) the average of the Fair Market Value of
Common Stock on the sixth through tenth trading days, inclusive, following the
Distribution Date. To the extent such an election to transfer the deferred fee
account balance in the Western Atlas Plan or the Retirement Payout into the
Share Account is not made, the remaining balance of the Director's deferred fee
account in the Western Atlas Plan or Retirement Payout, to the extent
applicable, shall be transferred into the Cash Account under the Plan effective
as of the Distribution Date. Prior to the Distribution Date, any Director
subject to this Section 6(h) shall make an election (as described in Section
6(f)) with respect to the timing of the payouts of the Deferred Amounts under
this Section 6(h)).
(i) STATUS OF ACCOUNTS. The Share and Cash Accounts shall not be funded,
and all Deferred Amounts shall be held in the general assets of the Company and
be subject to the general creditors of the Company.
7. STOCK OPTIONS.
(a) INITIAL GRANT. Effective as of the Distribution Date, each Director
shall be granted an option to purchase 25,000 shares of Common Stock (the
"Initial Grant"). The option price per share for the Initial Grant shall equal
the average of the Fair Market Value of Common Stock on the sixth through tenth
trading days, inclusive, following the Distribution Date.
(b) SUBSEQUENT GRANTS. Each person who first becomes a Director after the
Distribution Date, shall be granted an option to purchase 25,000 shares of
Common Stock as of the date such person is elected or is appointed as a
Director; PROVIDED, that no such grant shall be made to any Director who either
(i) received a stock option grant under the Company's 1997 Stock Incentive Plan
during the two-year period immediately preceding the date of such election or
appointment to the Board or (ii) was an employee of the Company or a subsidiary
of the Company at any time during the two-year period referred to in (i) above.
Grants under this Section 7(b) shall be in addition to any annual grants of
options under Section 7(c) hereof.
(c) ANNUAL GRANTS. Commencing in 1999, an option to purchase 2,500 shares
of Common Stock shall be granted to each Director automatically on the first
business day following the Company's Annual Meeting of Shareholders for such
year.
(d) OPTION PRICE PER SHARE. Options granted under Sections 6(b) and 6(c)
hereof shall be exercisable at a price per share equal to the Fair Market Value
of the Common Stock on the date of the grant of the option.
(e) PERIOD OF OPTION. Each option granted under the Plan shall become
exercisable on the first anniversary of the date upon which it is granted;
PROVIDED, HOWEVER, that all options granted pursuant to the Plan shall become
exercisable in full upon the first to occur of (i) the retirement of the
Director in accordance with the mandatory retirement policy for members of the
Board, (ii)
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the total and permanent disability of the Director, or (iii) the death of the
Director while a member of the Board. Each option granted pursuant to the Plan
shall remain exercisable until the expiration of three years following the first
to occur of the retirement or resignation of the optionee as a director of the
Company (or the failure of the optionee to be re-elected a director of the
Company), the total and permanent disability of the optionee, or the death of
the optionee.
(f) EXERCISE OF OPTIONS. Options may be exercised only by written notice
to the Company at its corporate office accompanied by payment of the full
consideration for the shares as to which they are exercised. The purchase price
is to be paid in full to the Company upon the exercise of the option (i) by
cash, including a personal check payable to the order of the Company, or (ii) by
delivering Common Stock already owned by the optionee for a period of at least
six months (valued at Fair Market Value as of the date of delivery), or (iii)
any combination of cash and Common Stock so valued.
(g) NONSTATUTORY OPTIONS. No option granted hereunder shall constitute an
"incentive stock option" as that term is defined in the Code.
8. MODIFICATION, EXTENSION, AND RENEWAL OF OPTIONS. The Board shall have the
power to modify, extend, or renew outstanding options and authorize the grant of
new options in substitution therefor, provided that such power may not be
exercised in a manner which would (i) alter or impair any rights or obligations
of any option previously granted without the written consent of the optionee or
(ii) adversely affect the qualification of the Plan or any other stock-related
plan of the Company under Rule 16b-3 under the Exchange Act, as amended.
9. LIMITATION OF RIGHTS.
(a) NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan, nor the
granting of an option or the making of a Share Election or Deferral Election, or
any other action taken pursuant to the Plan, shall constitute or be evidence of
any agreement or understanding, express or implied, that the Company will retain
a Director for any period of time, or at any particular rate of compensation.
(b) NO SHAREHOLDERS' RIGHTS. An optionee or a Director who has made a
Share Election or Deferral Election (or his or her representative) shall have no
rights as a shareholder with respect to the shares covered by his or her options
or Share Election or to any Share Units with respect to a Deferral Election
until the date of the actual issuance to him or her (or such representative) of
shares of Common Stock (either through the Company's Direct Registration System
or by certification) and, subject to Sections 6(c) and 10 hereof, no adjustment
will be made for dividends or other rights for which the record date is prior to
the date such shares are issued.
10. EFFECT OF CERTAIN CHANGES IN CAPITALIZATION. In the event of any change in
corporate capitalization (such as a stock split), any corporate transaction
(such as any merger, consolidation or separation (including a spin-off)), any
other distribution of stock or property of the Company, any reorganization
(whether or not such reorganization comes within the definition of such term in
Section 368 of the Code) or any partial or complete liquidation of the Company,
the Board shall equitably adjust the Share Account to reflect any such
transaction, and shall make such
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substitution or adjustments in the aggregate number and kind of shares reserved
for issuance under the Plan, in the number, kind and option price of shares
subject to outstanding options, in the number and kind of shares subject to
automatic option grants under Section 6 and/or such other equitable substitution
or adjustments in the terms of options as it may determine to be appropriate in
its sole discretion; PROVIDED, HOWEVER, that the number of shares subject to any
option shall always be a whole number.
11. CHANGE IN CONTROL.
(a) For purposes of the Plan, a "Change in Control" shall mean the
occurrence of any of the following events:
(i) an acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 30% or more of either (1) the then outstanding shares
of common stock of the Company (the "Outstanding Company Common Stock") or
(2) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); excluding, however, the following
acquisitions of Outstanding Company Common Stock and Outstanding Company
Securities: (1) any acquisition directly from the Company, other than an
acquisition by virtue of the exercise of a conversion privilege unless the
security being so converted was itself acquired directly from the Company,
(2) any acquisition by the Company, (3) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or
any company controlled by the Company, or (4) any acquisition by any Person
pursuant to a transaction which complies with clauses (1), (2) and (3) of
subsection (iii) of this Section 11(a); or
(ii) individuals who, as of the effective date of the Plan,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; PROVIDED, HOWEVER, that any
individual who becomes a member of the Board subsequent to such effective
date of the Plan, whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board; but, PROVIDED
FURTHER, that any such individual whose initial assumption of office occurs
as a result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board shall not be so
considered as a member of the Incumbent Board; or
(iii) the approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Company ("Business Combination")
or if consummation of such Business Combination is subject, at the time of
such approval of shareholders, to the consent of any government or
governmental agency, obtaining of such consent (either explicitly or
implicitly by consummation); excluding, however, such a Business
Combination pursuant to which (1) all
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or substantially all of the individuals and entities who are the beneficial
owners, respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such Business
Combination will beneficially own, directly or indirectly, more than 60%
of, respectively, the outstanding shares of common stock, and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions
as their ownership, immediately prior to such Business Combination, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (2) no Person (other than any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the corporation or such company resulting from such Business
Combination) will beneficially own, directly or indirectly, 30% or more of,
respectively, the outstanding shares of common stock of the Company
resulting from such Business Combination or the combined voting power of
the outstanding voting securities of such corporation entitled to vote
generally in the election of directors except to the extent that such
ownership existed with respect to the Company prior to the Business
Combination and (3) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination will
have been members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(iv) the approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(b) Notwithstanding anything in the Plan to the contrary, upon the
occurrence of a Change in Control:
(i) all Share Units credited to a Share Account shall be converted
into Common Stock and together with all Deferred Amounts credited to a Cash
Account shall be transferred as soon as practicable to each Director;
(ii) Fees earned in respect of the calendar quarter in which the
Change in Control occurs, shall be paid in cash as soon as practicable; and
(iii) all options shall immediately vest and become exercisable in
full.
12. TERM OF PLAN. This Plan shall become effective as of the date of approval
of the Plan by the sole stockholder of the Company. The Plan shall terminate on
December 15, 2007, unless earlier terminated by the Board. Notwithstanding the
Plan's termination, amounts shall be delivered pursuant to any Deferral Election
made prior to the Plan's termination in accordance with such election. Options
may be granted under the Plan at any time prior to the termination of the Plan.
Deferral Elections and Share Elections may not be made for any Fees which would
be paid following the date of the termination of the Plan.
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13. AMENDMENT; TERMINATION. The Board may at any time and from time to time
alter, amend, suspend, or terminate the Plan in whole or in part; PROVIDED,
HOWEVER, that no amendment which is required by any regulation, law or stock
exchange rule to be approved by shareholders shall be effective unless it is
approved by the shareholders of the Company entitled to vote thereon.
Notwithstanding the foregoing, no amendment shall affect adversely any of the
rights of any Director, under any option or under any election theretofore in
effect under the Plan, or with respect to Deferred Amounts, without such
Director's consent.
14. NONTRANSFERABILITY. No option, or right or interest of any Director in
Deferred Amounts, shall be transferable by a Director other than (i) by will or
by the laws of descent and distribution, (ii) pursuant to a qualified domestic
relations order (as defined in the Code or Title I of the Employee Retirement
Income Security Act of 1974, as amended), or (iii) in the case of an option, as
otherwise expressly permitted under the applicable option agreement including,
if so permitted, pursuant to a gift to such optionee's family, whether directly
or indirectly or by means of a trust or partnership or otherwise. All options
or rights with respect to Deferred Amounts shall be exercisable, during the
Director's lifetime, only by the Director or by the guardian or legal
representative of the Director or an alternate payee pursuant to a qualified
domestic relations order or, in the case of an option, by any person to whom
such option is transferred pursuant to the preceding sentence. Under the Plan,
it is understood that the term "optionee" includes the guardian and legal
representative of the Director named in the option agreement and any person to
whom an option is transferred by will or the laws of descent and distribution,
pursuant to a qualified domestic relations order or as otherwise described
above.
15. BENEFICIARIES. The Board shall establish such procedures as it deems
appropriate for a Director to designate a beneficiary to whom any amounts
payable in the event of a Director's death are to be paid or by whom any options
held by a Director may be exercised following his or her death. Directors shall
make a beneficiary election with respect to Deferred Amounts at the same time
that a Deferral Election is made.
16. COMPLIANCE WITH LAW, ETC. Notwithstanding any other provision of the Plan
or agreements made pursuant hereto, the Company shall not be required to issue
or deliver any certificate or certificates for shares of Common Stock under the
Plan prior to fulfillment of all of the following conditions:
(i) The listing, or approval for listing upon notice of issuance,
of such shares on the New York Stock Exchange, Inc., or such other
securities exchange or NASDAQ as may at the time be the principal market
for Common Stock;
(ii) Any registration or other qualification of such shares of the
Company under any state or federal law or regulation, or the maintaining in
effect of any such registration or other qualification which the Board
shall, in its absolute discretion upon the advice of counsel, deem
necessary or advisable; and
(iii) The obtaining of any other consent, approval, or permit from
any state or federal governmental agency, which the Board shall, in its
absolute discretion after receiving the advice of counsel, determine to be
necessary or advisable.
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17. NOTICE. Any written notice to the Company required by any of the
provisions of the Plan shall be addressed to the Secretary of the Company and
shall become effective when it is received.
18. GOVERNING LAW. The Plan and all determinations made and actions taken
pursuant hereto shall be governed by the law of the State of Delaware, without
reference to principles of conflict of laws, and shall be construed accordingly.
19. HEADINGS. The headings of sections and subsections herein are included
solely for convenience of reference and shall not affect the meaning of any of
the provisions of the Plan.
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EXHIBIT 10.12
UNOVA, INC.
1997 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS
The purpose of the Plan is to give the Company a competitive advantage in
attracting, retaining and motivating officers and employees and to provide the
Company and its subsidiaries with a stock plan providing incentives directly
linked to the profitability of the Company's businesses and increases in
shareholder value.
For purposes of the Plan, the following terms are defined as set forth
below:
a. "AFFILIATE" means a corporation or other entity controlled by the
Company and designated by the Committee from time to time as such.
b. "AWARD" means a Stock Appreciation Right, Stock Option, or Restricted
Stock.
c. "BOARD" means the Board of Directors of the Company.
d. "CHANGE IN CONTROL" and "Change in Control Price" have the meanings
set forth in Sections 8(b) and (c), respectively.
e. "CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
f. "COMMISSION" means the Securities and Exchange Commission or any
successor agency.
g. "COMMITTEE" means the Committee referred to in Section 2.
h. "COMPANY" means UNOVA, Inc., a Delaware corporation.
i. "COVERED EMPLOYEE" means a participant designated prior to the grant
of shares of Restricted Stock by the Committee who is or may be a "covered
employee" within the meaning of Section 162(m)(3) of the Code in the year in
which Restricted Stock is expected to be taxable to such participant.
j. "DISABILITY" means permanent and total disability as determined for
purposes of the Company's Long Term Disability Plan for the staff of the
Company's corporate headquarters.
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k. "EARLY RETIREMENT" means retirement from active employment with the
Company, a subsidiary or an Affiliate pursuant to the early retirement
provisions of the applicable pension plan of such employer.
l. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
m. "FAIR MARKET VALUE" means, as of any given date, the mean between the
highest and lowest reported sales prices of the Stock on the New York Stock
Exchange Composite Tape or, if not listed on such exchange, on any other
national securities exchange on which the Stock is listed or on NASDAQ. If
there is no regular public trading market for such Stock, the Fair Market Value
of the Stock shall be determined by the Committee in good faith.
n. "INCENTIVE STOCK OPTION" means any Stock Option designated as, and
qualified as, an "incentive stock option" within the meaning of Section 422 of
the Code.
o. "NON-EMPLOYEE DIRECTOR" means a member of the Board who qualifies as a
Non-Employee Director as defined in Rule 16b-3(b)(3), as promulgated by the
Commission under the Exchange Act, or any successor definition adopted by the
Commission.
p. "NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option.
q. "NORMAL RETIREMENT" means retirement from active employment with the
Company, a subsidiary or an Affiliate at or after age 65.
r. "QUALIFIED PERFORMANCE-BASED AWARD" means an Award of Restricted Stock
designated as such by the Committee at the time of grant, based upon a
determination that (i) the recipient is or may be a "covered employee" within
the meaning of Section 162(m)(3) of the Code in the year in which the Company
would expect to be able to claim a tax deduction with respect to such Restricted
Stock and (ii) the Committee wishes such Award to qualify for the Section 162(m)
Exemption.
s. "PERFORMANCE GOALS" means the performance goals established by the
Committee in connection with the grant of an Award. In the case of Qualified
Performance-Based Awards, (i) such Performance Goals shall be based on the
attainment of specified levels of one or more of the following measures: return
on capital utilized ("ROCU"), return on tangible equity ("ROTE"), return on
equity ("ROE"), return on assets ("ROA"), return on capital ("ROC"), cash flow
("CF"), revenue growth ("RG") or return on revenue ("ROR") of the Company or of
any business unit thereof within which the participant is primarily employed, or
that are based on the attainment of specified levels of Basic Earnings per Share
("BEPS") or Diluted Earnings per Share ("DEPS") of the Company or that are
based, in
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whole or in part, on a level or levels of increase in the Fair Market Value of
the Stock, and that are intended to qualify under Section 162(m)(4)(c) of the
Code, and (ii) such Performance Goals shall be set by the Committee within the
time period prescribed by Section 162(m) of the Code and related regulations.
For purposes of the Plan, ROCU, ROTE, ROE, ROA, ROC, CF, RG, ROR, BEPS and DEPS
shall have the meanings set forth in Exhibit A hereto.
t. "PLAN" means the UNOVA, Inc. 1997 Stock Incentive Plan, as set forth
herein and as hereinafter amended from time to time.
u. "RESTRICTED STOCK" means an Award granted under Section 7.
v. "RETIREMENT" means Normal or Early Retirement.
w. "RULE 16b-3" means Rule 16b-3, as promulgated by the Commission under
Section 16(b) of the Exchange Act, as amended from time to time.
x. "SECTION 162(m) EXEMPTION" means the exemption from the limitation on
deductibility imposed by Section 162(m) of the Code that is set forth in Section
162(m)(4)(C) of the Code.
y. "STOCK" means the common stock, par value $.01 per share, of the
Company.
z. "STOCK APPRECIATION RIGHT" means a right granted under Section 6.
aa. "STOCK OPTION" means an option granted under Section 5.
bb. "TERMINATION OF EMPLOYMENT" means the termination of the participant's
employment with the Company and any subsidiary or Affiliate. A participant
employed by a subsidiary or an Affiliate shall also be deemed to incur a
Termination of Employment if the subsidiary or Affiliate ceases to be such a
subsidiary or an Affiliate, as the case may be, and the participant does not
immediately thereafter become an employee of the Company or another subsidiary
or Affiliate. Temporary absences from employment because of illness, vacation
or leave of absence and transfers among the Company and its subsidiaries and
Affiliates shall not be considered Terminations of Employment.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
SECTION 2. ADMINISTRATION
The Plan shall be administered by the Compensation Committee or such other
committee of the Board as the Board may from time to time designate (the
"Committee"), which shall be composed of not less than two Non-Employee
Directors, each of whom shall
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be an "outside director" for purposes of Section 162(m)(4) of the Code and shall
be appointed by and serve at the pleasure of the Board.
The Committee shall have plenary authority to grant Awards pursuant to the
terms of the Plan to officers and employees of the Company and its subsidiaries
and Affiliates.
Among other things, the Committee shall have the authority, subject to the
terms of the Plan:
(a) To select the officers and employees to whom Awards may from time to
time be granted;
(b) To determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock or any
combination thereof are to be granted hereunder;
(c) To determine the number of shares of Stock to be covered by each Award
granted hereunder;
(d) To determine the terms and conditions of any Award granted hereunder
(including, but not limited to, the option price (subject to Section 5(a)), any
vesting condition, restriction or limitation (which may be related to the
performance of the participant, the Company or any subsidiary or Affiliate) and
any vesting acceleration or forfeiture waiver regarding any Award and the shares
of Stock relating thereto, based on such factors as the Committee shall
determine;
(e) To modify, amend or adjust the terms and conditions of any Award, at
any time or from time to time, including but not limited to Performance Goals;
provided, however, that the Committee may not adjust upwards the amount payable
with respect to a Qualified Performance-Based Award or waive or alter the
Performance Goals associated therewith;
(f) To determine to what extent and under what circumstances Stock and
other amounts payable with respect to an Award shall be deferred; and
(g) To determine under what circumstances an Award may be settled in cash
or Stock under Sections 5(j), 5(k) and 6(b)(ii), except as otherwise therein
provided.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any agreement relating thereto)
and to otherwise supervise the administration of the Plan.
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Any determination made by the Committee pursuant to the provisions of the
Plan with respect to any Award shall be made in the sole discretion of the
Committee at the time of the grant of the Award or, unless in contravention of
any express term of the Plan, at any time thereafter. All decisions made by the
Committee pursuant to the provisions of the Plan shall be final and binding on
all persons, including the Company and Plan participants.
Any authority granted to the Committee may also be exercised by the full
Board, except to the extent that the grant or exercise of such authority would
cause any Award or transaction to become subject to (or lose an exemption under)
the short-swing profit recovery provisions of Section 16 of the Exchange Act.
To the extent that any permitted action taken by the Board conflicts with action
taken by the Committee, the Board action shall control.
SECTION 3. STOCK SUBJECT TO PLAN
Subject to adjustment as provided herein, the total number of shares of
Stock available for grant under the Plan shall be six million (6,000,000) plus
(i) a number of shares of Stock equal to two percent of the total number of
shares of Stock outstanding as of the first day of each calendar year beginning
after December 31, 1999 for which the Plan is in effect -- provided that any
shares available for grant in a particular calendar year which are not, in fact,
granted in such year shall be added to the shares available for grant in any
subsequent calendar year. However, no more than five million (5,000,000) shares
of Stock shall be cumulatively available for grant of Incentive Stock Options
over the life of the Plan, and no more than 30 percent of the shares of Stock
available for grant under the Plan as of the first day of any calendar year
during which the Plan is in effect shall be utilized in that fiscal year for the
grant of Awards in the form of Restricted Stock. No participant may be granted
Awards covering more than one million (1,000,000) shares of Stock in any
calendar year during which the Plan is in existence. Shares subject to an Award
under the Plan may be authorized and unissued shares or may be treasury shares.
If any shares of Restricted Stock are forfeited, or if any Stock Option
(and related Stock Appreciation Right, if any) terminates without being
exercised, or if any Stock Appreciation Right is exercised for cash, shares
subject to such Awards shall again be available for distribution in connection
with Awards under the Plan.
In the event of any change in corporate capitalization, such as a stock
split or any corporate transaction (such as any merger, consolidation or
separation (including a spin-off)), any other distribution of stock or property
of the Company, any reorganization (whether or not such reorganization comes
within the definition of such term in Section 368 of the Code) or any partial or
complete liquidation of the Company, the Committee or Board may make such
substitution or adjustments in the aggregate number and kind of shares reserved
for issuance under the Plan, in the individual limits on Awards under the Plan,
in the number, kind and exercise price of shares subject to outstanding Stock
Options and Stock Appreciation Rights, in the number and kind of shares subject
to outstanding Awards in the
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form of Restricted Stock granted under the Plan and/or such other equitable
substitution or adjustments as it may determine to be appropriate in its sole
discretion; PROVIDED, HOWEVER, that the number of shares subject to any Award
shall always be a whole number. Such adjusted exercise price shall also be used
to determine the amount payable by the Company upon the exercise of any Stock
Appreciation Right associated with any Stock Option.
SECTION 4. ELIGIBILITY
Officers and employees of the Company, its subsidiaries and Affiliates who
are responsible for or contribute to the management, growth and profitability of
the business of the Company, its subsidiaries and Affiliates are eligible to be
granted Awards under the Plan. No grant shall be made under this Plan to a
director who is not an officer or a salaried employee of the Company, its
subsidiaries or Affiliates.
SECTION 5. STOCK OPTIONS
Stock Options may be granted alone or in addition to other Awards granted
under the Plan and may be of two types: Incentive Stock Options and
Non-Qualified Stock Options. Any Stock Option granted under the Plan shall be
in such form as the Committee may from time to time approve.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options or both types of Stock Options (in
each case with or without Stock Appreciation Rights); PROVIDED, HOWEVER, that
grants hereunder are subject to the annual limit on grants to individual
participants set forth in Section 3. Incentive Stock Options may be granted
only to employees of the Company and its subsidiaries (within the meaning of
Section 424(f) of the Code). To the extent that any Stock Option is not
designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock
Option.
Stock Options shall be evidenced by option agreements, the terms and
provisions of which may differ. An option agreement shall indicate on its face
whether it is intended to be an agreement for an Incentive Stock Option or a
Non-Qualified Stock Option. The grant of a Stock Option shall occur on the date
the Committee selects an individual to be a participant in any grant of a Stock
Option, determines the number of shares of Stock to be subject to such Stock
Option to be granted to such individual and specifies the terms and provisions
of the Stock Option. The Company shall notify a participant of any grant of a
Stock Option, and a written option agreement or agreements shall be duly
executed and delivered by the Company to the participant. Such agreement or
agreements shall become effective upon execution by the Company and the
participant.
Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options shall be interpreted, amended or altered nor
shall any discretion or
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authority granted under the Plan be exercised so as to disqualify the Plan under
Section 422 of the Code.
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions as
the Committee shall deem desirable:
(a) OPTION PRICE. The option price per share of Stock purchasable under a
Stock Option shall be determined by the Committee and set forth in the option
agreement, and shall not be less than the Fair Market Value of the Stock subject
to the Stock Option on the date of grant.
(b) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than 10 years
after the date the Stock Option is granted.
(c) EXERCISABILITY. Except as otherwise provided herein, Stock Options
shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. The exercisability of a
Stock Option may be conditional upon the attainment of Performance Goals, which
need not be the same for all optionees. If the Committee provides that any
Stock Option is exercisable only in installments, the Committee may at any time
waive such installment exercise provisions, in whole or in part, based on such
factors as the Committee may determine. In addition, the Committee may at any
time accelerate the exercisability of any Stock Option.
(d) METHOD OF EXERCISE; ISSUANCE OF STOCK. Subject to the provisions of
this Section 5, Stock Options may be exercised, in whole or in part, at any time
during the option term by giving written notice of exercise to the Company
specifying the number of shares of Stock subject to the Stock Option to be
purchased.
Such notice shall be accompanied by payment in full of the purchase price
by certified or bank check or such other instrument as the Company may accept.
Payment, in full or in part, may also be made in the form of unrestricted Stock
already owned by the optionee for a period of at least six months prior to the
date of exercise (based on the Fair Market Value of the Stock on the date the
Stock Option is exercised).
In the discretion of the Committee, payment for any shares subject to a
Stock Option may also be made by delivering a properly executed exercise notice
to the Company, together with a copy of irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds necessary to
pay the purchase price, and, if requested, the amount of any federal, state,
local or foreign withholding taxes. To facilitate the foregoing, the Company
may enter into agreements for coordinated procedures with one or more brokerage
firms.
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No shares of Stock shall be issued until full payment therefor has been
made. Except as otherwise provided in Section 5(l) below, an optionee shall
have all of the rights of a shareholder of the Company holding the class or
series of Stock that is subject to such Stock Option (including, if applicable,
the right to vote the shares and the right to receive dividends), when the
optionee has given written notice of exercise, has paid in full for such shares
and, if requested, has given the representation described in Section 11(a).
Upon exercise of a Stock Option, a participant shall be entitled (unless the
participant has given a broker the irrevocable instructions referred to in the
preceding paragraph) to receive a certificate representing the Stock issuable
upon exercise of the Stock Option or such other evidence of ownership as the
Company may then generally provide to its shareholders of record.
(e) NONTRANSFERABILITY OF STOCK OPTIONS. No Stock Option shall be
transferable by the optionee other than (i) by will or by the laws of descent
and distribution; or (ii) in the case of a Non-Qualified Stock Option, as
otherwise expressly permitted under the applicable option agreement including,
if so permitted, pursuant to a gift to such optionee's family, whether directly
or indirectly or by means of a trust or partnership or otherwise. All Stock
Options shall be exercisable, subject to the terms of this Plan, only by the
optionee, the guardian or legal representative of the optionee, or any person to
whom such option is transferred pursuant to the preceding sentence, it being
understood that the term "holder" and "optionee" include such guardian, legal
representative and other transferee.
(f) TERMINATION BY DEATH. Unless otherwise determined by the Committee,
if an optionee's employment terminates by reason of death, any Stock Option held
by such optionee may thereafter be exercised, to the extent then exercisable, or
on such accelerated basis as the Committee may determine, for a period of one
year (or such other period as the Committee may specify in the option agreement)
from the date of such death or until the expiration of the stated term of such
Stock Option, whichever period is the shorter.
(g) TERMINATION BY REASON OF DISABILITY. Unless otherwise determined by
the Committee, if an optionee's employment terminates by reason of Disability,
any Stock Option held by such optionee may thereafter be exercised by the
optionee, to the extent it was exercisable at the time of termination, or on
such accelerated basis as the Committee may determine, for a period of three
years (or such shorter period as the Committee may specify in the option
agreement) from the date of such termination of employment or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter; PROVIDED, HOWEVER, that if the optionee dies within such period, any
unexercised Stock Option held by such optionee shall, notwithstanding the
expiration of such period, continue to be exercisable to the extent to which it
was exercisable at the time of death for a period of 12 months from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter. In the event of termination of employment by
reason of Disability, if an Incentive Stock Option is exercised after the
expiration of the exercise
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periods that apply for purposes of Section 422 of the Code, such Stock Option
will thereafter be treated as a Non-Qualified Stock Option.
(h) TERMINATION BY REASON OF RETIREMENT. Unless otherwise determined by
the Committee, if an optionee's employment terminates by reason of Retirement,
any Stock Option held by such optionee may thereafter be exercised by the
optionee, to the extent it was exercisable at the time of such Retirement, or on
such accelerated basis as the Committee may determineuntil the expiration of the
stated term of such Stock Option, PROVIDED, HOWEVER, that if the optionee dies
within such period any unexercised Stock Option held by such optionee shall,
notwithstanding the expiration of such period, continue to be exercisable to the
extent to which it was exercisable at the time of death for a period of 12
months from the date of such death or until the expiration of the stated term of
such Stock Option, whichever period is the shorter. In the event of termination
of employment by reason of Retirement, if an Incentive Stock Option is exercised
after the expiration of the exercise periods that apply for purposes of Section
422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified
Stock Option.
(i) OTHER TERMINATION. Unless otherwise determined by the Committee, if
an optionee incurs a Termination of Employment for any reason other than death,
Disability or Retirement, any Stock Option held by such optionee, to the extent
then exercisable, or on such accelerated basis as the Committee may determine,
may be exercised for the lesser of three months from the date of such
Termination of Employment or the balance of the term of such Stock Option;
PROVIDED, HOWEVER, that if the optionee dies within such three-month period, any
unexercised Stock Option held by such optionee shall, notwithstanding the
expiration of such three-month period, continue to be exercisable to the extent
to which it was exercisable at the time of death for a period of 12 months from
the date of such death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter. In the event of Termination of
Employment, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, such
Stock Option will thereafter be treated as a Non-Qualified Stock Option.
(j) CASHING OUT OF STOCK OPTION. On receipt of written notice of
exercise, the Committee may elect to cash out all or part of the portion of the
shares of Stock for which a Stock Option is being exercised by paying the
optionee an amount, in cash or Stock, equal to the excess of the Fair Market
Value of the Stock over the option price times the number of shares of Stock for
which the Option is being exercised on the effective date of such cash-out.
(k) CHANGE IN CONTROL CASH-OUT. Notwithstanding any other provision of
the Plan, during the 60-day period from and after a Change in Control (the
"Exercise Period"), unless the Committee shall determine otherwise at the time
of grant, an optionee shall have the right, whether or not the Stock Option is
fully exercisable and in lieu of the payment of the exercise price for the
shares of Stock being purchased under the Stock Option and by giving
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notice to the Company, to elect (within the Exercise Period) to surrender all or
part of the Stock Option to the Company and to receive cash, within 30 days of
such notice, in an amount equal to the amount by which the Change in Control
Price per share of Stock on the date of such election shall exceed the exercise
price per share of Stock under the Stock Option (the "Spread") multiplied by the
number of shares of Stock granted under the Stock Option as to which the right
granted under this Section 5(k) shall have been exercised. Notwithstanding the
foregoing, if any right granted pursuant to this Section 5(k) would make a
Change in Control transaction ineligible for pooling-of-interests accounting
under APB No. 16 that but for the nature of such grant would otherwise be
eligible for such accounting treatment, the Committee shall have the ability to
substitute for the cash payable pursuant to such right Stock with a Fair Market
Value equal to the cash that would otherwise be payable hereunder.
(l) DEFERRAL OF OPTION SHARES. The Committee may from time to time
establish procedures pursuant to which an optionee may elect to defer, until a
time or times later than the exercise of an Option, receipt of all or a portion
of the Shares subject to such Option and/or to receive cash at such later time
or times in lieu of such deferred Shares, all on such terms and conditions as
the Committee shall determine. If any such deferrals are permitted, then
notwithstanding Section 5(d) above, an optionee who elects such deferral shall
not have any rights as a stockholder with respect to such deferred Shares unless
and until Shares are actually delivered to the optionee with respect thereto,
except to the extent otherwise determined by the Committee.
SECTION 6. STOCK APPRECIATION RIGHTS
(a) GRANT AND EXERCISE. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of grant of such Stock
Option. A Stock Appreciation Right shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option.
A Stock Appreciation Right may be exercised by an optionee in accordance
with Section 6(b) by surrendering the applicable portion of the related Stock
Option in accordance with procedures established by the Committee. Upon such
exercise and surrender, the optionee shall be entitled to receive an amount
determined in the manner prescribed in Section 6(b). Stock Options which have
been so surrendered shall no longer be exercisable to the extent the related
Stock Appreciation Rights have been exercised.
(b) TERMS AND CONDITIONS. Stock Appreciation Rights shall be subject to
such terms and conditions as shall be determined by the Committee, including the
following:
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(i) Stock Appreciation Rights shall be exercisable only at such
time or times and to the extent that the Stock Options to which they relate
are exercisable in accordance with the provisions of Section 5 and this
Section 6.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee
shall be entitled to receive an amount in cash, shares of Stock or both, in
value equal to the excess of the Fair Market Value of one share of Stock
over the option price per share specified in the related Stock Option
multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised, with the Committee having the
right to determine the form of payment.
(iii) Stock Appreciation Rights shall be transferable only to
permitted transferees of the underlying Stock Option in accordance with
Section 5(e).
(iv) Upon the exercise of a Stock Appreciation Right, the Stock
Option or part thereof to which such Stock Appreciation Right is related
shall be deemed to have been exercised for the purpose of the limitation
set forth in Section 3 on the number of shares of Stock to be issued under
the Plan, but only to the extent of the number of shares covered by the
Stock Appreciation Right at the time of exercise based on the value of the
Stock Appreciation Right at such time.
SECTION 7. RESTRICTED STOCK
(a) ADMINISTRATION. Shares of Restricted Stock may be awarded either
alone or in addition to other Awards granted under the Plan. The Committee
shall determine the officers and employees to whom and the time or times at
which grants of Restricted Stock will be awarded, the number of shares to be
awarded to any participant (subject to the annual limit on grants to individual
participants set forth in Section 3), the conditions for vesting, the time or
times within which such Awards may be subject to forfeiture and any other terms
and conditions of the Awards, in addition to those contained in Section 7(c).
(b) AWARDS AND CERTIFICATES. Shares of Restricted Stock shall be
evidenced in such manner as the Committee may deem appropriate, including
book-entry registration or issuance of one or more stock certificates. Any
certificate or other evidence of ownership issued in respect of shares of
Restricted Stock shall be registered in the name of such participant and shall
bear an appropriate legend referring to the terms, conditions, and restrictions
applicable to such Award, substantially in the following form:
"The transferability of the shares of stock represented hereby
[referred to herein] are subject to the terms and conditions
(including forfeiture) of the UNOVA, Inc. 1997 Stock Incentive
Plan and a Restricted Stock Agreement. Copies of such Plan and
Agreement are on file at the offices of UNOVA, Inc., 360 North
Crescent Drive, Beverly Hills, California 90210."
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The Committee may require that any certificates evidencing such shares be
held in custody by the Company until the restrictions thereon shall have lapsed
and that, as a condition of any Award of Restricted Stock, the participant shall
have delivered a stock power, endorsed in blank, relating to the Stock covered
by such Award.
(c) TERMS AND CONDITIONS. Shares of Restricted Stock shall be subject to
the following terms and conditions:
(i) The Committee may, prior to or at the time of grant,
designate an Award of Restricted Stock as a Qualified Performance-Based
Award, in which event it shall condition the grant or vesting, as
applicable, of such Restricted Stock upon the attainment of Performance
Goals. If the Committee does not designate an Award of Restricted Stock as
a Qualified Performance-Based Award, it may also condition the grant or
vesting thereof upon the attainment of Performance Goals. Regardless of
whether an Award of Restricted Stock is a Qualified Performance-Based
Award, the Committee may also condition the grant or vesting thereof upon
the continued service of the participant. The conditions for grant or
vesting and the other provisions of Restricted Stock Awards (including
without limitation any applicable Performance Goals) need not be the same
with respect to each recipient. The Committee may at any time, in its sole
discretion, accelerate or waive, in whole or in part, any of the foregoing
restrictions; PROVIDED, HOWEVER, that in the case of Restricted Stock that
is a Qualified Performance-Based Award, the applicable Performance Goals
shall have been satisfied.
(ii) Subject to the provisions of the Plan and the Restricted
Stock Agreement referred to in Section 7(c)(vi), during the period, if any,
set by the Committee, commencing with the date of such Award for which such
participant's continued service is required (the "Restriction Period"), and
until the later of (i) the expiration of the Restriction Period and (ii)
the date the applicable Performance Goals (if any) are satisfied, the
participant shall not be permitted to sell, assign, transfer, pledge or
otherwise encumber shares of Restricted Stock; PROVIDED that the foregoing
shall not prevent a participant from pledging Restricted Stock as security
for a loan, the sole purpose of which is to provide funds to pay the option
price for Stock Options.
(iii) Except as provided in this paragraph (iii) and Sections
7(c)(i) and 7(c)(ii) and the Restricted Stock Agreement, the participant
shall have, with respect to the shares of Restricted Stock, all of the
rights of a stockholder of the Company holding the class or series of Stock
that is the subject of the Restricted Stock, including, if applicable, the
right to vote the shares and the right to receive any cash dividends. If
so determined by the Committee in the applicable Restricted Stock Agreement
and subject to Section 11(e) of the Plan, (A) cash dividends on the class
or series of Stock that is the subject of the Restricted Stock Award shall
be automatically
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deferred and reinvested in additional Restricted Stock, held subject to the
vesting of the underlying Restricted Stock, or held subject to meeting
Performance Goals applicable only to dividends, and (B) dividends payable
in Stock shall be paid in the form of Restricted Stock of the same class as
the Stock with which such dividend was paid, held subject to the vesting of
the underlying Restricted Stock, or held subject to meeting Performance
Goals applicable only to dividends.
(iv) Except to the extent otherwise provided in the applicable
Restricted Stock Agreement and Sections 7(c)(i), 7(c)(ii), 7(c)(v) and
8(a)(ii), upon a participant's Termination of Employment for any reason
during the Restriction Period or before the applicable Performance Goals
are satisfied, all shares still subject to restriction shall be forfeited
by the participant.
(v) Except to the extent otherwise provided in Section 8(a)(ii),
in the event that a participant retires or such participant's employment is
involuntarily terminated, the Committee shall have the discretion to waive,
in whole or in part, any or all remaining restrictions (other than, in the
case of Restricted Stock with respect to which a participant is a Covered
Employee, satisfaction of the applicable Performance Goals unless the
participant's employment is terminated by reason of death or Disability)
with respect to any or all of such participant's shares of Restricted
Stock.
(vi) If and when any applicable Performance Goals are satisfied
and the Restriction Period expires without a prior forfeiture of the
Restricted Stock, unlegended certificates or other evidence of ownership
for such shares shall be delivered to the participant upon surrender of the
legended certificates or other evidence of ownership.
(vii) Each Award shall be confirmed by, and be subject to, the
terms of a Restricted Stock Agreement.
(viii) Notwithstanding the foregoing, but subject to the provisions
of Section 8 hereof, no Award in the form of Restricted Stock, the vesting
of which is conditioned only upon the continued service of the participant,
shall vest earlier than the first, second and third anniversaries of the
date of grant thereof, on each of which dates a maximum of one-third of the
shares of Stock subject to the Award may vest, and no award in the form of
Restricted Stock, the vesting of which is conditioned upon the attainment
of a specified Performance Goal or Goals, shall vest earlier than the first
anniversary of the date of grant thereof.
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SECTION 8. CHANGE IN CONTROL PROVISIONS
(a) IMPACT OF EVENT. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change in Control:
(i) Any Stock Options and Stock Appreciation Rights outstanding
as of the date such Change in Control is determined to have occurred, and
which are not then exercisable and vested, shall become fully exercisable
and vested to the full extent of the original grant.
(ii) The restrictions and deferral limitations applicable to any
Restricted Stock shall lapse, and such Restricted Stock shall become free
of all restrictions and become fully vested and transferable to the full
extent of the original grant.
(b) DEFINITION OF CHANGE IN CONTROL. For purposes of the Plan, a "Change
in Control" shall mean the happening of any of the following events:
(i) An acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 30 percent or more of either (1) the
then outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (2) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
excluding, however, the following acquisitions of Outstanding Company
Common Stock and Outstanding Company Voting Securities: (1) any acquisition
directly from the Company, other than an acquisition by virtue of the
exercise of a conversion privilege unless the security being so converted
was itself acquired directly from the Company, (2) any acquisition by the
Company, (3) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled
by the Company, or (4) any acquisition by any Person pursuant to a
transaction which complies with clauses (1), (2) and (3) of subsection
(iii) of this Section 8(b); or
(ii) Individuals who, as of the effective date of the Plan,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; PROVIDED, HOWEVER, that any
individual who becomes a member of the Board subsequent to such effective
date of the Plan, whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board; but, PROVIDED
FURTHER, that any such individual whose initial assumption of office occurs
as a result of either an actual or threatened election contest (as such
terms are used in Rule 14a-11 of
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Regulation 14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board shall not be so considered as a member of the
Incumbent Board; or
(iii) The approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Company ("Business Combination")
or if consummation of such Business Combination is subject, at the time of
such approval by shareholders, to the consent of any government or
governmental agency, obtaining of such consent (either explicitly or
implicitly by consummation); excluding, however, such a Business
Combination pursuant to which (1) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination will beneficially
own, directly or indirectly, more than 60 percent of, respectively, the
outstanding shares of common stock, and the combined voting power of the
then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly or through one
or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (2) no Person (other than any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company or such corporation resulting from such Business
Combination) will beneficially own, directly or indirectly, 30 percent or
more of, respectively, the outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the outstanding voting securities of such corporation entitled to
vote generally in the election of directors except to the extent that such
ownership existed with respect to the Company prior to the Business
Combination and (3) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination will
have been members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(iv) The approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
(c) CHANGE IN CONTROL PRICE. For purposes of the Plan, "Change in Control
Price" means the higher of (i) the highest reported sales price, regular way, of
a share of Common Stock in any transaction reported on the New York Stock
Exchange Composite Tape or other national exchange on which such shares are
listed or on NASDAQ during the 60-day period
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prior to and including the date of a Change in Control or (ii) if the Change in
Control is the result of a tender or exchange offer or a Business Combination,
the highest price of a share of Stock paid in such tender or exchange offer or
Business Combination; PROVIDED, HOWEVER, that in the case of Incentive Stock
Options and Stock Appreciation Rights relating to Incentive Stock Options, the
Change in Control Price shall be in all cases the Fair Market Value of the Stock
on the date such Incentive Stock Option or Stock Appreciation Right is
exercised. To the extent that the consideration paid in any such transaction
described above consists all or in part of securities or other noncash
consideration, the value of such securities or other noncash consideration shall
be determined in the sole discretion of the Board.
SECTION 9. TERM, AMENDMENT AND TERMINATION
The Plan will terminate 10 years after the effective date of the Plan.
Under the Plan, Awards outstanding as of such date shall not be affected or
impaired by the termination of the Plan.
The Board may amend, alter or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of an
optionee under a Stock Option or a recipient of a Stock Appreciation Right, or
Restricted Stock Award theretofore granted without the optionee's or recipient's
consent, except such an amendment made to cause the Plan to qualify for any
exemption provided by Rule 16b-3. In addition, no such amendment shall be made
without the approval of the Company's shareholders to the extent such approval
is required by law or agreement.
The Committee may amend the terms of any Stock Option or other Award
theretofore granted, prospectively or retroactively, but no such amendment shall
impair the rights of any holder without the holder's consent except such an
amendment made to cause the Plan or Award to qualify for any exemption provided
by Rule 16b-3 ; provided, however, that such power of the Committee shall not
extend to the reduction of the exercise price of a previously granted Stock
Option, except as provided in Section 3 hereof, nor may the Committee substitute
new Stock Options for previously granted Stock Options having higher option
prices.
Subject to the above provisions, the Board shall have authority to amend
the Plan to take into account changes in law and tax and accounting rules as
well as other developments, and to grant Awards which qualify for beneficial
treatment under such rules without stockholder approval.
SECTION 10. UNFUNDED STATUS OF PLAN
It is presently intended that the Plan constitute an "unfunded" plan for
incentive and deferred compensation. The Committee may authorize the creation
of trusts or other arrangements to meet the obligations created under the Plan
to deliver Stock or make payments;
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PROVIDED, HOWEVER, that unless the Committee otherwise determines, the existence
of such trusts or other arrangements is consistent with the "unfunded" status of
the Plan.
SECTION 11. GENERAL PROVISIONS
(a) The Committee may require each person purchasing or receiving shares
pursuant to an Award to represent to and agree with the Company in writing that
such person is acquiring the shares without a view to the distribution thereof.
The certificates or evidence of ownership for such shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.
Notwithstanding any other provision of the Plan or agreements made pursuant
thereto, the Company shall not be required to issue or deliver any certificate
or certificates for shares of Stock under the Plan prior to fulfillment of all
of the following conditions:
(1) Listing or approval for listing upon notice of issuance, of
such shares on the New York Stock Exchange, Inc., or such other securities
exchange as may at the time be the principal market for the Stock;
(2) Any registration or other qualification of such shares of
Stock under any state or federal law or regulation, or the maintaining in
effect of any such registration or other qualification which the Committee
shall, in its absolute discretion upon the advice of counsel, deem
necessary or advisable; and
(3) Obtaining any other consent, approval or permit from any
state or federal governmental agency which the Committee shall, in its
absolute discretion after receiving the advice of counsel, determine to be
necessary or advisable.
(b) Nothing contained in the Plan shall prevent the Company or any
subsidiary or Affiliate from adopting other or additional compensation
arrangements for its employees.
(c) Adoption of the Plan shall not confer upon any employee any right to
continued employment, nor shall it interfere in any way with the right of the
Company or any subsidiary or Affiliate to terminate the employment of any
employee at any time.
(d) No later than the date as of which an amount first becomes includable
in the gross income of the participant for federal income tax purposes with
respect to any Award under the Plan, the participant shall pay to the Company,
or make arrangements satisfactory to the Company regarding the payment of, any
federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Company, withholding obligations may be settled with Stock, including Stock that
is part of the Award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements, and the Company and its Affiliates shall, to the extent
permitted by law, have
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the right to deduct any such taxes from any payment otherwise due to the
participant. The Committee may establish such procedures as it deems
appropriate for the settlement of withholding obligations with Stock.
(e) Reinvestment of dividends in additional Restricted Stock at the time
of any dividend payment shall only be permissible if sufficient shares of Stock
are available under Section 3 for such reinvestment (taking into account then
outstanding Stock Options and other Awards).
(f) The Committee shall establish such procedures as it deems appropriate
for a participant to designate a beneficiary to whom any amounts payable in the
event of the participant's death are to be paid or by whom any rights of the
participant, after the participant's death, may be exercised.
(g) In the case of a grant of an Award to any employee of a subsidiary of
the Company, the Company may, if the Committee so directs, issue or transfer the
shares of Stock, if any, covered by the Award to the subsidiary, for such lawful
consideration as the Committee may specify, upon the condition or understanding
that the subsidiary will transfer the shares of Stock to the employee in
accordance with the terms of the Award specified by the Committee pursuant to
the provisions of the Plan.
(h) The Plan and all Awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware,
without reference to principles of conflict of laws.
SECTION 12. EFFECTIVE DATE OF PLAN
The Plan shall be effective as of the date it is approved by the sole
stockholder of the Company.
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EXHIBIT A
DEFINITIONS
RETURN ON CAPITAL UTILIZED (ROCU)
Business Operating Profit (BOP) divided by average Capital Utilized (computed
on a monthly basis).
CAPITAL UTILIZED
Total equity, plus Notes Payable, plus Current Portion of Long-Term Debt plus
Long-Term Debt, plus Advances from Corporate (less if net Advances are to
Corporate), less Investments in Consolidated Subsidiaries, less Goodwill.
BUSINESS OPERATING PROFIT (BOP)
Total Sales less Total Cost of Sales less Marketing expense less General and
Administrative Expenses plus Other Income or minus Other Expense (1).
(1) Other expenses such as Goodwill Amortization.
RETURN ON TANGIBLE EQUITY (ROTE)
Net Income divided by beginning tangible equity.
CONSOLIDATED PRE-TAX INCOME
Net income of the Company and its Consolidated Subsidiaries before taxes and
before giving effect to extraordinary items.
CASH FLOW (CF)
The sum of net income plus depreciation and amortization.
REVENUE
Revenue as reported on the Company's annual financial statements.
REVENUE GROWTH (RG)
The increase in revenue for the current fiscal year, expressed as a percent,
above a specified base line period.
RETURN ON ASSETS (ROA)
BOP divided by average assets (computed on a monthly basis).
CAPITAL
The sum of all interest-bearing debt, including debt with imputed interest,
and total equity.
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RETURN ON CAPITAL (ROC)
Income before interest and taxes divided by average annual capital (computed
on a monthly basis).
RETURN ON EQUITY (ROE)
Net income divided by beginning equity.
RETURN ON REVENUE (ROR)
BOP divided by total Net Revenue expressed as a percent.
NET REVENUE
Total net sales and service revenue after adjustments for all discounts,
returns, and allowances.
BASIC EARNINGS PER SHARE (BEPS)
Income available to common stockholders of the Company divided by the
weighted-average number of common shares of the Company outstanding during
the applicable period. Shares issued during the applicable period and shares
reacquired during the applicable period shall be weighted for the portion of
the period that they were outstanding.
DILUTED EARNINGS PER SHARE (DEPS)
DEPS is computed in the same manner as BEPS; however, the weighted-average
number of common shares of the Company outstanding during the applicable
period is increased to include the number of additional common shares that
would have been outstanding if the dilutive potential common shares resulting
from stock options or other common stock equivalents had been issued.
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EXHIBIT 10.13
UNOVA, INC.
EXECUTIVE SEVERANCE PLAN
The Board of Directors of UNOVA, Inc. (the "Company") recognizes that, as is
the case with many publicly held companies, there exists the possibility of a
Change of Control of the Company. This possibility and the uncertainty it
creates may result in the loss or distraction of employees of the Company and
its Subsidiaries to the detriment of the Company and its shareholders.
The Board considers the avoidance of such loss and distraction to be
essential to protecting and enhancing the best interests of the Company and
its shareholders. The Board also believes that when a Change of Control is
perceived as imminent, or is occurring, the Board should be able to receive
and rely on disinterested service from its executives and other key employees
regarding the best interests of the Company and its shareholders without
concern that such employees might be distracted or concerned by the personal
uncertainties and risks created by the perception of an imminent or occurring
Change of Control.
In addition, the Board believes that it is consistent with the Company's
employment practices and policies and in the best interests of the Company
and its shareholders to treat fairly its employees whose employment
terminates in connection with or following a Change of Control.
Accordingly, the Board has determined that appropriate steps should be taken
to assure the Company of the continued employment, attention and dedication
to duty of its executives and other key employees and to seek to ensure the
availability of their continued service, notwithstanding the possibility,
threat or occurrence of a Change of Control.
Therefore, in order to fulfill the above purposes, the following plan has
been developed and is hereby adopted.
ARTICLE I. ESTABLISHMENT OF PLAN
As of the Effective Date, the Company hereby establishes a severance
compensation plan known as the UNOVA, Inc. Executive Severance Plan as set
forth in this document.
ARTICLE II. DEFINITIONS
As used herein the following words and phrases shall have the following
respective meanings unless the context clearly indicates otherwise:
(a) ANNUAL BONUS. The annual cash bonus that a Participant may earn
pursuant to the terms of any short-term incentive compensation plan or
arrangement, whether or not set forth in a written document, of UNOVA, Inc.,
or by any of its Subsidiaries pursuant to which
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annual cash bonuses or cash incentive awards may be made, as such plans or
arrangements may be in effect from time to time.
(b) ANNUAL BONUS AWARD. The highest amount a Participant received or
was awarded as an Annual Bonus in any of the three 12-month periods
(including service with Western Atlas) prior to a termination of employment
entitling the Participant to a Separation Benefit.
(c) ANNUAL COMPENSATION. The sum of a Participant's Annual Salary and
Annual Bonus.
(d) ANNUAL SALARY. The Participant's regular annual base salary
immediately prior to his or her termination of employment, including
compensation converted to other benefits under a flexible pay arrangement
maintained by the Company or deferred pursuant to a written plan or agreement
with the Company, but excluding special allowances, premium pay, compensation
paid or payable under any Company long-term or short-term incentive plan or
any similar payment.
(e) BOARD. The Board of Directors of UNOVA, Inc.
(f) CAUSE. With respect to any Participant: (i) the willful and
continued failure of the Participant to perform substantially the
Participant's duties with the Company or one of its affiliates (other than
any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to
the Participant by the Board or the Chief Executive Officer of the Company
which specifically identifies the manner in which the Board or Chief
Executive Officer believes that the Participant has not substantially
performed the Participant's duties, or (ii) the willful engaging by the
Participant in illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Company. For purposes of this definition, no
act or failure to act on the part of the Participant shall be considered
"willful" unless it is done, or omitted to be done, by the Participant in bad
faith or without reasonable belief that the Participant's action or omission
was in the best interests of the Company. Any act or failure to act based
upon authority given pursuant to a resolution duly adopted by the Board or
upon the instructions of the Chief Executive Officer or an executive officer
of the Company or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the Participant
in good faith and in the best interests of the Company.
(g) CHANGE OF CONTROL. The occurrence of any of the following events:
(i) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person"), of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30
percent or more of either (x) the then outstanding shares of common stock of
the Company (the "Outstanding Company Common Stock"); excluding, however, the
following acquisitions of Outstanding Company Common Stock or (y) the
combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); excluding, however, the following
acquisitions of Outstanding Company Common Stock and Outstanding Company
Voting Securities: (A) any acquisition directly from the Company, other than
an acquisition by virtue of the exercise of a conversion privilege unless the
security being so converted was itself acquired directly from the Company,
(B) any acquisition by the Company, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or
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maintained by the Company or any corporation controlled by the Company or (D)
any acquisition by any Person pursuant to a transaction which complies with
clauses (A), (B) and (C) of paragraph (iii) below; or
(ii) Individuals who, as of the effective date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at least
a majority of the Board; provided, however, that any individual who becomes a
member of the Board subsequent to such effective date hereof whose election,
or nomination for election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board; but, provided further, that any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) with respect to the
election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board shall
not be so considered as a member of the Incumbent Board; or
(iii) The approval by the shareholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Company ("Business Combination") or
if consummation of such Business Combination is subject, at the time of such
approval by shareholders, to the consent of any government or governmental
agency, obtaining of such consent (either explicitly or implicitly, by
consummation); excluding, however, such a Business Combination pursuant to
which (A) all or substantially all of the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to such Business
Combination will beneficially own, directly or indirectly, more than 60
percent of, respectively, the outstanding shares of common stock and the
combined voting power of the outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly
or through one or more subsidiaries) in substantially the same proportions as
their ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (B) no Person (other than any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company or such corporation resulting from such Business
Combination) will beneficially own, directly or indirectly, 30 percent or
more of, respectively, the outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined voting
power of the outstanding voting securities of such corporation entitled to
vote generally in the election of directors except to the extent that such
ownership existed with respect to the Company prior to the Business
Combination and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination will
have been members of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for such Business
Combination; or
(iv) The approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(h) CODE. The Internal Revenue Code of 1986, as amended from time to
time.
(i) COMMITTEE. The Compensation Committee of the Board.
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(j) COMPANY. UNOVA, Inc. and any successor thereto.
(k) DATE OF THE CHANGE OF CONTROL. The date on which a Change of
Control occurs.
(l) DATE OF TERMINATION. The date on which a Participant ceases to be
an Employee.
(m) DISABILITY. A termination of a Participant's employment for
Disability shall have occurred if the termination occurs because illness or
injury has prevented the Participant from performing his or her duties (as
they existed immediately prior to the illness or injury) on a full time basis
for 180 consecutive days.
(n) EFFECTIVE DATE. The date specified in the resolutions of the Board
adopting this Plan.
(o) EMPLOYEE. Any full-time, regular-benefit, non-bargaining employee
of an Employer.
(p) EMPLOYER. The Company or a Subsidiary which has adopted the Plan
pursuant to Article V hereof.
(q) ERISA. The Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
(r) GOOD REASON. With respect to any Participant, (i) the assignment to
the Participant of any duties inconsistent in any respect with the
Participant's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities immediately before the
Change of Control, or any other action by the Company which results in a
significant diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Participant;
(ii) any material reduction in the Participant's Annual Salary, opportunity
to earn Annual Bonuses, or other compensation or employee benefits, other
than as a result of an isolated and inadvertent action not taken in bad faith
and which is remedied by the Company promptly after receipt of notice thereof
given by the Participant; (iii) the Company's requiring the Participant to
relocate his or her principal place of employment to a location which is
more than 35 miles from his or her previous principal place of employment ;
(iv) any purported termination of the Plan otherwise than as expressly
permitted by the Plan; or (v) any failure by the Company to comply with and
satisfy Article IV of the Plan. For purposes of the Plan, any good faith
determination of "Good Reason" made by the Participant shall be conclusive.
(s) MULTIPLE. With respect to any Participant, the number set forth
opposite the Participant's name under the heading "Benefit Level" on Schedule
1 hereto.
(t) PARTICIPANT. An Employee designated as such pursuant to Section 3.1.
(u) PLAN. The UNOVA, Inc. Executive Severance Plan.
(v) RETIREMENT. A termination by Retirement shall have occurred where a
Participant's termination is due to his or her late, normal or early
retirement under a pension plan sponsored by the Company or any of its
affiliates, as defined in such plan.
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(w) SEPARATION BENEFITS. The benefits described in Section 4.2 that are
provided to qualifying Participants under the Plan.
(x) SEPARATION PERIOD. The period beginning on a Participant's Date of
Termination and ending upon the termination of a number of years equal to the
Multiple for such Participant.
(y) SUBSIDIARY. Any corporation in which the Company, directly or
indirectly, holds a majority of the voting power of such corporation's
outstanding shares of capital stock.
(z) TARGET ANNUAL BONUS. The Maximum Potential Award that the
Participant would have received for the year in which his or her Date of
Termination occurs, if the performance goals applicable to such Participant
under any UNOVA, Inc. incentive compensation plan (or any successor plan) had
been achieved to the extent necessary to enable the Participant to receive
100% of his or her Maximum Potential Award for that year.
(aa) WESTERN ATLAS INC. Means Western Atlas Inc., a Delaware corporation
which was the parent corporation of UNOVA, Inc., prior to the spin-off of
UNOVA, Inc. in accordance with Section 355 of the Internal Revenue Code.
ARTICLE III. ELIGIBILITY
3.1 PARTICIPATION. Each of the individuals named on Schedule 1 hereto
shall be a Participant in the Plan. Prior to a Change of Control Schedule 1
may be amended by the Board from time to time to add or delete individuals as
Participants in this Plan.
3.2 DURATION OF PARTICIPATION. A Participant shall only cease to be a
Participant in the Plan as a result of an amendment or termination of the
Plan complying with Article VII of the Plan, or when prior to a Change of
Control the Board removes a Participant from participation in this Plan, or
when he or she ceases to be an Employee of any Employer, unless, at the time
he or she ceases to be an Employee, such Participant is entitled to payment
of a Separation Benefit as provided in the Plan or there has been an event or
occurrence constituting Good Reason that would enable the Participant to
terminate his or her employment and receive a Separation Benefit. A
Participant entitled to payment of a Separation Benefit or any other amounts
under the Plan shall remain a Participant in the Plan until the full amount
of the Separation Benefit and any other amounts payable under the Plan have
been paid to the Participant.
ARTICLE IV. SEPARATION BENEFITS
4.1 TERMINATIONS OF EMPLOYMENT WHICH GIVE RISE TO SEPARATION BENEFITS
UNDER THIS PLAN. A Participant shall be entitled to Separation Benefits as
set forth in Section 4.2 below if, at any time before the number of years
(and months, if any) equal to the Multiple has elapsed following the Date of
the Change of Control, the Participant's Employment is terminated (i) by the
Company for any reason other than Cause, death, Disability or Retirement or
(ii) by the Participant within 90 days after the occurrence of Good Reason.
4.2 SEPARATION BENEFITS.
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(a) If a Participant's employment is terminated in circumstances
entitling him or her to a Separation Benefit as provided in Section 4.1, the
Participant's Employer shall pay such Participant, within ten days of the
Date of Termination, a cash lump sum as set forth in subsection (b) below and
the continued benefits set forth in subsection (c) below. For purposes of
determining the benefits set forth in subsections (b) and (c), if the
termination of the Participant's employment is for Good Reason based upon a
reduction of the Participant's Annual Salary, opportunity to earn Annual
Bonuses, or other compensation or employee benefits, such reduction shall be
ignored.
(b) The cash lump sum referred to in Section 4.2(a) is the
aggregate of the following amounts:
(i) the sum of (1) the Participant's Annual Salary through the
Date of Termination to the extent not theretofore paid, (2) the product of
(x) the Target Annual Bonus and (y) a fraction, the numerator of which is the
number of days in the such year through the Date of Termination, and the
denominator of which is 365, and (3) any compensation previously deferred by
the Participant (together with any accrued interest or earnings thereon) and
any accrued vacation pay, in each case to the extent not theretofore paid and
in full satisfaction of the rights of the Participant thereto;
(ii) an amount equal to the product of (1) the Participant's
Multiple times (2) the sum of (x) the Participant's Annual Salary and (y) the
higher of the Participant's Target Annual Bonus or Annual Bonus Award; and
(iii) any unpaid installments of any Annual Bonus
previously awarded to the Participant.
(c) The continued benefits referred to above are as follows:
(i) during the Separation Period, the Participant and his or
her family shall be provided with medical, dental and life insurance benefits
as if the Participant's employment had not been terminated; provided,
however, that if the Participant becomes re-employed with another employer
and is eligible to receive medical or other welfare benefits under another
employer-provided plan, the medical and other welfare benefits described
herein shall be secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining eligibility
(but not the time of commencement of benefits) of the Participant for retiree
medical, dental and life insurance benefits under the Company's plans,
practices, programs and policies, the Participant shall be considered to have
remained employed during the Separation Period and to have retired on the
last day of such period; and
(ii) the Company shall, at its sole expense as incurred,
provide the Participant with outplacement services the scope and provider of
which shall be selected by the Participant in his or her sole discretion (but
at a cost to the Company of not more than $30,000) or, at the Participant's
option, the use of office space, office supplies and equipment and
secretarial services for a period not to exceed one year.
To the extent any benefits described in this Section 4.2(c) cannot be
provided pursuant to the appropriate plan or program maintained for
Employees, the Employer shall provide such benefits outside such plan or
program at no additional cost (including without limitation tax cost) to the
Participant.
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4.3 OTHER BENEFITS PAYABLE. The cash lump sum and continuing benefits
described in Section 4.2 above shall be payable in addition to, and not in
lieu of, all other accrued or vested or earned but deferred compensation,
rights, options or other benefits which may be owed to a Participant upon or
following termination, including but not limited to accrued vacation or sick
pay, amounts or benefits payable under any bonus or other compensation plans,
stock option plan, stock ownership plan, stock purchase plan, life insurance
plan, health plan, disability plan or similar or successor plan, but
excluding any severance pay or pay in lieu of notice required to be paid to
such Participant under applicable law or under any other severance plan or
policy of the Company or any Subsidiary. Without limiting the generality of
the foregoing, nothing in the Plan shall be deemed to override or deprive any
Participant of the full benefit of any provision in any stock incentive plan,
supplemental retirement plan, or other benefit plan which provides for
acceleration of benefits upon a change of control of the Company, whether or
not the term "Change of Control" has a definition identical to that set forth
in Article II of this Plan.
4.4 CERTAIN REDUCTION OF PAYMENTS BY THE COMPANY.
(a) For purposes of this Section 4.4, (i) a Payment shall mean any
payment or distribution in the nature of compensation to or for the benefit
of a Participant, whether paid or payable pursuant to this Plan or otherwise;
(ii) Separation Payment shall mean a Payment paid or payable pursuant to this
Plan (disregarding this Section); (iii) Net After Tax Receipt shall mean the
Present Value of a Payment net of all taxes imposed on a Participant with
respect thereto under Sections 1 and 4999 of the Internal Revenue Code of
1986, as amended (the "Code"), determined by applying the highest marginal
rate under Section 1 of the Code and any applicable state income tax law
which is expected to apply to the Participant's taxable income for the
year(s) when the Payments are received; (iv) "Present Value" shall mean such
value determined in accordance with Section 280G(d) (4) of the Code; and (v)
"Reduced Amount" shall mean the greatest aggregate amount of Separation
Payments which (a) is less than the sum of all Separation Payments and (b)
results in aggregate Net After Tax Receipts which are equal to or greater
than the Net After Tax Receipts which would result if the Participant were
paid the sum of all Separation Payments.
(b) Anything in this Plan to the contrary notwithstanding, in the
event Deloitte & Touche LLP or such other certified public accounting firm
designated by the Participant (the "Accounting Firm") shall determine that
receipt of all Payments would subject the Participant to tax under Section
4999 of the Code, it shall determine whether some amount of Separation
Payments would meet the definition of a "Reduced Amount." If the Accounting
Firm determines that there is a Reduced Amount, the aggregate Separation
Payments shall be reduced to such Reduced Amount. All fees payable to the
Accounting Firm shall be paid solely by the Company.
(c) If Accounting Firm determines that aggregate Separation
Payments should be reduced to the Reduced Amount, the Company shall promptly
give the Participant notice to that effect and a copy of the detailed
calculation thereof, and the Participant may then elect, in his or her sole
discretion, which and how much of the Separation Payments shall be eliminated
or reduced (as long as after such election the Present Value of the aggregate
Separation Payments equals the Reduced Amount), and shall advise the Company
in writing of his or her election within ten days of his or her receipt of
notice. If no such election is made by the Participant within such ten-day
period, the Company may elect which of such Separation Payments shall be
eliminated or reduced (as long as after such election the Present Value of
the aggregate Separation Payments equals the Reduced Amount) and shall notify
the
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Participant promptly of such election. All determinations made by Accounting
Firm under this Section shall be binding upon the Company and the Participant
and shall be made within 60 days of a termination of employment of the
Participant. As promptly as practicable following such determination, the
Company shall pay to or distribute for the benefit of the Participant such
Separation Payments as are then due to the Participant under this Plan and
shall promptly pay to or distribute for the benefit of the Participant in the
future such Separation Payments as become due to the Participant under this
Plan.
(d) While it is the intention of the Company to reduce the amounts
payable or distributable to the Participants hereunder only if the aggregate
Net After Tax Receipts to a Participant would thereby be increased, as a
result of the uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by Accounting Firm hereunder, it is
possible that amounts will have been paid or distributed by the Company to or
for the benefit of a Participant pursuant to this Plan which should not have
been so paid or distributed ("Overpayment") or that additional amounts which
will have not been paid or distributed by the Company to or for the benefit
of a Participant pursuant to this Plan could have been so paid or distributed
("Underpayment"), in each case, consistent with the calculation of the
Reduced Amount hereunder. In the event that Accounting Firm, based upon the
assertion of a deficiency by the Internal Revenue Service against either the
Company or the Participant which Accounting Firm believes has a high
probability of success determines that an Overpayment has been made, any such
Overpayment paid or distributed by the Company to or for the benefit of a
Participant shall be treated for all purposes as a loan to the Participant
which the Participant shall repay to the Company together with interest at
the applicable federal rate provided for in Section 7872(f) (2) of the Code;
provided however, that no such loan shall be deemed to have been made and no
amount shall be payable by a Participant to the Company if and to the extent
such deemed loan and payment would not either reduce the amount on which the
Participant is subject to tax under Section 1 and Section 4999 of the Code or
generate a refund of such taxes. In the event that Accounting Firm, based
upon controlling precedent or substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by
the Company to or for the benefit of the Participant together with interest
at the applicable federal rate provided for in Section 7872(f) (2) of the
Code.
4.5 PAYMENT OBLIGATIONS ABSOLUTE. Subject to Section 4.4, the
obligations of the Company and the Employers to pay the Separation Benefits
described in Section 4.2 shall be absolute and unconditional and shall not be
affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company or any of
its Subsidiaries may have against any Participant. In no event shall a
Participant be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to a Participant under any of the
provisions of this Plan, nor shall the amount of any payment hereunder be
reduced by any compensation earned by a Participant as a result of employment
by another employer, except as specifically provided in Section 4.2(c) (i).
ARTICLE V. PARTICIPATING EMPLOYERS
This Plan may be adopted by any Subsidiary of the Company. Upon such
adoption, the Subsidiary shall become an Employer hereunder and the
provisions of the Plan shall be fully applicable to the Employees of that
Subsidiary who are Participants pursuant to Section 3.1.
ARTICLE VI. SUCCESSOR TO THE COMPANY
This Plan shall bind any successor of the Company, its assets or its
businesses (whether direct or indirect, by purchase, merger, consolidation or
otherwise), in the same
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manner and to the same extent that the Company would be obligated under this
Plan if no succession had taken place.
In the case of any transaction in which a successor would not by the
foregoing provision or by operation of law be bound by this Plan, the Company
shall require such successor expressly and unconditionally to assume and
agree to perform the Company's obligations under this Plan, in the same
manner and to the same extent that the Company would be required to perform
if no such succession had taken place. The term "Company," as used in this
Plan, shall mean the Company as herein before defined and any successor or
assignee to the business or assets which by reason hereof becomes bound by
this Plan.
ARTICLE VII. DURATION, AMENDMENT, AND TERMINATION
7.1 DURATION. If a Change of Control has not occurred, this Plan shall
remain in effect until terminated as provided in Sections 7.2 and 7.3. If a
Change of Control occurs while this Plan is in effect, this Plan shall
continue in full force and effect and shall not terminate or expire until
after all Participants who become entitled to any payments hereunder shall
have received such payments in full and all adjustments required to be made
pursuant to Sections 4.2 and 4.3 have been made.
7.2 AMENDMENT OR TERMINATION. The Board may amend or terminate this
Plan at any time; PROVIDED, that this Plan may not be terminated or amended
in any manner that could adversely affect the rights of any Participant (i)
after a Change of Control has occurred, (ii) at the request of a third party
who has taken steps reasonably calculated to effect a Change of Control, or
(iii) otherwise in connection with or in anticipation of a Change of Control.
7.3 PROCEDURE FOR EXTENSION, AMENDMENT OR TERMINATION. Any extension,
amendment or termination of this Plan by the Board in accordance with the
foregoing shall be made by action of the Board in accordance with the
Company's Certificate of Incorporation and by-laws and applicable law, and
shall be evidenced by a written instrument signed by a duly authorized
officer of the Company, certifying that the Board has taken such action.
ARTICLE VIII. MISCELLANEOUS
8.1 INDEMNIFICATION. If a Participant institutes any legal action in
seeking to obtain or enforce, or is required to defend in any legal action
the validity or enforceability of, any right or benefit provided by this
Plan, the Company or the Employer will pay for all actual legal fees and
expenses incurred (as incurred) by such Participant, if such Participant
prevails in such legal action, regardless of whether such action is between
the Company or the Employer and the Participant or between either of them and
any third party.
8.2 EMPLOYMENT STATUS. This Plan does not constitute a contract of
employment or impose on the Participant or the Participant's Employer any
obligation for the Participant to remain an Employee or change the status of
the Participant's employment or the policies of the Company and its
affiliates regarding termination of employment.
-9-
<PAGE>
8.3 NAMED FIDUCIARY, ADMINISTRATION. UNOVA, Inc. is the named fiduciary
of the Plan, with full authority to control and manage the operation and
administration of the Plan, acting through the Compensation Committee of its
Board.
8.4 CLAIM PROCEDURE. If an Employee or former Employee makes a written
request alleging a right to receive benefits under this Plan or alleging a
right to receive an adjustment in benefits being paid under the Plan, the
Company shall treat it as a claim for benefit. All claims for benefit under
the Plan shall be sent to the Human Resources Department of the Company and
must be received within 30 days after the Date of Termination. If the
Company determines that any individual who has claimed a right to receive
benefits, or different benefits, under the Plan is not entitled to receive
all or any part of the benefits claimed, it will inform the claimant in
writing of its determination and the reasons therefor in terms calculated to
be understood by the claimant. The notice will be sent within 90 days of the
claim unless the Company determines additional time, not exceeding 90 days,
is needed. The notice shall make specific reference to the pertinent Plan
provisions on which the denial is based, and describe any additional material
or information as necessary. Such notice shall, in addition, inform the
claimant what procedure the claimant should follow to take advantage of the
review procedures set forth below in the event the claimant desires to
contest the denial of the claim. The claimant may within 90 days thereafter
submit in writing to the Company a notice that the claimant contests the
denial of his or her claim by the Company and desires a further review. The
Company shall within 60 days thereafter review the claim and authorize the
claimant to appear personally and review pertinent documents and submit
issues and comments relating to the claim to the persons responsible for
making the determination on behalf of the Company. The Company will render
its final decision with specific reasons therefor in writing and will
transmit it to the claimant within 60 days of the written request for review,
unless the Company determines additional time, not exceeding 60 days, is
needed, and so notifies the Participant. If the Company fails to respond to
a claim filed in accordance with the foregoing within 60 days or any such
extended period, the Company shall be deemed to have denied the claim.
8.5 UNFUNDED PLAN STATUS. This Plan is intended to be an unfunded plan
maintained primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees, within the
meaning of Section 401 of ERISA. All payments pursuant to the Plan shall be
made from the general funds of the Company and no special or separate fund
shall be established or other segregation of assets made to assure payment.
No Participant or other person shall have under any circumstances any
interest in any particular property or assets of the Company as a result of
participating in the Plan. Notwithstanding the foregoing, the Company may
(but shall not be obligated to) create one or more grantor trusts, the assets
of which are subject to the claims of the Company's creditors, to assist it
in accumulating funds to pay its obligations under the Plan.
8.6 VALIDITY AND SEVERABILITY. The invalidity or unenforceability of
any provision of the Plan shall not affect the validity or enforceability of
any other provision of the Plan, which shall remain in full force and effect,
and any prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
8.7 GOVERNING LAW. The validity, interpretation, construction and
performance of the Plan shall in all respects be governed by the laws of
California, without reference to principles of conflict of law, except to the
extent pre-empted by federal law.
-10-
<PAGE>
EXHIBIT 10.14
PROMISSORY NOTE
FOR VALUE RECEIVED, on demand, or if no demand is made on December 31,
2002, I promise to pay to the order of UNOVA, Inc. (the "Company"), a
Delaware corporation having its principal place of business at 360 North
Crescent Drive, Beverly Hills, California, the principal sum of WrittenAmount
Dollars (NumAmount), together with interest at the rate of four percent (4%)
per annum on the unpaid principal balance on this Note. Interest shall be
payable quarterly on the last day of each March, June, September, and
December.
In the event my employment by the Company should terminate, or if I shall
commit any act of bankruptcy, on a date prior to such time that demand for
payment of this Note is made, then demand shall be deemed to have been made
for payment of both principal and all accrued interest thereon, on the date
of termination of my employment or my commission of any act of bankruptcy and
such principal and interest will become due and payable on such date without
any further notice to me by the Company, which is hereby waived; provided,
however, that if my employment should be terminated by my death, or physical
incapacity, then either I or my estate, as the case may be, shall have a
period of ninety (90) days following the date of my death, or termination for
physical incapacity, in which to make full payment of the principal and
accrued interest on this Note.
In consideration of the loan made to me by the Company which is evidenced
by this Note, I hereby stipulate and agree that my employment with the
Company or a subsidiary is at will (unless otherwise specifically provided in
a written agreement
-1-
<PAGE>
between the Company or such subsidiary and me) and subject to termination by
the Company for any reason not in violation of applicable law or of any
written agreement governing my employment.
Demand for payment of this Note, other than demand deemed to have been
made as aforesaid, shall be made in writing and delivered in person or by
registered mail to the maker of this Note at the maker's address specified
below, or at such other address as the maker shall specify in writing to the
Company. Such writing or any other notice to the Company relating to this
Note shall be in writing and delivered in person or by registered mail to the
Company at its office: 360 North Crescent Drive, Beverly Hills, California
90210, to the attention of the Secretary, and shall specifically refer to
this Note.
This Note is subject to prepayment at any time and, from time to time, in
whole or in part, without premium or penalty.
Presentment for payment, notice of dishonor, protest, and notice of
protest are waived.
In the event of default by me hereunder, I hereby authorize any attorney
to appear for me in any court of record in the State of California, to waive
the issuance and service of process, and to confess a judgment against me in
favor of the holder of this Note, for the amount of this Note plus interest,
together with the costs of suit thereon, including attorneys' fees. Stay of
execution is hereby waived, and the exemption of personal property from levy
and sale on any execution is also expressly waived.
Name
HomeAddress1
HomeAddress2
Employee Number: empnum
-2-
<PAGE>
EXHIBIT 10.15
UNOVA, INC.
EXCERPT OF RESOLUTIONS ADOPTED BY THE
BOARD OF DIRECTORS
SEPTEMBER 24, 1997
UNOVA, INC. INCENTIVE LOAN PROGRAM
RESOLVED, that in order to provide an additional incentive for key
executives, the Corporation is hereby authorized to provide loans at 4
percent interest, without security, to any officer or key employee of the
Corporation, including any officer who is also a director of the
Corporation, said loans to be repaid in full on December 31, 2002, or upon
termination of employment of the borrower, whichever comes earlier;
RESOLVED FURTHER, that the total amount of loans outstanding at any one time
shall not exceed $6 million in the aggregate, shall not be extended to more
than 50 key executives, and each loan shall not exceed the annual base
salary of the borrower; and
RESOLVED FURTHER, that the participation in said loan program of those
executives and key employees of Western Atlas Inc. ("Western Atlas") who
become employees of the Corporation upon the distribution by Western Atlas
of the shares of the Corporation to Western Atlas shareholders, shall be
transferred to this corporation's books and new promissory notes evidencing
such indebtedness to the Corporation shall be executed by all such
individuals.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 13,368
<SECURITIES> 0
<RECEIVABLES> 493,654
<ALLOWANCES> 0
<INVENTORY> 138,964
<CURRENT-ASSETS> 756,270
<PP&E> 378,425
<DEPRECIATION> 217,339
<TOTAL-ASSETS> 1,350,221
<CURRENT-LIABILITIES> 642,176
<BONDS> 61,176
0
0
<COMMON> 0
<OTHER-SE> 619,538
<TOTAL-LIABILITY-AND-EQUITY> 1,350,221
<SALES> 1,094,104
<TOTAL-REVENUES> 1,094,104
<CGS> 753,329
<TOTAL-COSTS> 753,329
<OTHER-EXPENSES> 468,759 <F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,736
<INCOME-PRETAX> (140,755)
<INCOME-TAX> 25,018
<INCOME-CONTINUING> (165,773)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (165,773)
<EPS-PRIMARY> (3.07)
<EPS-DILUTED> (3.07)
<FN>
<F1> TAG NUMBER 30 INCLUDES WRITE-OFF OF $203,300 OF ACQUIRED IN-PROCESS
RESEARCH AND DEVELOPMENT.
</FN>
</TABLE>
