AFTER SUCH NOTIFICATION DATE, BUYER
NOTIFIES PFC IN WRITING THAT BUYER DISAGREES WITH THE COMPUTATION OF ANY SUCH
AMOUNT. IN THAT CASE, PFC AND BUYER SHALL PROCEED IN GOOD FAITH TO DETERMINE THE
CORRECT AMOUNT, AND PFC'S PAYMENT TO BUYER, OR BUYER'S PAYMENT TO PFC, SHALL BE
DUE THE LATER OF (I) THE TIME SPECIFIED IN THE IMMEDIATELY PRECEDING SENTENCE OR
(II) 10 DAYS AFTER PFC AND BUYER AGREE TO THE AMOUNT PAYABLE.
42
(C)
TAX CHARACTERIZATION OF THE MERGER AND RELATED TAX TRANSACTIONS.
(1)
FOR FEDERAL TAX PURPOSES (A) THE COMPANY IS TAXABLE AS A
CORPORATION, (B) EACH OF THE COMPANY PARTNERS AND ALL THE SUBSIDIARIES, EXCEPT
WINCHESTER, ARE DISREGARDED ENTITIES, AND (C) WINCHESTER IS CURRENTLY TAXABLE AS
A CORPORATION. AT LEAST ONE BUSINESS DAY BEFORE THE CLOSING DATE, WINCHESTER
WILL, AND THE COMPANY WILL CAUSE WINCHESTER TO, BECOME A DISREGARDED ENTITY FOR
FEDERAL TAX PURPOSES BY FILING IRS FORM 8832 (ENTITY CLASSIFICATION ELECTION) AT
LEAST ONE BUSINESS DAY BEFORE THE CLOSING DATE. ACCORDINGLY, THE PARTIES INTEND
THAT FOR FEDERAL TAX PURPOSES, AND FOR STATE INCOME TAX PURPOSES IN ANY STATE
THAT CONFORMS TO THE FEDERAL TAX TREATMENT, (E) WINCHESTER WILL BE TREATED AS
COMPLETELY LIQUIDATING IN A NONTAXABLE TRANSACTION PURSUANT TO SECTIONS 332 AND
337 OF THE CODE, (F) THE MERGER WILL BE TREATED AS A TAXABLE SALE OF THE ASSETS
OF THE COMPANY (INCLUDING THE ASSETS OF WINCHESTER AND THE OTHER SUBSIDIARIES)
TO BUYER, AND A PURCHASE OF THE COMPANY'S ASSETS BY BUYER, FOR THE ADJUSTED
PURCHASE PRICE AND THE ASSUMPTION OF LIABILITIES OF THE COMPANY (INCLUDING
LIABILITIES OF THE SUBSIDIARIES), FOLLOWED BY THE NONTAXABLE DISTRIBUTION OF THE
ADJUSTED PURCHASE PRICE BY THE COMPANY TO PFC IN COMPLETE LIQUIDATION OF THE
COMPANY PURSUANT TO SECTION 332 OF THE CODE, AND (G) THIS AGREEMENT IS A PLAN OF
COMPLETE LIQUIDATION OF THE COMPANY FOR PURPOSES OF SECTION 332 OF THE CODE. THE
PARTIES AGREE NOT TO TAKE ANY POSITION INCONSISTENT WITH SUCH INTENDED FEDERAL
TAX CONSEQUENCES AND STATE INCOME TAX CONSEQUENCES FOR ANY STATE THAT CONFORMS
TO THE FEDERAL TAX TREATMENT. THE PARTIES FURTHER AGREE THAT SECTION 7.7(A)(1)
WILL APPLY TO THE FEDERAL INCOME TAX RETURN THAT WILL INCLUDE THE COMPANY AND
THE SUBSIDIARIES THROUGH THE EFFECTIVE TIME; FOR SUCH STATES, SECTION 7.7(B)(1)
WILL APPLY TO THE STATE INCOME TAX RETURNS OF THE COMPANY AND OF THE
SUBSIDIARIES FOR THE PERIOD THROUGH THE EFFECTIVE TIME; AND FOR SUCH STATES,
THERE WILL BE NO STATE INCOME TAX RETURN TO WHICH SECTION 7.7(B)(3) WILL APPLY.
(2)
THE PARTIES FURTHER ACKNOWLEDGE THAT FOR TEXAS FRANCHISE TAX
PURPOSES (A) THE COMPANY AND ALL THE SUBSIDIARIES, EXCEPT VAUGHAN AND GARRISON
(EACH OF WHICH IS TREATED THE SAME AS A CORPORATION FOR TEXAS FRANCHISE TAX
PURPOSES) ARE TREATED AS LIMITED PARTNERSHIPS, (B) THE CHANGE IN THE FEDERAL TAX
CLASSIFICATION OF WINCHESTER FROM A CORPORATION TO A DISREGARDED ENTITY IS
INTENDED TO HAVE NO TEXAS TAX CONSEQUENCE FOR THE COMPANY, WINCHESTER, AND THE
OTHER SUBSIDIARIES, AND (C) THE MERGER IS INTENDED TO BE TREATED