Exhibit 10.2

 

TAX MATTERS AGREEMENT

 

This TAX MATTERS AGREEMENT (this “Agreement”), is made and entered into as of
November 3, 2015, by and between EXTERRAN HOLDINGS, INC. (to be renamed
Archrock, Inc.), a Delaware corporation (“RemainCo”), and EXTERRAN CORPORATION,
a Delaware corporation (“SpinCo”).  All capitalized terms not otherwise defined
shall have the meanings set forth in Article I.

 

RECITALS

 

WHEREAS, RemainCo and certain of its subsidiaries have joined in filing
consolidated U.S. federal Income Tax Returns and certain consolidated, combined
or unitary state or local Income Tax Returns;

 

WHEREAS, RemainCo, SpinCo and certain of their subsidiaries have entered into
that certain Separation and Distribution Agreement, dated as of the date hereof,
by and between RemainCo, Exterran General Holdings LLC, a Delaware limited
liability company (“General Holdings”), Exterran Energy Solutions, L.P., a
Delaware limited partnership (“EESLP”), SpinCo, AROC Corp., a Delaware
corporation (“Controlled”), EESLP LP LLC, a Delaware limited liability company,
AROC Services GP LLC, a Delaware limited liability company, AROC Services LP
LLC, a Delaware limited liability company, and Archrock Services, L.P., a
Delaware limited partnership (the “Separation Agreement”), pursuant to which,
among other things, (i) EESLP will contribute or will have contributed to
Controlled, certain assets and liabilities associated with the RemainCo Business
and will distribute all of the outstanding common stock of Controlled to
RemainCo in a transaction intended to qualify for tax-free treatment under
Sections 368(a)(1)(D) and 355 of the Code; and (ii) RemainCo will contribute or
will have contributed to SpinCo its interests in EESLP and General Holdings, and
certain assets and liabilities associated with the SpinCo Business, and will
distribute all of the outstanding common stock of SpinCo to RemainCo’s
stockholders in a transaction intended to qualify for tax-free treatment under
Sections 368(a)(1)(D) and 355 of the Code (the transactions referenced in
clauses (i) and (ii) above being collectively referred to as the “Spin-off
Transactions”);

 

WHEREAS, pursuant to the Spin-off Transactions, SpinCo and its subsidiaries will
leave the Pre-Spin Group; and

 

WHEREAS, the parties hereto, on behalf of themselves and their Affiliates, wish
to provide for (i) the allocation of, and indemnification against, certain
liabilities for Taxes, (ii) the preparation and filing of Tax Returns and the
payment of Taxes with respect thereto and (iii) certain related matters.

 

NOW THEREFORE, in consideration of the foregoing and the respective covenants
and agreements set forth below, the parties agree as follows:

 

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ARTICLE I.
DEFINITIONS

 

When used herein the following terms shall have the following meanings:

 

“Affiliate” means, when used with respect to a specified Person, a Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with such specified Person. For the
purpose of this definition, “control” (including with correlative meanings,
“controlled by” and “under common control with”), when used with respect to any
specified Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or other interests, by
contract, agreement, obligation, indenture, instrument, lease, promise,
arrangement, release, warranty, commitment, undertaking or otherwise. It is
expressly agreed that, from and after the Distribution Date and for purposes of
this Agreement, no member of the SpinCo Group shall be deemed to be an Affiliate
of any member of the RemainCo Group, and no member of the RemainCo Group shall
be deemed to be an Affiliate of any member of the SpinCo Group.

 

“Affiliated Group” means, with respect to a Tax Period, (a) an affiliated group
of corporations within the meaning of Section 1504(a) of the Code or, for
purposes of any state or local Tax matters, any consolidated, combined, unitary
or similar group of corporations within the meaning of any similar provisions of
Tax law for the jurisdiction in question, and (b) for purposes of any U.S.
federal, state or local Income Tax matters, any entity owned by a corporation
described in clause (a) that is disregarded as separate from its owner for such
purposes.

 

“Agreement” has the meaning set forth in the preamble to this Agreement.

 

“Audit” means any audit, assessment of Taxes, other examination by any Taxing
Authority, proceeding or appeal of such a proceeding relating to Taxes, whether
judicial or administrative.

 

“Code” means the Internal Revenue Code of 1986, as amended, or any successor
thereto.

 

“Controlled” has the meaning set forth in the recitals to this Agreement.

 

“Current Allocation Methodology” means the allocation methodology that is set
forth in Exhibit A.

 

“Distribution Date” has the meaning set forth in the Separation Agreement.

 

“EESLP” has the meaning set forth in the recitals to this Agreement.

 

“External Distribution” has the meaning set forth in the Separation Agreement.

 

“External Spin” means the distribution to the holders of shares of RemainCo
common stock of all of the outstanding shares of SpinCo common stock.

 

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“Final Determination” means (i) a decision, judgment, decree, or other order by
a court of competent jurisdiction, which has become final and unappealable;
(ii) a closing agreement or accepted offer in compromise under Sections 7121 or
7122 of the Code, or comparable agreements under the laws of other
jurisdictions; (iii) any other final settlement with the IRS or other Taxing
Authority (including the execution of IRS Form 870-AD, or a comparable form
under the laws of other jurisdictions, but excluding any such form that reserves
(whether by its terms or by operation of law) the right of the taxpayer to file
a claim for refund or the right of the Taxing Authority to assert a further
deficiency); (iv) the expiration of an applicable statute of limitations; or
(v) the allowance of a refund or credit, but only after the expiration of all
periods during which such refund or credit may be recovered (including by way of
offset).

 

“GAAP” means generally accepted accounting principles in the United States,
consistently applied.

 

“General Holdings” has the meaning set forth in the recitals to this Agreement.

 

“Income Tax” means any and all Taxes based upon or measured by net income
(regardless of whether denominated as an “income tax,” a “franchise tax” or
otherwise).

 

“Income Tax Return” means a Tax Return relating to an Income Tax.

 

“IRS” means the Internal Revenue Service or any successor thereto.

 

“Latham Opinion” means the opinion of Latham & Watkins LLP with respect to
certain matters relating to qualification of the Spin-off Transactions under
Sections 368(a)(1)(D) and 355 of the Code.

 

“Opinion Representation Letters” means the representation letters executed by
officers of RemainCo, SpinCo and Controlled and delivered in connection with the
Latham Opinion.

 

“Post-Distribution Tax Period” means a Tax Period that begins after the
Distribution Date.

 

“Pre-Distribution Tax Period” means a Tax Period that ends on or before the
Distribution Date.

 

“Pre-Spin Group” means RemainCo and its Affiliates before the Spin-off
Transactions.

 

“Pre-Spin Member” means any entity that was a member of the Pre-Spin Group.

 

“Prime Rate” has the meaning set forth in the Separation Agreement.

 

“RemainCo” has the meaning set forth in the preamble to this Agreement.

 

“RemainCo Affiliated Group” means, for any applicable Tax Period, RemainCo and
each entity that is a member of an Affiliated Group for such Tax Period (or
portion thereof) with respect to which RemainCo would be the common parent. For
the avoidance of doubt, the

 

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RemainCo Affiliated Group shall include, for the portion of the Straddle Period
that ends on the Distribution Date, SpinCo and other entities that will be
members of the SpinCo Affiliated Group beginning on the day immediately after
the Distribution Date.

 

“RemainCo Business” has the meaning set forth in the Separation Agreement.

 

“RemainCo Group” means RemainCo and its Affiliates, excluding any entity that
would be a member of the SpinCo Group.

 

“RemainCo Member” means any entity that would be a member of the RemainCo Group.

 

“RemainCo Prepared Pre-Spin/Straddle Mixed Return” has the meaning set forth in
Section 2.2(a).

 

“RemainCo Ratable Portion” means 50%.

 

“Representative” means, with respect to any person or entity, any of such
person’s or entity’s directors, officers, employees, agents, consultants,
accountants, attorneys and other advisors.

 

“Responsible Party” means the party responsible for the preparation and filing
of a Tax Return pursuant to Section 2.1.

 

“Section 355(e) Tax” means any Income Taxes imposed on the Pre-Spin Group
resulting from a Final Determination that Section 355(e) of the Code is
applicable to the Spin-off Transactions because the Spin-off Transactions were
part of a plan or series of related transactions pursuant to which one or more
persons acquired directly or indirectly stock of RemainCo or SpinCo representing
a “50-percent or greater interest” within the meaning of Section 355(e) of the
Code.  For the avoidance of doubt, Section 355(e) Tax includes any Income Taxes
imposed as a result of Section 355(f) of the Code.

 

“Separate Affiliated Group” means, with respect to any corporation, such
corporation’s separate affiliated group as defined by Section 355(b)(3) of the
Code and the Treasury Regulations promulgated thereunder.

 

“Separation Agreement” has the meaning set forth in the recitals to this
Agreement.

 

“SpinCo” has the meaning set forth in the preamble to this Agreement.

 

“SpinCo Active Trade or Business” means the active conduct (as defined in
Section 355(b)(2) of the Code and the Treasury Regulations thereunder) by SpinCo
and its Separate Affiliated Group of the SpinCo Business as conducted
immediately prior to the External Spin.

 

“SpinCo Affiliated Group” means SpinCo and each entity that would be a member of
an Affiliated Group with respect to which SpinCo would be the common parent for
any Post-Distribution Tax Period.  For purposes of this Agreement, the SpinCo
Affiliated Group shall

 

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exist from and after the beginning of the day immediately after the Distribution
Date.

 

“SpinCo Business” has the meaning set forth in the Separation Agreement.

 

“SpinCo Group” means SpinCo and its Affiliates after the Spin-off Transactions.

 

“SpinCo Member” means any entity that would be a member of the SpinCo Group.

 

“SpinCo Prepared Pre-Spin/Straddle Nonmixed Return” has the meaning set forth in
Section 2.2(b).

 

“SpinCo Ratable Portion” means 50%.

 

“Spin-off Transactions” has the meaning set forth in the recitals to this
Agreement.

 

“Straddle Period” means a Tax Period that begins on or before and ends after the
Distribution Date.

 

“Tax” means any U.S. federal, state, foreign or local income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security, unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added, alternative
or add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty or addition thereto.

 

“Tax Asset” means any Tax Item that has accrued for Tax purposes, but has not
been used during a Tax Period, and that could reduce a Tax in another Tax
Period, including, but not limited to, a net operating loss, net capital loss,
investment tax credit, foreign tax credit, credit for increasing research
activities, charitable deduction, credit related to alternative minimum tax and
any other Tax credit.

 

“Taxing Authority” means the IRS or any other governmental authority responsible
for the administration of any Tax.

 

“Tax Item” means any item of income, gain, loss, deduction, credit, recapture of
credit or any other attribute or item (including the adjusted basis of property)
that may have the effect of increasing or decreasing any Tax.

 

“Tax Period” means any period prescribed by law or any Taxing Authority for
which a Tax Return is required to be filed or a Tax is required to be paid.

 

“Tax Practices” means the policies, procedures and practices customarily and
consistently employed by the Pre-Spin Group in the preparation and filing of,
and positions taken on, any Tax Returns of the RemainCo Affiliated Group or any
Pre-Spin Member (or group thereof) for any Pre-Distribution Tax Period.

 

“Tax Refund” means any refund of Taxes, whether by payment, credit, offset,
reduction

 

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in Tax or otherwise, plus any interest or other amounts received or payable with
respect to such refund.

 

“Tax Return” means any return (including any information return), report,
statement, declaration, notice, form, election, estimated Tax filing, claim for
refund or other filing (including any amendments thereof and attachments
thereto) required to be filed with or submitted to any Taxing Authority with
respect any Tax.

 

“Tax Treatment” has the meaning set forth in Section 3.3(a).

 

“Treasury Regulations” means the income tax regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).

 

ARTICLE II.
FILING OF TAX RETURNS AND PAYMENT OF TAXES

 

Section 2.1            Preparation and Filing of Tax Returns.

 

(a)           Subject to Section 2.2, RemainCo shall prepare (or caused to be
prepared) and timely file (taking into account applicable extensions):

 

(i)            all Tax Returns of the RemainCo Affiliated Group or any Pre-Spin
Member (or group thereof) for any Pre-Distribution Tax Period other than Tax
Returns described in Section 2.1(b)(i);

 

(ii)           all Tax Returns of the RemainCo Affiliated Group or any Pre-Spin
Member (or group thereof) for any Straddle Period other than Tax Returns
described in Section 2.1(b)(ii); and

 

(iii)          all Tax Returns of the RemainCo Affiliated Group or any RemainCo
Member (or group thereof) for all Post-Distribution Tax Periods.

 

(b)           Subject to Section 2.2, SpinCo shall prepare (or caused to be
prepared) and timely file (taking into account applicable extensions):

 

(i)            all Tax Returns for any Pre-Distribution Tax Period that are
filed after the Distribution Date that relate solely to the SpinCo Group or any
SpinCo Member (or group thereof);

 

(ii)           all Tax Returns for any Straddle Period that relate solely to the
SpinCo Group or any SpinCo Member (or group thereof); and

 

(iii)          all Tax Returns of the SpinCo Affiliated Group or any SpinCo
Member (or group thereof) for all Post-Distribution Tax Periods.

 

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Section 2.2            Advance Review of Tax Returns.

 

(a)           At least twenty (20) business days (or such other reasonable time
as mutually agreed to by both parties) prior to the filing of any Tax Return
pursuant to Section 2.1(a)(i) or Section 2.1(a)(ii) (any such Tax Return, a
“RemainCo Prepared Pre-Spin/Straddle Mixed Return”) which reflects any Taxes for
which SpinCo might be liable pursuant to the Current Allocation Methodology,
RemainCo shall provide SpinCo with a copy for its review of the portion of such
Tax Return that relates to SpinCo’s liability.

 

(b)           At least twenty (20) business days, or such other reasonable time
as mutually agreed to by both parties, prior to the filing of any Tax Return
pursuant to Section 2.1(b)(i) or Section 2.1(b)(ii) (any such Tax Return, a
“SpinCo Prepared Pre-Spin/Straddle Nonmixed Return”) which reflects any Taxes
for which RemainCo might be liable pursuant to the Current Allocation
Methodology, SpinCo shall provide RemainCo with a copy for its review of the
portion of such Tax Return that relates to RemainCo’s liability.

 

(c)           SpinCo and its Representatives shall have the right to review all
related work papers prior to RemainCo’s filing of a RemainCo Prepared
Pre-Spin/Straddle Mixed Return for which SpinCo has review rights pursuant to
Section 2.2(a).  RemainCo shall in good faith consult with SpinCo and its
Representatives regarding SpinCo’s comments with respect to such Tax Returns or
related work papers and shall in good faith consult with such party in an effort
to resolve any differences with respect to (i) the preparation and accuracy of
such Tax Returns and their consistency with past Tax Practices and (ii) the
recommendations of SpinCo and its Representatives for alternative positions with
respect to items reflected on such Tax Returns; provided, however, that RemainCo
shall not be obligated to consider any recommendation the result of which would
materially adversely affect the Taxes of the RemainCo Affiliated Group (or any
RemainCo Member) for any Straddle Period or Post-Distribution Tax Period, and
RemainCo may condition the acceptance of any such recommendation upon the
receipt of appropriate indemnification from SpinCo for any increases in Taxes
that may result from the adoption of the relevant alternative position.

 

(d)           RemainCo and its Representatives shall have the right to review
all related work papers prior to SpinCo’s filing of a SpinCo Prepared
Pre-Spin/Straddle Nonmixed Return.  SpinCo shall consult with RemainCo and its
Representatives regarding RemainCo’s comments with respect to such Tax Returns
or related work papers and shall in good faith consult with such party in an
effort to resolve any differences with respect to (i) the preparation and
accuracy of such Tax Returns and their consistency with past Tax Practices and
(ii) the recommendations of RemainCo and its Representatives for alternative
positions with respect to items reflected on such Tax Returns; provided,
however, that SpinCo shall not be obligated to consider any recommendation the
result of which would materially adversely affect the Taxes of the SpinCo
Affiliated Group (or any SpinCo Member) for any Straddle Period or
Post-Distribution Tax Period, and SpinCo may condition the acceptance of any
such recommendation upon the receipt of appropriate indemnification from
RemainCo for any increases in Taxes that may result from the adoption of the
relevant alternative position.

 

Section 2.3            Consistent Positions on Tax Returns.  The Responsible
Party shall prepare all Tax Returns (a) for all Pre-Distribution Tax Periods and
Straddle Periods in a manner consistent with past Tax Practices and (b) in a
manner consistent with the Latham Opinion,

 

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except in either case as otherwise required by changes in applicable law or
material underlying facts or as consented by the parties hereto in writing,
which consent shall not be unreasonably withheld.

 

Section 2.4            Taxable Year.  The parties agree that, to the extent
permitted by applicable law, (a) the Tax Period with respect to U.S. federal
Income Taxes of the SpinCo Members included in the consolidated U.S. federal
Income Tax Return of the RemainCo Affiliated Group for the Straddle Period (and
all corresponding consolidated, combined, unitary or similar state or local
Income Tax Returns of such Affiliated Group) shall end as of the close of the
Distribution Date and (b) the SpinCo Affiliated Group and each member thereof
shall begin a new taxable year for purposes of such U.S. federal, state or local
Income Taxes as of the beginning of the day after the Distribution Date.  The
parties further agree that, to the extent permitted by applicable law, all U.S.
federal, state, local and foreign Tax Returns shall be filed consistently with
this position.

 

Section 2.5            Payment of Taxes.

 

(a)           RemainCo shall be liable for and shall pay all Taxes due and
payable (including additional Taxes imposed as a result of a Final
Determination) with respect to Tax Returns filed by RemainCo pursuant to
Section 2.1(a); provided, however, that RemainCo and SpinCo shall apportion and
allocate the liability with respect to any RemainCo Prepared Pre-Spin/Straddle
Mixed Returns in accordance with the Current Allocation Methodology.

 

(b)           SpinCo shall be liable for and shall pay all Taxes due and payable
(including additional Taxes imposed as a result of a Final Determination) with
respect to Tax Returns filed by SpinCo pursuant to Section 2.1(b); provided,
however, that RemainCo and SpinCo shall apportion and allocate the liability
with respect to any SpinCo Prepared Pre-Spin/Straddle Nonmixed Returns in
accordance with the Current Allocation Methodology.

 

(c)           SpinCo or RemainCo, as applicable, shall pay to the other party
the amount required to be paid pursuant to Section 2.5(a) and
Section 2.5(b) under the Current Allocation Methodology within thirty (30) days
after written demand is made by such other party; provided, however, that any
such amount shall not be payable earlier than five (5) business days before the
date on which the applicable Taxes are required to be paid to the Taxing
Authority.

 

Section 2.6            Amended Returns.  Notwithstanding anything to the
contrary in this Agreement:

 

(a)           (i) RemainCo may not file any amendment to a RemainCo Prepared
Pre-Spin/Straddle Mixed Return for which SpinCo has review rights pursuant to
Section 2.2(a), and (ii) SpinCo may not file any amendment to any SpinCo
Prepared Pre-Spin/Straddle Nonmixed Return for which RemainCo has review rights
pursuant to Section 2.2(b), in each case, without the other party’s written
consent, which consent shall not be unreasonably withheld.

 

(b)           (i) at SpinCo’s request and to the extent RemainCo consents in
writing, RemainCo will file an amendment to any RemainCo Prepared
Pre-Spin/Straddle Mixed Return,

 

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and (ii) at RemainCo’s request and to the extent SpinCo consents in writing,
SpinCo will file an amendment to any SpinCo Prepared Pre-Spin/Straddle Nonmixed
Return, in each case, which consent shall not be unreasonably withheld.

 

(c)           For purposes of this Section 2.6, a party may withhold consent to
amending any Tax Return if the amendment will increase the Tax liability (as
shown as due on any amended Tax Return) of the party whose consent is required,
and the party requesting consent has not entered into a written agreement to
indemnify the consenting party for any such increased Tax liability.

 

Section 2.7            Refunds of Taxes.  RemainCo and SpinCo shall apportion
and allocate any Tax Refund realized as a result of an amendment of or a Final
Determination with respect to any RemainCo Prepared Pre-Spin/Straddle Mixed
Return or SpinCo Prepared Pre-Spin/Straddle Nonmixed Return, as applicable, in
the same proportion as the liability for the Taxes with respect to such Tax
Return was apportioned and allocated pursuant to the Current Allocation
Methodology.  Any Tax Refund realized as a result of a Final Determination with
respect to any Tax Return filed pursuant to Section 2.1(a)(iii) and
Section 2.1(b)(iii) shall be for the benefit of the Responsible Party.  If
RemainCo or SpinCo, as applicable, receives a Tax Refund with respect to which
the other party is entitled to all or an allocable portion pursuant to this
Section 2.7, RemainCo or SpinCo, as applicable, shall pay such amount to such
other party in immediately available funds within thirty (30) days of receipt
thereof.  Any payment not made within thirty (30) days of receipt shall
thereafter bear interest at a rate per annum equal to the Prime Rate plus 1.5%
or the maximum rate permitted by law.

 

Section 2.8            Tax Elections.  Nothing in this Agreement is intended to
change or otherwise affect any previous tax election made by or on behalf of the
RemainCo Affiliated Group (including the election with respect to the
calculation of earnings and profits under Section 1552 of the Code and the
Treasury Regulations thereunder).  RemainCo shall continue to have discretion,
reasonably exercised, to make any and all elections with respect to any Tax
Returns which it is obligated to file under Section 2.1(a); provided, however,
that if any such election could reasonably be expected to adversely affect any
SpinCo Member, such election shall not be made without the prior written consent
of SpinCo, which consent shall not be unreasonably withheld.  SpinCo shall have
discretion, reasonably exercised, to make any and all elections with respect to
Tax Returns which it is obligated to file Tax Returns under Section 2.1(b);
provided, however, that if any such election could reasonably be expected to
adversely affect any RemainCo Member, such election shall not be made without
the prior written consent of RemainCo, which consent shall not be unreasonably
withheld.

 

Section 2.9            Allocation of Tax Assets.

 

(a)           RemainCo and SpinCo shall cooperate, each at its own cost and
expense, in determining the allocation of any Tax Assets or Tax liabilities
among the parties in accordance with the Code and Treasury Regulations (and any
applicable state, local and foreign laws). In the absence of controlling legal
authority or unless otherwise provided under this Agreement, RemainCo and SpinCo
shall cooperate to reasonably determine the allocation of all Tax Assets and Tax
liabilities of the Pre-Spin Group. RemainCo and SpinCo hereby agree to compute
all

 

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Taxes for Post-Distribution Tax Periods and Straddle Periods consistently with
the determinations made pursuant to this Section 2.9 unless otherwise required
by a Final Determination.

 

(b)           To the extent that the amount of any Tax Asset is later reduced or
increased by a Taxing Authority, or as a result of an Audit or carrybacks of Tax
Assets from Post-Distribution Tax Periods of either the RemainCo Affiliated
Group or any RemainCo Member, on one hand, or the SpinCo Affiliated Group or any
SpinCo Member, on the other hand, such reduction or increase shall be allocated
to the party to which such Tax Asset was allocated pursuant to Section 2.9(a). 
In addition, a party that is notified by a Taxing Authority or in the course of
an Audit of an adjustment in any Tax Asset or that carries back any Tax Asset
from Post-Distribution Tax Periods that results in an adjustment in the amount
of any Tax Asset shall promptly notify the other party of such adjustment.

 

Section 2.10          Certain Expenses.

 

(a)           If RemainCo incurs any expenses payable to outside Tax advisors in
connection with the preparation and filing of any RemainCo Prepared
Pre-Spin/Straddle Mixed Return (other than the preparation and filing of an
amended Tax Return), or if SpinCo incurs any expenses payable to outside Tax
advisors in connection with the preparation and filing of any SpinCo Prepared
Pre-Spin/Straddle Nonmixed Return (other than the preparation and filing of an
amended Tax Return), then within thirty (30) days after written demand is made
by the Responsible Party, the non-Responsible Party shall reimburse the
Responsible Party for the non-Responsible Party’s share of such expenses, which
share shall be apportioned and allocated between the RemainCo Group and the
SpinCo Group for the relevant period in the same manner as the Taxes reflected
on such Tax Returns are apportioned between RemainCo and SpinCo.

 

(b)           Any expenses payable to outside Tax advisors in connection with
the preparation or filing of any amended RemainCo Prepared Pre-Spin/Straddle
Mixed Return or any amended SpinCo Prepared Pre-Spin/Straddle Nonmixed Return
shall be borne by the party requesting the filing of such amended Tax Return. 
The party requesting the filing of such amended Tax Return shall reimburse the
other party for any expenses payable to outside Tax advisors within thirty (30)
days after written demand is made by such other party.

 

ARTICLE III.
INDEMNIFICATION

 

Section 3.1            By RemainCo.  Subject to Section 3.3, RemainCo shall
indemnify and hold SpinCo and each SpinCo Member harmless against:

 

(a)           any and all Taxes for which RemainCo is liable pursuant to
Section 2.5(a) and Section 2.5(c); and

 

(b)           any and all increases in the liability for Taxes of the SpinCo
Group or any SpinCo Member (or group thereof) as a result of a RemainCo Member’s
material inaccuracies in, or failure to timely provide, such information and
assistance specified in Section 5.1.

 

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Section 3.2            By SpinCo.  Subject to Section 3.3, SpinCo shall
indemnify and hold RemainCo and each RemainCo Member harmless against:

 

(a)           any and all Taxes for which SpinCo is liable pursuant to
Section 2.5(b) and Section 2.5(c); and

 

(b)           any and all increases in the liability for Taxes of the RemainCo
Affiliated Group or any RemainCo Member (or group thereof) as a result of a
SpinCo Member’s material inaccuracies in, or failure to timely provide, such
information and assistance specified in Section 5.1.

 

Section 3.3            Tax Treatment of Spin-off Transactions.

 

(a)           The parties expressly agree for all purposes to treat the Spin-off
Transactions as tax-free distributions under Sections 368(a)(1)(D) and 355 of
the Code in accordance with the Latham Opinion (the “Tax Treatment”).  Each
party hereto also expressly agrees to (i) comply with the representations made
in the Opinion Representation Letters, (ii) unless otherwise required by law,
not take any action, or fail to take any action the failure of which to take, is
inconsistent with the Tax Treatment, and (iii) take any and all reasonable
actions to support and defend the Tax Treatment.  Without limiting the
generality of the foregoing, RemainCo and SpinCo further represent, agree and
covenant that the representations and information contained in the Opinion
Representation Letters, insofar as they concern or relate to such party or its
Affiliates, are true, correct and complete in all material respects.

 

(b)           Without limiting the generality of Section 3.3(a), SpinCo further
represents, agrees and covenants as follows:

 

(i)            From and after the Distribution Date until the second anniversary
thereof, SpinCo will (i) maintain its status as a company engaged in the SpinCo
Active Trade or Business for purposes of Section 355(b)(2) of the Code, and
(ii) not engage in any transaction (or allow its Affiliates to engage in any
transaction) that would result in it ceasing to be a company engaged in the
SpinCo Active Trade or Business for purposes of Section 355(b)(2) of the Code,
in each case, taking into account Section 355(b)(3) of the Code, unless,  prior
to taking any such action, it obtains and provides to RemainCo a ruling from the
IRS or a written opinion from a nationally recognized law firm with expertise in
these matters, in form and substance reasonably acceptable to RemainCo, that
such action, and any action related thereto, will not affect the qualification
of the Spin-off Transactions under Sections 368(a)(1)(D) and 355 of the Code.

 

(ii)           From and after the Distribution Date until the second anniversary
thereof, SpinCo shall not take any of the following actions unless, prior to
taking any such action, it obtains and provides to RemainCo a ruling from the
IRS or a written opinion from a nationally recognized law firm with expertise in
these matters, in form and substance reasonably acceptable to RemainCo, that
such transaction, and any transaction or transactions related thereto, will not
affect the qualification of the Spin-off Transactions under
Sections 368(a)(1)(D) and 355 of the Code and will not cause Section 355(e) of
the

 

11

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Code to apply:

 

(A)          enter into (or, to the extent SpinCo has the right to prohibit such
action, permit) any transaction or series of transactions (or any agreement,
understanding, arrangement or substantial negotiations, within the meaning of
Section 355(e) of the Code and Treasury Regulations Section 1.355-7, to enter
into a transaction or series of transactions), as a result of which any person
or group of persons would (directly or indirectly) acquire or have the right to
acquire from SpinCo or one or more holders of its stock, a number of shares of
its stock that, together with any shares issued in an equity offering described
in clause (B) below, would comprise 40% or more of (1) the value of all
outstanding shares of stock of SpinCo as of the date of such transaction or
(2) the total combined voting power of all outstanding shares of stock of SpinCo
as of the date of such transaction, or, with respect to either (1) or (2), in
the case of a series of transactions, the date of the last transaction of such
series;

 

(B)          issue equity of SpinCo in an offering in excess, in the aggregate,
together with any shares acquired in a transaction described in clause
(A) above, of 40%, of (1) the value of all outstanding shares of stock of SpinCo
as of the date of such transaction or (2) the total combined voting power of all
outstanding shares of stock of SpinCo, as of the date of such transaction, or,
with respect to either (1) or (2), in the case of a series of transactions, as
of the date of the last transaction of such series;

 

(C)          merge or consolidate with any other person or entity or liquidate
or partially liquidate; or

 

(D)          in a single transaction or series of transactions (whether or not
such transactions are related) sell or transfer (other than sales or transfers
of inventory in the ordinary course of business) 40% or more of the gross assets
of any SpinCo Active Trade or Business or 40% or more of the gross assets of
SpinCo’s Separate Affiliated Group (such percentages to be measured based on
fair market value as of the Distribution Date).

 

(c)           Notwithstanding anything to the contrary in Section 2.55,
Section 3.1, Section 3.2 or Section 6.2(c):

 

(i)            If there is a Final Determination that results in the
disallowance, in whole or in part, of the Tax Treatment (other than (x) a
disallowance which is addressed by Section 3.3(c)(ii) or (y) the
Section 355(e) Tax which is addressed by Section 3.3(c)(iii)), then any
liability for Taxes of the Pre-Spin Group as a result of such disallowance shall
be divided between RemainCo and SpinCo in proportion to the RemainCo Ratable
Portion and the SpinCo Ratable Portion, respectively.  RemainCo shall be liable
for, and shall indemnify SpinCo and each SpinCo Member against, any liability
for which RemainCo is responsible pursuant to the preceding sentence, and SpinCo
shall be liable for, and shall indemnify RemainCo and each RemainCo Member
against, any liability for which SpinCo is responsible pursuant to the preceding
sentence.

 

12

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(ii)                                                                                 
(A)          If there is a Final Determination that results in the disallowance,
in whole or in part, of the Tax Treatment (other than the Section 355(e) Tax,
which is addressed by Section 3.3(c)(iii)), and RemainCo or any RemainCo Member
(and neither SpinCo nor any SpinCo Member) has taken any action after the
Distribution Date which action results in such disallowance, then RemainCo shall
be liable for, and shall indemnify SpinCo and each SpinCo Member against, any
Taxes of the Pre-Spin Group as a result of such disallowance.

 

(B)          If there is a Final Determination that results in the disallowance,
in whole or in part, of the Tax Treatment (other than the Section 355(e) Tax,
which is addressed by Section 3.3(c)(iii)), and SpinCo or any SpinCo Member (and
neither RemainCo nor any RemainCo Member) has taken any action after the
Distribution Date which action results in such disallowance, then SpinCo shall
be liable for, and shall indemnify RemainCo and each other RemainCo Member
against, any Taxes of the Pre-Spin Group as a result of such disallowance.

 

(iii)                                                                              
(A)          If there is a Final Determination that Section 355(e) of the Code
is applicable to the Spin-off Transactions solely because the Spin-off
Transactions were part of a plan or series of related transactions pursuant to
which one or more persons acquired directly or indirectly RemainCo stock (or
interests in any predecessor or successor thereto within the meaning of
Section 355(e) of the Code) representing a “50-percent or greater interest”
within the meaning of Section 355(e), then RemainCo shall be liable for, and
shall indemnify SpinCo and each SpinCo Member against, the Section 355(e) Tax;
provided, however, that to the extent such Section 355(e) Tax arises solely as a
result of transactions that occurred prior to the Distribution Date, then such
liability shall be divided between RemainCo and SpinCo in proportion to the
RemainCo Ratable Portion and the SpinCo Ratable portion, respectively; and

 

(B)          If there is a Final Determination that Section 355(e) of the Code
is applicable to the Spin-off Transactions solely because the Spin-off
Transactions were part of a plan or series of related transactions pursuant to
which one or more persons acquired directly or indirectly SpinCo stock (or
interests in any predecessor or successor thereto within the meaning of
Section 355(e) of the Code) representing a “50-percent or greater interest”
within the meaning of Section 355(e), then SpinCo shall pay and be liable for,
and shall indemnify RemainCo and each RemainCo Member against, the
Section 355(e) Tax; provided, however, that to the

 

13

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extent such Section 355(e) Tax arises solely as a result of transactions that
occurred prior to the Distribution Date, then such liability shall be divided
between RemainCo and SpinCo in proportion to the RemainCo Ratable Portion and
the SpinCo Ratable portion, respectively.

 

(iv)          Any such claim for indemnification to effectuate this
Section 3.3(c) shall otherwise be governed in the manner specified under this
Article III, but shall not affect in any manner the provisions of Article V
and Article VI (except as set forth in Section 6.2(a)) with respect to
cooperation and control of Audits.

 

Section 3.4            Certain Reimbursements.  Each party shall notify the
other party of any Taxes paid by it or any of its Affiliates that are subject to
indemnification under this Article III.  Any notification pursuant to this
Section 3.4 shall include a detailed calculation (including, if applicable,
separate allocations of such Taxes between the parties and supporting work
papers) and a brief explanation of the basis for indemnification hereunder. 
Whenever such a notification is given, the indemnifying party shall pay the
amount requested in such notice to the indemnified party in accordance with
Article IV, but only to the extent the indemnifying party agrees with such
request.  To the extent the indemnifying party disagrees with such request, it
shall so notify the indemnified party within thirty (30) days of receipt of such
notice, whereupon the parties shall use their best efforts to resolve any such
disagreement.  Any indemnification payment made after such thirty (30) day
period shall include interest accrued at a rate per annum equal to the Prime
Rate plus 1.5% from the date of receipt of the original indemnification notice.

 

Section 3.5            Adjustments.  The parties agree to cooperate in good
faith, without bias to any RemainCo Member or SpinCo Member, to make appropriate
adjustments to accomplish the objectives of this Article III.

 

ARTICLE IV.
METHOD AND TIMING OF
PAYMENTS REQUIRED BY THIS AGREEMENT

 

Section 4.1            Payment in Immediately Available Funds; Interest.  All
payments made pursuant to this Agreement shall be made in immediately available
funds.  Except as otherwise provided in the Agreement, all payments shall be
made within thirty (30) days of receipt of request therefor.  Except as
otherwise provided in the Agreement, any payment not made within thirty (30)
days of receipt shall thereafter bear interest at a rate per annum equal to the
Prime Rate plus 1.5%.

 

Section 4.2            Characterization of Payments.  Any payment (other than
interest thereon) made hereunder by RemainCo to SpinCo, or by SpinCo to
RemainCo, shall be treated by all parties for all Tax purposes to the extent
permitted by law and GAAP in the same manner as if such payment were a
non-taxable distribution or capital contribution made immediately prior to the
External Distribution, except to the extent that RemainCo and SpinCo treat a
payment as the settlement of an intercompany liability (including, without
limitation, the settlement of an intercompany liability with respect to the
sharing of Tax liabilities pursuant to the Current

 

14

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Allocation Methodology).

 

ARTICLE V.
COOPERATION; DOCUMENT RETENTION; CONFIDENTIALITY

 

Section 5.1            Provision of Cooperation, Documents and Other
Information.  Upon the reasonable request of any party to this Agreement,
RemainCo or SpinCo, as applicable, shall promptly provide (and shall cause its
Affiliates to promptly provide) the requesting party with such cooperation and
assistance, documents, and other information as may be necessary or reasonably
helpful in connection with (a) the preparation and filing of any Tax Return, 
including all Tax Returns relating to Pre-Distribution Tax Periods and Straddle
Periods, (b) the conduct of any Audit involving any Taxes or Tax Returns within
the scope of this Agreement or (c) the verification by a party of an amount
payable to or receivable from another party.  Such cooperation and assistance
shall include, without limitation, (i) all information necessary for filing a
Tax Return in a manner consistent with past Tax Practices and any other
information reasonably requested in connection with the preparation of such Tax
Returns, (ii) the provision of books, records, Tax Returns, documentation or
other information relating to any relevant Tax Return, (iii) the execution of
any document that may be necessary or reasonably helpful and the provision of
such other assistance reasonably necessary or requested in connection with the
filing of any Tax Return, or in connection with any Audit, including, without
limitation, the execution of powers of attorney and extensions of applicable
statutes of limitations with respect to Tax Returns which RemainCo may be
obligated to file on behalf of SpinCo Members pursuant to Section 2.1, (iv) the
prompt and timely filing of appropriate claims for refund, and (v) the use of
reasonable best efforts to obtain any documentation from a governmental
authority or a third party that may be necessary or reasonably helpful in
connection with the foregoing.  Each party shall make its employees and
facilities available on a mutually convenient basis to facilitate such
cooperation.

 

Section 5.2            Retention of Books and Records.  Each party to this
Agreement shall retain or cause to be retained (and shall cause each of their
Affiliates to retain) all Tax Returns and all books, records, schedules, work
papers, and other documents relating thereto, until the later of (a) the date
seven (7) years from the close of the applicable Tax Period, (b) the expiration
of all applicable statutes of limitations (including any waivers or extensions
thereof) and (c) the expiration of any retention period required by law (e.g.,
depreciation or inventory records) or pursuant to any record retention
agreement.  The parties hereto shall notify each other in writing of any
waivers, extensions or expirations of applicable statutes of limitations.

 

Section 5.3            Confidentiality of Documents and Information.  Except as
required by law or with the prior written consent of the other party, all Tax
Returns, documents, schedules, work papers and similar items and all information
contained therein that are within the scope of this Agreement shall be kept
confidential by the parties hereto and their Representatives, shall not be
disclosed to any other person and shall be used only for the purposes provided
herein.

 

15

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ARTICLE VI.
AUDITS

 

Section 6.1            Notification and Status of Audits or Disputes.  Upon the
receipt by any party to this Agreement (or any of its Affiliates) of notice of
any pending or threatened Audit pertaining to Taxes subject to indemnification
under this Agreement, such party shall promptly notify the other party in
writing of the receipt of such notice.  Each party to this Agreement shall use
reasonable best efforts to keep the other party advised as to the status of any
Audits pertaining to Taxes subject to indemnification under this Agreement.  To
the extent relating to any such Tax, each party hereto shall promptly furnish
the other party with copies of any inquiries or requests for information from
any Taxing Authority or any other administrative, judicial or other governmental
authority, as well as copies of any revenue agent’s report or similar report,
notice of proposed adjustment or notice of deficiency.

 

Section 6.2            Control and Settlement.

 

(a)           RemainCo shall have the right to control, and to represent the
interests of all affected taxpayers in, any Audit relating, in whole or in part,
to any RemainCo Prepared Pre-Spin/Straddle Mixed Return and to employ counsel or
other advisors of its choice at its own cost and expense; provided, however,
that with respect to any issue arising on an Audit of a RemainCo Prepared
Pre-Spin/Straddle Mixed Return that could reasonably be expected to have a more
than immaterial adverse effect on SpinCo or any SpinCo Member (including as a
result of SpinCo’s indemnification obligations pursuant to Sections 3.3(c)(i),
3.3(c)(ii)(B) and 3.3 (c)(iii)(B)), (i) RemainCo shall not settle or otherwise
resolve any such issue without the written consent of SpinCo, which consent
shall not be unreasonably withheld; (ii) SpinCo shall provide RemainCo a written
response to any notification by RemainCo of a proposed settlement within ten
(10) days of its receipt of such notification; and (iii) if SpinCo fails to
respond within such ten (10) day period, it shall be deemed to have consented to
the proposed settlement.  Each of RemainCo and SpinCo shall bear the costs
relating to any Audit under this Section 6.2(a) in proportion to the amount of
Taxes each of RemainCo and SpinCo will bear as a result of the Audit.

 

(b)           SpinCo shall have the right to control, and to represent the
interests of all affected taxpayers in, any Audit relating, in whole or in part,
to any SpinCo Prepared Pre-Spin/Straddle Nonmixed Return and to employ counsel
or other advisors of its choice at its own cost and expense; provided, however,
that with respect to any issue arising on an Audit of a SpinCo Prepared
Pre-Spin/Straddle Nonmixed Return that could reasonably be expected to have a
more than immaterial adverse effect on RemainCo or any RemainCo Member,
(i) SpinCo shall not settle or otherwise resolve any such issue without the
written consent of RemainCo, which consent shall not be unreasonably withheld;
(ii) RemainCo shall provide SpinCo a written response to any notification by
SpinCo of a proposed settlement within ten (10) days of its receipt of such
notification; and (iii) if RemainCo fails to respond within such ten (10) day
period, it shall be deemed to have consented to the proposed settlement.  Each
of RemainCo and SpinCo shall bear the costs relating to any Audit under this
Section 6.2(a) in proportion to the amount of Taxes each of RemainCo and SpinCo
will bear as a result of the Audit.

 

16

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(c)           Notwithstanding anything to the contrary contained in Sections
6.2(a) and 6.2(b), Schedule 2 attached hereto contains a list of specific Audits
and the party that shall have the right to control, and to represent the
interests of all affected taxpayers in such Audits; provided, however, that to
the extent any issue arising in such Audit could reasonably be expected to have
a more than immaterial adverse effect on the noncontrolling party, then (i) the
party that has the right to control such Audit shall not settle or otherwise
resolve any such issue in such Audit without the written consent of the other
party, which consent shall not be unreasonably withheld; (ii) the
non-controlling party shall provide the other party a written response to any
notification by the controlling party of a proposed settlement within ten
(10) days of its receipt of such notification; and (iii) if the non-controlling
party fails to respond within such ten (10) day period, it shall be deemed to
have consented to the proposed settlement.

 

(d)           The payment of any Taxes as a result of a Final Determination with
respect to an Audit, as well as any payments between RemainCo and SpinCo with
respect to such Taxes, shall be governed by Section 2.5.

 

Section 6.3            Delivery of Powers of Attorney and Other Documents. 
RemainCo and SpinCo shall execute and deliver to the other party, promptly upon
request, powers of attorney authorizing such other party to extend statutes of
limitations, receive refunds, negotiate settlements and take such other actions
that RemainCo or SpinCo, as applicable, reasonably considers to be appropriate
in exercising its control rights pursuant to Section 6.2, and any other
documents reasonably necessary thereto to effect the exercise of such control
rights.

 

ARTICLE VII.
MISCELLANEOUS

 

Section 7.1            Effectiveness.  This Agreement shall be effective from
and after the Distribution Date and shall survive until the expiration of any
applicable statute of limitations.

 

Section 7.2            Counterparts; Entire Agreement; Corporate Power.

 

(a)           This Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
when one or more counterparts have been signed by each party and delivered to
each other party.

 

(b)           This Agreement, and the exhibits, annexes and schedules hereto,
contain the entire agreement between the parties with respect to the subject
matter hereof, supersede all previous agreements, negotiations, discussions,
writings, understandings, commitments and conversations with respect to such
subject matter and there are no agreements or understandings between the parties
with respect to such subject matter other than those set forth or referred to
herein or therein.

 

(c)           RemainCo represents on behalf of itself and each other member of
the RemainCo Group, and SpinCo represents on behalf of itself and each other
member of the SpinCo Group, as follows:

 

17

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(i)            each such person has the requisite corporate or other power and
authority and has taken all corporate or other action necessary in order to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby; and

 

(ii)           this Agreement has been duly executed and delivered by it and
constitutes a valid and binding agreement of it enforceable in accordance with
the terms hereof.

 

(d)           Each party hereto acknowledges that it and each other party hereto
may execute this Agreement by facsimile, stamp or mechanical signature.  Each
party hereto expressly adopts and confirms each such facsimile, stamp or
mechanical signature made in its respective name as if it were a manual
signature, agrees that it shall not assert that any such signature is not
adequate to bind such party to the same extent as if it were signed manually and
agrees that at the reasonable request of any other party hereto at any time it
shall as promptly as reasonably practicable cause this Agreement to be manually
executed (any such execution to be as of the date of the initial date thereof).

 

Section 7.3            Guarantees of Performance.  Each party hereby guarantees
the complete and prompt performance by its Affiliates of all of their
obligations and undertakings pursuant to this Agreement.  If, subsequent to the
consummation of the Spin-off Transactions, either RemainCo or SpinCo shall be
acquired by another entity (the “acquirer”) such that 50% or more of the
acquired corporation’s common stock is held by the acquirer and its affiliates,
the acquirer shall, by making such acquisition, simultaneously agree to jointly
and severally guarantee the complete and prompt performance by the acquired
corporation and any Affiliate of the acquired corporation of all of their
obligations and undertakings pursuant to this Agreement and the acquired
corporation shall cause such acquirer to enter into an agreement reflecting such
guarantee.

 

Section 7.4            Severability.  If any provision of this Agreement or the
application thereof to any person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof or thereof, or the application of such provision to persons or
circumstances or in jurisdictions other than those as to which it has been held
invalid or unenforceable, shall remain in full force and effect and shall in no
way be affected, impaired or invalidated thereby. Upon such determination, the
parties shall negotiate in good faith in an effort to agree upon such a suitable
and equitable provision to effect the original intent of the parties.

 

Section 7.5            Waiver of Default.  Waiver by any party of any default by
the other party of any provision of this Agreement shall not be deemed a waiver
by the waiving party of any subsequent or other default, nor shall it prejudice
the rights of such party.  No failure or delay by any party in exercising any
right, power or privilege under this Agreement shall operate as a waiver thereof
nor shall a single or partial exercise thereof prejudice any other or further
exercise thereof or the exercise of any other right, power or privilege.

 

Section 7.6            Governing Law.  This Agreement (and any claims or
disputes arising out of or related hereto or to the transactions contemplated
hereby or to the inducement of any party to enter herein, whether for breach of
contract, tortious conduct or otherwise and whether

 

18

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predicated on common law, statute or otherwise) shall be governed by and
construed and interpreted in accordance with the Laws of the State of Texas,
irrespective of the choice of laws principles of the State of Texas, including
all matters of validity, construction, effect, enforceability, performance and
remedies.

 

Section 7.7            Notices.  Notice shall be provided to the parties and in
the manner set forth in Section 11.5 of the Separation Agreement.

 

Section 7.8            Amendments.  No provisions of this Agreement shall be
deemed waived, amended, supplemented or modified by any party, unless such
waiver, amendment, supplement or modification is in writing and signed by the
authorized representative of the party against whom such waiver, amendment,
supplement or modification is sought to be enforced.

 

Section 7.9            Assignability.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and thereto, respectively, and their
respective successors and permitted assigns; provided, however, that no party
hereto or thereto may assign its respective rights or delegate its respective
obligations under this Agreement without the express prior written consent of
the other parties hereto or thereto.

 

Section 7.10          No Third-Party Beneficiaries.  (a) The provisions of this
Agreement are solely for the benefit of the parties and are not intended to
confer upon any Person (including, without limitation, any stockholders of
RemainCo or stockholders of SpinCo) except the parties hereto any rights or
remedies hereunder; and (b) there are no third-party beneficiaries of this
Agreement, and this Agreement shall not provide any third Person (including,
without limitation, any stockholders of RemainCo or stockholders of SpinCo) with
any remedy, claim, liability, reimbursement, claim of action or other right in
excess of those existing without reference to this Agreement.

 

Section 7.11          Headings.  The article, section and paragraph headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.

 

Section 7.12          Predecessors and Successors.  To the extent necessary to
give effect to the purposes of this Agreement, any reference to any corporation
or other entity shall also include any predecessors or successors thereto, by
operation of law or otherwise.

 

Section 7.13          Dispute Resolution.  The provisions of Article VI of the
Separation Agreement shall apply, mutatis mutandis, to all disputes,
controversies or claims (whether arising in contract, tort or otherwise) that
may arise out of or relate to, or arise under or in connection with this
Agreement or the transactions contemplated hereby.

 

Section 7.14          Specific Performance.  Subject to the provisions of
Article VI in the Separation Agreement, in the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are, or are to be, thereby aggrieved shall
have the right to specific performance and injunctive or other equitable relief
(on an interim or permanent basis) in respect of its or their rights under this
Agreement, in

 

19

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addition to any and all other rights and remedies at law or in equity, and all
such rights and remedies shall be cumulative. The parties agree that the
remedies at law for any breach or threatened breach, including monetary damages,
are inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is waived. Any
requirements for the securing or posting of any bond with such remedy are waived
by each of the parties to this Agreement.

 

Section 7.15          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
party shall, in connection with entering into this Agreement, performing its
obligations hereunder and taking 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
authority (including any regulatory or administrative agency, commission or
similar authority) and promptly provide the other party with all such
information as it may reasonably request in order to be able to comply with the
provisions of this sentence.

 

Section 7.16          Setoff.  All payments to be made by any party under this
Agreement shall be made without setoff, counterclaim or withholding, all of
which are expressly waived.

 

Section 7.17          Expenses.  Except as specifically provided in this
Agreement, each party agrees to pay its own costs and expenses resulting from
the fulfillment of its respective obligations hereunder.

 

Section 7.18          Rules of Construction.  Any ambiguities shall be resolved
without regard to which party drafted the Agreement.

 

Section 7.19          Consistency.  Except with respect to Section 7.1 hereof,
to the extent that any provision of this Article VII conflicts with the
provisions of Article XI in the Separation Agreement, the provisions of
Article XI in the Separation Agreement shall control.  In addition, to the
extent Article XI in the Separation Agreement contains matters that are not
addressed in this Article VII or elsewhere in this Agreement, the provisions of
Article XI in the Separation Agreement shall control.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the date above written.

 

 

 

EXTERRAN HOLDINGS, INC.

 

a Delaware corporation

 

 

 

 

 

By:

/s/ D. Bradley Childers

 

Name: D. Bradley Childers

 

Title: President

 

 

 

 

 

EXTERRAN CORPORATION,

 

a Delaware corporation

 

 

 

 

 

By:

/s/ Andrew J. Way

 

Name: Andrew J. Way

 

Title: President

 

Signature Page to Tax Matters Agreement

 

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Exhibit A:

 

Current Allocation Methodology

 

U.S. Federal Income Tax

 

With respect to any RemainCo Prepared Pre-Spin/Straddle Mixed Returns, to the
extent any Income Taxes are reflected as due and payable thereon (determined by
taking into account any refundable credits but not any estimated Tax payments),
the amount of U.S. federal Income Taxes allocable to SpinCo shall be the amount
of such U.S. federal Income Taxes that the SpinCo Affiliated Group would have
been required to pay on a consolidated basis if the SpinCo Affiliated Group had
paid tax on behalf of an affiliated group consisting only of the SpinCo Group,
as determined in a manner consistent with the following principles:

 

(a)           including only Tax Items to the extent relating to the SpinCo
Business that were included in the relevant RemainCo Affiliated Group
consolidated Tax Return;

 

(b)           including the SpinCo Ratable Portion of the Tax Items of the
RemainCo Affiliated Group that do not clearly relate to either the SpinCo
Business or the RemainCo Business;

 

(c)           using all elections, accounting methods and conventions used on
the RemainCo Affiliated Group consolidated Tax Return for such period; and

 

(d)           applying the effective U.S. federal corporate Income Tax rate
applicable to the RemainCo Affiliated Group for such Tax Period.

 

Any U.S. federal Income Taxes allocable to SpinCo and payable by SpinCo to
RemainCo pursuant to this Agreement shall be reduced by the amount of estimated
Tax payments made prior to the Distribution Date to the extent such estimated
Tax payments related to the SpinCo Business.  In the event the estimated Tax
payments made relating to the SpinCo Business exceed the actual U.S. federal
Income Taxes allocable to Spinco (as determined hereunder) for period covered by
the applicable RemainCo Prepared Pre-Spin/Straddle Mixed Return, RemainCo shall
reimburse Spinco for any such excess within 30 days after the applicable
RemainCo Prepared Pre-Spin/Straddle Mixed Returns is filed.

 

Any U.S. federal Income Taxes with respect to RemainCo Prepared
Pre-Spin/Straddle Mixed Returns that are not allocable to SpinCo pursuant to the
above shall be allocable to RemainCo.

 

State Income Tax

 

With respect to any RemainCo Prepared Pre-Spin/Straddle Mixed Returns or SpinCo
Prepared Pre-Spin/Straddle Nonmixed Returns, as applicable, to the extent any
Income Taxes are reflected as due and payable thereon (determined by taking into
account any refundable credits but not any estimated Tax payments), the amount
of state or local Income Taxes allocable to SpinCo or

 

A-1

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RemainCo, as applicable, shall be as determined by the Responsible Party in a
manner consistent with the principles set forth under the heading “U.S. Federal
Income Tax” above (for the avoidance of doubt, using the effective state or
local corporate Income Tax rate applicable to the RemainCo Affiliated Group (or
other group of Pre-Spin Members) for such applicable state or local
jurisdiction, as the case may be).

 

Foreign Income Tax

 

With respect to any RemainCo Prepared Pre-Spin/Straddle Mixed Returns or SpinCo
Prepared Pre-Spin/Straddle Nonmixed Returns, as applicable, the amount of
foreign Income Taxes allocable to SpinCo or RemainCo, as applicable, shall be as
determined by the Responsible Party in a manner consistent with the principles
set forth under the heading “U.S. Federal Income Tax” above.

 

Other Taxes

 

With respect to any sales, use, property or similar Taxes (“Other Taxes”)
reflected on any RemainCo Prepared Pre-Spin/Straddle Mixed Returns or SpinCo
Prepared Pre-Spin/Straddle Nonmixed Returns, as applicable, the amount of such
Other Taxes shall be apportioned to the Pre-Distribution Tax Period and the
Post-Distribution Tax Period.  The portion of any Other Taxes relating to the
Pre-Distribution Tax Period reflected on a RemainCo Prepared Pre-Spin/Straddle
Mixed Returns shall be allocated to SpinCo to the extent the asset with respect
to which such Other Taxes are imposed was used in connection with the SpinCo
Business.  The portion of any Other Taxes relating to the Pre-Distribution Tax
Period that are reflected on a SpinCo Prepared Pre-Spin/Straddle Nonmixed
Returns shall be allocated to RemainCo if the asset with respect to which such
Other Taxes are imposed was used in connection with the RemainCo Business.

 

With respect to any RemainCo Prepared Pre-Spin/Straddle Mixed Returns or SpinCo
Prepared Pre-Spin/Straddle Nonmixed Returns, as applicable, the amount of Taxes
(other than U.S. federal Income Taxes, state, local or foreign Income Taxes,
Other Taxes or Taxes otherwise addressed in this Exhibit A) allocable to SpinCo
or RemainCo, as applicable shall be as determined by the Responsible Party as
follows: (i) to the extent such Taxes clearly relate to Tax Items generated by
the SpinCo Business during the Pre-Distribution Tax Period, to SpinCo, (ii) to
the extent such Taxes clearly relate to Tax Items generated by the RemainCo
Business during the Pre-Distribution Tax Period, to RemainCo, and (iii) to the
extent such Taxes do not clearly relate to Tax Items generated by either the
RemainCo Business or SpinCo Business in such period, then to SpinCo based on the
SpinCo Ratable Portion and to RemainCo based on the RemainCo Ratable Portion.

 

For purposes of the Other Taxes provision in this Exhibit A, Taxes will be
apportioned to the Pre-Distribution Tax Period by multiplying the amount of such
Taxes for the entire period covered by the applicable Tax Return by a fraction,
the numerator of which is the number of days during the applicable portion of
the such period that ends on the Distribution Date and the denominator of which
is the total number of days in period covered by such Tax Return.

 

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Schedule 1 Override

 

Notwithstanding anything to the contrary contained in this Exhibit A, any Taxes
or Tax Refunds specifically enumerated on Schedule 1 hereto shall be allocated
to SpinCo or RemainCo as set forth on such Schedule.

 

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