MASTER SEPARATION AGREEMENT BETWEEN HALLIBURTON COMPANY AND KBR, INC. Dated as of November 20, 2006
EXHIBIT
10.1
BETWEEN
HALLIBURTON
COMPANY
AND
KBR,
INC.
Dated
as
of November 20, 2006
TABLE
OF
CONTENTS
ARTICLE
I DEFINITIONS
|
1
|
|
ARTICLE
II SEPARATION AND RELATED TRANSACTIONS
|
15
|
|
2.1
|
Separation
Date; Separation Time
|
15
|
2.2
|
Instruments
of Transfer and Assumption
|
16
|
2.3
|
Ancillary
Agreements
|
16
|
2.4
|
Performance
of Non-Novated Contracts
|
17
|
2.5
|
Other
Matters
|
17
|
ARTICLE
III MUTUAL RELEASES; INDEMNIFICATION
|
18
|
|
3.1
|
Mutual
Release of Pre-IPO Closing Date Claims
|
18
|
3.2
|
Indemnification
by KBR
|
19
|
3.3
|
Indemnification
by Halliburton
|
20
|
3.4
|
Indemnifications
Relating to FCPA Subject Matters
|
21
|
3.5
|
Indemnifications
Relating to Barracuda-Caratinga Project
|
26
|
3.6
|
Indemnification
Obligations Net of Insurance Proceeds and Other Amounts
|
28
|
3.7
|
Procedures
for Indemnification of Third Party Claims
|
29
|
3.8
|
Additional
Matters
|
30
|
3.9
|
Remedies
Cumulative
|
31
|
3.10
|
Survival
of Indemnities
|
31
|
3.11
|
Indemnification
of Directors and Officers
|
31
|
3.12
|
Mitigation
of Damages
|
31
|
ARTICLE
IV THE IPO AND ACTIONS PENDING THE IPO
|
31
|
|
4.1
|
Transactions
Prior to the IPO
|
31
|
4.2
|
Use
of Proceeds
|
32
|
4.3
|
Cooperation
for IPO
|
32
|
4.4
|
Conditions
Precedent to Consummation of the IPO
|
32
|
ARTICLE
V CORPORATE GOVERNANCE AND OTHER MATTERS
|
34
|
|
5.1
|
Charter
and Bylaws
|
34
|
5.2
|
KBR
Board Representation
|
34
|
5.3
|
Committees
|
36
|
5.4
|
Subscription
Right.
|
36
|
5.5
|
Issuance
of Stock
|
38
|
5.6
|
Settlement
of KBR Benefit Plan Awards
|
38
|
5.7
|
Applicability
of Rights to Parent in the Event of an Acquisition
|
39
|
5.8
|
Transfer
of Halliburton’s Rights Under Article V
|
39
|
5.9
|
Restricted
Opportunities Under KBR Charter
|
39
|
ARTICLE
VI SUBSEQUENT TRANSACTION
|
40
|
|
6.1
|
Sole
Discretion of Halliburton
|
40
|
6.2
|
Cooperation
for Halliburton Transfers
|
40
|
6.3
|
Cooperation
for Halliburton Distribution
|
40
|
6.4
|
Registration
Rights Agreement
|
41
|
ARTICLE
VII ARBITRATION; DISPUTE RESOLUTION
|
41
|
|
7.1
|
Agreement
to Arbitrate
|
41
|
7.2
|
Escalation
|
42
|
7.3
|
Demand
for Arbitration
|
42
|
7.4
|
Arbitrators
|
43
|
7.5
|
Hearings
|
43
|
7.6
|
Discovery
and Certain Other Matters
|
44
|
7.7
|
Certain
Additional Matters
|
45
|
7.8
|
Continuity
of Service and Performance
|
45
|
7.9
|
Law
Governing Arbitration Procedures
|
45
|
ARTICLE
VIII COVENANTS AND OTHER MATTERS
|
46
|
|
8.1
|
Other
Agreements
|
46
|
8.2
|
Further
Instruments
|
46
|
8.3
|
Provision
of Corporate Records
|
46
|
8.4
|
Agreement
For Exchange of Information
|
47
|
8.5
|
Auditors
and Audits; Annual and Quarterly Statements and Accounting
|
49
|
8.6
|
Audit
Rights
|
52
|
8.7
|
Preservation
of Legal Privileges
|
52
|
8.8
|
Payment
of Expenses
|
53
|
8.9
|
Governmental
Approvals
|
53
|
8.10
|
Continuance
of Halliburton Credit Support
|
53
|
8.11
|
Confidentiality
|
56
|
8.12
|
Receipt
of Notices
|
57
|
8.13
|
Non
Solicitation of Employees
|
58
|
8.14
|
Halliburton
Policies and Procedures
|
58
|
8.15
|
Antitrust
Matters
|
59
|
8.16
|
Cooperation
for Litigation
|
60
|
8.17
|
Performance
Standard
|
60
|
ARTICLE
IX MISCELLANEOUS
|
60
|
|
9.1
|
Limitation
of Liability
|
60
|
9.2
|
Conflicting
Agreements; Entire Agreement
|
60
|
9.3
|
Governing
Law
|
61
|
9.4
|
Termination
|
61
|
9.5
|
Notices
|
61
|
9.6
|
Counterparts
|
62
|
9.7
|
No
Third Party Beneficiaries; Assignment
|
62
|
9.8
|
Severability
|
62
|
9.9
|
Failure
or Indulgence Not Waiver; Remedies Cumulative
|
62
|
9.10
|
Amendment
|
62
|
9.11
|
Authority
|
62
|
9.12
|
Interpretation
|
63
|
THIS
MASTER SEPARATION AGREEMENT (this “Agreement”)
is
entered into as of November 20, 2006 by and between Halliburton Company, a
Delaware corporation (“Halliburton”),
and
KBR, Inc., a Delaware corporation (“KBR”).
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in Article I hereof.
RECITALS
WHEREAS,
KBR is an indirect wholly-owned subsidiary of Halliburton;
WHEREAS,
KBR, together with its direct and indirect U.S. and foreign subsidiaries,
provides a wide range of services, including global engineering, procurement,
construction, technology and other services, to energy and industrial customers
and government entities worldwide;
WHEREAS,
the Board of Directors of Halliburton has determined that it is appropriate
and
desirable, on the terms and conditions contemplated hereby, to initiate the
separation of the KBR Group from the Halliburton Group, and has approved
this
Agreement and the transactions contemplated hereby;
WHEREAS,
Halliburton currently contemplates that KBR will effect an initial public
offering (“IPO”)
of
less than 20% of the shares of KBR Common Stock pursuant to a registration
statement on Form S-1 filed with the Commission pursuant to the Securities
Act;
WHEREAS,
the parties intend to set forth in this Agreement, including the Schedules
hereto and the Ancillary Agreements contemplated hereby, the principal
arrangements between and among them and the members of their respective Groups
regarding the separation of the KBR Group from the Halliburton Group, the
IPO
and certain future transactions.
NOW,
THEREFORE, in consideration of the foregoing and the covenants and agreements
set forth below, the parties hereto agree as follows:
ARTICLE
I
DEFINITIONS
The
following terms used in this Agreement are defined as set forth below or
in the
sections indicated, as applicable:
“AAA”
has
the
meaning set forth in Section 7.4.
“Action”
means
any demand, action, suit, countersuit, arbitration, inquiry, proceeding or
investigation by or before any federal, state, local, foreign or international
Governmental Authority or any arbitration or mediation tribunal.
An
“Affiliate”
of
any
Person means another Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
such Person. For this purpose “control” means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and
policies of the Person controlled, whether through ownership of voting
securities, by contract or otherwise. Notwithstanding anything herein to
the
contrary, no member of the KBR Group shall be deemed to be an Affiliate of
any
member of the Halliburton Group, and no member of the Halliburton Group shall
be
deemed to be an Affiliate of any member of the KBR Group.
“Agreement”
has
the
meaning given such term in the Preamble.
“Ancillary
Agreements”
has
the
meaning set forth in Section 2.3.
“Antitrust
Matters”
are
alleged or actual violations of antitrust, competition or other applicable
Law
that occurred prior to the date of this Agreement relating to investigations
by
the DOJ or other Governmental Authorities into whether in the conduct of
the KBR
Business (including, without limitation, conduct by a member of the KBR Group
or
its current or former directors, officers, employees, agents or representatives)
coordinated bidding with one or more competitors on projects occurred, as
described under the heading “Bidding practices investigation” in Note 12 of the
condensed consolidated financial statements included in the Halliburton
Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.
“Applicable
FCPA Law”
means
(a) the Council of Europe Criminal Law Convention on Corruption entered
into force July 1, 2002, (b) Council of Europe Civil Law Convention on
Corruption entered into force November 1, 2003, (c) Organization of
American States Inter-American Convention against Corruption adopted on
Xxxxx 00, 0000, (x) African Union Convention on Preventing and
Combating Corruption adopted July 11, 2003, (e) United Nations
Convention against Corruption adopted October 31, 2003, (f) OECD
Convention on Combating Bribery of Foreign Public Officials in International
Business Transactions adopted November 21, 1997, (g) the FCPA and
(h) any and all implementing legislation in respect of clauses
(a) through (g) above, including, without limitation, any laws,
statutes, regulations and rules issued by any Governmental Authority of similar
purpose and scope.
“Applicable
Deadline”
has
the
meaning set forth in Section 7.3.
“Arbitration
Demand Date”
has
the
meaning set forth in Section 7.3.
“Arbitration
Demand Notice”
has
the
meaning set forth in Section 7.3.
“Barracuda-Caratinga
Bolts Matter”
means
threatened, pending or future claims against any KBR B-C Indemnitee by
Barracuda & Caratinga Leasing Company B.V. and/or Petrobras or its
Affiliates, and threatened, pending or future claims by any KBR B-C Indemnitee
against Barracuda & Caratinga Leasing Company B.V. and/or Petrobras or
its Affiliates, arising out of the subsea flow-line bolts installed in
connection with the Barracuda-Caratinga Project.
“Barracuda-Caratinga
Project”
means
the turnkey engineering, procurement and construction contract, dated as
of
June 30, 2000, as amended, and related agreements by and among members of
the KBR Group, Barracuda & Caratinga Leasing Company B.V., Petrobras or
its Affiliates relating to the development of the Barracuda and Caratinga
oilfields located in the Xxxxxx Basin offshore of Brazil.
“best
efforts”
means
a
Person’s good faith best efforts to achieve such goal as expeditiously as
possible, which may require the incurrence of expense or hardship in order
to
achieve the reasonable expectations of the parties as agreed hereunder.
“Business
Day”
means
a
day other than a Saturday, a Sunday or a day on which banking institutions
located in the State of Texas are authorized or obligated by law or executive
order to close.
“Code”
means
the Internal Revenue Code of 1986, as amended, or any successor statute.
“Commission”
means
the U.S. Securities and Exchange Commission.
“Confidential
Information”
has
the
meaning set forth in Section 8.11.
“Credit
Support Agreements”
means
any and all surety bonds, letters of credit, reimbursement agreements, surety
contracts, performance guarantees, financial guarantees, indemnities and
other
credit support instruments and agreements relating to or for the benefit
of the
KBR Business or a customer or lender thereof for which a member of the
Halliburton Group is a primary obligor, secondary obligor, guarantor,
indemnitor, account party or otherwise may become liable (i) entered into
or obtained prior to the Separation Date and (ii) entered into or obtained
following the Separation Date as provided under Section 8.10(b) hereof or
at Halliburton’s sole discretion. Non-exclusive lists of certain Credit Support
Agreements are set forth on Schedule
C-1
(Surety
Bonds and Related Indemnity Agreements), Schedule
C-2
(Letters
of Credit and Related Reimbursement Agreements), Schedule
C-3
(Performance and Financial Guarantees) and Schedule
C-4 (Other
Credit Support Agreements).
“Current
Investigations”
means
the investigations ongoing as of the date hereof by (a) the DOJ,
(b) the Commission, (c) the Tribunal de Grande Instance de Paris
(investigation number: 25/03 and Public Prosecution Service ID: P 02/29192509)
in the French Republic, (d) the Serious Frauds Office in the United
Kingdom, (e) officials at the Federal Police Office (proceeding B 0152492
BOT) of the Swiss Confederation, (f) the Economic and Financial Crimes
Commission, an agency of the executive branch of the government of the Federal
Republic of Nigeria, (g) the Committee on Public Petitions of the House of
Representatives of the Federal Republic of Nigeria, and (h) a public
prosecutor or an investigating judge in the People’s Democratic Republic of
Algeria with respect to contracts awarded to Xxxxx & Root - Condor Spa.
“Disposition”
means
any resolution or termination of any Proceeding, whether adjudicated or
consensual.
“Distribution”
means
a
tax-free distribution under Section 355 of the Code or any corresponding
provision of any successor statute of all or any portion of the KBR Common
Stock
beneficially owned by Halliburton to Halliburton stockholders by way of a
dividend, exchange or otherwise.
“DOJ”
means
the United States Department of Justice.
“Employee
Matters Agreement”
means
the Employee Matters Agreement dated the date hereof between Halliburton
and
KBR.
“Environmental
Law”
means
any and all Laws or determinations of any Governmental Authority (including
common law duties established by courts or other Governmental Authorities)
pertaining to pollution or the protection of human health, the environment,
natural resources or plant or animal species including Laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants or chemical, industrial, hazardous, radioactive, or toxic materials
or wastes into ambient or indoor air, surface water, ground water or lands
or
otherwise relating to the manufacture, processing, distribution (including
the
sale or marketing of goods containing), use, treatment, storage, disposal,
transportation or handling of pollutants, contaminants or chemical, industrial,
hazardous. radioactive, or toxic materials or wastes, in any jurisdiction,
federal, state, local or foreign, in which the Halliburton Business or KBR
Business is or has operated; including, without limitation, in United States
jurisdictions the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Section 9601 et
seq.
(“CERCLA”), the Superfund Amendments Reauthorization Act, 42 U.S.C.
Section 11001 et
seq.,
the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
seq.,
the
Clean Air Act, 42 U.S.C. Section 7401 et
seq.,
the
Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et
seq.,
the Oil
Pollution Act of 1990, 33 U.S.C. Section 2701 et
seq.,
the
Toxic Substances Control Act, 15 U.S.C. Section 2601 et
seq.,
and the
Safe Drinking Water Act, 42 U.S.C. Section 300f et
seq.,
other
similar state or local laws or laws or decrees in non-U.S. jurisdictions,
and
all other environmental conservation and protection laws, both foreign and
domestic, and any applicable state or local statutes, and the regulations
promulgated thereto, as each has been and may be amended and supplemented
from
time to time, provided,
however,
that
Environmental Laws shall not include Laws pertaining primarily to workplace
safety, such as the Occupational Safety and Health Act, except to the extent
such Laws govern environmental conditions, including the management of
asbestos-containing materials, or employee exposure or potential exposure
to
pollutants, contaminants or chemical, industrial, hazardous, radioactive,
or
toxic materials or wastes.
“Escalation
Notice”
has
the
meaning set forth in Section 7.2.
“Excess
Director Number”
has
the
meaning set forth in Section 5.2.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, or any successor statute.
“Existing
Authority”
has
the
meaning set forth in Section 8.9.
“FCPA”
means
the United States Foreign Corrupt Practices Act of 1977, as amended.
“FCPA
Subject Matters”
are
alleged or actual violations of the FCPA or other Applicable FCPA Law that
occurred prior to the date of this Agreement in the conduct of the KBR Business
(including, without limitation, conduct by a member of the KBR Group or its
current or former directors, officers, employees, agents or representatives)
in
connection with (a) the
construction and subsequent expansion by TSKJ of a natural gas liquefaction
complex and related facilities at Bonny Island in Rivers State, Nigeria or
(b) such other projects, whether located inside or outside of Nigeria, in
each case including without limitation the use of agents in connection with
such
projects, that are identified by Governmental Authorities of the United States,
France, the United Kingdom, Switzerland, Nigeria or Algeria in connection
with
the Current Investigations and the continuation of such Current Investigations
after the date hereof.
“Governmental
Approvals”
means
any notices, reports or other filings to be made, or any consents,
registrations, approvals, permits or authorizations to be obtained from,
any
Governmental Authority.
“Governmental
Authority”
means
any nation or government, any state, province, city, municipal entity or
other
political subdivision thereof, and any governmental, executive, legislative,
judicial, administrative or regulatory agency, department, authority,
instrumentality, commission, board, bureau or similar body, whether xxxxxxx,
xxxxx, xxxxxxxxxx, xxxxxxxxxxx, local or foreign.
“Governmental
FCPA Claim”
means
a
claim, whether civil or criminal, made by any Governmental Authority of the
United States, France, the United Kingdom, Switzerland, Nigeria or Algeria,
or
by a court of competent jurisdiction therein relating to the FCPA Subject
Matters.
“Group”
means
either the Halliburton Group or the KBR Group, as the context requires.
“Halliburton”
has
the
meaning given such term in the Preamble.
“Halliburton’s
Auditors”
means
Halliburton’s independent certified public accountants.
“Halliburton
Books and Records”
means
originals or true and complete copies thereof, including electronic copies
(if
available) of (a) minute books, corporate charters and bylaws or comparable
constitutive documents, records of share issuances and related corporate
records, of the Halliburton Group; (b) all books and records primarily
relating to (i) Persons who are employees of the Halliburton Group as of
the Separation Date, (ii) the purchase of materials, supplies and services
for the Halliburton Business and (iii) dealings with customers of the
Halliburton Business; and (c) all files relating to any Action the
Liability with respect to which is a Halliburton Liability.
“Halliburton
Business”
means
any business of the Halliburton Group (whether conducted independently or
in
association with one or more third parties through a partnership, joint venture
or other mutual enterprise) other than the KBR Business, including without
limitation the Non-Novated ESG Contracts. The parties intend that each member
of
the KBR Group which is party to a Non-Novated ESG Contract shall remain a
party
thereto following the Separation, and the parties hereby agree that each
Non-Novated ESG Contract shall be considered to be part of the Halliburton
Business for all purposes under this Agreement.
“Halliburton
Cash Management Note”
means
the promissory note dated as of December 1, 2005 made by Halliburton Energy
Services, Inc. to KBR Holdings, LLC.
“Halliburton
Designee”
has
the
meaning set forth in Section 5.2.
“Halliburton
Environmental Liabilities”
means
all Liabilities arising under or relating to Environmental Law to the extent,
as
between the Halliburton Group and the KBR Group, such Liabilities relate
to,
arise out of or result from: (a) the ownership, operation or conduct of the
Halliburton Business at any time prior to, on or after the Separation Time
except for those Liabilities included in clause (ii) of the definition of
“KBR Environmental Liabilities” below, or (b) any properties or assets
owned, leased, used or held for use in connection with any terminated, divested
or discontinued business or other activities which, at the time of such
termination, divestiture or discontinuation, related to the Halliburton Business
as then conducted. It is understood that, consistent with the foregoing,
Halliburton Environmental Liabilities shall include without limitation all
Liabilities arising under or relating to Environmental Law attributable to
(1) investigation or remediation activities involving the sites listed on
Part 1 of the attached Schedule
D;
and
(2) the transportation, treatment, storage, or disposal of waste generated
by the operations of members of the Halliburton Group, including liability
under
CERCLA or a comparable law allocated by the applicable Governmental Authority
or
potentially responsible party group, as appropriate, to members of the
Halliburton Group, which shall include the liability ultimately allocated
to
members of the Halliburton Group at the sites listed on Part 2 of Schedule
D.
“Halliburton
Group”
means
Halliburton, each current and former subsidiary of Halliburton (other than
any
member of the KBR Group), including the subsidiaries set forth in Schedule
A,
and
each Person that becomes a subsidiary of Halliburton after the Separation
Time.
“Halliburton
Indemnified Barracuda-Caratinga Matters”
has
the
meaning set forth in Section 3.5.
“Halliburton
Indemnified FCPA Matters”
has
the
meaning set forth in Section 3.4.
“Halliburton
Indemnitees”
has
the
meaning set forth in Section 3.2.
“Halliburton
Liabilities”
shall
mean (a) any and all Liabilities that are expressly contemplated by a Prior
Transfer Agreement, this Agreement or any Ancillary Agreement as Liabilities
to
be retained or assumed by Halliburton or any other member of the Halliburton
Group, (b) all agreements, obligations and Liabilities of any member of the
Halliburton Group under a Prior Transfer Agreement, this Agreement or any
of the
Ancillary Agreements, (c) any liability arising under or relating to a
claim made against Halliburton by a Halliburton stockholder in its capacity
as
such other than a claim for which KBR and the KBR Group have agreed to indemnify
Halliburton and the Halliburton Group pursuant to Section 3.2(f) hereof and
(d) any Liability of any member of the Halliburton Group other than the KBR
Liabilities.
“Halliburton
Transferee”
has
the
meaning set forth in Section 5.7.
“Indebtedness”
of
any
Person means (a) all obligations of such Person for borrowed money,
(b) all obligations of such Person evidenced by bonds, debentures, notes or
similar instruments, (c) all obligations of such Person upon which interest
charges are customarily paid, (d) all obligations of such Person under
conditional sale or other title retention agreements relating to property
or
assets purchased by such Person, (e) all obligations of such Person issued
or assumed as the deferred purchase price of property or services, (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any mortgage,
lien, pledge, or other encumbrance on property owned or acquired by such
Person,
whether or not the obligations secured thereby have been assumed, (g) all
guarantees by such Person of Indebtedness of others, (h) all capital lease
obligations of such Person and (i) all securities or other similar
instruments convertible or exchangeable into any of the foregoing, but excluding
daily cash overdrafts associated with routine cash operations.
“Indemnifying
Party”
has
the
meaning set forth in Section 3.6.
“Indemnitee”
shall
have the meaning set forth in Section 3.6.
“Indemnity
Payment”
has
the
meaning set forth in Section 3.6.
“Information”
means
information, whether or not patentable or copyrightable, in written, oral,
electronic or other tangible or intangible forms, stored in any medium,
including studies, reports, records, books, contracts, instruments, surveys,
discoveries, ideas, concepts, know-how, techniques, designs, specifications,
drawings, blueprints, diagrams, models, prototypes, samples, flow charts,
data,
computer data, disks, diskettes, tapes, computer programs or other software,
marketing plans, customer names, communications by or to attorneys (including
attorney-client privileged communications), memos and other materials prepared
by attorneys or under their direction (including attorney work product),
and
other technical, financial, employee or business information or data, but
excluding the Halliburton Books and Records and the KBR Books and Records.
“Insurance
Proceeds”
means
those monies:
(a)
received by an insured from an insurance carrier; or
(b)
paid
by an insurance carrier on behalf of the insured;
in
any
such case net of any applicable premium adjustments (including reserves and
retrospectively rated premium adjustments) and net of any costs or expenses
(including allocated costs of in-house counsel and other personnel) incurred
in
the collection thereof.
“Intercompany
Note”
means
the promissory note dated as of December 1, 2005 made by KBR Holdings, LLC
to Halliburton Energy Services, Inc. in an amount not to exceed $489 million.
“Intellectual
Property Matters Agreement”
means
the Intellectual Property Matters Agreement dated the date hereof between
Halliburton and KBR.
“IPO”
has
the
meaning given such term in the Recitals.
“IPO
Closing Date”
means
the first date on which the proceeds of any sale of KBR Common Stock to the
Underwriters are received.
“IPO
Prospectus”
means
the prospectus included in the IPO Registration Statement, including any
prospectus subject to completion, final prospectus or any supplement to or
amendment of any of the foregoing.
“IPO
Registration Statement”
means
the Registration Statement on Form S-1 (Registration No. 333-133302) of KBR
filed with the Commission pursuant to the Securities Act, registering the
shares
of KBR Common Stock to be issued in the IPO, together with all amendments
thereto.
“Issuance
Event”
has
the
meaning set forth in Section 5.4.
“Issuance
Event Date”
has
the
meaning set forth in Section 5.4.
“KBR”
has
the
meaning given such term in the Preamble.
“KBR
Auditors”
means
KBR’s independent certified public accountants.
“KBR
Balance Sheets”
means
(a) the KBR Holdings, LLC Consolidated Balance Sheet as of
December 31, 2005 and (b) the KBR Holdings, LLC Consolidated Balance
Sheet as of September 30, 2006.
“KBR
B-C Indemnitees”
shall
mean KBR and its Majority Owned Subsidiaries as of the date hereof.
“KBR
Books and Records”
means
originals or true and complete copies thereof, including electronic copies
(if
available), of (a) all minute books, corporate charters and bylaws or
comparable constitutive documents, records of share issuances and related
corporate records of the KBR Group; (b) all books and records primarily
relating to (i) Persons who are employees of the KBR Group as of the
Separation Date, (ii) the purchase of materials, supplies and services for
the KBR Business and (iii) dealings with customers of the KBR Business; and
(c) all files relating to any Action the Liability with respect to which is
a KBR Liability; except that no portion of the Halliburton Books and Records
shall be included in the “KBR Books and Records.”
“KBR
Business”
means
(a) the business and operations conducted by KBR and the members of the KBR
Group (whether conducted independently or in association with one or more
third
parties through a partnership, joint venture or other mutual enterprise)
prior
to, on and after the Separation Time, including without limitation the following
global engineering, procurement, construction, technology and other services
provided to energy and industrial customers and government entities worldwide
as
conducted by the Energy and Chemicals and the Government and Infrastructure
segments of Halliburton (such segments as referenced in the Halliburton Form
10-K for the year ended December 31, 2005) prior to the Separation:
(i)
construction, maintenance and logistics services for government operations,
facilities and installations;
(ii)
civil engineering, construction, consulting and project management services
for
state and local government agencies and private industries;
(iii)
integrated security solutions, including threat definition assessments,
mitigation and consequence management; design, engineering and program
management; construction and delivery; and physical security, operations
and
maintenance;
(iv)
dockyard operation and management, with services that include design,
construction, surface/subsurface fleet maintenance, nuclear engineering and
refueling, and weapons engineering;
(v)
privately financed initiatives such as a facility, service or infrastructure
for
a government client, and the ownership, operation and maintenance of same;
(vi)
downstream engineering and construction capabilities, including global
engineering execution centers, as well as engineering, construction and program
management of liquefied natural gas, ammonia, petrochemicals, crude oil
refineries and natural gas plants;
(vii)
upstream oil and gas engineering, marine technology and project management;
(viii)
operations, maintenance and start-up services to the oil and gas, petrochemical,
forest product, power and commercial markets;
(ix)
technology licensing in the areas of fertilizers and synthesis gas, olefins,
refining and chemicals and polymers;
(x)
consulting services in the form of expert technical and management advice
that
includes studies, conceptual and detailed engineering, project management,
construction supervision and design, and construction verification or
certification in upstream, midstream and downstream markets;
(xi)
effective from and after April 11, 2006, the business and operations of
MMM-SS Holdings, LLC and its subsidiaries MMM S.R.L. de C.V., AGRH S.R. L.
de
C.V. and CCC Cayman Ltd.; and
(xii)
the
Non-Novated KBR Contracts. The parties intend that each member of the
Halliburton Group which is party to a Non-Novated KBR Contract shall remain
a
party thereto following the Separation, and the parties hereby agree that
each
Non-Novated KBR Contract shall be considered to be part of the KBR Business
for
all purposes under this Agreement;
and
(b) except as otherwise specifically provided herein, any terminated,
divested or discontinued business or operations that at the time of such
termination, divestiture or discontinuation related primarily to the KBR
Business as then conducted.
“KBR
Cash Management Note”
means
the promissory note dated as of December 1, 2005 made by KBR Holdings, LLC
to Halliburton Company and Halliburton Energy Services, Inc.
“KBR
Charter”
means
the Amended and Restated Certificate of Incorporation of KBR as in effect
on the
date hereof.
“KBR
Common Stock”
means
Common Stock, par value $0.001 per share, of KBR.
“KBR
Credit Agreement”
means
the $850 million Five Year Revolving Credit Agreement dated as of
December 16, 2005 among KBR Holdings, LLC, as borrower, and the issuing
banks named therein, as amended by Amendment No. 1 dated April 13,
2006 and Amendment No. 2 dated October 31, 2006, and as further
amended from time to time.
“KBR
Debt Obligations”
means
all Indebtedness of KBR or any other member of the KBR Group, including without
limitation the Intercompany Note but excluding all Indebtedness of any member
of
the Halliburton Group to the extent it constitutes Indebtedness of KBR by
virtue
of clause (f) or clause (g) of the definition of Indebtedness. KBR
Debt Obligations shall include, as of the date of the most recent balance
sheet
of KBR Holdings, LLC included in the IPO Prospectus, the Indebtedness of
KBR
Holdings, LLC reflected on such balance sheet.
“KBR
Environmental Liabilities”
means
all Liabilities arising under or relating to Environmental Law to the extent,
as
between the Halliburton Group and the KBR Group, such Liabilities relate
to,
arise out of, or result from (i) the ownership, operation or conduct of the
KBR Business at any time prior to, on or after the Separation Time except
for
those Liabilities included in clause (b) of the definition of “Halliburton
Environmental Liabilities” above, or (ii) any properties or assets owned,
leased, used or held for use in connection with any terminated, divested
or
discontinued business or other activities which, at the time of such
termination, divestiture or discontinuation, related to the KBR Business
as then
conducted. It is understood that, consistent with the foregoing, KBR
Environmental Liabilities shall include without limitation all Liabilities
arising under or relating to Environmental Law attributable to
(1) investigation or remediation activities involving the sites listed on
Part 1 of the attached Schedule
E;
and
(2) the transportation, treatment, storage, or disposal of waste generated
by the operations of members of the KBR Group, including liability under
CERCLA
or a comparable law allocated by the applicable Governmental Authority or
potentially responsible party group, as appropriate, to members of the KBR
Group, which shall include the liability ultimately allocated to members
of the
KBR Group at the sites listed on Part 2 of Schedule
E.
“KBR
FCPA Indemnitees”
shall
mean KBR and its Majority Owned Subsidiaries as of the date hereof.
“KBR
Group”
means
KBR, each current and former subsidiary of KBR, including the subsidiaries
set
forth in Schedule
B,
and
each Person that becomes a subsidiary of KBR after the Separation Time.
“KBR
Indemnitees”
has
the
meaning assigned to that term in Section 3.3.
“KBR
Liabilities”
shall
mean (without duplication):
(i)
any
and all Liabilities that are expressly contemplated by a Prior Transfer
Agreement, this Agreement or any Ancillary Agreement to be assumed by KBR
or any
member of the KBR Group, and all agreements, obligations and Liabilities
of any
member of the KBR Group under a Prior Transfer Agreement, this Agreement
or any
of the Ancillary Agreements;
(ii)
all
Liabilities (other than Taxes that are not treated as liabilities of KBR
under
the Tax Sharing Agreement) primarily relating to, arising out of or resulting
from the operation of the KBR Business, as conducted at any time prior to,
on or
after the Separation Time including, without limitation:
(A)
any
Liability relating to, arising out of or resulting from any act or failure
to
act by any director, officer, employee, agent or representative of KBR (whether
or not such act or failure to act is or was within such Person’s authority);
(B)
any
KBR Environmental Liabilities;
(C)
liabilities primarily relating to, arising out of or resulting from any KBR
Assets;
(D)
the
KBR Debt Obligations; and
(E)
any
liability arising under or relating to a claim made against KBR by a KBR
stockholder in its capacity as such (other than Halliburton) other than a
claim
for which Halliburton and the Halliburton Group have agreed to indemnify
KBR and
the KBR Group pursuant to Section 3.3(f) hereof; and
(iii)
all
Liabilities reflected as liabilities or obligations of KBR in the KBR Balance
Sheets, subject to any discharge of such Liabilities subsequent to the date
of
such KBR Balance Sheets.
Notwithstanding
the foregoing, the KBR Liabilities shall not include the Halliburton
Liabilities.
“KBR
Non-Voting Stock”
means
any class or series of KBR capital stock, and any warrant, option or right
in
such stock, other than KBR Voting Stock.
“KBR
Voting Stock”
means
the KBR Common Stock and any other capital stock of KBR entitled to vote
generally in the election of directors but excluding any class or series
of
capital stock only entitled to vote in the event of dividend arrearages thereon,
whether or not at the time of determination there are any such dividend
arrearages.
“Law”
means
any law, statute, ordinance, rule, regulation, order, writ, judgment, injunction
or decree of any Governmental Authority.
“Liabilities”
shall
mean any and all Indebtedness, liabilities and obligations of any nature,
whether accrued, fixed or contingent, mature or inchoate, known or unknown,
reflected on a balance sheet or otherwise, including, but not limited to,
those
arising under any law, rule, regulation, Action, order, injunction or consent
decree of any Governmental Authority or any judgment of any court of any
kind or
any award of any arbitrator of any kind, and those arising under any contract,
commitment or undertaking.
“Losses”
shall
mean any and all damages, losses, deficiencies, Liabilities, obligations,
penalties, judgments, settlements, claims, payments, fines, interest costs
and
expenses (including, without limitation, the costs and expenses of any and
all
Actions and demands, assessments, judgments, settlements and compromises
relating thereto, and attorneys’, accountants’, consultants’ and other
professionals’ fees and expenses incurred in the investigation or defense
thereof or the enforcement of rights hereunder), excluding losses that are
special, indirect, derivative or consequential, lost profits or punitive
damages
(other than punitive damages awarded to any third party against an Indemnified
Party).
“Majority
Owned Subsidiary”
of
any
Person means any corporation (including a business trust), partnership, joint
stock company, trust, unincorporated association, joint venture or other
entity
of which more than 50% of the outstanding capital stock, securities or other
ownership interests having ordinary voting power to elect directors of such
corporation or, in the case of any other entity, other persons performing
similar functions (irrespective of whether or not at the time capital stock,
securities or other ownership interests of any other class or classes of
such
corporation or such other entity shall or might have voting power upon the
occurrence of any contingency) is, as of the date hereof, directly or indirectly
owned by such Person, by such Person and one or more other subsidiaries of
such
Person or by one or more other subsidiaries of such Person.
“Market
Price”
of
any
shares of KBR Voting Stock or KBR Non-Voting Stock on any date means
(i) the last sale price during regular trading hours of such shares on such
date on the New York Stock Exchange, Inc. or, if such shares are not listed
thereon, on the principal national securities exchange or automated interdealer
quotation system on which such shares are traded; or (ii) if such sale
price is unavailable or such shares are not so traded, the value of such
shares
on such date determined in accordance with agreed-upon procedures reasonably
satisfactory to Halliburton and KBR.
“Non-Novated
ESG Contracts”
means
those contracts and other agreements entered into by the Energy Services
Group
segments of Halliburton (such segments as referenced in the Halliburton Form
10-K for the year ended December 31, 2005) prior to the Separation Date for
which a member of the KBR Group is a signator or contract party, including
without limitation certain contracts entered into by Xxxxxxx Xxxxx &
Root LLC (and its predecessor), Xxxxxxx Xxxxx & Root Limited, Rockwell
B.V., Xxxxxxx Xxxxx & Root International, Inc., Halliburton AS, Asian
Marine Contractors Limited, KBR Overseas, Inc., Breswater Marine Contracting
B.V., Corporación Mexicana de Mantenimiento Integral, S. de X.X. de C.V., PT KBR
Indonesia and Halliburton Australia Pty. Ltd. (B&R Div.). A non-exclusive
list of outstanding contract jobs associated with the Non-Novated ESG Contracts
is set forth on Schedule
G
hereto.
“Non-Novated
KBR Contracts”
means
those contracts and other agreements entered into by the Energy and Chemicals
or
the Government and Infrastructure segments of Halliburton (such segments
as
referenced in the Halliburton Form 10-K for the year ended December 31,
2005) prior to the Separation Date for which a member of the Halliburton
Group
is a signator or contract party, including without limitation certain contracts
entered into by Servicios Professionales Petroleros, S. de X.X. de C.V.,
Halliburton Far East Pte Ltd., Halliburton International, Inc., Servicios
Halliburton De Venezuela, S.R.L., Halliburton West Africa Ltd., Halliburton
Operations Nigeria Limited and Halliburton SAS. A non-exclusive list of
outstanding contract jobs associated with the Non-Novated KBR Contracts is
set
forth on Schedule
F
hereto.
“NYSE”
means
the New York Stock Exchange, Inc.
“Ownership
Percentage”
means
with respect to any class or series of KBR Non-Voting Stock, at any time,
the
fraction, expressed as a percentage and rounded to the nearest thousandth
of a
percent, whose numerator is the number of shares of such class or series
of KBR
Non-Voting Stock beneficially owned by the Halliburton Group and whose
denominator is the total number of outstanding shares of such class or series
of
KBR Non-Voting Stock; provided, however, that any shares of such KBR Non-Voting
Stock issued by KBR in violation of its obligations under Article V of this
Agreement shall not be deemed outstanding for the purpose of determining
the
Ownership Percentage.
“Penalty”
means
a
fine or other monetary penalty or direct monetary damage, including
disgorgement, in each case as a result of a Governmental FCPA Claim, assessed
against a KBR FCPA Indemnitee or paid by a KBR FCPA Indemnitee.
“Person”
means
an individual, a partnership, a corporation, a limited liability company,
an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a Governmental Authority or any department, agency or political
subdivision thereof.
“Prior
Transfer”
means
a
transfer in contemplation of the Separation occurring prior to the Separation
Date of any part of the KBR Business contained in the Halliburton Group to
the
KBR Group and an assumption in contemplation of the Separation occurring
prior
to the Separation Date by the KBR Group of any of the KBR Liabilities, and
a
transfer in contemplation of the Separation occurring prior to the Separation
Date of any part of the Halliburton Business contained in the KBR Group to
the
Halliburton Group and an assumption in contemplation of the Separation occurring
prior to the Separation Date by the Halliburton Group of any of the Halliburton
Liabilities.
“Prior
Transfer Agreements”
means
all agreements, deeds, certificates, instruments or other documents entered
into
by a member of the Halliburton Group or a member of the KBR Group in order
to
implement the Prior Transfers.
“Privilege”
has
the
meaning set forth in Section 8.7.
“Providing
Company”
has
the
meaning set forth in Section 8.6.
“reasonable
best efforts”
means
a
Person’s good faith best efforts to achieve such goal as soon as reasonably
practicable and consistent with reasonable commercial practice and without
payment of any assignment, consent or similar fee requested by any person
or the
incurrence of unreasonable expense or hardship, and/or the requirement to
engage
in litigation.
“Receiving
Company”
has
the
meaning set forth in Section 8.6.
“Registration
Rights Agreement”
means
the Registration Rights Agreement dated the date hereof between Halliburton
and
KBR.
“Regulatory
Proceedings”
shall
mean filings, notices, adjudicatory proceedings, rulemakings, enforcement
actions before a Governmental Authority relating to regulatory activity,
any
other proceedings at or before any regulatory or administrative agency, and
any
investigation instituted by the Audit Committee of the Board of Directors
of a
Party in response to or in anticipation of the foregoing. The term shall
also
refer to appellate activities relating to any of the foregoing, including
actions seeking injunctions, writs of mandamus and appeals.
“Securities
Act”
means
the Securities Act of 1933, as amended, or any successor statute.
“Separation”
means
(i) the transfer of those assets (including funds relating to the KBR
Business) relating primarily to the KBR Business as conducted immediately
prior
to the IPO that are contained in the Halliburton Group immediately prior
to the
IPO to the KBR Group and the assumption by KBR and the members of the KBR
Group
of the KBR Liabilities, and (ii) the transfer of those assets (including
funds relating to the Halliburton Business) relating primarily to the
Halliburton Business as conducted immediately prior to the IPO that are
contained in the KBR Group immediately prior to the IPO to the Halliburton
Group
and the assumption by the Halliburton Group of the Halliburton Liabilities,
all
as more fully described in this Agreement and the Ancillary Agreements.
“Separation
Date”
has
the
meaning set forth in Section 2.1.
“Separation
Time”
has
the
meaning set forth in Section 2.1.
“Silica
Note”
means
the Senior Secured Note dated January 20, 2005 made jointly and severally
by DII Industries, LLC and Xxxxxxx Xxxxx & Root LLC (as successor to
Xxxxxxx Xxxxx & Root, Inc., a Delaware corporation) to the DII
Industries, LLC Silica PI Trust.
“Subscription
Right”
has
the
meaning set forth in Section 5.4.
“Subscription
Right Notice”
has
the
meaning set forth in Section 5.4.
“Tax
Sharing Agreement”
means
the Tax Sharing Agreement dated as of January 1, 2006 by and among
Halliburton and its affiliated companies and KBR and its affiliated companies.
“Taxes”
has
the
meaning set forth in the Tax Sharing Agreement.
“Third
Party Claim”
has
the
meaning set forth in Section 3.7.
“Third-Party
FCPA Claim”
means
a
claim resulting in a monetary judgment against a KBR FCPA Indemnitee, or
a
settlement in lieu thereof, to the extent relating to the FCPA Subject Matters
and as a result of demands or claims made against a KBR FCPA Indemnitee by
a
Person other than a Governmental Authority, including without limitation
by
Persons who are customers of, joint venture partners in or financing parties
of
projects of a KBR FCPA Indemnitee.
“Transition
Services Agreements”
means
the two Transition Services Agreements dated the date hereof between Halliburton
Energy Services, Inc. and KBR.
“TSKJ”
means
the private limited liability company registered in Madiera, Portugal whose
members are Technip, SA, Snamprogetti Netherlands B.V., JGC Corporation and
Xxxxxxx, Xxxxx and Root.
“Underwriters”
means
the several underwriters of the IPO named in the Underwriting Agreement.
“Underwriting
Agreement”
has
the
meaning set forth in Section 4.1.
“Voting
Percentage”
means,
at any time, the fraction, expressed as a percentage and rounded to the nearest
thousandth of a percent, whose numerator is the number of votes entitled
to be
cast with respect to all of the outstanding shares of KBR Voting Stock
beneficially owned by the Halliburton Group and whose denominator is the
number
of votes entitled to be cast with respect to all of the outstanding shares
of
KBR Voting Stock; provided, however, that any shares of such KBR Voting Stock
issued by KBR in violation of its obligations under Article V of this Agreement
shall not be deemed outstanding for the purpose of determining the Voting
Percentage.
ARTICLE
II
SEPARATION
AND RELATED TRANSACTIONS
2.1
Separation
Date; Separation Time.
Unless
otherwise provided in this Agreement, or in any agreement to be executed
in
connection with this Agreement, the effective time and date of each action
in
connection with the Separation shall be as of 11:59 p.m., Houston, Texas
time
(the “Separation
Time”),
on
the date that is immediately prior to the IPO Closing Date, or such other
date
as may be fixed by Halliburton (the “Separation
Date”).
The
effective time and date of each action in connection with a Prior Transfer
shall
be as specified in such Prior Transfer Agreement. Notwithstanding the
Separation, each of the KBR Cash Management Note and the Halliburton Cash
Management Note shall continue in full force and effect pursuant to
Section 9.2 hereof.
2.2
Instruments
of Transfer and Assumption.
Halliburton and KBR agree that (a) transfers of assets required to be
transferred by this Agreement or an Ancillary Agreement shall be effected
by
delivery by Halliburton or the other transferring entity, as applicable,
to the
transferee, of (i) with respect to those assets that constitute stock,
certificates endorsed in blank or evidenced or accompanied by stock powers
or
other instruments of transfer endorsed in blank, against receipt, (ii) with
respect to any real property interest or any improvements thereon, a special
warranty deed with general warranty of limited application limiting recourse
and
remedies to title insurance and warranties by predecessors in title to the
transferor, and (iii) with respect to all other assets, such good and
sufficient instruments of contribution, conveyance, assignment and transfer,
in
form and substance reasonably satisfactory to Halliburton and KBR, as shall
be
necessary to vest in the designated transferee, all of the title and ownership
interest of the transferor in and to any such asset, and (b) to the extent
necessary, the assumption of the Liabilities contemplated hereby shall be
effected by delivery by the transferee to the transferor of such good and
sufficient instruments of assumption, in form and substance reasonably
satisfactory to Halliburton and KBR, as shall be necessary for the assumption
by
the transferee of such Liabilities. Each of the parties hereto also agrees
to
deliver to the other party hereto such other documents, instruments and writings
as may be reasonably requested by such other party hereto in connection with
the
transactions contemplated hereby. Except as set forth in this Section 2.2,
(x) THE TRANSFERS AND ASSUMPTIONS REFERRED TO HEREIN WILL BE MADE WITHOUT
ANY REPRESENTATION OR WARRANTY OF ANY NATURE (A) AS TO THE VALUE OR FREEDOM
FROM ENCUMBRANCE OF, ANY ASSETS, (B) AS TO MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OR (C) AS
TO THE LEGAL SUFFICIENCY TO CONVEY TITLE TO ANY ASSETS, and (y) the
instruments of transfer or assumption referred to herein shall not include
any
representations and warranties other than as specifically provided herein.
Halliburton and KBR hereby acknowledge and agree that ALL ASSETS ARE BEING
TRANSFERRED “AS IS, WHERE IS.”
2.3
Ancillary
Agreements.
On or
prior to the Separation Date, Halliburton and KBR shall execute and deliver
(or
shall cause the appropriate members of their respective Groups to execute
and
deliver, as applicable) the agreements between them designated as follows:
(a)
the
Transition Services Agreements;
(b)
the
Employee Matters Agreement;
(c)
the
Tax Sharing Agreement;
(d)
the
Registration Rights Agreement;
(e)
the
Intellectual Property Matters Agreement; and
(f)
such
other agreements, documents or instruments as the parties may agree are
necessary or desirable and which specifically state that they are Ancillary
Agreements within the meaning of this Agreement
(collectively,
the “Ancillary
Agreements”).
To
the extent such documents are not executed and delivered on the Separation
Date,
they shall be executed and delivered as soon as practicable thereafter and
(except as otherwise provided therein) shall be effective as of the Separation
Time.
2.4
Performance
of Non-Novated Contracts.
(a)
Non-Novated
KBR Contracts.
The
parties intend that each member of the Halliburton Group which is party to
a
Non-Novated KBR Contract shall remain a party thereto following the Separation
Date, and the parties hereby agree that each Non-Novated KBR Contract shall
be
considered to be part of the KBR Business for all purposes under this Agreement.
Notwithstanding the foregoing, Halliburton will cause each member of the
Halliburton Group which is a party to a Non-Novated KBR Contract to continue
to
timely perform each such Non-Novated KBR Contract on behalf of the KBR Group.
The benefits and/or liabilities of the performance of each such Non-Novated
KBR
Contract, and the costs associated with such performance, from and after
the
Separation Time shall be for the account of the KBR Group.
(b)
Non-Novated
ESG Contracts.
The
parties intend that each member of the KBR Group which is party to a Non-Novated
ESG Contract shall remain a party thereto following the Separation Date,
and the
parties hereby agree that each Non-Novated ESG Contract shall be considered
to
be part of the Halliburton Business for all purposes under this Agreement.
Notwithstanding the foregoing, KBR will cause each member of the KBR Group
which
is a party to a Non-Novated ESG Contract to continue to timely perform each
such
Non-Novated ESG Contract on behalf of the Halliburton Group. The benefits
and/or
liabilities of the performance of each such Non-Novated ESG Contract, and
the
costs associated with such performance, from and after the Separation Time
shall
be for the account of the Halliburton Group.
(c)
Settlement
of Intercompany Balances.
From
time to time following the Separation Date, the parties shall settle the
intercompany account balances relating to the Non-Novated KBR Contracts and
the
Non-Novated ESG Contracts with cash payments.
2.5
Other
Matters.
From
and after the Separation Date, except as contemplated under this Agreement
or
any Ancillary Agreement, KBR covenants and agrees that it will not, and will
not
permit any member of the KBR Group to, enter into any commitment or agreement
that binds or purports to bind Halliburton or any member of the Halliburton
Group.
ARTICLE
III
MUTUAL
RELEASES; INDEMNIFICATION
3.1
Mutual
Release of Pre-IPO Closing Date Claims.
(a)
KBR
Release.
Except
as expressly provided in this Agreement, effective as of the Separation Time,
KBR does hereby, for itself and each other member of the KBR Group and their
respective successors and assigns, remise, release and forever discharge
Halliburton, each member of the Halliburton Group and their respective
successors and assigns, from any and all Liabilities whatsoever to KBR and
each
other member of the KBR Group, whether at law or in equity (including any
right
of contribution), whether arising under any contract or agreement, by operation
of law or otherwise, existing or arising from any acts or events occurring
or
failing to occur or alleged to have occurred or to have failed to occur or
any
conditions existing or alleged to have existed on or before the Separation
Time,
including in connection with the transactions and all other activities to
implement any Prior Transfers, the Separation, the IPO and any Distribution.
(b)
Halliburton
Release.
Except
as expressly provided in this Agreement, effective as of the Separation Time,
Halliburton does hereby, for itself and each other member of the Halliburton
Group and their respective successors and assigns, remise, release and forever
discharge KBR, each member of the KBR Group and their respective successors
and
assigns, from any and all Liabilities whatsoever to Halliburton and each
other
member of the Halliburton Group, whether at law or in equity (including any
right of contribution), whether arising under any contract or agreement,
by
operation of law or otherwise, existing or arising from any acts or events
occurring or failing to occur or alleged to have occurred or to have failed
to
occur or any conditions existing or alleged to have existed on or before
the
Separation Time, including in connection with the transactions and all other
activities to implement any Prior Transfers, the Separation, the IPO and
any
Distribution.
(c)
Surviving
Liabilities.
Nothing
contained in Section 3.1(a) or (b) shall impair any right of any
Person to enforce a Prior Transfer Agreement, this Agreement, any Ancillary
Agreement or any agreements, arrangements, commitments or understandings
that
are specified in, or are contemplated to continue pursuant to, a Prior Transfer
Agreement, this Agreement or in any Ancillary Agreement. Furthermore, nothing
contained in Section 3.1(a) or (b) shall release any Person from:
(i)
any
Liability, contingent or otherwise, assumed, transferred, assigned or allocated
to the Group of which such Person is a member in accordance with, or any
other
Liability of any member of any Group under, a Prior Transfer Agreement, this
Agreement or any Ancillary Agreement;
(ii)
any
Liability for unpaid amounts for the sale, lease, construction or receipt
of
goods, property or services purchased, obtained or used in the ordinary course
of business by a member of one Group from a member of any other Group within
180
days prior to the IPO Closing Date;
(iii)
any
Liability for unpaid amounts for products or services or refunds owing on
products or services for work done by a member of one Group at the request
or on
behalf of a member of another Group within 180 days prior to the IPO Closing
Date;
(iv)
any
Liability that the parties may have with respect to indemnification or
contribution pursuant to this Agreement, any Ancillary Agreement or any Prior
Transfer Agreement, which Liability shall be governed by the provisions of
this
Article III and, if applicable, the appropriate provisions of such Ancillary
Agreement or such Prior Transfer Agreement; or
(v)
any
Liability the release of which would result in the release of any Person
other
than a Person released pursuant to this Section 3.1; provided that the
parties agree not to bring suit, seek to collect any amounts or file any
liens
or encumbrances against any Person, or permit any member of their Group to
bring
suit, seek to collect any amounts or file any liens or encumbrances against
any
Person, with respect to any Liability to the extent that such Person would
be
released with respect to such Liability by this Section 3.1 but for the
provisions of this clause (v).
(d)
Agreement
to Make No Claims.
Except
as provided in this Article III, KBR shall not make, and shall not permit
any
member of the KBR Group to make, any claim or demand, or commence any Action
asserting any claim or demand, including any claim of contribution or any
indemnification, against Halliburton or any member of the Halliburton Group,
or
any other Person released pursuant to Section 3.1(a), with respect to any
Liabilities released pursuant to Section 3.1(a). Except as provided in this
Article III, Halliburton shall not make, and shall not permit any member
of the
Halliburton Group to make, any claim or demand, or commence any Action asserting
any claim or demand, including any claim of contribution or any indemnification,
against KBR or any member of the KBR Group, or any other Person released
pursuant to Section 3.1(b), with respect to any Liabilities released
pursuant to Section 3.1(b).
(e)
Further
Assurances.
Except
as expressly set forth in Section 3.1(c), it is the intent of each of
Halliburton and KBR by virtue of the provisions of this Section 3.1 to
provide for a full and complete release and discharge of all Liabilities
existing or arising from all acts and events occurring or failing to occur
or
alleged to have occurred or to have failed to occur and all conditions existing
or alleged to have existed on or before the Separation Time, between or among
KBR or any member of the KBR Group, on the one hand, and Halliburton or any
member of the Halliburton Group, on the other hand (including any contractual
agreements or arrangements existing or alleged to exist between or among
any
such members on or before the Separation Time). At any time, at the request
of
any other party, each party shall cause each member of its respective Group
to
execute and deliver releases reflecting the provisions hereof.
3.2
Indemnification
by KBR.
Except
as provided in this Article III, KBR and the Appropriate Members of the KBR
Group shall indemnify, defend and hold harmless Halliburton, each member
of the
Halliburton Group and their respective successors and assigns (collectively,
the
“Halliburton
Indemnitees”),
from
and against any and all Losses of the Halliburton Indemnitees relating to,
arising out of or resulting from any of the following (without duplication):
(a)
any
KBR Liability, including the failure of KBR or any other member of the KBR
Group
or any other Person to pay, perform or otherwise promptly discharge any KBR
Liabilities in accordance with their respective terms, whether prior to or
after
the Separation Time;
(b)
the
KBR Business;
(c)
any
breach by KBR or any member of the KBR Group of this Agreement or any of
the
Ancillary Agreements;
(d)
the
Credit Support Agreements;
(e)
certain pending or threatened litigation described on Schedule
3.2(e)
hereto;
and
(f)
any
untrue statement or alleged untrue statement of a material fact or omission
or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, with respect to
all
information (i) contained in the IPO Registration Statement or any IPO
Prospectus (other than information provided by Halliburton to KBR specifically
for inclusion in the IPO Registration Statement or any IPO Prospectus and
set
forth on Schedule
3.3(f)),
(ii) contained in any public filings made by KBR with the Commission
following the IPO Closing Date and (iii) provided by KBR to Halliburton
specifically for inclusion in Halliburton’s annual or quarterly reports
following the IPO Closing Date.
As
used
in this Section 3.2, “Appropriate
Members of the KBR Group”
means
the member or members of the KBR Group, if any, whose acts, conduct or omissions
or failures to act caused, gave rise to or resulted in the Loss from and
against
which indemnity is provided.
3.3
Indemnification
by Halliburton.
Except
as provided in this Article III, Halliburton and the Appropriate Members
of the
Halliburton Group shall indemnify, defend and hold harmless KBR, each member
of
the KBR Group and their respective successors and assigns (collectively,
the
“KBR
Indemnitees”),
from
and against any and all Losses of the KBR Indemnitees relating to, arising
out
of or resulting from any of the following (without duplication):
(a)
the
Halliburton Liabilities, including the failure of Halliburton or any other
member of the Halliburton Group or any other Person to pay, perform or otherwise
promptly discharge any Halliburton Liabilities, in accordance with their
respective terms, whether prior to or after the Separation Time;
(b)
the
Halliburton Business;
(c)
any
breach by Halliburton or any member of the Halliburton Group of this Agreement
or any of the Ancillary Agreements;
(d)
any
Halliburton Environmental Liabilities;
(e)
certain pending or threatened litigation described on Schedule
3.3(e)
hereto;
(f)
any
untrue statement or alleged untrue statement of a material fact or omission
or
alleged omission to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, with respect to
all
information contained in the IPO Registration Statement or any IPO Prospectus
provided by Halliburton specifically for inclusion therein and set forth
on
Schedule
3.3(f);
and
(g)
the
Silica Note and any reimbursement obligations of the Halliburton Group to
the
KBR Group with respect thereto.
As
used
in this Section 3.3, “Appropriate
Members of the Halliburton Group”
means
the member or members of the Halliburton Group, if any, whose acts, conduct
or
omissions or failures to act caused, gave rise to or resulted in the Loss
from
and against which indemnity is provided.
3.4
Indemnifications
Relating to FCPA Subject Matters
(a)
Halliburton
Indemnity.
Halliburton agrees to indemnify and hold harmless the KBR FCPA Indemnitees
from
and against any Penalties (such Penalties hereinafter referred to as
“Halliburton
Indemnified FCPA Matters”);
provided, that with respect to any KBR FCPA Indemnitee that is not wholly
owned,
directly or indirectly, by the KBR Group as of the date hereof (a “non-wholly
owned majority subsidiary”),
the
Halliburton indemnity provided under this Section 3.4(a) shall be limited
to that percentage of Penalties assessed against or paid by such non-wholly
owned majority subsidiary equal to the KBR Group’s ownership interest in such
non-wholly owned majority subsidiary as of the date hereof.
For
avoidance of doubt, the Halliburton indemnification provided under this
Section 3.4(a) shall not apply to any losses, claims, liabilities or
damages relating to the FCPA Subject Matters that are not Halliburton
Indemnified FCPA Matters (and the indemnity provided under Section 3.4(a)
will not include any such other losses, claims, liabilities or damages),
regardless of how denominated or the cause of action, whether in tort, contract,
a criminal proceeding or otherwise. Without limiting the foregoing, “Halliburton
Indemnified FCPA Matters” shall not include, and the indemnity provided under
this Section 3.4(a) shall not apply to: (x) Third-Party FCPA Claims;
(y) losses, claims, liabilities or damages that (I) are special,
indirect, derivative or consequential, (II) relate to or result in threatened
or
actual suspension or debarment from bidding or continued activity under
government contracts, (III) relate to alleged or actual damage to business
or
other reputation or loss of, or adverse effect on, cash flow, assets, goodwill,
results of operations, business, prospects, profits or business value, whether
in the present or future, (IV) relate to alleged or actual adverse consequences
in obtaining, continuing or termination of financing for current or future
projects, and/or (V) are as a result of claims by directors, officers,
employees, Affiliates, advisors, attorneys, agents, debt holders or other
interest holders or constituents of KBR or any member of the KBR Group in
their
capacity as such; or (z) costs or expenses incurred for any monitor
required by or agreed to with, a Governmental Authority to review continued
compliance by the KBR Group with Applicable FCPA Law.
(b)
Sole
Beneficiaries.
The
indemnity provided under Section 3.4(a) is solely for the benefit of the
KBR FCPA Indemnitees, and no provision of this Agreement shall create any
third
party beneficiary or other rights in any Person or Persons other than the
KBR
FCPA Indemnitees.
(c)
Control
of Proceedings.
Until
such time, if ever, that KBR exercises its right to assume control over the
investigation, defense and/or settlement of FCPA Subject Matters with respect
to
KBR pursuant to Section 3.4(e), Halliburton and its Majority Owned
Subsidiaries shall at all times, in their sole discretion, have and maintain
control over the investigation, defense and/or settlement of, any FCPA Subject
Matter. Even if KBR exercises its right pursuant to Section 3.4(e) hereof,
Halliburton and its Majority Owned Subsidiaries shall at all times, in their
sole discretion, have and maintain control over the investigation, defense
and/or settlement of FCPA Subject Matters with respect to Halliburton.
Notwithstanding the foregoing, (i) no settlement by KBR of any claims
relating to FCPA Subject Matters effected without the prior written consent
of
Halliburton will be effective or binding upon Halliburton, any member of
the
Halliburton Group or their respective successors or assigns, and (ii) no
settlement by Halliburton of any claims relating to FCPA Subject Matters
effected without the prior written consent of KBR will be effective or binding
upon any KBR FCPA Indemnitee. The parties agree that Halliburton may terminate
its indemnity provided under Section 3.4(a) upon the settlement by KBR of
any claims relating to FCPA Subject Matters effected without the prior written
consent of Halliburton.
(d)
Cooperation.
At all
times during the term of this Agreement, including whether or not or before
or
after KBR exercises its right to assume control over the investigation, defense
and/or settlement of FCPA Subject Matters pursuant to Section 3.4(e)
hereof, KBR, at Halliburton’s expense, shall use best efforts to assist with
Halliburton’s full cooperation with any Governmental Authority in Halliburton’s
investigation of FCPA Subject Matters and its investigation, defense and/or
settlement of any Governmental FCPA Claim. Without limiting the foregoing,
KBR’s
best efforts to assist with Halliburton’s full cooperation contemplated by the
preceding sentence shall include:
(i)
At
the request of Halliburton, the voluntary and truthful disclosure to
Halliburton, the DOJ, the Commission or other Governmental Authority of all
information in KBR’s possession, custody or control (in any form or medium,
including documents) respecting the activities of KBR, Halliburton and its
or
their current and former directors, officers, employees, agents, distributors
and Affiliates relating to FCPA Subject Matters about which Halliburton inquires
or which is material to the investigation conducted by Halliburton, the DOJ,
the
Commission or other Governmental Authority into the FCPA Subject Matters.
(ii)
At
the written request of Halliburton, the voluntary production to Halliburton,
the
DOJ, the Commission or other Governmental Authority, of all documents, records
or other tangible evidence in KBR’s possession, custody or control relating to
FCPA Subject Matters. Without limiting the foregoing, KBR will assemble,
organize and produce, or take reasonable steps to effectuate the production
of,
all documents, records, or other tangible evidence related to FCPA Subject
Matters in KBR’s possession, custody, or control in such reasonable format as
Halliburton, the DOJ, the Commission or other Governmental Authority requests.
KBR shall preserve, maintain and retain all such documents, records and other
tangible evidence related to FCPA Subject Matters. KBR shall provide Halliburton
access to all electronic mail, metadata, computer hard drives, computer tape
or
other electronic data necessary to answer a subpoena of any Governmental
Authority.
(iii)
At
the request of Halliburton, the provision of access to copies of KBR’s original
documents and records relating to FCPA Subject Matters in KBR’s possession,
custody or control and, using reasonable best efforts, in the custody or
control
of all current and former directors, officers, employees, agents, distributors,
attorneys and Affiliates.
(iv)
At
the written request of Halliburton, using reasonable best efforts,
(A) making available any of KBR’s current and former directors, officers,
employees, agents, distributors, attorneys and Affiliates who may have been
involved in FCPA Subject Matters and whose cooperation is requested by
Halliburton, the DOJ, the Commission or other Governmental Authority;
(B) recommending orally and in writing that any and all such Persons
cooperate fully (including by appearing for interviews with Governmental
Authorities or testimony, including sworn testimony before a grand jury)
with
(x) any investigation conducted by Halliburton, the DOJ, the Commission or
other Governmental Authority with respect to FCPA Subject Matters, or
(y) any prosecution of individuals (including without limitation the
cooperation of current or former directors, officers or employees of KBR
who are
not defendants in the prosecution) or entities; and (C) taking appropriate
disciplinary action with respect to such of KBR’s current and former directors,
officers, employees, agents, distributors and Affiliates who do not cooperate,
or who cease to cooperate, fully as contemplated herein.
(v)
At
the written request of Halliburton, the provision of testimony and other
information deemed necessary by Halliburton to identify or establish the
original location, authenticity or other evidentiary foundation necessary
to
admit into evidence documents in any criminal or other proceeding as requested
by Halliburton related to FCPA Subject Matters.
(vi)
At
the written request of Halliburton, using reasonable best efforts, the provision
of access to the outside accounting and legal consultants of KBR whose work
includes or relates to FCPA Subject Matters, as well as the records, reports
and
documents of those outside consultants related to FCPA Subject Matters.
(vii)
At
the request of Halliburton, KBR shall not assert a claim of attorney-client
or
work-product privilege as to: (i) any KBR original documents or records, or
any copies thereof, in possession of attorneys of KBR relating to FCPA Subject
Matters, (ii) any memoranda of witness interviews (including exhibits
thereto) by attorneys or employees of KBR relating to FCPA Subject Matters;
(iii) due diligence reports by attorneys of KBR relating to agents of KBR
that are or have been created contemporaneously with and related to transactions
or events underlying FCPA Subject Matters; or (iv) documents that are or
have been created by attorneys of KBR in connection with internal investigations
by Halliburton or KBR into FCPA Subject Matters.
Notwithstanding
anything to the contrary contained in this Agreement, in making production
of
any documents, disclosure of any information or available any people, pursuant
to this Section 3.4(d), KBR shall not be required to (1) expressly or
implicitly waive its right to assert any privilege that is available under
law
against Persons other than the Governmental Authority at issue concerning
the
documents or information at issue or the subject matters thereof; or
(2) produce, disclose or make available any legal advice or attorney work
product relating to or given in connection with (A) internal investigations
by Halliburton or KBR; (B) investigations conducted by any Governmental
Authority, proceedings related thereto or resulting therefrom; or (C) any
Third-Party Claims.
KBR
shall
promptly inform and disclose to Halliburton any developments, communications
or
negotiations between KBR, on the one hand, and any Governmental Authority
or
third party, on the other hand, with respect to FCPA Subject Matters, except
as
prohibited by law or lawful order of a Governmental Authority. Halliburton
may
terminate its indemnity provided under Section 3.4(a) upon the material
breach by KBR of its obligations under this Section 3.4(d); provided,
however, that if, despite using KBR’s best efforts or reasonable best efforts,
as the case may be, to assist with Halliburton’s full cooperation in accordance
with this Section 3.4(d), KBR is unable to achieve the desired goal
contemplated by any of the foregoing subsections (i)-(vii), Halliburton shall
not have grounds to terminate such indemnity. Termination of Halliburton’s
indemnity provided under Section 3.4(a) pursuant to this
Section 3.4(d) shall not preclude Halliburton from pursuing any other
rights or seeking any and all other available remedies against KBR for material
breach by KBR of its obligations under this Section 3.4(d).
(e)
Assumption
of Control by KBR; Refusal of Settlement.
KBR, by
written notice to Halliburton, may (i) take control over the investigation,
defense and/or settlement of FCPA Subject Matters with respect to KBR or
(ii) refuse (in KBR’s sole discretion) to agree to a settlement of FCPA
Subject Matters negotiated and presented by Halliburton. In either such event,
Halliburton may terminate its indemnity provided under Section 3.4(a).
Notwithstanding the foregoing, a member of the KBR Group that is not a Majority
Owned Subsidiary as of the date hereof may control the investigation, defense
and/or settlement of FCPA Subject Matters solely with respect to such
subsidiary, and may agree to a settlement of FCPA Subject Matters solely
with
respect to such subsidiary without the prior written consent of Halliburton,
and
any such control or agreement to a settlement shall not allow Halliburton
to
terminate its indemnity provided under Section 3.4(a).
(f)
No
Admission.
Each of
Halliburton and KBR do not, by the making of the indemnities in this
Section 3.4 or by any other provision of this Agreement, concede that it or
any of its Affiliates have violated applicable Law.
(g)
Expenses.
Until
such time, if ever, that KBR exercises its right to assume control over the
investigation, defense and/or settlement of FCPA Subject Matters pursuant
to
Section 3.4(e), Halliburton shall bear, at its sole expense, all
attorneys’, accountants’, consultants’ and other professionals’ fees and
expenses and all other costs incurred on behalf of Halliburton and KBR in
the
investigation, defense, and/or settlement of FCPA Subject Matters, except
as
contemplated by Section 3.11. After such time, if ever, that KBR exercises
its right to assume control over the investigation, defense and/or settlement
of
FCPA Subject Matters pursuant to Section 3.4(e), Halliburton shall continue
to bear, at its sole expense, all attorneys’, accountants’, consultants’, and
other professionals’ fees and expenses and all other costs incurred on its own
behalf in the investigation, defense, and/or settlement of FCPA Subject Matters,
but shall no longer be responsible for such fees, expenses and costs incurred
on
behalf of KBR. Nothing in this Section 3.4(g) shall prohibit KBR from at
any time engaging (at KBR’s own expense) its own legal advisors, accountants,
consultants or other professionals with respect to the FCPA Subject Matters.
(h)
Communication.
Notwithstanding the rights and obligations set forth in Section 3.4(d),
each of Halliburton and KBR agrees to provide, or cause to be provided, to
each
other as soon as reasonably practicable after written request therefor, any
Information relating to FCPA Subject Matters in the possession or under the
control of such party that the requesting party reasonably needs (i) to
comply with reporting, disclosure, filing or other requirements imposed on
the
requesting party (including under applicable securities laws) by a Governmental
Authority having jurisdiction over the requesting party, (ii) for use in
any Regulatory Proceeding, judicial proceeding or other proceeding or in
order
to satisfy audit, accounting, claims, regulatory, litigation or other similar
requirements, (iii) to allow the other party to investigate, defend and/or
settle any Governmental FCPA Claim or Third-Party FCPA Claim for which such
party is responsible under this Agreement, or (iv) to comply with its
obligations under this Agreement or any Ancillary Agreement; provided, however,
that in the event that any party determines that any such provision of
Information could violate any Law or agreement, or waive any attorney-client
or
work-product privilege other than as contemplated by Section 3.4(d)(vii),
the parties shall take all reasonable measures to permit the compliance with
such obligations in a manner that avoids any such harm or consequence. Until
such time, if ever, that KBR exercises its right pursuant to Section 3.4(e)
hereof, Halliburton shall provide to KBR copies of all correspondence between
Halliburton and any Governmental Authority with respect to the FCPA Subject
Matters insofar as such correspondence relates to KBR. In addition, until
such
time, if ever, that KBR exercises its right pursuant to Section 3.4(e)
hereof, from time to time and upon KBR’s reasonable request, the attorneys,
accountants, consultants or other advisors of the Board of Directors of
Halliburton or any special committee of independent directors thereof shall
brief the Board of Directors of KBR, the special committee of independent
directors formed pursuant to Section 5.3(c) or the agents or
representatives of either of them, concerning the status of or issues arising
under or relating to Halliburton’s investigation of FCPA Subject Matters and its
defense and/or settlement of any Governmental FCPA Claim.
(i)
Procedures
for Foreign Agents.
The
parties agree that Halliburton may terminate its indemnity provided under
Section 3.4(a) upon the material breach by KBR of its obligations under
Section 8.14(b).
3.5
Indemnifications
Relating to Barracuda-Caratinga Project.
(a)
Halliburton
Indemnity.
Halliburton agrees to indemnify and hold harmless the KBR B-C Indemnitees
from
and against (i) all out-of-pocket cash costs and expenses they incur after
the date hereof as a result of the replacement of the subsea flow-line bolts
installed in connection with the development of the Barracuda-Caratinga Project,
and (ii) any cash damages, losses, liabilities, obligations, judgments,
claims, payments, interest costs, expenses or other award assessed against
the
KBR B-C Indemnitees in connection with the arbitration of the
Barracuda-Caratinga Bolts Matter, and/or any cash settlement or compromise
amounts agreed to in lieu thereof (the foregoing (i) and (ii), the
“Halliburton
Indemnified Barracuda-Caratinga Matters”).
For
avoidance of doubt, the Halliburton indemnification provided under this
Section 3.5(a) shall not apply to any other losses, claims, liabilities or
damages relating to the Barracuda-Caratinga Project that are not Halliburton
Indemnified Barracuda-Caratinga Matters (and the indemnity provided under
Section 3.5(a) will not include any such other losses, claims, liabilities
or damages), regardless of how denominated or the cause of action, whether
in
tort, contract, a criminal proceeding or otherwise. Without limiting the
foregoing, “Halliburton Indemnified Barracuda-Caratinga Matters” shall not
include, and the Halliburton indemnity provided under this Section 3.5(a)
shall not apply to: (x) Third Party Claims other than claims commenced by
Barracuda & Caratinga Leasing Company B.V. or Affiliates of Petrobras
with respect to the Barracuda-Caratinga Bolts Matter, or (y) losses,
claims, liabilities or damages that (I) are special, indirect, derivative
or consequential, (II) relate to alleged or actual damage to business or
other
reputation or loss of, or adverse effect on, cash flow, assets, goodwill,
results of operations, business, prospects, profits or business value, whether
in the present or future, or (III) relate to alleged or actual adverse
consequences in obtaining, continuing or termination of financing for current
or
future projects.
(b)
Sole
Beneficiaries.
The
indemnity provided under Section 3.5(a) is solely for the benefit of the
KBR B-C Indemnitees, and no provision of this Agreement shall create any
third
party beneficiary or other rights in any Person or Persons other than the
KBR
B-C Indemnitees.
(c)
Control
of Proceedings.
Until
such time, if ever, that Halliburton exercises its right pursuant to
Section 3.5(e) hereof, the KBR B-C Indemnitees shall at all times, in their
sole discretion, have and maintain control over the defense, counterclaim
and/or
settlement of the Barracuda-Caratinga Bolts Matter in respect of which indemnity
may be sought under Section 3.5(a). Notwithstanding the foregoing,
(i) no settlement by KBR of any claims relating to the Barracuda-Caratinga
Bolts Matter effected without the prior written consent of Halliburton will
be
effective or binding upon Halliburton, any member of the Halliburton Group
or
their respective successors and assigns, and (ii) no settlement by
Halliburton of any claims relating to the Barracuda-Caratinga Bolts Matter
effected without the prior written consent of KBR will be effective or binding
upon any KBR B-C Indemnitee. The parties agree that Halliburton may terminate
its indemnity provided under Section 3.5(a) upon the settlement by KBR of
any claims relating to the Barracuda-Caratinga Bolts Matter effected without
the
prior written consent of Halliburton.
(d)
Cooperation;
Provision of Information.
Upon
such time, if ever, that Halliburton exercises its right pursuant to
Section 3.5(e), KBR shall use best efforts to fully cooperate with
Halliburton in the defense, counterclaim and/or settlement of the
Barracuda-Caratinga Bolts Matter. At all times under this Agreement, KBR
shall
promptly inform and disclose to Halliburton any developments, communications
or
negotiations between KBR, on the one hand, and Petrobras, its Affiliates
or any
third party, on the other hand, with respect to the Barracuda-Caratinga Bolts
Matter, except as prohibited by law or lawful order of a government or
Governmental Authority or a court of competent jurisdiction. Halliburton
may
terminate its indemnity provided under Section 3.5(a) upon the material
breach by KBR of its obligations under this Section 3.5(d). Termination of
the Halliburton indemnity provided under Section 3.5(a) pursuant to this
Section 3.5(d) shall not preclude Halliburton from pursuing any other
rights or seeking any and all other available remedies against KBR for material
breach by KBR of its obligations under this Section 3.5(d).
(e)
Assumption
of Control by Halliburton; Refusal of Settlement.
Halliburton, by written notice to KBR, may (i) take control over the
defense, counterclaim and/or settlement of the Barracuda-Caratinga Bolts
Matter
or (ii) refuse (in Halliburton’s sole discretion) to agree to a settlement
of the Barracuda-Caratinga Bolts Matter negotiated and presented by KBR.
If
Halliburton exercises its right pursuant to this Section 3.5(e) to control
the defense, counterclaim and/or settlement of the Barracuda-Caratinga Bolts
Matter, and KBR refuses to agree to a settlement of the Barracuda-Caratinga
Bolts Matter negotiated and presented by Halliburton, Halliburton may terminate
its indemnity provided under Section 3.5(a).
(f)
Expenses.
Until
such time, if ever, that Halliburton exercises its right to assume control
over
the defense, counterclaim and/or settlement of the Barracuda-Caratinga Bolts
Matter pursuant to Section 3.5(e), KBR shall bear, at its sole expense, all
attorney’s, accountants’, consultants’ and other professionals’ fees and
expenses and other costs incurred on behalf of Halliburton and KBR in the
defense, counterclaim and/or settlement of the Barracuda-Caratinga Bolts
Matter,
except as contemplated by Section 3.11. Nothing in this Section 3.5(f)
shall prohibit Halliburton from at any time engaging (at Halliburton’s own
expense) its own legal advisors, accountants, consultants or other professionals
with respect to the Barracuda-Caratinga Bolts Matter.
(g)
Master
Intercompany Reimbursement Agreement.
The
parties agree that the rights and obligations set forth in this Section 3.5
shall supersede the rights and obligations of the parties under, and control
over, the Master Intercompany Reimbursement Agreement dated as of
December 16, 2005 between Halliburton and KBR Holdings, LLC solely with
respect to the Barracuda-Caratinga Bolts Matter.
(h)
Communication.
Each of
Halliburton and KBR agrees to provide, or cause to be provided, to each other
as
soon as reasonably practicable after written request therefor, any Information
relating to the Barracuda-Caratinga Bolts Matters in the possession or under
the
control of such party that the requesting party reasonably needs (i) to
comply with reporting, disclosure, filing or other requirements imposed on
the
requesting party (including under applicable securities laws) by a Governmental
Authority having jurisdiction over the requesting party, (ii) for use in
any Regulatory Proceeding, judicial proceeding or other proceeding or in
order
to satisfy audit, accounting, claims, regulatory, litigation or other similar
requirements, (iii) to allow the other party to defend, counterclaim and/or
settle the Barracuda-Caratinga Bolts Matter or any Third Party Claim relating
to
the Barracuda-Caratinga Bolts Matter for which such party is responsible
under
this Agreement, or (iv) to comply with its obligations under this Agreement
or any Ancillary Agreement; provided, however, that in the event that any
party
determines that any such provision of Information could violate any law or
agreement, or waive any attorney-client or work-product privilege, the parties
shall take all reasonable measures to permit the compliance with such
obligations in a manner that avoids any such harm or consequence. In addition,
until such time, if ever, that Halliburton exercises its right pursuant to
Section 3.5(e) hereof, from time to time and upon Halliburton’s reasonable
request, the attorneys, accountants, consultants or other advisors of the
Board
of Directors of KBR or any special committee of independent directors thereof
shall brief members of Halliburton senior management, the Board of Directors
of
Halliburton or any special committee of independent directors thereof concerning
the status of or issues arising under or relating to KBR’s defense, counterclaim
and/or settlement of the Barracuda-Caratinga Bolts Matters.
(i)
Arbitration
Recovery.
The
parties agree that KBR shall be entitled to retain the cash proceeds of any
judgment, decision or award entered in favor of a member of the Halliburton
Group and/or the KBR Group (including any judgment, decision or award for
any
counterclaim), or any cash settlement or compromise in lieu thereof received
from Petrobras or its Affiliate by a member of the Halliburton Group and/or
the
KBR Group, in connection with the Barracuda-Caratinga Bolts Matter; provided,
however, that Halliburton shall be entitled to any portion of such judgment,
decision or award or any settlement or compromise amount (i) which is
designated by an arbitration panel or otherwise agreed by Petrobras or its
Affiliate with Halliburton and/or KBR to constitute recovery of legal fees,
costs or expenses paid by Halliburton or advanced to KBR by Halliburton and
(ii) which constitutes recovery by KBR of out-of-pocket cash costs and
expenses advanced to KBR by Halliburton or paid by Halliburton pursuant to
the
Halliburton indemnity provided under Section 3.5(a).
3.6
Indemnification
Obligations Net of Insurance Proceeds and Other Amounts.
(a)
The
parties intend that any Loss subject to indemnification or reimbursement
pursuant to this Article III will be net of Insurance Proceeds that actually
reduce the amount of the Loss. Accordingly, the amount which any party (an
“Indemnifying
Party”)
is
required to pay to any Person entitled to indemnification under this Article
III
(an “Indemnitee”)
will
be reduced by any Insurance Proceeds theretofore actually recovered by or
on
behalf of the Indemnitee in reduction of the related Loss. If an Indemnitee
receives a payment (an “Indemnity
Payment”)
required by this Agreement from an Indemnifying Party in respect of any Loss
and
subsequently receives Insurance Proceeds, then the Indemnitee will pay to
the
Indemnifying Party an amount equal to the excess of the Indemnity Payment
received over the amount of the Indemnity Payment that would have been due
if
the Insurance Proceeds recovery had been received, realized or recovered
before
the Indemnity Payment was made. Notwithstanding anything to the contrary
in the
Transition Services Agreements, the parties agree that if any such Insurance
Proceeds were paid by an insurance company under a plan, such as a retrospective
premium or large deductible program, where such Insurance Proceeds are
subsequently billed back to one of the parties by the insurance company,
then
(i) if billed to the Indemnifying Party, it will pay the insurance company
and will not charge such amount to the Indemnitee, or (ii) if billed to the
Indemnitee, the Indemnifying Party will pay on behalf of or reimburse, as
appropriate, the Indemnitee for such amount.
(b)
An
insurer who would otherwise be obligated to pay any claims 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 these indemnification provisions) by
virtue of the indemnification provisions herein. Nothing contained in this
Agreement or any Ancillary Agreement shall obligate any member of any Group
to
seek to collect or recover any Insurance Proceeds.
3.7
Procedures
for Indemnification of Third Party Claims.
(a)
If an
Indemnitee shall receive notice or otherwise learn of the assertion by a
Person
(including any Governmental Authority) who is not a member of the Halliburton
Group or the KBR Group of any claims or of the commencement by any such Person
of any Action (collectively, a “Third
Party Claim”)
with
respect to which an Indemnifying Party may be obligated to provide
indemnification to such Indemnitee pursuant to this Article III, such Indemnitee
shall give such Indemnifying Party written notice thereof within 20 days
after
becoming aware of such Third Party Claim. Any such notice shall describe
the
Third Party Claim in reasonable detail. Notwithstanding the foregoing, the
failure of any Indemnitee or other Person to give notice as provided in this
Section 3.7(a) shall not relieve the related Indemnifying Party of its
obligations under this Article III, except to the extent that such Indemnifying
Party is actually prejudiced by such failure to give notice.
(b)
An
Indemnifying Party may elect to defend (and, unless the Indemnifying Party
has
specified any reservations or exceptions, to seek to settle or compromise),
at
such Indemnifying Party’s own expense and by such Indemnifying Party’s own
counsel, any Third Party Claim for which indemnification is available under
this
Article III. Within 30 days after the receipt of notice from an Indemnitee
in
accordance with Section 3.7(a) (or sooner, if the nature of such Third
Party Claim so requires), the Indemnifying Party shall notify the Indemnitee
of
its election whether the Indemnifying Party will assume responsibility for
defending such Third Party Claim, which election shall specify any reservations
or exceptions. After notice from an Indemnifying Party to an Indemnitee of
its
election to assume the defense of a Third Party Claim, such Indemnitee shall
have the right to employ separate counsel and to participate in (but not
control) the defense, compromise or settlement thereof, but the fees and
expenses of such counsel shall be the expense of such Indemnitee except as
set
forth in the next sentence. In the event that the Indemnifying Party has
elected
to assume the defense of a Third Party Claim for which indemnification is
available under this Article III but has specified, and continues to assert,
any
reservations or exceptions in such notice, then, in any such case, the
reasonable fees and expenses of one separate counsel for all Indemnitees
shall
be borne by the Indemnifying Party.
(c)
If an
Indemnifying Party elects not to assume responsibility for defending a Third
Party Claim for which indemnification is available under this Article III,
or
fails to notify an Indemnitee of its election as provided in
Section 3.7(b), such Indemnitee may defend such Third Party Claim at the
cost and expense (including allocated costs of in-house counsel and other
personnel) of the Indemnifying Party.
(d)
Unless the Indemnifying Party has failed to assume the defense of the Third
Party Claim for which indemnification is available under this Article III
in
accordance with the terms of this Agreement, no Indemnitee may settle or
compromise such Third Party Claim without the consent of the Indemnifying
Party.
(e)
Except with respect to Halliburton Indemnified FCPA Matters and the
Barracuda-Caratinga Bolts Matter, which shall be governed by Section 3.4
and Section 3.5 respectively, no Indemnifying Party shall consent to entry
of any judgment or enter into any settlement of the Third Party Claim without
the consent of an Indemnitee if the effect thereof is to permit any injunction,
declaratory judgment, other order or other nonmonetary relief to be entered,
directly or indirectly, against such Indemnitee.
(f)
In
the event of payment by or on behalf of any Indemnifying Party to any Indemnitee
in connection with any Third Party Claim under this Article III, such
Indemnifying Party shall be subrogated to and shall stand in the place of
such
Indemnitee as to any events or circumstances in respect of which such Indemnitee
may have any right, defense or claim relating to such Third Party Claim against
any claimant or plaintiff asserting such Third Party Claim or against any
other
person. Such Indemnitee shall cooperate with such Indemnifying Party in a
reasonable manner, and at the cost and expense (including allocated costs
of
in-house counsel and other personnel) of such Indemnifying Party, in prosecuting
any subrogated right, defense or claim. In the event of an Action in which
the
Indemnifying Party is not a named defendant, if either the Indemnitee or
Indemnifying Party shall so request, the parties shall endeavor to substitute
the Indemnifying Party for the named defendant, if at all practicable. If
such
substitution or addition cannot be achieved for any reason or is not requested,
the named defendant shall allow the Indemnifying Party to manage the Action
as
set forth in this Section 3.7 and the Indemnifying Party shall fully
indemnify the named defendant against all costs of defending the Action
(including court costs, sanctions imposed by a court, attorneys’ fees, experts’
fees and all other external expenses, and the allocated costs of in-house
counsel and other personnel), the costs of any judgment or settlement, and
the
costs of any interest or penalties relating to any judgment or settlement.
3.8
Additional
Matters.
(a) Any claim under this Article III on account of a Loss which does not
result from a Third Party Claim shall be asserted by written notice given
by the
Indemnitee to the Indemnifying Party. Such Indemnifying Party shall have
a
period of 30 days after the receipt of such notice within which to respond
thereto. If such Indemnifying Party does not respond within such 30-day period,
such Indemnifying Party shall be deemed to have refused to accept responsibility
to make payment. If such Indemnifying Party does not respond within such
30-day
period or rejects such claim in whole or in part, such Indemnitee shall be
free
to pursue such remedies as may be available to such party as contemplated
by
this Agreement and the Ancillary Agreements.
(b)
THE
PARTIES UNDERSTAND AND AGREE THAT THE INDEMNIFICATION OBLIGATIONS HEREUNDER
AND
UNDER THE ANCILLARY AGREEMENTS MAY INCLUDE INDEMNIFICATION FOR LOSSES RESULTING
FROM, OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, AN INDEMNIFIED PARTY’S OWN
NEGLIGENCE OR STRICT LIABILITY.
(c)
The
provisions of Sections 3.2 through 3.8 shall not apply with respect to
indemnification or indemnification procedures concerning: Taxes (which are
governed exclusively by the Tax Sharing Agreement), employee benefits matters
(which are governed exclusively by the Employee Matters Agreement), intellectual
property matters (which are governed exclusively by the Intellectual Property
Matters Agreement) or services provided under the Transition Services Agreements
(which are governed exclusively by the Transition Services Agreements).
3.9
Remedies
Cumulative.
The
remedies provided in this Article III shall be cumulative and, subject to
the
provisions of Article VII, shall not preclude assertion by any Indemnitee
of any
other rights or the seeking of any and all other remedies against any
Indemnifying Party.
3.10
Survival
of Indemnities.
The
rights and obligations of each of Halliburton and KBR and their respective
Indemnitees under this Article III shall survive the sale or other transfer by
any party of any assets or businesses or the assignment by it of any
Liabilities.
3.11
Indemnification
of Directors and Officers.
It is
the parties’ intent that each of KBR and Halliburton, as applicable, shall be
responsible for the costs and expenses incurred pursuant to any indemnification
obligations to its current and former officers, directors, employees and
agents.
To the extent that a party’s current or former officer, director, employee or
agent shall receive indemnification or an advancement of funds from the other
party (the party so indemnifying or advancing funds, the “advancing
party”)
pursuant to an indemnification obligation of the advancing party to such
person
under its certificate of incorporation or by-laws, an employment agreement
or
otherwise, then the advancing party shall be reimbursed promptly and in full
by
the other party. The parties agree that reimbursement pursuant to this
Section 3.11 shall not be construed to expand or limit the parties’
respective indemnification rights and obligations under this Article III
or to
confer upon any Person any rights of indemnification. For purposes of this
Section 3.11, persons who serve on the Board of Directors of KBR and who
serve as officers of Halliburton after the IPO Closing Date shall be deemed
to
be directors and officers of Halliburton.
3.12
Mitigation
of Damages.
The
parties each agree to attempt to mitigate, and to cause each of the members
of
their respective Groups to attempt to mitigate, any Losses that such party
may
suffer as a consequence of any matter giving rise to a right to indemnification
under this Article III by taking all actions which a reasonable person would
undertake to minimize or alleviate the amount of Losses and the consequences
thereof, as if such person would be required to suffer the entire amount
of such
Losses and the consequences thereof by itself, without recourse to any remedy
against another person, including pursuant to any right of indemnification
hereunder.
ARTICLE
IV
THE
IPO
AND ACTIONS PENDING THE IPO
4.1
Transactions
Prior to the IPO.
Subject
to the conditions specified in Section 4.4, Halliburton and KBR shall use
their reasonable best efforts to consummate the IPO on or before
November 30,
2006. Such efforts shall include, but not necessarily be limited to, those
specified in this Section 4.1 (to the extent not previously accomplished):
(a)
KBR
has filed the IPO Registration Statement, and shall use its reasonable best
efforts to cause such IPO Registration Statement to become effective, including
by filing such amendments thereto as may be necessary or appropriate, responding
promptly to any comments of the Commission and taking such other action with
respect to the IPO Registration Statement as may be reasonably requested
by
Halliburton. Halliburton and KBR shall also cooperate in preparing, filing
with
the Commission and causing to become effective a registration statement
registering the KBR Common Stock under the Exchange Act, and any information
statement or registration statement or amendments thereto which are required
to
reflect the establishment of, or amendments to, any employee benefit and
other
plans necessary or appropriate in connection with the IPO, any Prior Transfers,
the Separation or the other transactions contemplated by this Agreement.
(b)
KBR
shall enter into an underwriting agreement with the Underwriters (the
“Underwriting
Agreement”),
in
form and substance reasonably satisfactory to Halliburton, and shall comply
with
its obligations thereunder.
(c)
Halliburton and KBR shall consult with each other and the Underwriters regarding
the timing, pricing and other material matters with respect to the IPO, it
being
understood that decisions on such matters may be dictated by Halliburton
in its
sole discretion.
(d)
KBR
shall take all such action as may be necessary or appropriate under state
securities and blue sky laws of the United States (and any comparable laws
under
any foreign jurisdictions) in connection with the IPO.
(e)
KBR
shall prepare, file and use reasonable best efforts to seek to make effective,
an application for listing of the KBR Common Stock issued in the IPO on the
NYSE, subject to official notice of issuance.
4.2
Use
of
Proceeds.
KBR
shall use the net proceeds from the IPO (after deduction of all expenses
in
connection with the IPO payable by KBR as provided in Section 8.8) as
described under the heading “Use of Proceeds” in the IPO Prospectus.
4.3
Cooperation
for IPO.
KBR
shall, at Halliburton’s direction, promptly take any and all actions necessary
or desirable to consummate the IPO as contemplated by the IPO Registration
Statement and the Underwriting Agreement. Notwithstanding anything to the
contrary contained herein, as between Halliburton and KBR, Halliburton may
in
its sole discretion choose to terminate, abandon or amend any aspect of the
IPO
at any time prior to the IPO Closing Date, and KBR promptly shall take all
actions directed by Halliburton in that regard.
4.4
Conditions
Precedent to Consummation of the IPO.
The
parties hereto shall use their reasonable best efforts to satisfy the conditions
listed below to the consummation of the IPO as soon as practicable. The
obligations of the parties to use their reasonable best efforts to consummate
the IPO shall be conditioned on the satisfaction, or waiver by Halliburton,
of
the following conditions. The conditions set forth below are for the sole
benefit of Halliburton and
shall
not
give rise to or create any duty on the part of Halliburton or the Halliburton
Board of Directors to waive or not waive any such condition.
(a)
The
IPO Registration Statement shall have been filed and declared effective by
the
Commission, and there shall be no stop order in effect with respect thereto.
(b)
The
actions and filings with regard to state securities and blue sky laws of
the
United States (and any comparable laws under any foreign jurisdictions)
described in Section 4.1(d) shall have been taken and, where applicable,
have become effective or been accepted.
(c)
The
KBR Common Stock to be issued in the IPO shall have been accepted for listing
on
the NYSE, subject to official notice of issuance.
(d)
KBR
shall have entered into the Underwriting Agreement and all conditions to
the
obligations of KBR and the Underwriters shall have been satisfied or waived.
(e)
Halliburton shall be satisfied, in its sole discretion, that (i) following
the IPO, Halliburton and other members of the Halliburton Group will
collectively own KBR Common Stock representing control of KBR within the
meaning
of Section 368(c) of the Code and (ii) to Halliburton’s actual
knowledge (with no duty to investigate), all other conditions to permit any
future Distribution to qualify as a tax-free distribution to Halliburton,
KBR
and Halliburton’s stockholders shall, to the extent applicable as of the time of
the IPO, be satisfied, and there shall be no event or condition that is likely
to cause any of such conditions not to be satisfied as of the time of the
Distribution or thereafter.
(f)
Any
material Governmental Approvals necessary to consummate the IPO shall have
been
obtained and be in full force and effect.
(g)
No
order, injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the IPO or any of the other transactions contemplated by a Prior Transfer
Agreement, this Agreement or any Ancillary Agreement shall be in effect.
(h)
The
Separation shall have become effective.
(i)
Such
other actions as the parties hereto may, based upon the advice of underwriters,
accountants or counsel, reasonably request to be taken prior to the IPO in
order
to assure the successful completion of the IPO shall have been taken.
(j)
This
Agreement and all Ancillary Agreements shall have been executed and shall
not
have been terminated.
(k)
A
pricing committee for the IPO designated by the Board of Directors of KBR
shall
have determined that the terms of the IPO are acceptable to KBR.
(l)
Halliburton shall have determined that the terms of the IPO are acceptable
to
Halliburton.
ARTICLE
V
CORPORATE
GOVERNANCE AND OTHER MATTERS
5.1
Charter
and Bylaws.
As of
the IPO Closing Date, the KBR Charter and Amended and Restated Bylaws of
KBR
shall be in the forms of Schedule
5.1(a)
and
Schedule
5.1(b),
respectively, with such changes therein as may be agreed to in writing by
Halliburton.
5.2
KBR
Board Representation.
(a)
Beginning on the IPO Closing Date, and for so long as the Halliburton Group
beneficially owns shares of KBR Common Stock representing a majority of the
total voting power of all of the outstanding KBR Voting Stock, Halliburton
shall
have the right to designate for nomination by the KBR Board (or any nominating
committee thereof) for election to the KBR Board (each person so designated,
a
“Halliburton
Designee”)
a
majority of the members of the KBR Board, including the Chairman of the Board.
For so long as the Halliburton Group beneficially owns shares of KBR Common
Stock representing less than a majority but at least 15% of the total voting
power of all of the outstanding shares of KBR Voting Stock, Halliburton shall
have the right to designate for nomination by the KBR Board (or any nominating
committee thereof) for election to the KBR Board a proportionate number of
Halliburton Designees to the KBR Board, as calculated in accordance with
Section 5.2(d). Notwithstanding anything to the contrary set forth herein,
(i) KBR’s obligations with respect to the election or appointment of
Halliburton Designees shall be limited to the obligations set forth under
this
Section 5.2 and (ii) shall be further limited by KBR’s compliance with
Law and any applicable Commission or stock exchange director independence
requirements.
(b)
For
so long as the Halliburton Group beneficially owns shares of KBR Common Stock
representing a majority of the total voting power of all of the outstanding
shares of KBR Voting Stock, KBR shall use reasonable best efforts to avail
itself of the “Controlled Companies” exemption set forth in Rule 303A of the
NYSE Listed Company Manual, and any exemption to any analogous Commission
rule
or requirement, to exempt KBR from compliance with corporate governance
requirements relating to director independence. For so long as the Halliburton
Group beneficially owns shares of KBR Common Stock representing a majority
of
the total voting power of all of the outstanding shares of KBR Voting Stock,
commencing with the annual meeting of stockholders of KBR to be held in 2007
and
prior to each annual meeting of stockholders of KBR thereafter, Halliburton
shall be entitled to present to the KBR Board or any nominating committee
thereof for nomination thereby such number of Halliburton Designees for election
to the KBR Board (or if there is a classified board, the class of directors
up
for election) at such annual meeting as would result in Halliburton having
the
appropriate number of Halliburton Designees on the KBR Board as determined
pursuant to this Section 5.2.
(c)
KBR
shall at all such times exercise all authority under applicable Law and use
reasonable best efforts to cause all such Halliburton Designees to be nominated
for election as KBR Board members by the KBR Board (or any nominating committee
thereof). KBR shall cause each Halliburton Designee for election to the KBR
Board to be included in the slate of nominees recommended by the KBR Board
to
holders of KBR Common Stock (including at any special meeting of stockholders
held for the election of directors) and shall use reasonable best efforts
to
cause the election of each such Halliburton Designee, including soliciting
proxies in favor of the election of such persons. In the event that any
Halliburton Designee elected to the KBR Board shall cease to serve as a director
for any reason, the vacancy resulting therefrom shall be filled by the KBR
Board
with a substitute Halliburton Designee. In the event that as a result of
any
increase in the size of the KBR Board, Halliburton is entitled to have one
or
more additional Halliburton Designees elected to the KBR Board pursuant to
this
Section 5.2, the KBR Board shall appoint the appropriate number of such
additional Halliburton Designees.
(d)
If at
any time the Halliburton Group beneficially owns shares of KBR Common Stock
representing less than a majority but at least 15% of the total voting power
of
all of the outstanding shares of KBR Voting Stock, the number of persons
Halliburton shall be entitled to designate for nomination by the KBR Board
(or
any nominating committee thereof) for election to the KBR Board shall be
equal
to the number of directors computed using the following formula (rounded
to the
nearest whole number): the product of (i) the percentage of the total
voting power of all of the outstanding shares of KBR Voting Stock beneficially
owned by the Halliburton Group and (ii) the number of directors then on the
KBR Board (assuming no vacancies exist). Notwithstanding the foregoing, if
the
calculation set forth in the foregoing sentence would result in Halliburton
being entitled to elect a majority of the members of the KBR Board, the formula
will be recalculated with the product being rounded down to the nearest whole
number; provided, however, that if the Halliburton Group, at any time, acquires
additional shares of KBR Common Stock so that the Halliburton Group beneficially
owns shares of KBR Common Stock representing a majority of the total voting
power of all of the outstanding shares of KBR Voting Stock, then the number
of
persons Halliburton shall be entitled to designate for nomination by the
KBR
Board (or any nominating committee thereof) for election to the KBR Board
shall
be adjusted upward, if appropriate as a result of rounding, in accordance
with
the provisions of this Section 5.2(d). If the number of Halliburton
Designees serving on the KBR Board exceeds the number determined pursuant
to the
foregoing sentences of this Section 5.2(d) (such difference being herein
called the “Excess
Director Number”),
then
Halliburton in its sole discretion shall instruct such Halliburton Designees
(the number of which designees shall be equal to the Excess Director Number)
to
promptly resign from the KBR Board, and, to the extent such persons do not
so
resign, Halliburton shall assist KBR in increasing the size of the KBR Board,
so
that after giving effect to such increase, the number of Halliburton Designees
on the KBR Board is in accordance with the provisions of this
Section 5.2(d).
(e)
The
parties hereto agree that the KBR Board shall consist of seven directors
as of
the IPO Closing Date, including at least four Halliburton Designees consisting
of Messrs. Xxxxxx X. Xxxxxxxxxx, Xx., C. Xxxxxxxxxxx Xxxx, Xxxxxx X. Xxxx
and
Xxxx X. XxXxxxxx, and including Xx. Xxxxxxx Xxx, the KBR President and CEO.
(f)
For
so long as the Halliburton Group beneficially owns shares of KBR Common Stock
representing a majority of the total voting power of all of the outstanding
shares of KBR Voting Stock, the parties agree that the Halliburton Board
of
Directors will review and approve all KBR Group projects with an estimated
value
in excess of $250 million.
5.3
Committees.
(a)
Effective as of the IPO Closing Date and for so long as the Halliburton Group
beneficially owns shares of KBR Common Stock representing a majority of the
total voting power of all of the outstanding shares of KBR Voting Stock,
any
committee of the Board of Directors of KBR (other than the Audit Committee
and a
special committee of independent directors of KBR to be formed pursuant to
Section 5.3(c) hereof) shall, unless Halliburton consents otherwise, be
composed of directors at least a majority of which are Halliburton Designees.
Effective as of the IPO Closing Date and for so long as the Halliburton Group
beneficially owns shares of KBR Common Stock representing less than a majority
but at least 15% of the total voting power of all of the outstanding shares
of
KBR Voting Stock, each committee of the KBR Board of Directors (other than
the
Audit Committee and the special committee of independent directors of KBR
to be
formed pursuant Section 5.3(c) hereof) shall, unless Halliburton consents
otherwise, include at least one Halliburton Designee to the extent permitted
by
Law or applicable Commission or stock exchange requirement.
(b)
The
parties agree that the KBR Board shall form and maintain an executive committee,
which committee shall exercise the authority of the KBR Board of Directors
when
the KBR Board of Directors is not in session in reviewing and approving the
analysis, preparation and submission of significant project bids, managing
the
review, negotiation and implementation of significant project contracts,
and
reviewing the business and affairs of the KBR Group to ensure that Halliburton’s
business practices and standards with respect to internal controls and the
Halliburton Code of Business Conduct are consistently implemented and maintained
by the KBR Group. For so long as the Halliburton Group beneficially owns
shares
of KBR Common Stock representing a majority of the total voting power of
all
outstanding shares of KBR Voting Stock, the executive committee shall consist
solely of Halliburton Designees. If at any time the Halliburton Group
beneficially owns shares of KBR Common Stock representing less than a majority
but at least 15% of the total voting power of all of the outstanding shares
of
KBR Voting Stock, then Halliburton shall be entitled to designate for
appointment by the Board to the executive committee at least one Halliburton
Designee.
(c)
The
parties agree that the KBR Board shall form a special committee of independent
directors of KBR which shall exercise the authority of the KBR Board of
Directors with respect to FCPA Subject Matters and the rights and obligations
of
KBR under Section 3.4 hereof. The members of such special committee shall
satisfy in all material respects the independence standards of Rule 303A
of the
NYSE Listed Company Manual, as if those standards applied.
5.4
Subscription
Right.
(a)
KBR
hereby grants to Halliburton, on the terms and conditions set forth herein,
a
continuing right (the “Subscription
Right”)
to
purchase from KBR, at the times set forth herein:
(i)
with
respect to the issuance of a class or series of shares of KBR Voting Stock,
the
number of such shares as is necessary to allow Halliburton to maintain its
Voting Percentage (or, in the case of a class or series not outstanding prior
to
such issuance, 80% of the total number of shares of such class or series
being
issued); and
(ii)
with
respect to the issuance of a class or series of shares of KBR Non-Voting
Stock,
the number of such shares as is necessary to allow Halliburton to maintain
its
Ownership Percentage with respect to such class or series of shares (or,
in the
case of a class or series not outstanding prior to such issuance, 80% of
the
total number of shares of such class or series being issued).
The
Subscription Right shall be assignable, in whole or in part and from time
to
time, by Halliburton to any member of the Halliburton Group or to a Halliburton
Transferee pursuant to Section 5.8. The exercise price for each share
purchased pursuant to an exercise of the Subscription Right shall be:
(i) in the event of the issuance by KBR of shares in exchange for cash
consideration, the per share price paid to KBR in the related Issuance Event
(defined below); and (ii) in the event of the issuance by KBR of shares for
consideration other than cash, the per share Market Price of such shares
at the
Issuance Event Date (defined below).
(b)
The
provisions of Section 5.4(a) hereof notwithstanding, and subject to
Section 5.6 hereof, the Subscription Right granted pursuant to
Section 5.4(a) shall not apply and shall not be exercisable in connection
with the issuance by KBR of any shares of KBR Common Stock pursuant to any
stock
option or other executive, director or employee benefit, compensation or
incentive plan maintained by KBR, to the extent such issuance: (i) would
not result in Halliburton and other members of the Halliburton Group losing
collective control of KBR within the meaning of Section 368(c) of the Code,
(ii) would not cause Halliburton to fail to satisfy the stock ownership
requirements of Section 1504(a)(2) of the Code with respect to the stock of
KBR or (iii) would not cause a change of control under the provisions of
Section 355(e) of the Code. The Subscription Right granted pursuant to
Section 5.4(a) shall terminate if at any time the Voting Percentage, or the
Ownership Percentage with respect to any class or series of KBR Non-Voting
Stock, is less than 80%.
(c)
At
least 20 Business Days prior to the issuance of any shares of KBR Stock (other
than pursuant to any stock option or other executive or employee benefit
or
compensation plan maintained by KBR in the circumstances described in
Section 5.4(b) above and other than issuances of shares to any member of
the Halliburton Group) or the first date on which any event could occur that,
in
the absence of a full or partial exercise of the Subscription Right, would
result in a reduction in the Voting Percentage, a reduction in any Ownership
Percentage or the issuance of any shares of a class or series of KBR Non-Voting
Stock not outstanding prior to such issuance, KBR will notify Halliburton
in
writing (a “Subscription
Right Notice”)
of any
plans it has to issue such shares and the date on which such issuance could
first occur (such issuance being referred to herein as an “Issuance
Event”
and
the
closing date of such issuance an “Issuance
Event Date”).
The
Subscription Right Notice shall also specify the number of shares KBR intends
to
issue or may issue (or, if an exact number is not known, a good faith estimate
of the range of shares KBR may issue) and the other terms and conditions
of such
Issuance Event.
(d)
The
Subscription Right may be exercised by Halliburton (or any member of the
Halliburton Group to which all or any part of the Subscription Right has
been
assigned) for a number of shares equal to or less than the number of shares
the
Halliburton Group is entitled to purchase pursuant to Section 5.4(a). The
Subscription Right may be exercised at any time after receipt of an applicable
Subscription Right Notice and prior to the applicable Issuance Event Date
by the
delivery to KBR of a written notice to such effect specifying (i) the
number of shares to be purchased by Halliburton or any member of the Halliburton
Group, and (ii) a determination of the exercise price for such shares. Upon
any such exercise of the Subscription Right, KBR will, on or prior to the
applicable Issuance Event Date, deliver to Halliburton (or any member of
the
Halliburton Group designated by Halliburton), against payment therefor,
certificates (issued in the name of Halliburton or its permitted assignee
hereunder or as directed by Halliburton) representing the shares being purchased
upon such exercise. Payment for such shares shall be made by wire transfer
or
intrabank transfer of immediately-available funds to such account as shall
be
specified by KBR, for the full purchase price of such shares.
(e)
Except as provided in Section 5.4(f), any failure by Halliburton to
exercise the Subscription Right, or any exercise for less than all shares
purchasable under the Subscription Right, in connection with any particular
Issuance Event shall not affect Halliburton’s right to exercise the Subscription
Right in connection with any subsequent Issuance Event; provided, however,
that
the Voting Percentage and any Ownership Percentage following such Issuance
Event
in connection with which Halliburton so failed to exercise such Subscription
Right in full or in part shall be recalculated to account for the dilution
of
Halliburton’s interest.
(f)
The
Subscription Right, or any part thereof, assigned to any member of the
Halliburton Group other than Halliburton, shall terminate in the event that
such
member ceases to be a Majority Owned Subsidiary of Halliburton for any reason
whatsoever.
5.5
Issuance
of Stock.
Notwithstanding anything to the contrary in this Article V, following the
IPO
Closing Date and until the earliest to occur of (i) the date of any
Distribution or (ii) the date that Halliburton ceases to control KBR within
the meaning of Section 368(c) of the Code, without the prior written
consent of Halliburton, KBR shall not issue any stock of KBR or any securities,
securities-based awards, options, warrants or rights convertible into or
exercisable or exchangeable for stock of KBR if such issuance would cause
Halliburton to fail to control KBR within the meaning of Section 368(c) of
the Code, would cause Halliburton to fail to satisfy the stock ownership
requirements of Section 1504(a)(2) of the Code with respect to the stock of
KBR or would cause a change of control under the provisions of
Section 355(e) of the Code.
5.6
Settlement
of KBR Benefit Plan Awards.
Following the IPO Closing Date and until the earliest to occur of (i) the
date of any Distribution or (ii) the date that Halliburton ceases to
control KBR within the meaning of Section 368(c) of the Code, without the
prior written consent of Halliburton, KBR shall not issue any stock of KBR
(or
any securities, security-based awards, options, warrants or rights convertible
into or exercisable or exchangeable for stock of KBR) in settlement of any
award, including without limitation any KBR restricted stock unit, phantom
stock, option, stock appreciation right or other securities-based award,
granted
pursuant to any stock option or other executive, director or employee benefit,
compensation or incentive plan maintained by KBR. The parties hereby acknowledge
and agree that it is their mutual intent that settlement of any such KBR
award
shall be made in cash, in treasury shares or via purchase by KBR of KBR Common
Stock in the open marketplace.
5.7
Applicability
of Rights to Parent in the Event of an Acquisition.
In the
event KBR merges into, consolidates, sells substantially all of its assets
to or
otherwise becomes an Affiliate of a Person (other than Halliburton), pursuant
to
a transaction or series of related transactions in which Halliburton or any
member of the Halliburton Group receives equity securities of such Person
(or of
any Affiliate of such Person) in exchange for KBR Common Stock held by
Halliburton or any member of the Halliburton Group, all of the rights of
Halliburton set forth in this Article V and in Section 8.5 shall continue
in full force and effect and shall apply to the Person the equity securities
of
which are received by Halliburton pursuant to such transaction or series
of
related transactions (it being understood that all other provisions of this
Agreement will apply to KBR notwithstanding this Section 5.7). KBR agrees
that, without the consent of Halliburton, it will not enter into any agreement
which will have the effect set forth in the first clause of the preceding
sentence, unless such Person agrees to be bound by the foregoing provision.
5.8
Transfer
of Halliburton’s Rights Under Article X.
Xxxxxxxxxxx may transfer all or any portion of its rights under this Article
V
to a transferee of any KBR Common Stock from any member of the Halliburton
Group
(a “Halliburton
Transferee”)
holding at least 15% of the voting power of all of the outstanding shares
of KBR
Common Stock. Halliburton shall give written notice to KBR of its transfer
of
rights under this Article V no later than 30 days after Halliburton enters
into a binding agreement for such transfer of rights. Such notice shall state
the name and address of the Halliburton Transferee and identify the amount
of
KBR Common Stock transferred and the scope of rights being transferred under
this Article V. In connection with any such transfer, the term “Halliburton” as
used in this Article V shall, where appropriate to give effect to the
assignment of rights and obligations hereunder to such Halliburton Transferee,
be deemed to refer to such Halliburton Transferee. Halliburton and any
Halliburton Transferee may exercise the rights under this Article V in such
priority, as among themselves, as they shall agree upon among themselves,
and
KBR shall observe any such agreement of which it shall have notice as provided
above.
5.9
Restricted
Opportunities Under KBR Charter.
For so
long as Article Eighth of the KBR Charter remains in effect in accordance
with
its current terms, Halliburton, on behalf of itself and each member of the
Halliburton Group, hereby agrees to renounce, to the fullest extent permitted
by
applicable Law, any and all rights, interest or expectancy with respect to
each
investment, commercial activity or other opportunity that, in each case,
is a
“Restricted Opportunity” (as such term is defined in the KBR Charter as in
effect on the date hereof).
ARTICLE
VI
SUBSEQUENT
TRANSACTION
6.1
Sole
Discretion of Halliburton.
(a)
Halliburton shall, in its sole and absolute discretion, determine whether
one or
more transfers of its KBR Common Stock or a Distribution shall occur, the
date
of the consummation of such transfer(s) or Distribution and all terms of
such
transfer(s) or Distribution, including, without limitation, the form, structure
and terms of any transaction(s), exchange(s) and/or offering(s) to effect
such
transfer(s) or Distribution and the timing of and conditions to the consummation
of such transfer(s) or Distribution. In addition, Halliburton may at any
time
decide to abandon such transfer(s) or Distribution or to modify or change
the
terms of such transfer(s) or Distribution, including, without limitation,
by
accelerating or delaying the timing of the consummation of all or part of
such
transfer(s) or Distribution. In the case of a Distribution, this Agreement
is
intended to be, and is hereby adopted as, a plan of reorganization under
Section 368 of the Code.
(b)
Halliburton shall select any investment banker(s) and manager(s) in connection
with the transfer(s) or Distribution, as well as any financial printer,
solicitation and/or exchange agent and outside counsel; provided, however,
that
nothing herein shall prohibit KBR from engaging (at its own expense) its
own
financial, legal, accounting and other advisors in connection with such transfer
or Distribution.
6.2
Cooperation
for Halliburton Transfers.
KBR
agrees, at KBR’s sole expense, that it, and the members of the KBR Group, will
use reasonable best efforts to assist Halliburton in any transfer of all
or any
portion of its KBR Common Stock, whether in a public or private sale, exchange
or other transaction to a Halliburton Transferee, including the execution
and
delivery of instruments of conveyance, assignment, assumption and delivery
of
stock certificates, stock powers and other agreements or documents, in form
and
substance reasonably satisfactory to Halliburton, as shall be necessary to
transfer such KBR Common Stock to the Halliburton Transferee and to vest
in such
Halliburton Transferee all related rights and obligations as shall be assigned
to it by Halliburton hereunder and under any Ancillary Agreement. The rights
and
obligations of the parties in this Section 6.2 are in addition to any
rights and obligations set forth in any Ancillary Agreement.
6.3
Cooperation
for Halliburton Distribution.
KBR
agrees, at KBR’s sole expense, to take all actions requested by Halliburton to
facilitate a Distribution, including, without limitation, internal
restructurings and continuation of businesses necessary to achieve such tax-free
Distribution. KBR shall cooperate with Halliburton in all respects to accomplish
any Distribution and shall, at Halliburton’s direction, promptly take any and
all actions necessary or desirable to effect such Distribution, including,
without limitation, the following actions:
(a)
Halliburton and KBR shall prepare, file with the Commission and mail, prior
to
the date of the Distribution to the holders of common stock of Halliburton
such
information statement, registration statement or other information concerning
KBR and the Distribution (and such other matters as Halliburton shall reasonably
determine) as is necessary and as may be required by Law and applicable stock
exchange requirement. Halliburton and KBR will prepare, and KBR will, to
the
extent required under applicable Law, file with the Commission any such
registration statement or other documentation which Halliburton and KBR
determine is necessary or desirable to effectuate the Distribution, and
Halliburton and KBR shall each use reasonable best efforts to respond promptly
to any comments of the Commission thereto and to obtain all necessary approvals
from the Commission with respect thereto as soon as practicable.
(b)
Halliburton and KBR shall take all such actions as may be necessary or
appropriate under the securities or blue sky laws of the United States (and
any
comparable laws under any foreign jurisdiction) in connection with the
Distribution.
(c)
KBR
shall prepare and file, and shall use its reasonable best efforts to have
approved, an application for the listing of the KBR Common Stock to be
distributed in the Distribution on the NYSE or such other exchange on which
KBR
Common Stock shall then be listed, subject to official notice of distribution.
(d)
Halliburton and KBR shall enter into a Distribution Agreement in form and
substance acceptable to Halliburton, a form of which is attached hereto as
Schedule
6.3.
6.4
Registration
Rights Agreement.
The
Registration Rights Agreement sets forth the rights and obligations of the
parties with respect to the registration and subsequent offering of shares
of
KBR Common Stock held by the Halliburton Group.
ARTICLE
VII
ARBITRATION;
DISPUTE RESOLUTION
7.1
Agreement
to Arbitrate.
The
procedures for discussion, negotiation and arbitration set forth in this
Article
VII shall be the final, binding and exclusive means to resolve, and shall
apply
to all disputes, controversies or claims (whether in contract, tort or
otherwise) that may rise out of or relate to, or arise under or in connection
with: (a) this Agreement , any Prior Transfer Agreement and/or any
Ancillary Agreement, (b) the transactions contemplated hereby or thereby,
including all actions taken in furtherance of the transactions contemplated
hereby or thereby on or prior to the date hereof, or (c) for a period of
ten years after the IPO Closing Date, the commercial or economic relationship
of
the parties, in each case between or among any member of the Halliburton
Group
and the KBR Group. Each party agrees on behalf of itself and each member
of its
respective Group that the procedures set forth in this Article VII shall
be the
final, binding and exclusive remedy in connection with any dispute, controversy
or claim relating to any of the foregoing matters and irrevocably waives
any
right to commence any Action in or before any Governmental Authority, except
as
expressly provided in Section 7.7(b) and except to the extent provided
under the Federal Arbitration Act in the case of judicial review of arbitration
results or awards. Each party on behalf of itself and each member of its
respective Group irrevocably waives any right to any trial by jury with respect
to any dispute, controversy or claim covered by this Section 7.1.
7.2
Escalation.
(a) It is the intent of the parties to use their respective reasonable best
efforts to resolve expeditiously any dispute, controversy or claim between
or
among them with respect to the matters covered by this Article VII pursuant
to
Section 7.1 that may arise from time to time on a mutually acceptable
negotiated basis. In furtherance of the foregoing, any party involved in
a
dispute, controversy or claim may deliver a notice (an “Escalation
Notice”)
demanding an in-person meeting involving representatives of the parties at
a
senior level of management (or if the parties agree, of the appropriate business
function or division within such entity) who have not previously been directly
engaged in asserting or responding to the dispute. A copy of any such Escalation
Notice shall be delivered addressed to the General Counsel, or like chief
legal
officer or official, of each party involved in the dispute, controversy or
claim
(which copy shall state that it is an Escalation Notice pursuant to this
Agreement). Any agenda, location or procedures for such discussions or
negotiations between the parties may be established by agreement of the parties
from time to time; provided, however, that the parties shall use their
reasonable best efforts to meet within 20 days of the Escalation Notice.
(b)
Following delivery of an Escalation Notice, the parties shall undertake good
faith, diligent efforts to negotiate a commercially reasonable resolution
of the
dispute, controversy or claim. The parties may, by mutual consent, retain
a
mediator to aid the parties in their discussions and negotiations by informally
providing advice to parties. Any opinion expressed by the mediator shall
be
strictly advisory and shall not be binding on the parties, nor shall any
opinion
expressed by the mediator be admissible in any arbitration proceedings. The
mediator may be chosen from a list of mediators previously selected by the
parties or by other agreement of the parties. Costs of the mediation shall
be
borne equally by the parties involved in the matter, except that each party
shall be responsible for its own expenses. Mediation is not a prerequisite
to an
Arbitration Demand Notice under Section 7.3.
7.3
Demand
for Arbitration.
(a) At any time following 60 days after the date of an Escalation Notice
(the “Arbitration
Demand Date”),
any
party involved in the dispute, controversy or claim (regardless of whether
such
party delivered the Escalation Notice) may deliver a notice demanding
arbitration of such dispute, controversy or claim (an “Arbitration
Demand Notice”).
Delivery of an Escalation Notice by a party shall be a prerequisite to delivery
of an Arbitration Demand Notice by either party, provided, however, that
in the
event that any party shall deliver an Arbitration Demand Notice to another
party, such other party may itself deliver an Arbitration Demand Notice to
such
first party with respect to any related dispute, controversy or claim with
respect to which the Applicable Deadline has not passed without the requirement
of delivering an Escalation Notice. No party may assert that the failure
to
resolve any matter during any prior discussions or negotiations, the course
of
conduct during such prior discussions or negotiations, or the failure to
agree
on a mutually acceptable time, agenda, location or procedures for a meeting
is a
prerequisite to an Arbitration Demand Notice under Section 7.3. In the
event that any party delivers an Arbitration Demand Notice with respect to
any
dispute, controversy or claim that is the subject of any then pending
arbitration proceeding or of a previously delivered Arbitration Demand Notice,
all such disputes, controversies and claims shall be resolved in the arbitration
proceeding for which an Arbitration Demand Notice was first delivered unless
the
arbitrators in their sole discretion determine that it is impracticable or
otherwise inadvisable to do so.
(b)
Except as may be expressly provided in any Ancillary Agreement or Prior Transfer
Agreement, any Arbitration Demand Notice may be given until the date that
is two
years after the later of the occurrence of the act or event giving rise to
the
underlying claim or the date on which such act or event was, or should have
been, in the exercise of reasonable due diligence, discovered by the party
asserting the claim (as applicable and as it may in a particular case be
specifically extended by the parties in writing, the “Applicable
Deadline”).
Any
discussions, negotiations or mediations between the parties pursuant to this
Agreement or otherwise will not toll the Applicable Deadline unless expressly
agreed in writing by the parties. Each of the parties agrees on behalf of
itself
and each member of its Group that if an Arbitration Demand Notice with respect
to a dispute, controversy or claim is not given prior to the expiration of
the
Applicable Deadline, as between or among the parties and the members of their
Groups, such dispute, controversy or claim will be barred. Subject to
Section 7.7(b) and Section 7.9, upon delivery of an Arbitration Demand
Notice pursuant to Section 7.3(a) prior to the Applicable Deadline, the
dispute, controversy or claim, and all substantive and procedural issues
related
thereto, shall be decided by a three member panel of arbitrators in accordance
with this Article VII.
7.4
Arbitrators.
(a) The party delivering the Arbitration Demand Notice shall notify the
American Arbitration Association (“AAA”)
and
the other parties in writing describing in reasonable detail the nature of
the
dispute. Within 20 days of the date of the Arbitration Demand Notice, each
party
to the dispute shall select one arbitrator from the members of a panel of
arbitrators of the AAA. The selected arbitrators shall then jointly select
a
third arbitrator from the members of a panel of arbitrators of the AAA, and
such
third arbitrator shall be disinterested with respect to each of the parties
and
shall be experienced in complex commercial arbitration. In the event that
the
parties’ selected arbitrators are unable to agree on the selection of the third
arbitrator, the AAA shall select the third arbitrator, within 45 days of
the
date of the Arbitration Demand Notice. In the event that any arbitrator is
unable to serve, his replacement will be selected in the same manner as the
arbitrator to be replaced. The vote of two of the three arbitrators shall
be
required for any decision under this Article VII.
(b)
The
arbitrators will set a time for the hearing of the matter which will commence
no
later than 180 days after the date of appointment of the third arbitrator
and
which hearing will be no longer than 30 days (unless in the judgment of the
arbitrators the matter is unusually complex and sophisticated and thereby
requires a longer time, in which event such hearing shall be no longer than
90
days). The final decision of such arbitrators will be rendered in writing
to the
parties not later than 60 days after the last day of the hearing, unless
otherwise agreed by the parties in writing.
(c)
The
place of any arbitration hereunder will be Houston, Texas and the language
of
any arbitration hereunder will be English, unless otherwise agreed by the
parties. Unless otherwise agreed by the parties, the arbitration hearing
shall
be conducted on consecutive days.
7.5
Hearings.
Within
the time period specified in Section 7.4(b), the matter shall be presented
to the arbitrators at a hearing by means of written submissions of memoranda
and
verified witness statements, filed simultaneously, and responses, if necessary
in the judgment of the arbitrators or both of the parties. If the arbitrators
deem it to be essential to a fair resolution of the dispute, live
cross-examination or direct examination may be permitted, but is not generally
contemplated to be necessary. The arbitrators shall actively manage the
arbitration with a view to achieving a just, speedy and cost-effective
resolution of the dispute, claim or controversy. The arbitrators may, in
their
discretion, set time and other limits on the presentation of each party’s case,
its memoranda or other submissions, and may refuse to receive any proffered
evidence, which the arbitrators, in their discretion, find to be cumulative,
unnecessary, irrelevant or of low probative nature. Any arbitration hereunder
shall be conducted in accordance with the Commercial Arbitration Rules of
the
AAA in effect on the date the notice of Arbitration Demand Notice is served.
The
decision of the arbitrators will be final and binding on the parties, and
judgment thereon may be had and will be enforceable in any court having
jurisdiction over the parties. Arbitration awards will bear interest at an
annual rate of the then-prevailing prime rate plus 2% per annum, subject to
any maximum amount permitted by applicable law. To the extent that the
provisions of this Agreement and the prevailing rules of the AAA conflict,
the
provisions of this Agreement shall govern.
7.6
Discovery
and Certain Other Matters.
(a) Any party involved in a dispute, controversy or claim subject to this
Article VII may request document production from the other party or parties
of
specific and expressly relevant documents, with the reasonable expenses of
the
producing party incurred in such production paid by the requesting party.
Any
such discovery shall be conducted in accordance with the International Bar
Association Rules on the Taking of Evidence in International Commercial
Arbitration, subject to the discretion of the arbitrators. Any such discovery
shall be conducted expeditiously and shall not cause the hearing to be adjourned
except upon consent of all parties involved in the applicable dispute or
upon an
extraordinary showing of cause demonstrating that such adjournment is necessary
to permit discovery essential to a party to the proceeding. Disputes concerning
the scope of document production and enforcement of the document production
requests will be determined by written agreement of the parties involved
in the
applicable dispute or, failing such agreement, will be referred to the
arbitrators for resolution. All discovery requests will be subject to the
parties’ rights to claim any applicable privilege. The arbitrators will adopt
procedures to protect the proprietary rights of the parties and to maintain
the
confidential treatment of the arbitration proceedings (except as may be required
by law). Subject to the foregoing, the arbitrators shall have the power to
issue
subpoenas to compel the production of documents relevant to the dispute,
controversy or claim.
(b)
The
arbitrators shall have full power and authority to determine issues of
arbitrability but shall otherwise be limited to interpreting or construing
the
applicable provisions of this Agreement, any Ancillary Agreement or any Prior
Transfer Agreement, and will have no authority or power to limit, expand,
alter,
amend, modify, revoke or suspend any condition or provision of this Agreement,
any Ancillary Agreement or any Prior Transfer Agreement; it being understood,
however, that the arbitrators will have full authority to implement the
provisions of this Agreement, any Ancillary Agreement or any Prior Transfer
Agreement, and to fashion appropriate remedies for breaches of this Agreement
(including interim or permanent injunctive relief); provided that the
arbitrators shall not have (i) any authority in excess of the authority a
court having jurisdiction over the parties and the controversy or dispute
would
have absent these arbitration provisions or (ii) any right or power to
award punitive or treble damages. It is the intention of the parties that
in
rendering a decision the arbitrators give effect to the applicable provisions
of
this Agreement, the Ancillary Agreements and the Prior Transfer Agreements
and
follow applicable law (it being understood and agreed that this sentence
shall
not give rise to a right of judicial review of the arbitrators’ award).
(c)
If a
party fails or refuses to appear at and participate in an arbitration hearing
after due notice, the arbitrators may hear and determine the controversy
upon
evidence produced by the appearing party.
(d)
Arbitration costs will be borne equally by each party involved in the matter,
and each party will be responsible for its own attorneys’ fees and other costs
and expenses, including the costs of witnesses selected by such party.
7.7
Certain
Additional Matters.
(a) Any arbitration award shall be a bare award limited to a holding for or
against a party and shall be without findings as to facts, issues or conclusions
of law (including with respect to any matters relating to the validity or
infringement of patents or patent applications) and shall be without a statement
of the reasoning on which the award rests, but must be in adequate form so
that
a judgment of a court may be entered thereupon. Judgment upon any arbitration
award hereunder may be entered in any court having jurisdiction thereof.
(b)
Prior
to the time at which all of the arbitrators have been appointed pursuant
to
Section 7.4, any party may seek one or more temporary restraining orders in
a court of competent jurisdiction if necessary in order to preserve and protect
the status quo. Neither the request for, nor grant or denial of, any such
temporary restraining order shall be deemed a waiver of the obligation to
arbitrate as set forth herein and the arbitrators may dissolve, continue
or
modify any such order. Any such temporary restraining order shall remain
in
effect until the first to occur of the expiration of the order in accordance
with its terms or the dissolution thereof by the arbitrators.
(c)
Except as required by law, the parties shall hold, and shall cause their
respective officers, directors, employees, agents and other representatives
to
hold, the existence, content and result of mediation or arbitration in
confidence in accordance with the provisions of Section 8.11 and except as
may be required in order to enforce any award. Each of the parties shall
request
that any mediator or arbitrator comply with such confidentiality requirement.
7.8
Continuity
of Service and Performance.
Unless
otherwise agreed in writing, the parties will continue to provide service
and
honor all other commitments under this Agreement, each Ancillary Agreement,
each
Prior Transfer Agreement and any other agreement between or among any members
of
the Halliburton Group and the KBR Group during the course of the dispute
resolution procedures pursuant to this Article VII with respect to all matters
not subject to such dispute, controversy or claim.
7.9
Law
Governing Arbitration Procedures.
The
interpretation of the provisions of this Article VII, only insofar as they
relate to the agreement to arbitrate and any procedures pursuant thereto,
shall
be governed by the Federal Arbitration Act, as amended, and other applicable
federal law. In all other respects, the interpretation of this Agreement
shall
be governed as set forth in Section 9.3.
ARTICLE
VIII
COVENANTS
AND OTHER MATTERS
8.1
Other
Agreements.
In
addition to the specific agreements, documents and instruments contemplated
by
this Agreement, Halliburton and KBR agree to execute or cause to be executed
by
the appropriate parties and deliver, as appropriate, such other agreements,
instruments and other documents as may be necessary or desirable in order
to
effect the purposes of this Agreement and the Ancillary Agreements.
8.2
Further
Instruments.
The
parties intend to separate the KBR Business from the Halliburton Business
hereby, and to convey, assign or otherwise transfer to the KBR Group the
assets,
rights and other items relating to the KBR Business, and to convey, assign
or
otherwise transfer to the Halliburton Group the assets, rights and other
items
relating to the Halliburton Business. At the request of either Halliburton
or
KBR following the Separation Date, and without further consideration, the
other
party will execute and deliver, and will cause the applicable members of
its
Group to execute and deliver, to the requesting party and the applicable
members
of its Group such other instruments of transfer, conveyance, assignment,
substitution and confirmation and take such action as the requesting party
may
reasonably deem necessary or desirable in order more effectively to transfer,
convey and assign to the requesting party and the members of its Group and
confirm the requesting party’s and the members of its Group’s title to all of
the assets, rights and other items contemplated to be transferred to the
requesting party and the members of its Group pursuant to a Prior Transfer
Agreement, this Agreement, the Ancillary Agreements, and any documents referred
to therein, to put the requesting party and the members of its Group in actual
possession and operating control thereof and to permit the requesting party
and
the members of its Group to exercise all rights with respect thereto (including,
without limitation, rights under contracts and other arrangements as to which
the consent of any third party to the transfer thereof shall not have previously
been obtained). At the request of either Halliburton or KBR following the
Separation Date, and without further consideration, the other party will
execute
and deliver, and will cause the applicable members of its Group to execute
and
deliver, to the requesting party and the applicable members of its Group
all
instruments, assumptions, novations, undertakings, substitutions or other
documents and take such other action as the requesting party may reasonably
deem
necessary or desirable in order to have the other party fully and
unconditionally assume and discharge the Liabilities contemplated to be assumed
by the other party under a Prior Transfer Agreement, this Agreement, any
Ancillary Agreement or any document in connection herewith and to relieve
the
Halliburton Group or the KBR Group, as applicable, of any liability or
obligation with respect thereto and evidence the same to third parties. Neither
the requesting party nor the other party shall be obligated, in connection
with
the foregoing, to expend money other than reasonable out-of-pocket expenses,
attorneys’ fees and recording or similar fees. Furthermore, each party, at the
request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary
or
desirable for effecting completely the consummation of the transactions
contemplated hereby.
8.3
Provision
of Corporate Records.
Except
as contemplated by Sections 3.4 and 3.5, as soon as practicable after the
Separation Date, subject to the provisions of this Section 8.3 and the
provisions of Section 6.2 of the Transition Services Agreements,
Halliburton shall use reasonable best efforts to deliver or cause to be
delivered to KBR all KBR Books and Records in the possession of Halliburton
or
any member of the Halliburton Group, and KBR shall use reasonable best efforts
to deliver or cause to be delivered to Halliburton all Halliburton Books
and
Records in the possession of KBR or any member of the KBR Group. The foregoing
shall be limited by the following:
(a)
To
the extent any document (including computer files, as applicable) can be
subdivided without unreasonable effort or cost into two portions, one of
which
constitutes a KBR Book and Record and the other of which constitutes a
Halliburton Book and Record, such document (including computer files, as
applicable) shall be so subdivided and the appropriate portions shall be
delivered to the parties.
(b)
In
the case of this Section 8.3, “reasonable best efforts” shall require only
deliveries of (i) specific and discrete books and records or a reasonably
limited class of items requested by the other party and (ii) specific and
discrete books and records identified by either party in the ordinary course
of
business and determined by such party to be material to the other’s business.
(c)
Each
party may retain copies of books and records delivered to the other, subject
to
holding in confidence in accordance with Section 8.11 information contained
in such books and records.
(d)
Each
party may in good faith refuse to furnish any books and records under this
Section 8.3 if it reasonably believes in good faith that doing so could
materially adversely affect its ability to successfully assert a claim of
Privilege.
(e)
Neither party shall be required to deliver to the other books and records
or
portions thereof which are subject to any Law or confidentiality agreements
which would by their terms prohibit such delivery; provided, however, that
if
requested by the other party, such party shall use reasonable best efforts
to
seek a waiver of or other relief from such confidentiality restriction.
(f)
Nothing in this Section 8.3 shall affect the rights and obligations of any
party to the Tax Sharing Agreement with respect to the sharing of information
related to Taxes.
8.4
Agreement
For Exchange of Information.
(a)
Each
of Halliburton and KBR agrees to provide, or cause to be provided, to each
other
as soon as reasonably practicable after written request therefor, any
Information in the possession or under the control of such party that the
requesting party reasonably needs: (i) to comply with reporting,
disclosure, filing or other requirements imposed on the requesting party
(including under applicable securities laws) by a Governmental Authority
having
jurisdiction over the requesting party, (ii) for use in any Regulatory
Proceeding, judicial proceeding or other proceeding or in order to satisfy
audit, accounting, claims, regulatory, litigation, subpoena or other similar
requirements, (iii) to comply with its obligations under this Agreement or
any Ancillary Agreement or (iv) in connection with its ongoing businesses
as it relates to the conduct of such business, as the case may be; provided,
however, that in the event that any party determines that any such provision
of
Information could be commercially detrimental, violate any Law or agreement,
or
waive any attorney-client privilege, the parties shall take all reasonable
measures to permit the compliance with such obligations in a manner that
avoids
any such harm or consequence.
(b)
After
the Separation Date, notwithstanding the parties’ rights and obligations in
Section 8.5 hereof, (i) each party shall maintain in effect at its own
cost and expense adequate systems and controls for its business to the extent
necessary to enable the other party to satisfy its reporting, accounting,
audit
and other obligations in compliance with all applicable Law and stock exchange
requirements, and (ii) each party shall provide, or cause to be provided,
to the other party and the applicable members of its Group in such form as
such
requesting party shall request, at no charge to the requesting party, all
financial and other data and information as the requesting party determines
necessary or advisable in order to prepare its financial statements and reports
or filings with any Governmental Authority.
(c)
Any
Information owned by a party that is provided to a requesting party pursuant
to
this Section 8.4 shall be deemed to remain the property of the providing
party. Unless specifically set forth herein, nothing contained in this Agreement
shall be construed as granting or conferring rights of license or otherwise
in
any such Information.
(d)
To
facilitate the possible exchange of Information pursuant to this
Section 8.4 and other provisions of this Agreement, each party agrees to
use reasonable best efforts to retain all Information in its respective
possession or control substantially in accordance with its record retention
policies as in effect on the Separation Date. For so long as the Halliburton
Group collectively beneficially owns shares of KBR Common Stock representing
at
least 15% or more of the total voting power of all of the outstanding shares
of
KBR Voting Stock, KBR shall not amend its or any member of its Group’s record
retention policies without the consent of Halliburton. However, except as
set
forth in the Tax Sharing Agreement, at any time after the date that the
Halliburton Group collectively beneficially owns shares of KBR Common Stock
representing less than 15% of the total voting power of all of the outstanding
shares of KBR Voting Stock, KBR may amend its record retention policies at
KBR’s
discretion; provided, however, that KBR must give Halliburton thirty
(30) days prior written notice of such change in the policy. No party will
destroy, or permit any member of its Group to destroy, any Information that
exists on the Separation Date (other than Information that is permitted to
be
destroyed under the Halliburton record retention policy in effect as of the
date
hereof) without first using its reasonable best efforts to notify the other
party of the proposed destruction and giving the other party the opportunity
to
take possession of such Information prior to such destruction.
(e)
No
party shall have any liability to any other party in the event that any
Information exchanged or provided pursuant to this Section 8.4 is found to
be inaccurate, in the absence of willful misconduct by the party providing
such
Information. No party shall have any duty to update any Information exchanged
or
provided pursuant to this Section 8.4. No party shall have any liability to
any other party if any Information is destroyed or lost after reasonable
best
efforts by such party to comply with the provisions of Section 8.4(d).
(f)
The
rights and obligations granted under this Section 8.4 are subject to any
specific limitations, qualifications or additional provisions on the sharing,
exchange or confidential treatment of Information set forth in Sections 3.4
and
3.5 of this Agreement and any Ancillary Agreement.
(g)
Each
party hereto shall, except in the case of a dispute subject to Article VII
brought by one party against another party (which shall be governed by such
discovery rules as may be applicable under Article VII or otherwise), use
reasonable best efforts to make available to each other party, upon written
request, the former, current and future directors, officers, employees, other
personnel and agents of such party as witnesses and any books, records or
other
documents within its control or which it otherwise has the ability to make
available, to the extent that any such person (giving consideration to business
demands of such directors, officers, employees, other personnel and agents)
or
books, records or other documents may reasonably be required by the other
party
in connection with any Regulatory Proceeding, judicial proceeding or other
proceeding in which the requesting party may from time to time be involved,
regardless of whether such Regulatory Proceeding, judicial proceeding or
other
proceeding is a matter with respect to which indemnification may be sought
hereunder. The requesting party shall bear all costs and expenses in connection
therewith; provided that witnesses shall be made available under this
Section 8.4(g) without cost other than reimbursement of actual
out-of-pocket expenses and reasonable attorneys’ fees and expenses incurred.
8.5
Auditors
and Audits; Annual and Quarterly Statements and Accounting.
(a) Each party agrees that, for so long as the Halliburton Group
beneficially owns shares of KBR Common Stock representing 15% or more of
the
total voting power of all of the outstanding shares of KBR Voting Stock,
and
with respect to any financial reporting period during which the Halliburton
Group collectively beneficially owns shares of KBR Common Stock representing
15%
or more of the total voting power of all of the outstanding shares of KBR
Voting
Stock:
(i)
Selection
of Auditor.
KBR
shall not select a different accounting firm than the firm selected by
Halliburton to audit its financial statements to serve as its independent
certified public accountants for purposes of providing an opinion on its
consolidated financial statements without Halliburton’s prior written consent
(which shall not be unreasonably withheld). At all times, KBR shall retain
a
nationally recognized accounting firm to serve as its independent certified
public accountants for purposes of providing an opinion on KBR’s consolidated
financial statements (the “KBR
Auditors”).
(ii)
Annual
and Quarterly Reviews.
KBR
shall use reasonable best efforts to enable the KBR Auditors to complete
their
audit such that they will date their opinion on KBR’s audited annual financial
statements on the same date that Halliburton’s Auditors date their opinion on
Halliburton’s audited annual financial statements, and to enable Halliburton to
meet its timetable for the printing, filing and public dissemination of
Halliburton’s annual financial statements, including press releases relating to
earnings information. KBR shall use reasonable best efforts to enable the
KBR
Auditors to complete their quarterly review procedures such that they will
provide clearance on KBR’s quarterly financial statements on the same date that
Halliburton’s Auditors provide clearance on Halliburton’s quarterly financial
statements, and to enable Halliburton to meet its timetable for the printing,
filing and public dissemination of Halliburton’s quarterly financial statements,
including press releases relating to earnings information.
(iii)
Information
for Preparation of Financial Statements.
KBR
shall provide to Halliburton on a timely basis all Information that Halliburton
reasonably requires to meet its schedule for the preparation, printing, filing
and public dissemination of Halliburton’s annual, quarterly and periodic
financial statements, including press releases relating to earnings information.
Without limiting the generality of the foregoing, KBR will provide all required
financial information with respect to the KBR Group to the KBR Auditors in
a
sufficient and reasonable time and in sufficient detail to permit the KBR
Auditors to take all steps and perform all reviews necessary to provide
sufficient assurance to Halliburton’s Auditors with respect to Information to be
included or contained in Halliburton’s annual, quarterly and periodic financial
statements, including press releases relating to earnings information.
Similarly, Halliburton shall provide to KBR on a timely basis all Information
that KBR reasonably requires to meet its schedule for the preparation, printing,
filing and public dissemination of KBR’s annual, quarterly and periodic
financial statements, including press releases relating to earnings information.
Without limiting the generality of the foregoing, Halliburton will provide
all
required financial Information with respect to the Halliburton Group to
Halliburton’s Auditors in a sufficient and reasonable time and in sufficient
detail to permit Halliburton’s Auditors to take all steps and perform all
reviews necessary to provide sufficient assurance to the KBR Auditors with
respect to Information to be included or contained in KBR’s annual, quarterly
and periodic financial statements, including press releases relating to earnings
information.
(iv)
Access
to Auditors and Work Papers.
KBR
shall authorize the KBR Auditors to make available to Halliburton’s Auditors
both the personnel who performed or are performing the annual audits and
quarterly reviews of KBR and work papers related to such reviews of KBR,
in all
cases within a reasonable time prior to the KBR Auditors’ opinion date, so that
Halliburton’s Auditors are able to perform the procedures they consider
necessary to take responsibility for the work of the KBR Auditors as it relates
to Halliburton’s Auditors’ report on Halliburton’s financial statements, all
within sufficient time to enable Halliburton to meet its timetable for the
printing, filing and public dissemination of Halliburton’s annual and quarterly
financial statements, including press releases relating to earnings information.
Similarly, Halliburton shall authorize Halliburton’s Auditors to make available
to the KBR Auditors both the personnel who performed or are performing the
annual audits and quarterly reviews of Halliburton and work papers related
to
such reviews of Halliburton, in all cases within a reasonable time prior
to
Halliburton’s Auditors’ opinion date, so that the KBR Auditors are able to
perform the procedures they consider necessary to take responsibility for
the
work of Halliburton’s Auditors as it relates to the KBR Auditors’ report on
KBR’s financial statements, all within sufficient time to enable KBR to meet
its
timetable for the printing, filing and public dissemination of KBR’s annual and
quarterly financial statements, including press releases relating to earnings
information.
(v)
Accounting
Principles and Practices.
Without
the prior written consent of Halliburton, KBR may not change its accounting
principles or practices if a change in such accounting principle or practice
would be required to be disclosed in KBR’s financial statements as filed with
the SEC or otherwise publicly disclosed, except for such changes which are
required by GAAP and as to which there is no discretion on the part of KBR,
as
concurred in by the KBR Auditors prior to its implementation. KBR shall give
Halliburton as much prior notice as reasonably practical of any proposed
determination of, or any significant changes in, its accounting estimates
or,
subject as aforesaid, accounting principles from those in effect on the
Separation Date. KBR will consult with Halliburton and, if requested by
Halliburton, KBR will consult with Halliburton’s Auditors with respect thereto.
Halliburton shall give KBR as much prior notice as reasonably practical of
any
proposed determination of, or any significant changes in, its accounting
estimates or accounting principles pertaining to KBR from those in effect
on the
Separation Date.
(vi)
Comfort
Letters.
Upon
Halliburton’s request, KBR shall use reasonable best efforts to cause to be
delivered “comfort letters” of the KBR Auditors with regard to KBR’s financial
statements, dated as of the pricing dates and the closing dates and addressed
to
the underwriters, in any offering of securities by Halliburton or any member
of
the Halliburton Group for which such comfort letters are required by
underwriters. Such “comfort letters” shall be in form reasonably satisfactory to
Halliburton and customary in scope and substance for “comfort letters” delivered
by independent public accountants in connection with public securities
offerings.
(vii)
Auditor
Consents.
KBR
shall use reasonable best efforts to cause the KBR Auditors to consent to
inclusion of the information described in this Section 8.5 and to be named
in Halliburton’s filings with the Commission with respect to any such
information as is customary for such consents.
(b)
Provision
of Financial Information.
For so
long as the Halliburton Group collectively beneficially owns 15% or more
of the
total voting power of all of the outstanding shares of KBR Voting Stock:
(i) KBR will furnish Halliburton within ten (10) Business Days after
the end of each quarter and ten (10) Business Days after the end of each
fiscal year, the unaudited balance sheet, income statement and statement
of cash
flows of the KBR Group as at the end of such period, (ii) KBR shall furnish
to Halliburton such financial information or documents in the possession
of KBR
and any member of its Group as Halliburton may reasonably request, and
(iii) KBR shall furnish to Halliburton on a monthly basis such management
and other periodic reports related to financial information in the form and
substance consistent with the practice of KBR as of the date of this Agreement.
(c)
Assignment
to Halliburton Transferee.
Halliburton may transfer all or any portion of its rights under this
Section 8.5 to a Halliburton Transferee holding at least 15% of the voting
power of all of the outstanding KBR Common Stock. Halliburton shall give
written
notice to KBR of its transfer of rights under this Section 8.5 no later
than 30 days after Halliburton enters into a binding agreement for such transfer
of rights. Such notice shall state the name and address of the Halliburton
Transferee and identify the amount of KBR Common Stock transferred and the
scope
of rights being transferred under this Section 8.5. In connection with any
such transfer, the term “Halliburton” as used in this Section 8.5 shall,
where appropriate to give effect to the assignment of rights and obligations
hereunder to such Halliburton Transferee, be deemed to refer to such Halliburton
Transferee. Halliburton and any Halliburton Transferee may exercise the rights
under this Section 8.5 in such priority, as among themselves, as they shall
agree upon among themselves, and KBR shall observe any such agreement of
which
it shall have notice as provided above.
8.6
Audit
Rights.
To the
extent any member of the Halliburton Group provides goods or services to
any
member of the KBR Group, or any member of the KBR Group provides goods or
services to a member of the Halliburton Group, under this Agreement or under
any
Ancillary Agreement (other than pursuant to the Transition Services Agreements),
the company providing such goods or services (the “Providing
Company”)
shall
maintain complete and accurate books and records relating to costs and charges
made to the company receiving such goods and services (the “Receiving
Company”).
Books
and accounts shall be maintained in accordance with generally accepted
accounting principles, consistently applied. Annually, the Receiving Company,
at
its expense, shall be entitled to audit the Providing Company’s books and
records related to the goods and services provided during the preceding year,
using its own personnel or personnel from its independent auditing firm.
Discrepancies identified as a result of any audit shall be promptly reconciled
and agreed between the parties or, if no such reconciliation is agreed by
the
parties, shall be resolved in accordance with the dispute resolution provisions
of Article VII of this Agreement. Any charge which is not questioned by the
Receiving Company within the calendar year after the calendar year in which
the
charge was rendered shall be deemed incontestable.
8.7
Preservation
of Legal Privileges.
(a) Halliburton and KBR recognize that the members of their respective
groups possess and will possess information and advice that has been previously
developed but is legally protected from disclosure under legal privileges,
such
as the attorney-client privilege or work product exemption and other concepts
of
legal protection (“Privilege”).
Each
party recognizes that they shall be jointly entitled to the Privilege with
respect to such privileged information and that each shall be entitled to
maintain, preserve and assert for its own benefit all such information and
advice, but both parties shall ensure that such information is maintained
so as
to protect the Privileges with respect to the other party’s interest. To that
end, neither party will knowingly waive or compromise any Privilege associated
with such information and advice without the prior written consent of the
other
party. In the event that privileged information is required to be disclosed
to
any arbitrator or mediator in connection with a dispute between the parties,
such disclosure shall not be deemed a waiver of Privilege with respect to
such
information, and any party receiving it in connection with a proceeding shall
be
informed of its nature and shall be required to safeguard and protect it.
(b)
The
rights and obligations created by this Section 8.7 shall apply to all
information relating to the KBR Business as to which, but for the Separation,
either party would have been entitled to assert or did assert the protection
of
a Privilege, including (i) any and all information generated prior to the
Separation Date but which, after the Separation, is in the possession of
either
party and (ii) all information generated, received or arising after the
Separation Date that refers to or relates to information described in the
preceding clause (i).
(c)
Upon
receipt by either party of any subpoena, discovery or other request that
may
call for the production or disclosure of information that is the subject
of a
Privilege, or if a party obtains knowledge that any current or former employee
of a party has received any subpoena, discovery or other request that may
call
for the production or disclosure of such information, such party shall provide
the other party a reasonable opportunity to review the information and to
assert
any rights it may have under this Section 8.7 or otherwise to prevent the
production or disclosure of such information. Absent receipt of written consent
from the other party to the production or disclosure of information that
may be
covered by a Privilege, each party agrees that it will not produce or disclose
any information that may be covered by a Privilege unless a court of competent
jurisdiction has entered a final, nonappealable order finding that the
information is not entitled to protection under any applicable Privilege.
(d)
Nothing in this Section 8.7 shall limit or qualify the rights and
obligations of the parties in Section 3.4(d), Section 3.5(d) and
Section 8.15.
8.8
Payment
of Expenses.
KBR
shall pay all underwriting fees, discounts and commissions and other direct
costs incurred in connection with the IPO. Except as otherwise provided in
this
Agreement, the Ancillary Agreements or any other agreement between the parties
relating to the Separation, the IPO or the Distribution, all other out-of-pocket
costs and expenses of the parties hereto in connection with the preparation
of
this Agreement and the Ancillary Agreements, the Separation, the IPO and
the
Distribution shall be paid by Halliburton. Notwithstanding the foregoing,
KBR
shall pay any internal fees, costs and expenses incurred by KBR in connection
with the Separation, the IPO and the Distribution.
8.9
Governmental
Approvals.
The
parties acknowledge that certain of the transactions contemplated by this
Agreement and the Ancillary Agreements may be subject to certain conditions
established by applicable government regulations, orders, and approvals
(“Existing
Authority”).
The
parties intend to implement this Agreement, the Ancillary Agreements and
the
transactions contemplated hereby and thereby consistent with and to the extent
permitted by Existing Authority and to cooperate toward obtaining and
maintaining in effect such Governmental Approvals as may be required in order
to
implement this Agreement and each of the Ancillary Agreements as fully as
possible in accordance with their respective terms. To the extent that any
of
the transactions contemplated by this Agreement or any Ancillary Agreement
require any Governmental Approvals, the parties will use their reasonable
best
efforts to obtain any such Governmental Approvals.
8.10
Continuance
of Halliburton Credit Support.
(a) Duration
of Existing Credit Support Agreements.
Notwithstanding any other provision of this Agreement or any Ancillary Agreement
to the contrary, and except as set forth in Section 8.10(b) below, the
parties hereby agree that Halliburton and each applicable member of the
Halliburton Group shall maintain in full force and effect each Credit Support
Agreement which is issued and outstanding as of the Separation Date until
the
earlier of: (i) such time as the project contract, or all obligations of
any member of the KBR Group thereunder, to which such Credit Support Agreement
relates terminates or (ii) such time as such Credit Support Agreement or
the underlying instrument to which it relates expires in accordance with
its
terms or is otherwise released; provided, that KBR shall use reasonable best
efforts to attempt to release or replace the liability of Halliburton and
the
members of its Group under any Credit Support Agreement for which such
replacement or release is reasonably available.
(b)
Additional
Credit Support Agreements Post Separation Date.
(i)
Xxxxx
Xxxxxxxx 00, 0000, XXX may from time to time request, and Halliburton
agrees to provide or cause to be provided such additional guarantees,
indemnification or reimbursement obligations or extensions of existing
guarantees, indemnification or reimbursement obligations as are required
with
respect to: (i) the issuance of additional letters of credit necessary to
comply with KBR’s obligations under the Egypt Basic Industries Corporation
ammonia plant project contract, the U.K. Ministry of Defense Allenby &
Connaught project contract and all other KBR project contracts existing as
of
December 15, 2005; (ii) the issuance of additional surety bonds
necessary to support new task orders pursuant to the Little Rock Job Order
Contract, the U.K. Ministry of Defense Allenby & Connaught project
contract, the State of Missouri Job Order Contract and all other KBR project
contracts existing as of December 15, 2005; and (iii) the issuance of
performance guarantees necessary to support the Egypt Basic Industries
Corporation ammonia plant project contract, the U.K. Ministry of Defense
Allenby & Connaught project contract, the Little Rock Job Order
Contract, the State of Missouri Job Order Contract and all other KBR project
contracts existing as of December 15, 2005. Halliburton and each applicable
member of the Halliburton Group shall maintain in full force and effect each
additional Credit Support Agreement which is obtained pursuant to this
Section 8.10(b) until the earlier of: (i) such time as the project
contract, or all obligations of any member of the KBR Group thereunder, to
which
such Credit Support Agreement relates terminates or (ii) such time as such
Credit Support Agreement or the underlying instrument to which it relates
expires in accordance with its terms or is otherwise released; provided,
that
KBR shall use reasonable best efforts to attempt to release or replace the
liability of Halliburton and the members of its Group under any such Credit
Support Agreement for which such replacement or release is reasonably available.
(ii)
Except as expressly provided in this Section 8.10(b), the parties agree
that after the Separation Date, KBR shall not: (i) request the issuance of
any new letter of credit, surety bond or other instrument pursuant to the
Credit
Support Agreements, (ii) request the issuance by Halliburton of any
additional guarantee, indemnification or reimbursement obligation for the
benefit of any member of the KBR Group or any customer or lender thereof,
or
(iii) extend the term of, increase the obligations under, or otherwise
materially amend or modify any Credit Support Agreement, in each case without
the prior written consent of Halliburton (which consent may be withheld in
Halliburton’s sole discretion).
(c)
Carry
Charge for Letters of Credit.
For so
long as any Credit Support Agreement that is a letter of credit remains
outstanding prior to December 31, 2009, KBR shall pay to Halliburton a
quarterly carry charge for continuance of such letters of credit pursuant
to
this Section 8.10 equal to the sum of: (i) 0.40% per annum of the
then outstanding aggregate principal amount of all letters of credit for
such
quarter meeting the definition of “Performance Letters of Credit” or “Commercial
Letters of Credit” (as such terms are defined by the KBR Credit Agreement as of
the date hereof), and (ii) 0.80% per annum of the then outstanding
aggregate principal amount of all letters of credit constituting financial
letters of credit for such quarter, pro rated on a daily basis, payable on
the
last day of each calendar quarter by intercompany settlement or otherwise
as the
parties may from time to time agree. Following December 31, 2009, KBR shall
pay to Halliburton a quarterly carry charge for continuance of any Credit
Support Agreement that is a letter of credit pursuant to this Section 8.10
equal to the sum of: (i) 0.90% per annum of the then outstanding
aggregate principal amount of all letters of credit for such quarter meeting
the
definition of “Performance Letters of Credit” or “Commercial Letters of Credit”
(as such terms are defined by the KBR Credit Agreement as of the date hereof),
and (ii) 1.65% per annum of the then outstanding aggregate principal
amount of all letters of credit constituting financial letters of credit
for
such quarter, pro rated on a daily basis, payable on the last day of each
calendar quarter by intercompany settlement or otherwise as the parties may
from
time to time agree.
(d)
Carry
Charge for Surety Bonds.
For so
long as any Credit Support Agreement that is a surety bond remains outstanding
prior to December 31, 2009, KBR shall pay to Halliburton a quarterly carry
charge for continuance of such surety bonds pursuant to this Section 8.10
equal to 0.25% per annum of the then outstanding aggregate principal amount
of such surety bonds for such quarter, pro rated on a daily basis, payable
on
the last day of each calendar quarter by intercompany settlement or otherwise
as
the parties may from time to time agree. Following December 31, 2009, KBR
shall pay to Halliburton a quarterly carry charge for continuance of such
surety
bonds pursuant to this Section 8.10 equal 0.50% per annum of the then
outstanding aggregate principal amount of such surety bonds for such quarter,
pro rated on a daily basis, payable on the last day of each calendar quarter
by
intercompany settlement or otherwise as the parties may from time to time
agree.
(e)
No
Other Financing Obligations.
Except
as expressly set forth in this Section 8.10 or as contemplated by the
agreements listed on Schedule
9.2
hereto,
following the Separation Date, Halliburton shall have no obligation to provide
or continue any credit support to, or advance any funds to or on behalf of,
any
member of the KBR Group.
(f)
KBR
Liabilities; Performance Covenants.
(i)
All
obligations under the Credit Support Agreements shall be deemed to be KBR
Liabilities, as between the Halliburton Group and the KBR Group, for purposes
of
this Agreement.
(ii)
For
so long as Halliburton or any member of the Halliburton Group remains liable
to
any third party with respect to any Credit Support Agreement: (i) KBR shall
pay or perform, or cause the Person in the KBR Group for whose benefit the
Credit Support Agreement is provided to pay or perform, the underlying
obligation as and when the same shall become due and/or payable, to the end
that
no member of the Halliburton Group shall be required to make any payment
under
or by reason of its obligation under such Credit Support Agreement and
(ii) each member of the Halliburton Group shall retain all rights of
reimbursement and subrogation it may have, whether arising by law, by contract
or otherwise, with respect to such Credit Support Agreement and such rights
shall be enforceable against KBR as well as the member of the KBR Group for
whose benefit the Credit Support Agreement was made.
(iii)
For
so long as any Credit Support Agreement remains in effect, to the extent
that
covenants and agreements contained in the KBR Credit Agreement, any loan
or
other credit agreement or other material agreement in effect on the date
of this
Agreement to which any member of the Halliburton Group is a party requires,
or
requires such party to cause, any member of the KBR Group to take or refrain
from taking any action, or provides for a default or event of default if
any
member of the KBR Group takes or refrains from taking any action, such member
of
the KBR Group shall at all times take or refrain from taking any such action
as
would result in a breach or violation of, or a default under, such agreement.
8.11
Confidentiality.
(a)
Until
the date that is five (5) years from the date hereof, Halliburton and KBR
shall hold and shall cause the members of the Halliburton Group and the KBR
Group, respectively, to hold, and shall each cause their respective officers,
employees, agents, consultants and advisors to hold, in strict confidence
and
not to disclose or release without the prior written consent of the other
party,
any and all Confidential Information (as defined herein); provided, that
the
parties may disclose, or may permit disclosure of, Confidential Information:
(i) to their respective auditors, attorneys, financial advisors, bankers
and other appropriate consultants and advisors who have a need to know such
information and are informed of their obligation to hold such information
confidential to the same extent as is applicable to the parties hereto and
in
respect of whose failure to comply with such obligations, Halliburton or
KBR, as
the case may be, will be responsible or (ii) to the extent any member of
the Halliburton Group or the KBR Group is compelled to disclose any such
Confidential Information by judicial or administrative process or, in the
opinion of legal counsel, by other requirements of Law. Notwithstanding the
foregoing, in the event that any demand or request for disclosure of
Confidential Information is made pursuant to clause (ii) above, Halliburton
or KBR, as the case may be, shall promptly notify the other of the existence
of
such request or demand and shall provide the other a reasonable opportunity
to
seek an appropriate protective order or other remedy, which both parties
will
cooperate in seeking to obtain. In the event that such appropriate protective
order or other remedy is not obtained, the party being compelled to disclose
the
Confidential Information shall furnish or cause to be furnished only that
portion of the Confidential Information that is legally required to be
disclosed. As used in this Section 8.11, “Confidential
Information”
shall
mean all proprietary, technical or operational information, data or material
of
one party which, prior to or following the Separation Date, has been disclosed
by Halliburton or members of the Halliburton Group, on the one hand, or KBR
or
members of the KBR Group, on the other hand, in written, oral (including
by
recording), electronic, or visual form to, or otherwise has come into the
possession of, the other, including pursuant to any provision of this Agreement
(except to the extent that such Confidential Information can be shown to
have
been (a) in the public domain through no fault of such party or
(b) later lawfully acquired from other sources by the party to which it was
furnished; provided, however, in the case of (b) that such sources did not
provide such Confidential Information in breach of any confidentiality
obligations).
(b)
Notwithstanding anything to the contrary set forth herein, (i) Halliburton
and the other members of the Halliburton Group, on the one hand, and KBR
and the
other members of the KBR Group, on the other hand, shall be deemed to have
satisfied their obligations hereunder with respect to Confidential Information
if they exercise the same degree of care (but no less than a reasonable degree
of care) as they take to preserve confidentiality for their own similar
Information and (ii) confidentiality obligations provided for in any
agreement between Halliburton or any other member of the Halliburton Group,
or
KBR or any other members of the KBR Group, on the one hand, and any employee
of
Halliburton or any other member of the Halliburton Group, or KBR or any other
members of the KBR Group, on the other hand, shall remain in full force and
effect. Confidential Information of Halliburton or any other member of the
Halliburton Group, on the one hand, or KBR or any other member of the KBR
Group,
on the other hand, in the possession of and used by the other as of the
Separation Date may continue to be used by such Person in possession of the
Confidential Information in and only in the operation of the Halliburton
Business or the KBR Business, as the case may be, and may be used only so
long
as the Confidential Information is maintained in confidence and not disclosed
in
violation of Section 8.11(a). Such continued right to use may not be
transferred to any third party unless the third party purchases all or
substantially all of the business and assets in which the relevant Confidential
Information is used or employed in one transaction or in a series or related
transactions. In the event that such right to use is transferred in accordance
with the preceding sentence, the transferring party shall not disclose the
source of the relevant Confidential Information.
(c)
Nothing in this Section 8.11 shall limit or qualify the rights and
obligations of the parties with respect to Sections 3.4 and 3.5 hereof.
(d)
Nothing in Sections 8.3, 8.4 or 8.5 shall require KBR to violate any agreement
with any third parties regarding the confidentiality of confidential and
proprietary information relating to that third party or its business; provided,
however, that in the event that KBR is required under Sections 8.3, 8.4 or
8.5
to disclose any such information, KBR shall use reasonable best efforts to
seek
to obtain such third party’s consent to the disclosure of such information.
Similarly, nothing in Sections 8.3, 8.4 or 8.5 shall require Halliburton
to
violate any agreement with any third parties regarding the confidentiality
of
confidential and proprietary information relating to that third party or
its
business; provided, however, that in the event that Halliburton is required
under Sections 8.3, 8.4 or 8.5 to disclose any such information, Halliburton
shall use reasonable best efforts to seek to obtain such third party’s consent
to the disclosure of such information.
(e)
Nothing in this Section 8.11 shall limit or qualify the rights and
obligations of the parties under the Intellectual Property Matters Agreement.
8.12
Receipt
of Notices.
If a
party receives a notice or other communication from any Governmental Authority
or third party, or otherwise becomes aware of any fact or circumstance after
the
Separation Date relating to an asset, contract or ownership interest transferred
to the other party or liability assumed by the other party, it will promptly
forward the notice or other communication to the other party or give notice
to
the other party of such fact or circumstance of which it has become aware.
Each
of Halliburton and KBR will comply, and will cause members of their respective
Groups to comply, with this Section 8.12.
8.13
Non
Solicitation of Employees.
(a)
Halliburton
No Hire.
For a
period of one (1) year from the Separation Date, Halliburton agrees not to
(i) solicit, recruit or hire any employees, independent contractors or
officers of the KBR Group who have worked for or been contracted to the KBR
Business immediately prior to the Separation Date and who are employed full-time
by KBR or a member of the KBR Group immediately after the Separation Date
or
(ii) solicit or encourage any current employee or independent contractor of
the KBR Group who has worked full-time for the KBR Business to leave the
employment of KBR or a member of the KBR Group. Nothing in this
Section 8.13 shall prevent or restrict Halliburton or any member of the
Halliburton Group from employing any individual who responds to a general
solicitation for employment made by or on behalf of Halliburton or any member
of
the Halliburton Group that is not specifically directed at employees,
independent contractors or officers of KBR who have worked in the KBR Business
or any individual who, after the Separation Date, initiates contact with
Halliburton or any member of the Halliburton Group for purposes of seeking
employment.
(b)
KBR
No
Hire.
For a
period of one (1) year from the Separation Date, KBR agrees not to
(i) solicit, recruit or hire any employees, independent contractors or
officers of the Halliburton Group who have worked for or been contracted
to the
Halliburton Business immediately prior to the Separation Date and who are
employed full-time by Halliburton or a member of the Halliburton Group
immediately after the Separation Date or (ii) solicit or encourage any
current employee or independent contractor of the Halliburton Group who has
worked full-time for the Halliburton Business to leave the employment of
Halliburton or a member of the Halliburton Group. Nothing in this
Section 8.13 shall prevent or restrict KBR or any member of the KBR Group
from employing any individual who responds to a general solicitation for
employment made by or on behalf of KBR or any member of the KBR Group that
is
not specifically directed at employees, independent contractors or officers
of
Halliburton who have worked in the Halliburton Business or any individual
who,
after the Separation Date, initiates contact with KBR or any member of the
KBR
Group for purposes of seeking employment.
8.14
Halliburton
Policies and Procedures.
(a) For so long as the Halliburton Group beneficially owns shares of KBR
Common Stock representing a majority of the total voting power of all of
the
outstanding shares of KBR Voting Stock, the KBR Group will consistently
implement and maintain Halliburton’s business practices and standards with
respect to internal controls and the Halliburton Code of Business Conduct,
which
Halliburton may amend or supplement from time to time in its sole discretion.
(b)
Notwithstanding the foregoing, for a period of five (5) years following the
Separation Date, the KBR Group will consistently implement and maintain the
business practices and standards adopted by the Halliburton Board of Directors
in July 2006 for the KBR Group with respect to internal control procedures
relating to use of foreign agents; provided, however, that the KBR Group
may
amend such procedures during such 5-year period upon the prior written consent
of Halliburton, not to be unreasonably withheld.
8.15
Antitrust
Matters.
KBR and
Halliburton each agree, on behalf of itself and the members of its Group,
to at
all times during the term of this Agreement use reasonable best efforts to
assist with the other party’s full cooperation with any Governmental Authority
in its investigation of Antitrust Matters and such other party’s investigation,
defense and/or settlement of any claim by any Governmental Authority relating
to
or arising out of the Antitrust Matters. Without limiting the foregoing,
a
party’s reasonable best efforts to assist with the other party’s full
cooperation contemplated by the preceding sentence shall include:
(a)
Without limiting or qualifying the parties’ rights and obligations in
Section 8.4 or Section 3.4, each of Halliburton and KBR agrees, on
behalf of itself and the members of its Group, to provide, or cause to be
provided, to each other as soon as reasonably practicable after written request
therefor, any Information relating to the Antitrust Matters, in the possession
or under the control of such party that the requesting party reasonably needs:
(i) to comply with reporting, disclosure, filing or other requirements
imposed on the requesting party (including under applicable securities laws)
by
a Governmental Authority having jurisdiction over the requesting party,
(ii) for use in any Regulatory Proceeding, judicial proceeding or other
proceeding or in order to satisfy audit, accounting, claims, regulatory,
litigation, subpoena or other similar requirements, (iii) to allow the
other party to defend or settle any claim relating to Antitrust Matters for
which such party may be responsible, or (iv) to comply with its obligations
under this Agreement or any Ancillary Agreement; provided, however, that
neither
party shall be required by this Section 8.15 to violate any Law or waive
any attorney-client or other work-product privilege. In the event that any
party
determines that such provision of Information pursuant to this Section 8.15
could violate any Law or agreement, or waive any attorney-client or work-product
privilege, the parties shall take all reasonable measures to permit the
compliance with such obligations in a manner that avoids any such harm or
consequence.
(b)
Notwithstanding Section 8.4, each party hereby undertakes, on behalf of
itself and the members of its Group, to preserve, maintain and retain all
documents, records and other tangible evidence related to Antitrust Matters.
(c)
Each
party agrees, on behalf of itself and the members of its Group, to use
reasonable best efforts to (i) make available any of its current and former
directors, officers, employees, agents, distributors, attorneys and Affiliates
who may have been involved in the Antitrust Matters and whose cooperation
is
requested by the other party, the DOJ or other Governmental Authority; and
(ii) recommend orally and in writing that any and all such persons
cooperate fully (including by appearing for interviews with Governmental
Authorities or testimony, including sworn testimony before a grand jury)
with
any investigation conducted by a party, the DOJ or other Governmental Authority
with respect to the Antitrust Matters.
(d)
Each
party agrees to promptly inform and disclose to the other party any
developments, communications or negotiations between such party or any member
of
its Group, on the one hand, and any Governmental Authority or third party,
on
the other hand, with respect to Antitrust Matters, except as prohibited by
law
or lawful order of a Governmental Authority. In addition, upon either party’s
reasonable request, the attorneys, accountants, consultants or other advisors
of
the Board of Directors or any committee thereof of a requested party shall
brief
the Board of Directors or any committee thereof of the requesting party
concerning the status of or issues arising under or relating to the Antitrust
Matters.
8.16
Cooperation
for Litigation.
In
addition to the rights and obligations of the parties as set forth in Article
III and Sections 8.4 and 8.7 herein, KBR and Halliburton each agree, on behalf
of itself and the members of its Group, to at all times during the term of
this
Agreement use reasonable best efforts to assist with such other party’s
investigation, litigation, defense and/or settlement of any claim by or against
any Third Party or Governmental Authority relating to or arising out of the
KBR
Business or the Halliburton Business, as applicable, other than with respect
to
a dispute subject to Article VII brought by one party against another party;
provided, however, that nothing in this Section 8.16 shall be interpreted
to limit or qualify in any respect the parties’ additional cooperation
obligations with respect to the FCPA Subject Matters, the Barracuda-Caratinga
Bolts Matter and the Antitrust Matters, as set forth in Sections 3.4, 3.5
and
8.15, respectively.
8.17
Performance
Standard.
Each of
Halliburton and KBR agrees to at all times exercise good faith and fair dealing
in the performance of its rights and obligations under this Agreement.
ARTICLE
IX
MISCELLANEOUS
9.1
Limitation
of Liability.
NOTWITHSTANDING
ANYTHING TO THE CONTRARY IN ANY ANCILLARY AGREEMENT, IN NO EVENT SHALL ANY
MEMBER OF THE HALLIBURTON GROUP OR THE KBR GROUP OR THEIR RESPECTIVE DIRECTORS,
OFFICERS AND EMPLOYEES BE LIABLE TO ANY OTHER MEMBER OF THE HALLIBURTON GROUP
OR
THE KBR GROUP FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE
DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY
(INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT OR ANY ANCILLARY
AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH
DAMAGES; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT
EACH
PARTY’S INDEMNIFICATION OBLIGATIONS FOR LIABILITIES TO THIRD PARTIES AS SET
FORTH IN THIS AGREEMENT OR ANY ANCILLARY AGREEMENT.
9.2
Conflicting
Agreements; Entire Agreement.
For
avoidance of doubt, the parties agree that the agreements set forth on
Schedule
9.2
hereto
shall continue in full force and effect notwithstanding the execution of
this
Agreement, and nothing in this Agreement shall be construed to obligate either
party hereto to take any action or refrain from taking any action that would
result in a breach under any agreement listed on Schedule
9.2.
This
Agreement, the Prior Transfer Agreements, the Ancillary Agreements and the
agreements listed on Schedule
9.2,
and the
schedules referenced or attached hereto and thereto, constitute the entire
agreement of the parties to date with respect to the separation of KBR and
Halliburton, and supersede all prior written and oral agreements and all
contemporaneous oral agreements and understandings with respect to such
separation. Except as otherwise expressly provided herein, in the event of
a
conflict between this Agreement and any Prior Transfer Agreement, any Ancillary
Agreement or any agreement set forth on Schedule
9.2
hereto,
the provisions of such Prior Transfer Agreement, such Ancillary Agreement
or
such agreement set forth on Schedule
9.2
hereto,
as applicable, shall prevail over the provisions hereof.
9.3
Governing
Law.
Except
as set forth in Section 7.9, this Agreement shall be governed and construed
and enforced in accordance with the laws of the State of Delaware as to all
matters regardless of the laws that might otherwise govern under the principles
of conflicts of laws applicable thereto.
9.4
Termination.
This
Agreement and all Ancillary Agreements may be terminated at any time prior
to
the IPO Closing Date by and in the sole discretion of Halliburton without
the
approval of KBR. This Agreement and any Ancillary Agreement may be terminated
at
any time after the IPO Closing Date by mutual consent of Halliburton and
KBR. In
the event of termination pursuant to this Section 9.4 prior to the IPO
Closing Date, neither party shall have any liability of any kind to the other
party other than as set forth in Section 8.8 hereof. In the event of
termination after the IPO Closing Date, the provisions of Article I, Article
VII, Section 8.11 and Article IX shall survive.
9.5
Notices.
(a) Unless expressly provided herein, all notices, claims, certificates,
requests, demands and other communications hereunder shall be in writing
addressed to the attention of the addressee’s General Counsel at the address of
its principal executive office or to such other address or facsimile number
for
a party as it shall have specified by like notice, and shall be deemed to
be
duly given: (i) when personally delivered or (ii) if mailed registered
or certified mail, postage prepaid, return receipt requested, on the date
the
return receipt is executed or the letter refused by the addressee or its
agent
or (iii) if sent by overnight courier which delivers only upon the signed
receipt of the addressee, on the date the receipt acknowledgment is executed
or
refused by the addressee or its agent or (iv) if sent by facsimile or other
generally accepted means of electronic transmission, on the date confirmation
of
transmission is received (provided that a copy of any notice delivered pursuant
to this clause (iv) shall also be sent pursuant to clause (ii) or
(iii)).
(b)
Any
delivery, notice, or other communication to Halliburton in accordance with
this
Agreement will be conclusively deemed for all purposes to be delivery, notice
or
other communication to the appropriate member of the Halliburton Group and
any
delivery, notice or other communication given by Halliburton will be
conclusively deemed for all purposes to be a delivery, notice or communication
given by the appropriate member of the Halliburton Group.
(c)
Any
delivery, notice or other communication to KBR in accordance with this Agreement
will be conclusively deemed for all purposes to be delivery, notice or other
communication to the appropriate member of the KBR Group and any delivery,
notice or other communication given by KBR will be conclusively deemed for
all
purposes to be a delivery, notice or communication given by the appropriate
member of the KBR Group.
9.6
Counterparts.
This
Agreement, including the Schedules hereto and the other documents referred
to
herein, may be executed in counterparts, each of which shall be deemed to
be an
original but all of which shall constitute one and the same agreement.
9.7
No
Third Party Beneficiaries; Assignment.
This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective legal representatives, successors and assigns, and nothing
in this Agreement, express or implied, is intended to confer upon any other
Person any rights or remedies of any nature whatsoever under or by reason
of
this Agreement. Except as expressly provided herein or as otherwise agreed
by
the parties, this Agreement may not be assigned by any party hereto.
9.8
Severability.
If any
term or other provision of this Agreement or the Schedules attached hereto
is
determined by a nonappealable decision by a court, administrative agency
or
arbitrator to be invalid, illegal or incapable of being enforced by any rule
of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic
or
legal substance of the transactions contemplated hereby is not affected in
any
manner materially adverse to either party. Upon such determination that any
term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so
as to
effect the original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated hereby are fulfilled
to the fullest extent possible.
9.9
Failure
or Indulgence Not Waiver; Remedies Cumulative.
No
failure or delay on the part of either party hereto in the exercise of any
right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement
herein,
nor shall any single or partial exercise of any such right preclude other
or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement or the Schedules attached hereto are cumulative to,
and not
exclusive of, any rights or remedies otherwise available.
9.10
Amendment.
No
change or amendment will be made to this Agreement except by an instrument
in
writing signed on behalf of each of the parties to this Agreement.
9.11
Authority.
Each of
the parties hereto represents to the other that (a) it has, or its Group
member shall have, the corporate or other requisite power and authority to
execute, deliver and perform this Agreement and the Ancillary Agreements,
(b) the execution, delivery and performance of this Agreement and the
Ancillary Agreements by it have been, or by its Group member will be, duly
authorized by all necessary corporate or other actions, (c) it has, or its
Group member shall have, duly and validly executed and delivered this Agreement
and the Ancillary Agreements to be executed and delivered on or prior to
the
Separation Date, and (d) this Agreement and such Ancillary Agreements are
legal, valid and binding obligations, enforceable against it or its Group
member
in accordance with their respective terms subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors’ rights generally and general equity principles.
9.12
Interpretation.
The
headings contained in this Agreement, in any Schedule hereto and in the table
of
contents to this Agreement are for reference purposes only and shall not
affect
in any way the meaning or interpretation of this Agreement. Any capitalized
term
used in any Schedule but not otherwise defined therein, shall have the meaning
assigned to such term in this Agreement. When a reference is made in this
Agreement to an Article or a Section, or a Schedule, such reference shall
be to
an Article or Section of, or a Schedule to, this Agreement unless otherwise
indicated.
WHEREFORE,
the parties have signed this Master Separation Agreement effective as of
the
date first set forth above.
HALLIBURTON
COMPANY
|
|
By:
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/s/
C. Xxxxxxxxxxx Xxxx
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Name:
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C.
Xxxxxxxxxxx Xxxx
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Title:
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Executive
Vice President and Chief Financial
Officer
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KBR,
INC.
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By:
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/s/
Xxxxxxx X. Xxx
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Name:
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Xxxxxxx
X. Xxx
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Title:
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President
& CEO
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