EXHIBIT 10.1
DISTRIBUTION AGREEMENT
dated as of
November 30, 2000
between
FLUOR CORPORATION,
a Delaware corporation
incorporated in 2000
and
FLUOR CORPORATION,
a Delaware corporation
incorporated in 1978
(to be renamed ▇▇▇▇▇▇ Energy Company
on the Distribution Date described herein)
TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS.................................................................. 2
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Section 1.01. Definitions...................................................... 2
ARTICLE II THE DISTRIBUTION............................................................ 6
Section 2.01. The Distribution................................................. 6
Section 2.02. Securities Filings............................................... 7
ARTICLE III CROSS INDEMNIFICATION...................................................... 7
Section 3.01. Indemnification by New Fluor..................................... 7
Section 3.02. Indemnification by ▇▇▇▇▇▇........................................ 8
Section 3.03. Overriding Provisions............................................ 9
ARTICLE IV INDEMNIFICATION PROCEDURES.................................................. 9
Section 4.01. Notice and Payment of Claims..................................... 9
Section 4.02. Defense of Third-Party Claims.................................... 10
Section 4.03. Dispute Resolution............................................... 10
ARTICLE V OTHER AGREEMENTS............................................................. 11
Section 5.01. Asset Transfers.................................................. 11
Section 5.02. Further Assurances and Consents.................................. 11
Section 5.03. No Representation or Warranty.................................... 12
Section 5.04. Registration and Listing......................................... 12
Section 5.05. Conduct of Businesses Pending Distribution....................... 13
Section 5.06. Intercompany Accounts............................................ 13
Section 5.07. Intellectual Property............................................ 13
Section 5.08. Insurance........................................................ 13
Section 5.09. Retained Liabilities............................................. 15
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Section 5.10. Composition of Boards............................................ 15
Section 5.11. Capital Structure................................................ 15
Section 5.12. Additional Settlement Matters.................................... 16
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Section 5.13. Cooperation with SEC Filings..................................... 17
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Section 5.14. Agreement to Close Books......................................... 17
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ARTICLE VI INFORMATION AND SERVICES.................................................... 17
Section 6.01. Provision of Corporate Records................................... 17
Section 6.02. Access to Information............................................ 17
Section 6.03. Production of Witnesses.......................................... 17
Section 6.04. Reimbursement.................................................... 17
Section 6.05. Retention of Records............................................. 18
Section 6.06. Confidentiality.................................................. 18
Section 6.07. Information and Services Relating to Taxes....................... 18
ARTICLE VII EMPLOYEE BENEFITS.......................................................... 18
Section 7.01. Fluor Employee Benefit Plans..................................... 18
Section 7.02. ▇▇▇▇▇▇ Employee Benefit Plans.................................... 18
Section 7.03. Fluor Plans - Change of Sponsorship.............................. 19
Section 7.04. Master Trust Changes............................................. 20
Section 7.05. Indemnification by New Fluor..................................... 20
Section 7.06. Indemnification by ▇▇▇▇▇▇........................................ 21
ARTICLE VIII INTERCOMPANY AGREEMENTS................................................... 21
Section 8.01. Termination...................................................... 21
ARTICLE IX TERMINATION; SURVIVAL....................................................... 22
Section 9.01. Termination...................................................... 22
Section 9.02. Survival......................................................... 22
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ARTICLE X MISCELLANEOUS................................................................ 22
Section 10.01. Expenses........................................................ 22
Section 10.02. Notices......................................................... 23
Section 10.03. Amendment and Waiver............................................ 23
Section 10.04. Counterparts.................................................... 24
Section 10.05. Governing Law................................................... 24
Section 10.06. Consent to Jurisdiction......................................... 24
Section 10.07. Entire Agreement................................................ 24
Section 10.08. Parties in Interest............................................. 24
Section 10.09. Attorneys' Fees................................................. 24
SCHEDULE 1 NEW FLUOR GROUP
SCHEDULE 2 OLD FLUOR/▇▇▇▇▇▇ GROUP
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DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT (the "Agreement") dated as of November 30,
2000 between Fluor Corporation, a Delaware corporation, which shall be renamed
▇▇▇▇▇▇ Energy Company in connection with the transactions contemplated herein
(together with its successors and permitted assigns, "Parent"), and Fluor
Corporation, a Delaware corporation (together with its successors and permitted
assigns, "New Fluor").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Parent acting through its direct and indirect
subsidiaries currently conducts a number of businesses, including, without
limitation, (i) provision of engineering, procurement and construction services,
outsourcing and asset management solutions and business administration and
support services (together with all other businesses now or formerly conducted
by Parent and any of its subsidiaries, but excluding the ▇▇▇▇▇▇ Business as
defined below, the "Fluor Business") and (ii) mining, processing, brokering and
selling coal (together with all other businesses now or formerly conducted by
A.T. ▇▇▇▇▇▇ Coal Company, Inc. or any of its subsidiaries, including, without
limitation, Appalachian Synfuel, LLC, the "▇▇▇▇▇▇ Business");
WHEREAS, the Board of Directors of Parent has determined that it
is in the best interest of Parent's shareholders, as well as of Parent and its
businesses, to reorganize Parent by separating from Parent all businesses
currently conducted by Parent other than the ▇▇▇▇▇▇ Business and to cause such
businesses to be owned and conducted, directly or indirectly, by New Fluor;
WHEREAS, in order to effect such separation, the Board of
Directors of Parent has determined that it is appropriate, desirable and in the
best interest of Parent's shareholders, as well as of Parent and its businesses,
for Parent (i) to take certain steps to reorganize Parent's subsidiaries and
businesses and (ii) to distribute to the holders of Parent's common stock, par
value $0.625 per share, all of the outstanding shares of common stock of New
Fluor as set forth herein in what the parties intend to be a tax-free
distribution pursuant to Section 355 of the Internal Revenue Code;
WHEREAS, each of Parent and New Fluor has determined that it is
necessary and desirable, on or prior to the Distribution Date (as defined
herein), to allocate and transfer those assets and allocate and assign
responsibility for those liabilities in respect of activities of the businesses
of such entities;
WHEREAS, each of Parent and New Fluor has determined that it is
necessary and desirable to set forth the principal corporate transactions
required to effect such distribution and to set forth other agreements that will
govern certain other matters following such distribution; and
WHEREAS, in connection with such distribution, Parent is
concurrently herewith entering into a Tax Sharing Agreement dated as of the date
hereof with New Fluor.
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained in this Agreement, the parties hereby agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. As used herein, the following terms
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shall have the following meanings:
"Affiliate" means, with respect to any person, another person
directly or indirectly controlling, controlled by or under common control with
such person; provided, however, that for the purposes of this Agreement, no
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member of the ▇▇▇▇▇▇ Group shall be deemed an Affiliate of any member of the New
Fluor Group and vice versa.
"Agent" means ChaseMellon Shareholder Services, LLC, as
distribution agent hereunder.
"Agreement" is defined in the preamble to this Agreement.
"Assets" means all assets of any nature whatsoever that would be
reflected on a balance sheet of Parent as of the Distribution Date prepared in
accordance with generally accepted accounting principles consistently applied
and in accordance with existing management practices including, without
limitation: all cash equivalents; accounts receivable; notes receivable;
contract work in progress (costs and earnings in excess of ▇▇▇▇▇▇▇▇);
inventories; pre-paid taxes (current and non-current); property, plant and
equipment; pension assets; goodwill (excess of cost over net assets of acquired
companies); investments; and other current and non-current assets.
"Cumulative Cash Flow" is defined in Section 5.11 of this
Agreement.
"Distribution" means the distribution contemplated by Section
2.02 of this Agreement.
"Distribution Date" means such date as shall be agreed upon by
Parent and New Fluor on which the Distribution shall occur.
"Distribution Record Date" means the date set by the Board of
Directors of Parent for the determination of holders of record of Parent Common
Stock entitled to participate in the Distribution.
"DRIH Grid Note" means that certain note defined and described in
Paragraph 2 of Schedule 5.06 to this Agreement.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended .
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fluor Business" is defined in the recitals to this Agreement.
"Fluor Executive Plans" means certain plans, funds and programs
maintained by Parent and certain members of the New Fluor Group which are aimed
at providing additional compensation, equity participation and other benefits
for a select group of highly compensated management, executive employees and
non-employee directors.
"Fluor Master Trust" means the Fluor Corporation and Subsidiary
Employees' Master Trust, trusteed by Bankers Trust of California, N.A.
"Fluor Insurance Policies" means certain insurance policies which
provide property, workers compensation and employer liability, professional
liability, builders risk, automobile liability, commercial general liability,
directors and officers liability, fiduciary and political action committee
liability and crime coverage for the benefit of the New Fluor Group and the
Parent.
"Fluor Payroll Practices" means certain plans, funds and programs
maintained by Parent and certain members of the New Fluor Group in the nature of
payroll practices including, but not limited to, time off with pay, jury duty,
family leave and other programs
"Fluor Pension Benefit Plans" means certain "employee pension
benefit plans" maintained by Parent and certain members of the New Fluor Group
as defined in Title 29 U.S.C. Section 1002(2)(A).
"Fluor Plans" means collectively the Fluor Welfare Benefits
Plans, the Fluor Pension Benefit Plans, the Fluor Executive Plans and the Fluor
Payroll Practices.
"Fluor Welfare Benefit Plans" means certain "employee welfare
benefit plans" maintained by Parent and certain members of the New Fluor Group
as defined in Title 29 U.S.C. Section 1002(1).
"Grid Note" shall mean that note defined and described in
paragraph 3 of Schedule 5.06 to this Agreement.
"Grid Note Accounts" means the Grid Note and the HQ Account
existing as of the date hereof between the parties.
"Group" means either of the New Fluor Group and the ▇▇▇▇▇▇ Group.
"HQ Account" shall mean that certain intercompany account defined
and described in paragraph 1 of Schedule 5.06 of this Agreement.
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"Indemnified Party" has the meaning ascribed to such term in
Section 4.01 of this Agreement.
"Indemnifying Party" has the meaning ascribed to such term in
Section 4.01 of this Agreement.
"Industry Standards" has the meaning set forth in Section 5.07
below.
"Liabilities" means all liabilities of any nature whatsoever that
would be reflected on a balance sheet of Parent as of the Distribution Date
prepared in accordance with generally accepted accounting principles
consistently applied and in accordance with existing management practices
including, without limitation: all trade accounts and notes payable; short-term
debt; advance ▇▇▇▇▇▇▇▇ on contracts (▇▇▇▇▇▇▇▇ and earnings in excess of costs);
accrued salaries, wages and benefit plan liabilities; other accrued liabilities;
income taxes payable; deferred taxes; long-term debt (other than the Public
Debt); deferred taxes; minority interests and other current and non-current
liabilities.
"Loss" (individually) or "Losses" (collectively) means all
losses, damages, injuries, harm, detriment, declines in value, liabilities,
exposures, claims, demands, proceedings, settlements, judgments, awards,
punitive damage awards, fines, penalties, fees, charges, costs or expenses
(including, without limitation, reasonable costs of attempting to avoid or in
opposing the imposition thereof, interest, penalties, costs of preparation and
investigation, and the reasonable fees, disbursements and expenses of attorneys,
accountants and other professional advisors).
"▇▇▇▇▇▇" means Parent, as it is renamed ▇▇▇▇▇▇ Energy Company,
following the Distribution.
"▇▇▇▇▇▇ Business" is defined in the recitals to this Agreement.
"▇▇▇▇▇▇ Debt Position" is defined in Section 5.11.
"▇▇▇▇▇▇ Executive Plans" means certain plans, funds and programs
maintained by members of the ▇▇▇▇▇▇ Group which are aimed at providing
additional compensation, equity participation and other benefits for a select
group of highly compensated management, executive employees and non-employee
directors
"▇▇▇▇▇▇ Group" means ▇▇▇▇▇▇ and its subsidiaries as of the
Distribution Date (including, without limitation, the entities listed on
Schedule 2 hereto).
"▇▇▇▇▇▇ Indemnified Parties" has the meaning ascribed to such
term in Section 3.01 of this Agreement.
"▇▇▇▇▇▇ Master Trust" means a master trust maintained by ▇▇▇▇▇▇
Energy Company and Subsidiaries to be created with a reputable and financially
sound institutional trustee to receive the assets of the ▇▇▇▇▇▇ Pension Benefit
Plans which are currently held by the Fluor Master Trust.
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"▇▇▇▇▇▇ Payroll Practices" means certain plans, funds and
programs maintained by members of the ▇▇▇▇▇▇ Group in the nature of payroll
practices including, but not limited to, time off with pay, jury duty, family
leave and other programs.
"▇▇▇▇▇▇ Pension Benefit Plans" means certain "employee pension
benefit plans" maintained by certain members of the ▇▇▇▇▇▇ Group as defined in
Title 29 U.S.C. Section 1002(2)(A).
"▇▇▇▇▇▇ Plans" means collectively the ▇▇▇▇▇▇ Welfare Benefits
Plans, the ▇▇▇▇▇▇ Pension Benefit Plans, the ▇▇▇▇▇▇ Executive Plans and the
▇▇▇▇▇▇ Payroll Practices.
"▇▇▇▇▇▇ Welfare Benefits Plans" means certain "employee welfare
benefit plans" maintained by members of the ▇▇▇▇▇▇ Group as defined in Title 29
U.S.C. Section 1002(1).
"MPPAA" means the Multi-Employer Pension Plan Amendments Act of
1980, as amended.
"Net Cash Received" means actual cash received by Parent for
whatever purpose in excess of actual cash paid by Parent as evidenced by
transactions appropriately recorded in the respective Grid Note Accounts by both
the Parent and the ▇▇▇▇▇▇ Group in accordance with existing cash management
practices.
"Net Cash Paid" means actual cash paid by Parent for whatever
purpose in excess of actual cash received by Parent as evidenced by transactions
appropriately recorded in the respective Grid Note Accounts by both the Parent
and the ▇▇▇▇▇▇ Group in accordance with existing cash management practices.
"New Fluor" is defined in the preamble to this Agreement.
"New Fluor Common Stock" means the shares of common stock, par
value $0.01 per share, of New Fluor.
"New Fluor Group" means New Fluor and its subsidiaries as of the
Distribution Date (including, without limitation, the entities listed on
Schedule 1 hereto).
"New Fluor Indemnified Parties" has the meaning ascribed to such
term in Section 3.02 of this Agreement.
"Options" means those certain stock options, in the form of
NQSOs, ISOs and SARs granted to officers and other key employees of Parent prior
to the Distribution Date pursuant to the Fluor Executive Plans.
"Parent" is defined in the preamble to this Agreement.
"Parent Common Stock" means the issued and outstanding shares of
common stock, par value $0.625 per share, of Parent.
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"Proxy Statement" means the definitive proxy statement (and any
amendments thereof or supplements thereto) to be distributed in connection with
Parent's meeting of its stockholders to vote on the transactions contemplated
hereby.
"Public Debt" means the $300 million of outstanding 6.95% Senior
Notes of Parent issued on March 7, 1997.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Spinoff Registration Documents" means the registration statement
on Form 10, together with all exhibits, amendments and supplements thereto,
filed with the SEC for the registration of the New Fluor Common Stock pursuant
to the Exchange Act.
"Tax" means any income, gross income, gross receipts, profits,
capital stock, franchise, withholding, payroll, social security, workers
compensation, unemployment, disability, property, ad valorem, stamp, excise,
severance, occupation, service, sales, use, license, lease, transfer, import,
export, value added, alternative minimum, estimated or similar tax (including
any fee, assessment, or other charge in the nature of or in lieu of any tax)
imposed by any governmental entity or political subdivision thereof, and any
interest, penalties, additions to tax, or additional amounts in respect of or
related to the foregoing.
"Tax Sharing Agreement" means the tax sharing agreement between
Parent, New Fluor and A.T. ▇▇▇▇▇▇ Coal Company, Inc., a Virginia corporation,
entered into concurrently herewith.
"Transaction Expenses" are defined in Section 10.01 of this
Agreement.
"Transfer Date" means the date upon which the transfer of the
assets of the ▇▇▇▇▇▇ Plans to be transferred from the Fluor Master Trust occurs
as described in Section 7.04 below.
"Valuation Date" means the date upon which the value of the
assets of the ▇▇▇▇▇▇ Plans to be transferred from the Fluor Master to the ▇▇▇▇▇▇
Master Trust occurs as described in Section 7.04 below.
ARTICLE II
THE DISTRIBUTION
Section 2.01. The Distribution. (a) On the terms and subject to
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the conditions of this Agreement and applicable law, Parent shall distribute to
its shareholders of record as of the Distribution Record Date one share of New
Fluor Common Stock for each share of Parent Common Stock held by the
shareholders. All such distributed shares of New Fluor Common Stock shall be
fully paid, non-assessable and free of preemptive rights.
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(b) On the Distribution Date, Parent will deliver to the Agent a
global certificate, representing the aggregate number of shares of New Fluor
Common Stock to be distributed to the shareholders of Parent based upon the
latest information from Agent. Such certificate shall be registered in the name
of the Agent as agent for the shareholders of record of Parent common stock on
the Distribution Record Date. As soon as Agent and Parent agree on the final
list of shareholders of record as of the Distribution Record Date, Agent will
deliver to shareholders stock certificates representing shares of New Fluor
Common Stock . Shares represented by the global certificate in excess of the
final number of shares to be distributed to shareholders of record will be
cancelled.
Section 2.02. Securities Filings. (a) Prior to the Distribution,
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Parent and New Fluor shall file with the SEC the Spinoff Registration Documents
to effect the registration of the New Fluor Common Stock pursuant to the
Exchange Act. Parent and New Fluor shall use commercially reasonable efforts to
cause the Spinoff Registration Documents to be declared effective under the
Exchange Act as promptly as practicable.
(b) Parent and New Fluor shall take all such actions as may be
necessary or appropriate under any applicable state securities or blue sky laws
to effect the Distribution.
ARTICLE III
CROSS INDEMNIFICATION
Section 3.01. Indemnification by New Fluor. Subject to Section
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3.03, on and after the Distribution Date, New Fluor shall indemnify and hold
harmless the ▇▇▇▇▇▇ Group and each of its directors, officers and Affiliates
(the "▇▇▇▇▇▇ Indemnified Parties") from and against:
(a) all Losses of the ▇▇▇▇▇▇ Indemnified Parties relating to,
arising out of or due to, directly or indirectly, any breach of any provisions
of this Agreement by New Fluor.
(b) all Losses of the ▇▇▇▇▇▇ Indemnified Parties relating to,
arising out of or due to any untrue statement or alleged untrue statement of a
material fact concerning the New Fluor Group contained in the Spinoff
Registration Documents or the Proxy Statement or any omission or alleged
omission to state therein a material fact concerning the New Fluor Group
required to be stated therein or necessary in order to make the statements
therein not misleading.
(c) all Losses of the ▇▇▇▇▇▇ Indemnified Parties relating to,
arising out of or due to any untrue statement or alleged untrue statement of a
material fact concerning the New Fluor Group contained in any report of Parent
filed prior to the Distribution Date under the Exchange Act, or in any filing
made prior to the Distribution Date under the Securities Act by Parent, or the
omission or alleged omission to state in any such report or filing a material
fact concerning the New Fluor Group required to be stated therein or necessary
in order to make the statements therein not misleading.
(d) all Losses of the ▇▇▇▇▇▇ Indemnified Parties relating to,
arising out of or due to any untrue statement of a material fact concerning the
New Fluor Group contained in any report of ▇▇▇▇▇▇ filed after the Distribution
Date under the Exchange Act, or in any filing made after the Distribution Date
under the Securities Act by ▇▇▇▇▇▇, or the omission or alleged
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omission to state in any such report or filing a material fact concerning the
New Fluor Group required to be stated therein or necessary in order to make the
statements therein not misleading; provided, however, that New Fluor shall be
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liable in any such case only to the extent that any such Losses arise out of or
are based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in any such report or filing in reliance upon and in
conformity with written information furnished to ▇▇▇▇▇▇, its Affiliates or any
of their respective representatives by or on behalf of New Fluor, its Affiliates
or any of their respective representatives specifically for use in preparing
such report or filing by ▇▇▇▇▇▇.
(e) all Losses of the ▇▇▇▇▇▇ Indemnified Parties relating to,
arising out of or due to, directly or indirectly, the Fluor Business, the
operations and activities of DRIH Corporation or any other business conducted by
the New Fluor Group, whether relating to, arising out of or due to occurrences
or conditions prior to, on or after the Distribution Date, including, without
limitation, those set forth on Schedule 3.01(d).
Section 3.02. Indemnification by ▇▇▇▇▇▇. Subject to Section
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3.03, on and after the Distribution Date, ▇▇▇▇▇▇ shall indemnify and hold
harmless the New Fluor Group and each of its directors, officers and Affiliates
(the "New Fluor Indemnified Parties") from and against:
(a) all Losses of the New Fluor Indemnified Parties relating to,
arising out of or due to, directly or indirectly, any breach of any provisions
of this Agreement by ▇▇▇▇▇▇.
(b) all Losses of the New Fluor Indemnified Parties relating to,
arising out of or due to any untrue statement or alleged untrue statement of a
material fact concerning the ▇▇▇▇▇▇ Group contained in the Spinoff Registration
Documents or the Proxy Statement or any omission or alleged omission to state
therein a material fact concerning the ▇▇▇▇▇▇ Group required to be stated
therein or necessary in order to make the statements therein not misleading.
(c) all Losses of the New Fluor Indemnified Parties relating to,
arising out of or due to any untrue statement or alleged untrue statement of a
material fact concerning the ▇▇▇▇▇▇ Group contained in any report of New Fluor
filed prior to the Distribution Date under the Exchange Act, or in any filing
made prior to the Distribution Date under the Securities Act by New Fluor, or
the omission or alleged omission to state in any such report or filing a
material fact concerning the ▇▇▇▇▇▇ Group required to be stated therein or
necessary in order to make the statements therein not misleading.
(d) all Losses of the New Fluor Indemnified Parties relating to,
arising out of or due to any untrue statement of a material fact concerning the
▇▇▇▇▇▇ Group contained in any report of New Fluor filed after the Distribution
Date under the Exchange Act, or in any filing made after the Distribution Date
under the Securities Act by New Fluor, or the omission or alleged omission to
state in any such report or filing a material fact concerning the ▇▇▇▇▇▇ Group
required to be stated therein or necessary in order to make the statements
therein not misleading; provided, however, that ▇▇▇▇▇▇ shall be liable in any
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such case only to the extent that any such Losses arise out of or are based upon
any untrue statement or alleged untrue statement or omission or alleged omission
made in any such report or filing in reliance upon and in conformity with
written information furnished to New Fluor, its Affiliates or any of their
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respective representatives by or on behalf of ▇▇▇▇▇▇, its Affiliates or any of
their respective representatives specifically for use in preparing such report
or filing by New Fluor.
(e) All Losses of the New Fluor Indemnified Parties relating to,
arising out of or due to, directly or indirectly, the ▇▇▇▇▇▇ Business or any
other business conducted by the ▇▇▇▇▇▇ Group, whether relating to, arising out
of or due to occurrences or conditions prior to, on or after the Distribution
Date.
Section 3.03. Overriding Provisions. Notwithstanding anything to
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the contrary in this Agreement, this Article III and Article VII hereof shall be
subject to the following provisions: (a) This Article III shall not govern any
Tax, and any and all Losses relating to foreign, federal, state and local Taxes,
including the payment of Taxes, and all Losses relating to breach of any
representation, warranty or covenant under the Tax Sharing Agreement, shall be
exclusively governed by the Tax Sharing Agreement.
(b) Except as otherwise expressly set forth below, this Article
III shall not govern any employee benefits matters, or any and all Losses
relating to the establishment, maintenance and administration of employee
benefit plans and programs, which shall be exclusively governed by the
provisions of Article VII hereof.
(c) The indemnification provisions of this Article III and
Article VII hereof shall not inure to the benefit of any third party or parties
other than the directors, officers and Affiliates of a Group as expressly
provided in Sections 3.01, 3.02, 7.05 and 7.06. By way of illustration only, 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) by virtue
of the indemnification provisions. Accordingly, any indemnification shall be
paid net of the amount of any insurance paid to the indemnified party.
(d) In the case of any Loss with respect to which an
indemnification payment is required under this Article III or Article VII hereof
(an "Indemnification Payment"), the amount of such Indemnification Payment shall
be adjusted in accordance with the applicable provisions of the Tax Sharing
Agreement.
ARTICLE IV
INDEMNIFICATION PROCEDURES
Section 4.01. Notice and Payment of Claims. If either Group (the
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"Indemnified Party") determines that it is or may be entitled to indemnification
by the other Group (the "Indemnifying Party") under Article III or Article VII
hereof, the Indemnified Party shall promptly deliver to the Indemnifying Party a
written notice and demand therefor, specifying, to
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the extent reasonably practicable, the basis for its claim for indemnification,
the nature of the claim and the amount for which the Indemnified Party
reasonably believes it is entitled to be indemnified. Unless such claim is
subject to the provisions of Section 4.02 below, the Indemnifying Party shall
pay the Indemnified Party the amount set forth in such notice, in cash or other
immediately available funds, within thirty (30) days after receipt of such
notice. However, the Indemnifying Party may object to the claim for
indemnification set forth in such notice; provided, however, that if the
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Indemnifying Party does not give the Indemnified Party written notice setting
forth its objection to such claim and the grounds therefor within the same
thirty (30) day period, the Indemnifying Party shall be deemed to have
acknowledged its liability for the amount of such claim and the Indemnified
Party may exercise any and all of its rights under applicable law to collect
such amount. Any such objection to a claim for indemnification shall be resolved
in accordance with Section 4.03.
Section 4.02. Defense of Third-Party Claims. If the Indemnified
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Party's claim for indemnification is based on a claim, demand, action or
proceeding, judicial or otherwise, brought by a third party, and except in the
event that a party is disputing that it has any indemnification obligation to
the other party (in which event the provisions of Section 4.03 below shall
apply), within the thirty (30) day period referred to in Section 4.01 above, (a)
the Indemnified Party may, by giving written notice thereof to the Indemnifying
Party, require the Indemnifying Party to assume, or (b) the Indemnifying Party
may at its option and by giving written notice thereof to the Indemnified Party
elect to assume, the defense of such third-party claim at its sole cost and
expense. Any such contest shall be conducted by attorneys employed by the
Indemnifying Party, but the Indemnified Party shall have the right to
participate in such proceedings and to be represented by attorneys of its own
choosing at the Indemnified Party's sole cost and expense. If the Indemnifying
Party assumes the defense of any such third-party claim, the Indemnifying Party
may settle or compromise the claim without prior written consent of the
Indemnified Party so long as such settlement does not impose any obligation or
restriction of any nature on the Indemnified Party. The Indemnifying Party shall
pay to the Indemnified Party in cash the amount for which the Indemnified Party
is entitled to be indemnified within fifteen (15) days after the settlement or
compromise of such third-party claim or the final unappealable judgment of a
court of competent jurisdiction. If the Indemnified Party does not require the
Indemnifying Party, and the Indemnifying Party does not elect, to assume the
defense of any such third-party claim, the Indemnifying Party shall be bound by
the result obtained with respect thereto by the Indemnified Party.
Section 4.03. Dispute Resolution. In an effort to resolve
------------------
informally and amicably any claim or controversy arising out of or related to
the interpretation or performance of this Agreement without resorting to
litigation, each party shall notify the other party to the dispute in writing of
any difference or dispute hereunder that requires resolution. Each party in
dispute shall designate an employee to investigate, discuss and seek to settle
the matter between them. If the two are unable to settle the matter within
thirty (30) days after such notification, the matter shall be submitted to a
senior officer of each such party for consideration. If settlement cannot be
reached through their efforts within an additional thirty (30) days, or such
longer time period as they shall agree upon, such parties shall consider
arbitration or other alternative means to resolve the dispute. If they are
unable to agree to an alternative dispute resolution mechanism, either party may
initiate legal proceedings to resolve such matter. If upon final resolution of a
dispute it is determined that one party has an indemnification obligation to the
other, in such
10
event, the provisions of Section 4.02 shall then apply, with the thirty (30) day
period described in Sections 4.01 and 4.02 commencing upon the date of final
resolution of the matter.
ARTICLE V
OTHER AGREEMENTS
Section 5.01. Asset Transfers. (a) Prior to the Distribution
---------------
Date, Parent shall transfer, assign and convey any and all rights and/or
obligations it may have to New Fluor with respect to (a) all Parent Assets and
Parent Liabilities except (i) Parent's investments in any ▇▇▇▇▇▇ Group entity,
(ii) all intercompany accounts described in Section 5.06 to be retained by
Parent, (iii) all historical equity accounts of Parent, (iv) the ▇▇▇▇▇▇ Group's
share of all assets and liabilities under any Fluor Plans as described and
allocated in accordance with Section 7.03; (b) all intellectual property rights
of Parent as described in Section 5.07; (c) all investments in any subsidiary or
affiliate which are part of the New Fluor Group; (d) all liabilities arising
primarily from the Fluor Business or DRIH Corporation, whether fixed, contingent
or otherwise (other than the DRIH Grid Note); and (e) all other assets not
otherwise used primarily in the conduct of the ▇▇▇▇▇▇ Business including,
without in any way limiting the preceding, those assets to be assigned to New
Fluor as described in Paragraph B of Schedule 5.01. In addition, prior to the
Distribution Date, Fluor Enterprises, Inc. (a New Fluor subsidiary) shall
transfer, convey and assign to a ▇▇▇▇▇▇ Group subsidiary (to be designated)
those assets described in Paragraph A of Schedule 5.01. The parties acknowledge
and agree that the transfers set forth herein shall be completed on or prior to
the Distribution Date, if practicable.
(b) To the extent that a Group owns any other asset which is used
primarily in the business conducted by the other Group, the first-mentioned
Group shall use its commercially reasonable efforts, subject to receipt of any
necessary consents of third parties, to cause such asset to be conveyed,
assigned and transferred to such other Group.
(c) If any transfer contemplated by subsection (a) shall not have
been consummated prior to the Distribution Date, the parties shall cooperate to
effect such transfer as promptly thereafter as shall be reasonably practicable,
it nonetheless being agreed and understood that no party shall be liable to any
other party for any delay in making any transfer contemplated by this Section.
Notwithstanding the provisions of Article III, upon such transfer, the
transferee of any such asset shall assume any liability (other than any
liability relating to any Tax, which liabilities are exclusively governed by the
Tax Sharing Agreement) relating to such asset and shall indemnify and hold
harmless the transferor and its directors, officers and Affiliates against all
claims relating thereto. The cost (other than any cost relating to any Tax,
which costs are exclusively governed by the Tax Sharing Agreement) of effecting
any such transfer of assets and assumption of related liabilities shall be borne
by the person to whom such asset is transferred.
Section 5.02. Further Assurances and Consents. (a) Each of the
-------------------------------
parties hereto will execute and deliver such further instruments of conveyance
and assignment and will take such other actions as any other party may
reasonably request in order to effectuate the purposes of this Agreement and to
carry out the terms hereof.
11
(b) In addition to the actions specifically provided for
elsewhere in this Agreement, each of the parties hereto shall use commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things, reasonably necessary, proper or advisable under
applicable laws, regulations and agreements to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
using commercially reasonable efforts to obtain any consents and approvals and
to make the filings and applications necessary or desirable in order to
consummate the transactions contemplated by this Agreement; provided, however,
--------
that no party hereto shall be obligated to pay any consideration therefor
(except for filing fees and other administrative charges) to any third party
from whom such consents, approvals and amendments are requested or to take any
action or omit to take any action if the taking of such action or such omission
would be unreasonably burdensome to the party, its Group or its Group's
business.
Section 5.03. No Representation or Warranty. The parties hereto
-----------------------------
understand and agree that no party is representing or warranting in any way (i)
as to the nature or value of, freedom from encumbrance or fitness for purpose
of, or as to any other matter concerning, any assets or liabilities referred to
in Section 5.01 (it being agreed and understood that all such assets are being
transferred "as is, where is"), (ii) as to the legal sufficiency of any
conveyance or assignment contemplated by Sections 5.01 and 5.02, (iii) as to the
execution, delivery and filing of the instruments pertaining thereto, or (iv) as
to the obtaining of any consents or approvals, the making of any filings or
applications or the compliance with the requirements of any applicable laws or
judgments necessary to comply with Sections 5.01 and 5.02.
Section 5.04. Registration and Listing. (a) Each party shall
------------------------
cooperate in the preparation of the Spinoff Registration Documents and the Proxy
Statement and any amendments or supplements thereto. The parties shall use
commercially reasonable efforts to cause the New Fluor Common Stock to be
distributed hereunder to be registered pursuant to the Exchange Act and
thereafter to effect the Distribution in accordance with the terms of this
Agreement, including, without limitation, by preparing and filing the Spinoff
Registration Documents under the Exchange Act covering the New Fluor Common
Stock and using commercially reasonable efforts to cause the Spinoff
Registration Documents to be declared and remain effective.
(b) The parties shall cooperate in preparing and filing with the
SEC and causing to become and remain effective any registration statements, and
any amendments or supplements thereto, which are appropriate to reflect the
establishment of, or amendment to, any employee benefit and other plan
contemplated by Article VII hereof.
(c) The parties shall take all such commercially reasonable
actions 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) The parties shall take all such commercially reasonable
actions to prepare, and shall file and pursue, applications to permit listing of
the new Fluor Common Stock and ▇▇▇▇▇▇ Common Stock on the New York Stock
Exchange.
12
Section 5.05. Conduct of Businesses Pending Distribution. (a) The
------------------------------------------
parties agree that from the date hereof until the Distribution Date, except as
otherwise contemplated by this Agreement, they will use commercially reasonable
efforts to cause the businesses of New Fluor and Parent to be conducted
diligently in the ordinary course and substantially in the same manner as
heretofore conducted and to preserve intact the business organization and
goodwill of each such business; provided, however, that notwithstanding the
--------
foregoing, (i) Parent shall, at New Fluor's request, (A) authorize one or more
contributions from Parent to New Fluor on the Distribution Date, in the form of
cash, securities and/or property, in such amount and on such terms and subject
to such conditions as the board of directors of Parent may determine, (B)
determine Cumulative Cash Flow in order to determine the final level of ▇▇▇▇▇▇
Debt Position (as defined below) in accordance with Section 5.11, and (C) enter
into commercial paper or other financing arrangements to pay such contributions
and for other purposes and (ii) New Fluor shall adopt a charter and by-laws
reasonably satisfactory to New Fluor and Parent, for approval by Parent as sole
stockholder of New Fluor.
(b) The parties agree that on or before the Distribution Date,
Parent shall settle and terminate that certain Forward Equity Acquisition
Transaction between Parent and Citibank, N.A. dated as of October 30, 1998 for
the purchase of 1,850,000 shares of Parent common stock.
(c) Prior to the Distribution Date, the ▇▇▇▇▇▇ Group shall not,
without the prior consent in writing of Parent, make any public announcement or
issue any press release with respect to the Distribution or with respect to any
material event, and, subject to Article IX, each Group shall use commercially
reasonable efforts not to take any action which may prejudice or delay the
consummation of the Distribution.
Section 5.06. Intercompany Accounts. All intercompany accounts,
---------------------
receivables and payables between the parties hereto shall be settled and
resolved in accordance with the provisions of Schedule 5.06 attached hereto,
except those related to Appalachian Synfuel, LLC which shall be addressed in the
agreement transferring ownership to the ▇▇▇▇▇▇ Group.
Section 5.07. Intellectual Property. On or prior to the
---------------------
Distribution Date, Parent shall transfer to New Fluor all intellectual property
held by Parent, other than intellectual property that relates to the ▇▇▇▇▇▇
Business, including, without limitation, the intellectual property listed on
Schedule 5.07.
Section 5.08. Insurance. With respect to the Fluor Insurance
---------
Policies currently maintained by Parent, Parent shall continue to maintain the
status of the members of the ▇▇▇▇▇▇ Group as "insureds" under the layers of the
combined aggregate protection and excess liability portion of the Fluor
Insurance Policies up to the Distribution Date, and Parent and New Fluor will
take such action as is necessary and appropriate to cause, effective as of the
Distribution Date: (a) New Fluor (and with respect to directors and officers
liability insurance, the directors and officers of New Fluor) to become the sole
"named insured" on each of the Fluor Insurance Policies whose policy term shall
not have expired prior to the Distribution Date and on its combined aggregate
protection and excess liability policies for the period 10-31-98 through
10-31-00, and the transfer by Parent to New Fluor of all assets and liabilities
related to the Fluor Insurance Policies; (b) the termination of the excess
coverage of all members of the ▇▇▇▇▇▇
13
Group under the Fluor Insurance Policies and the discontinuation of all members
of the ▇▇▇▇▇▇ Group as an "insured" under any of the Fluor Insurance Policies;
(c) to provide Parent with additional insured status under the combined
aggregate protection and excess liability portions of its coverage with respect
to claims (other than those arising from the ▇▇▇▇▇▇ Business) for occurrences
arising before the Distribution Date; and (d) to provide the directors and
officers of Parent with additional insured status under the directors and
officers policy of Parent with respect to claims for occurrences arising on or
before the Distribution Date. Notwithstanding the foregoing, with respect to
aircraft liability coverage currently being maintained by Parent (ACE; Policy
No. S00387149) (the "Aircraft Policy"), Parent agrees that it shall use
commercially reasonable efforts to permit the assignment of such Aircraft Policy
to the ▇▇▇▇▇▇ Group, such assignment to occur, if at all, concurrently with the
Distribution Date. Parent and New Fluor have not taken, and on and after the
Distribution Date, New Fluor shall refrain from taking, any action which
adversely impacts the coverage of the ▇▇▇▇▇▇ Group for claims based upon their
status as an "insured" up to the Distribution Date with respect to any coverage
afforded under the Fluor Insurance Policies that is broader than that afforded
to ▇▇▇▇▇▇ under its own insurance policies covering the same types of risks.
Parent represents and warrants that it has provided notice to the primary and
excess layer of its combined aggregate protection and excess liability policies
concerning the coal slurry release, ▇▇▇▇▇▇ County, Kentucky, which commenced on
or about October 11, 2000, and Parent has taken no action constituting a waiver
of coverage therefor. It is specifically acknowledged and agreed that the ▇▇▇▇▇▇
Group may communicate directly with the Fluor Insurance Policies carriers on the
coal slurry release, provide claims related documentation to such carriers and
may take such other action as may be, in its reasonable discretion, required in
order to determine coverage under the applicable insurance policies. Any such
communications shall be concurrently copied to New Fluor and where the
communication deals with payment or coverage demands, coverage positions or
legal proceedings, then ▇▇▇▇▇▇ shall provide New Fluor with reasonable prior
notice and shall otherwise consult with New Fluor prior to any communication
with the Fluor carriers or the institution of legal proceedings. After the
Distribution Date, New Fluor shall not take any action to forfeit, waive,
cancel, amend or modify, or cause to be forfeited, waived, cancelled, amended or
modified, the insurance coverage to be provided to the ▇▇▇▇▇▇ Group under the
Fluor Insurance Policies up to the Distribution Date. After the Distribution
Date, the ▇▇▇▇▇▇ Group shall not take any action to forfeit, waive, cancel,
amend or modify, or cause to be forfeited, waived, cancelled, amended or
modified, the coverage to be provided to New Fluor under the Fluor Insurance
Policies up to the Distribution Date.
From and after the Distribution Date, New Fluor shall cause the
New Fluor Group to maintain, and ▇▇▇▇▇▇ shall cause the ▇▇▇▇▇▇ Group to
maintain, with financially sound and reputable insurance companies, property
damage, commercial general liability, professional liability and directors and
officer's liability insurance in at least such amounts and against such risks as
are usually insured against by companies of established repute engaged in the
same or similar business as the New Fluor Group or ▇▇▇▇▇▇ Group, as applicable,
and owning similar assets ("Industry Standards"), except where such risks are
covered by self-insurance so long as the amount of such self-insurance and the
risks covered thereby are consistent with Industry Standards. Each party will
promptly furnish the other party, subject to appropriate confidentiality
protection, such information as to insurance carried or self-insurance
maintained as may be reasonably requested in writing by such other party.
14
Parent hereby represents and warrants, on behalf of and with
respect to the ▇▇▇▇▇▇ Group, and New Fluor hereby represents and warrants on
behalf of and with respect to the New Fluor Group, that except as previously
disclosed in writing to the other party, there are no outstanding claims or
notices, or, to its best knowledge, facts and circumstances which could
reasonably be expected to result in a claim or notice, under any of the combined
aggregate protection or excess liability portions of the Fluor Insurance
Policies.
Section 5.09. Retained Liabilities. Without limiting any other
--------------------
provision of this Agreement, the ▇▇▇▇▇▇ Group acknowledges the obligations and
liabilities set forth on Schedule 5.09, and to the extent applicable, the ▇▇▇▇▇▇
Group agrees to honor and properly discharge all such obligations and
liabilities following the Distribution Date. Notwithstanding anything to the
contrary contained herein, the New Fluor indemnity provisions described in
Section 3.01 of this Agreement shall not apply to the extent that the ▇▇▇▇▇▇
Indemnified Parties are the cause, either directly or indirectly, of any matter,
activity or omission resulting in Losses due to breach of the obligations and
liabilities set forth in Schedule 5.09. The foregoing notwithstanding, with
respect to any guarantees issued by Parent that are listed on Schedule 5.09 and
any other guarantees by Parent of any obligations arising from the Fluor
Business that survive the Distribution, the obligations of the ▇▇▇▇▇▇ Group
under this Section 5.09 with respect to any such guarantee shall be deemed fully
satisfied, and the ▇▇▇▇▇▇ Indemnified Parties shall not suffer any diminution of
indemnity rights otherwise available under this agreement for Losses arising
from such guarantee if: (a) the ▇▇▇▇▇▇ Group provides New Fluor with prompt
written notice of any claims made under such guarantee and tenders the defense
of such claims to New Fluor in accordance with the provisions of Section 4.01
and 4.02 hereof and (b) the ▇▇▇▇▇▇ Group complies with its obligations under
Article VI hereof that arise in respect of any claims made under such guarantee.
With respect to the guarantees listed on Schedule 5.09 and any
other guarantees by Fluor Corporation that relate to the Fluor Business, the New
Fluor Group shall discharge in a timely manner all obligations secured by such
guarantees and use commercially reasonable efforts to prevent any claim from
being made under such guarantees; provided, however, that nothing in this
Section 5.09 shall impose any obligation or liability whatsoever on the New
Fluor Group to any member of the ▇▇▇▇▇▇ Group for taking any action or
refraining from taking any action in the defense, settlement or other handling
of any claim against any member of the New Fluor Group covered by any such
guarantee that the New Fluor Group determines in good faith to be appropriate in
protecting the interests of the New Fluor Group with respect to such claim,
except that the New Fluor Group shall use commercially reasonable efforts to
cause the prompt release of any lien imposed on any assets of the ▇▇▇▇▇▇ Group
in connection with any such guarantee. The obligations set forth in this Section
5.09 shall be in addition to any obligation of New Fluor to indemnify the ▇▇▇▇▇▇
Group with respect to Losses related to such guarantees pursuant to Section
3.01(e) of this Agreement.
Section 5.10. Composition of Boards. The initial members of
---------------------
the boards of directors of ▇▇▇▇▇▇ and New Fluor following the Distribution shall
be as set forth on Schedule 5.10.
Section 5.11. Capital Structure. Parent will retain the Public
-----------------
Debt, will incur additional borrowing in the commercial paper market and will
enter into a new bank credit
15
facility to support its commercial paper program. The ▇▇▇▇▇▇ Group's debt
position as of the Distribution Date, composed of the Public Debt and commercial
paper, will be $530 million (the "▇▇▇▇▇▇ Debt Position"), adjusted as follows:
(i) If for the period beginning August 1, 2000 and ending on the Distribution
Date, the Cumulative Cash Flow of A.T. ▇▇▇▇▇▇ Coal Company, Inc. and its
subsidiaries is positive, then the ▇▇▇▇▇▇ Debt Position will be decreased by
such amount unless the ▇▇▇▇▇▇ Group retains such excess cash in its cash
accounts in accordance with the provisions hereof and (ii) if such Cumulative
Cash Flow for such period is negative, then the ▇▇▇▇▇▇ Debt Position will be
increased by such amount. For purposes of this Section 5.11, the term
"Cumulative Cash Flow" shall be determined as follows:
(a) if on the Distribution Date, the net cumulative cash
transactions reflected through the Grid Note results in Net Cash Received by
Parent from the ▇▇▇▇▇▇ Group, such amount shall be deducted from the ▇▇▇▇▇▇ Debt
Position;
(b) if on the Distribution Date, the net cumulative cash
transactions reflected through the Grid Note results in Net Cash Paid by Parent
to the ▇▇▇▇▇▇ Group, such amount shall be added to the ▇▇▇▇▇▇ Debt Position.
(c) Notwithstanding the preceding, interest on the Grid Note,
and the purchase price, redemption price or liquidation amount paid along with
related settlement costs associated with the transfer of interests of
Appalachian Synfuel, LLC, as described in Schedule 5.01, shall be excluded from
the determination of Cumulative Cash Flow.
(d) Attached hereto as Schedule 5.11 solely for explanatory
purposes is a pro forma statement demonstrating how Cumulative Cash Flow would
be calculated using sample numbers and reflecting the amount of commercial paper
or other borrowings that would be deliverable from Parent to New Fluor in the
form of contributions but whose repayment responsibility shall be retained by
the ▇▇▇▇▇▇ Group following the closing of the Distribution, such contributions
to occur in accordance with Section 5.05.
Section 5.12 Additional Settlement Matters. The following
-----------------------------
additional costs, expenses and matters shall be settled as follows, and shall
not impact the determination of Cumulative Cash Flow:
(a) Transaction Expenses shall be determined in accordance with
Section 10.01.
(b) With respect to the Public Debt, the next interest payment
thereunder is due on March 1, 2001. New Fluor shall be responsible for its share
of interest payments due on the Public Debt between the last date interest was
paid on the Public Debt, September 1, 2000 through and including the
Distribution Date (the "New Fluor Share"). ▇▇▇▇▇▇ shall be responsible for
interest payments due on the Public Debt following the Distribution Date and
thereafter. ▇▇▇▇▇▇ will be responsible for the interest payment due on the
Public Debt on March 1, 2001, provided New Fluor shall reimburse ▇▇▇▇▇▇ for the
New Fluor Share. New Fluor shall pay the New Fluor Share within 10 days
following receipt of an invoice therefor from ▇▇▇▇▇▇, such invoice not due and
payable earlier than February 28, 2001.
16
(c) To the extent that the ▇▇▇▇▇▇ Group had any cash balances as
of July 31, 2000, such balances shall be retained by ▇▇▇▇▇▇ following the
Distribution and shall not impact the determination of Cumulative Cash Flow.
Section 5.13. Cooperation with SEC Filings. Each party shall
----------------------------
cooperate in providing to the other party information as may be reasonably
requested in order to comply with applicable filing requirements under the
Securities Act or the Exchange Act. The party providing such information shall
ensure that such information is correct and complete in all material respects.
Section 5.14 Agreement to Close Books. The ▇▇▇▇▇▇ Group agrees
------------------------
that it shall close its financial books and records on the Distribution Date,
and within fifteen (15) days thereafter report to New Fluor the financial
statements for the ▇▇▇▇▇▇ Group from the day after the last day of the last
financial reporting period through the Distribution Date, such financial
statements to be prepared in accordance with generally accepted accounting
principles consistently applied and in accordance with existing management
practices. Such financial statement shall be subject to audit by Ernst & Young.
ARTICLE VI
INFORMATION AND SERVICES
Section 6.01. Provision of Corporate Records. Each Group shall
------------------------------
arrange as soon as reasonably practicable following the Distribution Date for
the provision to the other Group of existing corporate governance documents
(e.g. minute books, stock registers, stock certificates, documents of title,
etc.) in its possession, if any, relating to such other Group or its business
and affairs.
Section 6.02. Access to Information. From and after the
---------------------
Distribution Date, each Group shall afford the other Group and its accountants,
counsel and other designated 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,
contacts, instruments, computer data and other data and information in such
Group's possession relating to the business and affairs of the other Group,
insofar as such access is reasonably required by the other Group, including,
without limitation, for audit, accounting, litigation and tax purposes, as well
as for purposes of fulfilling disclosure and reporting obligations.
Section 6.03. Production of Witnesses. Each Group shall use
-----------------------
reasonable efforts to make available to the other Group, upon written request,
its officers, directors, employees and agents as witnesses to the extent that
such persons may reasonably be required in connection with any legal,
administrative or other proceedings in which the requesting party may from time
to time be involved.
Section 6.04. Reimbursement. A Group providing information or
-------------
witnesses under this Article VI to the other Group shall be entitled to receive
from the recipient, upon the presentation of invoices therefor, payment for all
costs and expenses (including the allocable
17
portion of any overhead expenses attributable thereto) as may be reasonably
incurred in providing such information or witnesses.
Section 6.05. Retention of Records. Except as otherwise required
--------------------
by law or agreed to in writing, each party shall, and shall cause the members of
its Group to, retain all information relating to the other Group's business in
accordance with the record retention policies of such party as may be in effect
from time to time. Notwithstanding the foregoing, any party may destroy or
otherwise dispose of any information at any time, provided that, prior to such
destruction or disposal, (i) such party shall provide no less than 90 days prior
written notice to the other party, specifying the information proposed to be
destroyed or disposed of and (ii) if a recipient of such notice shall request in
writing prior to the scheduled date for such destruction or disposal that any of
the information proposed to be destroyed or disposed of be delivered to such
requesting party, the party proposing the destruction or disposal shall promptly
arrange for the delivery of such of the information as was requested at the
expense of the requesting party.
Section 6.06. 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 party hereto furnished it by such other party or its
representatives pursuant to this Agreement or otherwise (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 Section 6.06. 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.
Section 6.07. Information and Services Relating to Taxes. The
------------------------------------------
provisions of Sections 6.02, 6.04 and 6.05 hereof shall not apply to the extent
any matter addressed therein is addressed by any provision of the Tax Sharing
Agreement, and such provision of the Tax Sharing Agreement shall govern such
matters exclusively for all purposes.
ARTICLE VII
EMPLOYEE BENEFITS
Section 7.01. Fluor Employee Benefit Plans. Schedule 7.01
----------------------------
attached contains a complete listing of the Fluor Welfare Benefit Plans, Fluor
Pension Benefit Plans, Fluor Executive Plans and Fluor Payroll Practices.
Section 7.02. ▇▇▇▇▇▇ Employee Benefit Plans. Schedule 7.02
-----------------------------
attached contains a complete listing of the ▇▇▇▇▇▇ Welfare Benefit Plans, ▇▇▇▇▇▇
Pension Benefit Plans, ▇▇▇▇▇▇ Executive Plans and ▇▇▇▇▇▇ Payroll Practices.
18
Section 7.03(a). Fluor Plans - Change of Sponsorship. On and
-----------------------------------
after the Distribution Date, the sponsorship of all Fluor Welfare Benefit Plans
and all Fluor Pension Benefit Plans which are currently sponsored by Parent
shall be transferred from Parent to New Fluor, such change in sponsorship to
include a full transfer of all Plan assets and liabilities including any plan
underfunding or overfunding and such change in sponsorship shall be reflected by
corporate resolutions, amendments to such plans where appropriate and changes to
any required filings with any governmental agency reflecting New Fluor as plan
sponsor. With regard to the Fluor Executive Plans, those Fluor Executive Plans
listed on Schedule 7.03(a)(i), together with all related assets and liabilities,
will be assigned from Parent to New Fluor. Those Fluor Executive Plans listed on
Schedule 7.03(a)(ii), which include Parent stock as a form of benefit, will
remain with the Parent. Those Fluor Executive Plans listed on Schedule
7.03(a)(iii) which cover executives of both the New Fluor Group and the ▇▇▇▇▇▇
Group will be partitioned into two plans, with the assets and liabilities
attributable to current and former Fluor executives being transferred to New
Fluor and the assets and liabilities attributable to current and former ▇▇▇▇▇▇
Group executives remaining with the Parent. The grantor trust established by
Parent and any insurance policy(ies) funded by Parent to provide for payment of
benefits to current or former Parent executives shall be transferred to New
Fluor. Any insurance policy(ies) funded by Parent or any of its subsidiaries to
provide for payment of benefits to current or former ▇▇▇▇▇▇ Group executives
shall be retained by Parent. The indemnification provisions set forth in
Sections 7.05 and 7.06 shall apply to the Fluor Plans whether such Fluor Plans
are assigned to New Fluor or remain with the Parent.
(b) Except as provided otherwise in Section 10.01(b), any stock
options on Parent stock held by persons currently or formerly employed by the
▇▇▇▇▇▇ Group shall remain subject to the applicable plan under which such
options were granted, and shall be adjusted in a manner consistent with FASB
Emerging Issues Task Force Issue 90-9 to constitute solely options for Parent's
Common Stock. Stock options to Parent stock held by persons currently or
formerly employed by the New Fluor Group shall be assumed by New Fluor and shall
be adjusted in a manner consistent with FASB Emerging Issues Task Force Issue
90-9 to constitute solely options for New Fluor Common Stock, and New Fluor
shall adopt the Fluor 2000 Executive Incentive Performance Plan to provide
options in new Fluor Common Stock. Except as otherwise provided in Section
10.01(b), any unvested restricted stock, stock appreciation rights, phantom
stock, shadow stock, and other forms of equity-based compensation held by a
current or former employee of Parent shall be adjusted in the same manner
described in the preceding two sentences.
(c) Parent held restricted stock and restricted units by
non-employee directors of Parent who are directors of New Fluor on the
Distribution Date, but who are no longer directors of Parent immediately
following the Distribution Date, shall be assumed by New Fluor and shall be
adjusted in a manner consistent with FASB Emerging Issues Task Force Issue 90-9
to constitute solely restricted stock and restricted units for New Fluor Common
Stock, and New Fluor shall adopt the Fluor Stock Plan for Non-Employee
Directors. Parent restricted stock and restricted units held by non-employee
directors who are directors of both Parent and New Fluor immediately following
the Distribution Date shall be adjusted in a manner consistent with FASB
Emerging Issues Task Force Issue 90-9 so that a director has a corresponding
number of shares of Parent restricted stock and New Fluor restricted stock and a
corresponding number of share equivalents of Parent restricted units and New
Fluor restricted units.
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(d) Prior to the Distribution Date, Parent shall cause New Fluor
to adopt the Fluor 2000 Executive Incentive Performance Plan and the Fluor Stock
Plan for Non-Employee Directors, and Parent shall approve such plans as sole
stockholder of New Fluor.
Section 7.04. Master Trust Changes. Schedule 7.04(a) lists the
--------------------
Fluor Pension Benefit Plans and the ▇▇▇▇▇▇ Pension Benefit Plans (the "▇▇▇▇▇▇
Defined Benefit Plans") whose assets constitute the corpus of the Fluor Master
Trust. It is the intention of Parent and New Fluor to continue to maintain such
qualified plans after the Distribution Date although this representation shall
not bind either Parent or New Fluor with respect to the continuation of any such
plans subsequent to the Distribution Date. Not later than the Distribution Date,
the ▇▇▇▇▇▇ Group shall establish the ▇▇▇▇▇▇ Master Trust. The assets of the
▇▇▇▇▇▇ Defined Benefit Plans to be transferred from the Fluor Master Trust to
the ▇▇▇▇▇▇ Master Trust shall be determined in accordance with and based upon
the current asset allocation and the valuation policies and practices currently
being used by the Fluor Master Trust, with the value being determined as of the
end of the month immediately preceding or coinciding with the Distribution Date.
To the extent reasonably practicable, the assets shall be transferred in kind
and the transfer shall be completed within sixty (60) days following the
Distribution Date. Any increase or decrease during the period between the
Valuation Date and the Transfer Date in the value of the assets to be
transferred as described above, including any income or loss derived from such
assets during such period, shall be for the account of the ▇▇▇▇▇▇ Master Trust.
New Fluor and Parent shall each use diligent efforts to cause the transfers
contemplated above to be accomplished on an expeditious basis. On and after the
Distribution Date, Parent shall cease to be the grantor of the Fluor Master
Trust and New Fluor shall be substituted in its place in accordance with the
terms of the Fluor Master Trust.
Section 7.05. Indemnification by New Fluor. New Fluor shall
----------------------------
indemnify and hold harmless the ▇▇▇▇▇▇ Indemnified Parties from and against:
(a) All Losses relating to, or arising out of, or due to,
directly or indirectly, (i) the management or investment of assets of any of the
Fluor Plans with respect to all periods prior to and after the Distribution
Date; excluding losses relating to the management or investment, after the
Distribution Date, of assets relating to ▇▇▇▇▇▇ Group participants or
beneficiaries or (ii) claims by ▇▇▇▇▇▇ Group participants or beneficiaries
regarding the management or investment of the ▇▇▇▇▇▇ Defined Benefit Plans prior
to the Transfer Date for the period of time in which such plans were part of the
Fluor Master Trust.
(b) All Losses from assessments, fines or penalties imposed with
respect to any of the Fluor Plans, by any governmental agency, federal or state,
with jurisdiction in the premises with respect to all periods prior to and after
the Distribution Date; excluding Losses arising from the administration of such
Fluor Plans by or on behalf of the ▇▇▇▇▇▇ Group following the Distribution Date.
(c) All Losses relating to or arising out of any claims of
whatever nature made by or on behalf of New Fluor Group participants or
beneficiaries in any of the Plans, including but not limited to, claims under
applicable federal or state law with respect to all periods prior to and after
the Distribution Date.
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(d) All Losses which may be incurred with respect to Fluor
Pension Benefit Plans with respect to all periods prior to and after the
Distribution Date as a result of any withdrawal or any other liability under
ERISA and/or Losses which may be incurred with respect to multi-employer plans
contributed to by the New Fluor Group or, prior to the Distribution Date,
contributed to by Parent, under the MPPAA.
Section 7.06. Indemnification by ▇▇▇▇▇▇. ▇▇▇▇▇▇ shall
-------------------------
indemnify and hold harmless the New Fluor Indemnified Parties from and against:
(a) All Losses relating to, or arising out of, or due to,
directly or indirectly, (i) the management or investment of assets of any of the
▇▇▇▇▇▇ Plans with respect to all periods prior to and after the Distribution
Date (other than the ▇▇▇▇▇▇ Defined Benefit Plans with respect to periods prior
to the Transfer Date for the period in which they were part of the Fluor Master
Trust), or (ii) the management and investment, after the Distribution Date, of
Fluor Plan assets held by the ▇▇▇▇▇▇ Group that are attributable to ▇▇▇▇▇▇ Group
participants and beneficiaries.
(b) All Losses from assessments, fines or penalties imposed,
with respect to any of the ▇▇▇▇▇▇ Plans with respect to all periods prior to and
after the Distribution Date or imposed after the Distribution Date with respect
to the Fluor Plans, or any portions thereof, which are administered by or on
behalf of the ▇▇▇▇▇▇ Group on and after the Distribution Date and which are
based upon acts, errors or omissions of the ▇▇▇▇▇▇ Group.
(c) All Losses relating to or arising out of any claims of
whatever nature, including but not limited to, claims under applicable federal
or state law, made by or on behalf of participants or beneficiaries in any of
the ▇▇▇▇▇▇ Plans with respect to all periods prior to and after the Distribution
Date, or any claims made by or on behalf of ▇▇▇▇▇▇ Group Participants in any of
the Fluor Plans, which are administered by or on behalf of the ▇▇▇▇▇▇ Group
after the Distribution Date and which Losses are based on acts, errors or
omissions occurring after the Distribution Date.
(d) All Losses which may be incurred with respect to any ▇▇▇▇▇▇
Pension Benefit Plan with respect to all periods prior to and after the
Distribution Date as a result of any withdrawal or any other potential liability
under ERISA and/or, with respect to multi-employer plans contributed to by the
▇▇▇▇▇▇ Group (excluding Parent) or after the Distribution Date, contributed to
by Parent under the MPPAA.
ARTICLE VIII
INTERCOMPANY AGREEMENTS
Section 8.01. Termination. Without prejudice to any claims
-----------
thereunder based upon occurrences prior to the Distribution Date or any
confidentiality obligations thereunder, Parent and New Fluor hereby agree that
each the agreements described in Schedule 8.01 will, effective as of the
Distribution Date, be terminated and of no effect thereafter (it being
acknowledged by Parent and New Fluor that, except as specified herein and as may
have been
21
entered into in the ordinary course of business, there are no other material
agreements between Parent and New Fluor).
ARTICLE IX
TERMINATION; SURVIVAL
Section 9.01. Termination. This Agreement may be terminated
-----------
at any time prior to the Distribution upon a resolution to such effect passed by
the board of directors of Parent.
Section 9.02. Survival. The respective obligations of the
--------
parties hereto shall survive the Distribution Date.
ARTICLE X
MISCELLANEOUS
Section 10.01. Expenses. Except as otherwise specifically set
--------
forth below, all costs and expenses incurred in connection with the preparation,
execution and delivery of this Agreement and with the consummation of the
transactions contemplated hereby (collectively, the "Transaction Expenses") are
described on and shall be borne in accordance with Schedule 10.01 to this
Agreement.
(a) Within ten (10) days following the Distribution, and as more
particularly described in the Proxy Statement, ▇▇▇▇▇▇ intends to offer its
employees (other than ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇) who hold Options the opportunity to
surrender their Options in exchange for a cash payment. In the event that a
holder of an Option elects to surrender his or her Options, such Option holder
will be entitled to an amount equal to one-third of the present value of that
person's Options as calculated using the Black-Scholes option value methodology
(the "Cash Payment"). If accepted by an Option holder, the Cash Payment
obligation would be payable over three equal annual installments with the first
installment of the Cash Payment paid on the first anniversary of the
Distribution Date, subject to forfeiture to the extent the option holder's
employment with Parent terminates for a reason other than retirement or
permanent disability prior to the date an installment is to be paid. New Fluor
agrees that it shall be responsible for the Cash Payment to any ▇▇▇▇▇▇ Option
holders who elect to surrender their Options as described above subject to the
following: (i) within sixty (60) days following the Distribution Date, ▇▇▇▇▇▇
shall deliver to New Fluor a list of its Option holders who have elected to
surrender their Options, the amount of Options surrendered and, subject to New
Fluor's reasonable approval, the Black Scholes value of the Options surrendered;
(ii) ▇▇▇▇▇▇'▇ Option surrender program shall be identical to that which is
described in the Proxy and to the extent of any deviation therefrom which
results in increased or accelerated liability to New Fluor, ▇▇▇▇▇▇ shall bear
any such liability; and (iii) as and when a portion of the Cash Payment is due
to ▇▇▇▇▇▇ employees who elected to surrender Options, ▇▇▇▇▇▇ will invoice New
Fluor for the amounts so due, such invoice not to be due and payable earlier
than the payment date for the applicable portion of the Cash Payment.
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(b) Pursuant to that certain Amendment to Employment Agreement
(the "▇▇▇▇▇▇▇▇▇▇▇ Amendment"), Fluor, ▇▇▇▇▇▇, New Fluor and ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
("▇▇▇▇▇▇▇▇▇▇▇") have agreed to modify the terms of ▇▇▇▇▇▇▇▇▇▇▇'▇ existing
Employment Agreement and Special Successor Development and Retention Program
Agreement. New Fluor agrees that to the extent that under the ▇▇▇▇▇▇▇▇▇▇▇
Amendment cash payments are due to ▇▇▇▇▇▇▇▇▇▇▇ following the Distribution,
▇▇▇▇▇▇ will make all such cash payments provided that within ten (10) days
following receipt of invoice from ▇▇▇▇▇▇ indicating that such cash payments have
been paid to ▇▇▇▇▇▇▇▇▇▇▇, New Fluor will reimburse ▇▇▇▇▇▇ for such cash payments
made to ▇▇▇▇▇▇▇▇▇▇▇. Notwithstanding the preceding, in the event that
▇▇▇▇▇▇▇▇▇▇▇ elects to defer any such cash payments due under the ▇▇▇▇▇▇▇▇▇▇▇
Amendment by electing to place such cash payments in a deferred compensation
program maintained by ▇▇▇▇▇▇ ("Deferred Amounts"), and to the extent that such
Deferred Amounts are placed in a Rabbi Trust maintained by ▇▇▇▇▇▇, within ten
(10) days following New Fluor's receipt of a statement that ▇▇▇▇▇▇ has funded
the Rabbi Trust with the Deferred Amounts (which invoice shall specify the
amount so funded, not to exceed $2,778,700), New Fluor shall pay to ▇▇▇▇▇▇ the
amounts set forth in such invoice.
Section 10.02. Notices. All notices and communications under
-------
this Agreement shall be in writing and any communication or delivery hereunder
shall be deemed to have been duly given (i) when delivered, if delivered in
person, or (ii) two days following the date on which the notice or communication
is sent, if sent by first class mail or by other commercially reasonable means
of written communication (including delivery by an internationally recognized
courier service) addressed as follows:
If to ▇▇▇▇▇▇, to:
▇▇▇▇▇▇ Energy Company
Four ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
If to New Fluor, to:
Fluor Corporation
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
Any party may, by written notice so delivered to the other party, change the
address to which delivery of any notice shall thereafter be made.
Section 10.03. Amendment and Waiver. This Agreement may not be
--------------------
altered or amended, nor may rights hereunder be waived, except by an instrument
in writing executed by the party or parties to be charged with such amendment or
waiver. No waiver of any terms, provision or condition of this Agreement, in any
one or more instances, shall be deemed to be, or construed as a further or
continuing waiver of any such term, provision or condition or as a waiver of any
other term, provision or condition of this Agreement.
23
Section 10.04. Counterparts. This Agreement may be executed
------------
in any number of counterparts, each of which shall be deemed an original
instrument, but all of which together. shall constitute but one and the same
Agreement.
Section 10.05. Governing Law. This Agreement and the
-------------
transactions contemplated hereby shall be construed in accordance with, and
governed by, the laws of the State of New York without reference to choice of
law principles.
Section 10.06. Consent to Jurisdiction. Each of the parties
-----------------------
hereto hereby irrevocably submits to the nonexclusive jurisdiction of any United
States Federal or New York State court sitting in New York County in any action
or proceeding arising out of or relating to this Agreement, and irrevocably
agrees that all claims in respect of any such action or proceeding may be heard
and determined in any such United States Federal or New York State court. Each
of the parties hereto agrees to commence any action, suit or proceeding relating
hereto either in the United States District Court for the Southern District of
New York or, if for jurisdictional reasons such suit, action or other proceeding
may not be brought in such court, in the Supreme Court of the State of New York,
New York County. Each of the parties hereto further agrees that service of any
process, summons, notice or document by United States registered mail to such
party's respective address set forth in Section 10.02 shall be effective service
of process for any action, suit or proceeding in the State of New York with
respect to any matters to which it has submitted to jurisdiction as set forth
above in the immediately preceding sentence. Each of the parties hereto
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in (a) the Supreme Court of the State of New York, New York
County or (b) the United States District Court for the Southern District of New
York, and hereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any such court that any action, suit or proceeding brought
in any such court has been brought in an inconvenient forum.
Section 10.07. Entire Agreement. This Agreement and the Tax
----------------
Sharing Agreement constitute the entire understanding of the parties hereto with
respect to the subject matter hereof, superseding all negotiations, prior
discussions and prior agreements and understandings. To the extent that the
provisions of this Agreement are inconsistent with the provisions of the Tax
Sharing Agreement, the provisions of the Tax Sharing Agreement shall prevail.
Section 10.08. Parties in Interest. Neither party hereto may
-------------------
assign its rights or delegate any of its duties under this Agreement without the
prior written consent of the other party. This Agreement shall be binding upon,
and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns. Except as set forth in Section 3.03, nothing
contained in this Agreement, express or implied, is intended to confer any
benefits, rights or remedies upon any person or entity other than the parties
hereto.
Section 10.09. Attorneys' Fees. Subject to Section 4.03, in the
---------------
event any party to this Agreement brings an action or proceeding for the breach
or enforcement of this Agreement, the prevailing party in such action or
proceeding, whether or not such action or proceeding proceeds to final judgment,
shall be entitled to recover as an element of its costs, and not as damages,
such reasonable attorneys' fees as may be awarded in the action, proceeding or
appeal
24
in addition to whatever other relief the prevailing party may be entitled. For
purposes of this Section, the "prevailing party" shall be the party who is
entitled to recover its costs; a party not entitled to recover its costs shall
not recover attorneys' fees.
IN WITNESS WHEREOF, the parties hereto have caused this
Distribution Agreement to be duly executed and delivered as of the date and year
first written above.
FLUOR CORPORATION,
a Delaware corporation incorporated in 1978
(to be renamed ▇▇▇▇▇▇ Energy Company on the
Distribution Date)
By: ▇. ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇. ▇. ▇▇▇▇▇▇
Title: Senior Vice President-Law and
Secretary
FLUOR CORPORATION
a Delaware corporation incorporated in 2000
By: ▇. ▇. ▇▇▇▇
--------------------------------
Name: ▇. ▇. ▇▇▇▇
Title: Vice President and Treasurer
25