SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
March 27, 1998
PETER KIEWIT SONS', INC.
(Exact name of registrant as specified in its charter)
Delaware 000-23943 91-1842817
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
1000 Kiewit Plaza, Omaha Nebraska 68131
(Address of principal executive offices) (Zip Code)
(402) 342-2052
(Registrant's telephone number, including area code)
PKS HOLDINGS, INC.
(Former name)
Item 1. Change in Control of Registrant.
Peter Kiewit Sons', Inc. (the "Company") was
formed by its former parent, Level 3 Communications,
Inc. (formerly Peter Kiewit Sons', Inc.) ("Level 3"),
in connection with a transaction (the "Transaction")
intended to separate the construction business and the
diversified business of Level 3 into two independent
companies. On March 31, 1998, pursuant to the terms of
a Separation Agreement between the Company, Level 3
and certain other parties (the "Separation
Agreement"), Level 3 consummated the Transaction by:
(i) transferring 100 shares of the $100 par value
common stock ("KCG Stock") of Kiewit Construction
Group Inc. ("KCG"), representing all of the issued
and outstanding shares of KCG Stock, to the Company in
exchange for 7,677,920 shares of the $0.01 par value
common stock of the Company ("Common Stock") and (ii)
distributing 100% of its shares of the Common Stock to
the holders of Level 3's $0.0625 par value Class C
Construction & Mining Group Restricted Redeemable
Convertible Exchangeable Common Stock ("Class C
Stock") as of March 31, 1998, in exchange for such
shares of Class C Stock. Prior to the Transaction, the
Company was a wholly owned subsidiary of Level 3. As a
result of the Transaction, the Company is now owned by
the former holders of Level 3's Class C Stock. A more
detailed description of the Transaction is set forth
in the Registration Statement on Form S-4
(Registration No. 333-34627) filed by Level 3 and the
Company.
Item 2. Acquisition and Disposition of Assets.
In connection with the Transaction, and pursuant
to the Separation Agreement, the Company acquired all
of the issued and outstanding shares of KCG Stock.
Level 3 previously conducted its construction business
through KCG and its subsidiaries. The Company intends
to continue Level 3's historical construction business
through KCG and its subsidiaries. A more detailed
description of the Transaction is set forth in the
Registration Statement on Form S-4 (Registration No.
333-34627) filed by Level 3 and the Company.
Item 5. Other Events.
On March 27, 1998, the Company amended its Restated
Certificate of Incorporation to change its name from
"PKS Holdings, Inc." to "Peter Kiewit Sons', Inc."
The Company restated its Restated Certificate
Incorporation to integrate all prior amendments on
April 3, 1998.
On March 31, 1998, the Company amended its Amended
and Restated By-Laws to change its name thereon from
"PKS Holdings, Inc." to "Peter Kiewit Sons', Inc."
In connection with the Transaction, the Company
and Level 3 entered into a Tax Allocation Agreement
with respect to the allocation of certain continuing
tax liabilities.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements.
As of the date of filing this Current Report
on Form 8-K, it is impracticable for the Company
to provide the Financial Statements required by
this Item 7(a). In accordance with Item 7(a)(4) of
Form 8-K, such Financial Statements shall be filed
by amendment to this Form 8-K no later than sixty
(60) days after April 13, 1998.
(b) Pro Forma Financial Information.
As of the date of filing this Current Report
on Form 8-K, it is impracticable for the Company
to provide the Pro Forma Financial Information
required by this Item 7(b). In accordance with
Item 7(b)(2) of Form 8-K, such Pro Forma Financial
Information shall be filed by amendment to this
Form 8-K no later than sixty (60) days after April
13, 1998.
(c) Exhibits
2.1 Separation Agreement dated December 8, 1997,
between Level 3, the Company and certain other
parties, and Schedules thereto dated as of
March 31, 1998.
2.2 Amendment to Separation Agreement dated March
18, 1998, between Level 3, the Company and
certain other parties.
3.1 Restated Certificate of Incorporation of Peter
Kiewit Sons', Inc., effective April 3, 1998.
3.2 Amended and Restated By-Laws of Peter Kiewit
Sons', Inc.
10.1 Tax Allocation Agreement dated March 27, 1998,
between Level 3 and the Company.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the
undersigned hereunto duly authorized
PETER KIEWIT SONS', INC.
By: /s/ Thomas C. Stortz
________________________________
Date: April 13, 1998 Thomas C. Stortz, Vice President
SEPARATION AGREEMENT
This Separation Agreement (this "Agreement") is entered into as of December 8,
1997 by and among Peter Kiewit Sons', Inc., a Delaware corporation ("PKS"),
Kiewit Diversified Group Inc., a Delaware corporation ("KDG"), PKS Holdings,
Inc., a Delaware corporation ("PKS Holdings"), and Kiewit Construction Group
Inc., a Delaware corporation ("KCG", and together with PKS, KDG, and PKS
Holdings, collectively the "Parties" or individually a "Party").
Recitals
The Board of Directors of PKS has approved, by a unanimous vote of the Board,
a series of transactions intended to separate the construction businesses of
PKS and the diversified businesses of PKS into two separate and independent
companies, and the stockholders of PKS have ratified the action of the PKS
Board. PKS, KDG (the subsidiary of PKS that holds, directly or indirectly,
all of the diversified businesses of PKS), KCG (the subsidiary of PKS that
holds, directly or indirectly, all of the construction businesses of PKS) and
PKS Holdings (a subsidiary of PKS formed to acquire from PKS all of the
capital stock of KCG in connection with the separation) want to provide for
the principal corporate transactions necessary to consummate the separation,
the relationships among the Parties after the separation, the allocation of
risks and responsibilities among the Parties after the separation and certain
other matters.
The Parties hereby agree as follows:
Agreement
ARTICLE I
DEFINITIONS
1.01 General. Terms used but not elsewhere defined in this Agreement
have the following meanings:
Affiliate: with respect to any Person, a Person that directly, or
indirectly through one or more intermediaries, controls, is controlled by, or
is under common control with, such specified Person; provided, however, that
for purposes of this Agreement, no member of either Group will be deemed to be
an Affiliate of any member of the other Group.
Asset: any and all assets and properties, whether real, personal or
mixed, tangible or intangible, wherever located, and whether or not recorded or
reflected or required to be recorded on the books and records or financial
statements of any Person, including, without limitation, the following: (i)
cash, cash equivalents, bank accounts, lock boxes and other deposit
arrangements, notes, deposits, letters of credit, performance and surety bonds,
trade accounts and other accounts and notes receivable (whether current or non-
current); (ii) certificates of deposit, banker's acceptances, stock,
debentures, evidences of indebtedness, certificates of interest or
participation in profit-sharing agreements, collateral-trust certificates,
preorganization certificates or subscriptions, capital contributions, joint
venture and partnership interests, transferable shares, investment contracts,
voting-trust certificates, fractional undivided interests in oil, gas or other
mineral rights, puts, calls, straddles, options and other securities or equity
interests of any kind or in any Person; (iii) trade secrets, confidential
information, registered and unregistered trademarks, service marks, service
names, trade styles and trade names and associated goodwill; statutory, common
law and registered copyrights; domestic and foreign patents, applications for
any of the foregoing, rights to use the foregoing and other rights in, to and
under the foregoing; (iv) rights under leases, contracts, licenses, permits,
distribution arrangements, sales and purchase agreements, other agreements and
business arrangements; (v) real estate, all interests in real estate of
whatever nature and buildings and other improvements thereon; (vi) leasehold
improvements, fixtures, trade fixtures, machinery, equipment (including
transportation and office equipment), tools, dies and furniture; (vii) office
supplies, production supplies, spare parts, other miscellaneous supplies and
other tangible property of any kind; (viii) raw materials, work-in-process,
finished goods, consigned goods and other inventories; (ix) prepayments or
prepaid expenses; (x) claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind; (xi) the right to receive mail,
payments on accounts receivable and other communications; (xii) lists of
advertisers, records pertaining to advertisers and accounts, personnel records,
lists and records pertaining to suppliers and agents, and books, ledgers, files
and business records of every kind, whether in paper, microfilm, microfiche,
computer tape or disk, magnetic tape or any other form; (xiii) advertising
materials and other printed or written materials; (xiv) goodwill as a going
concern and other intangible properties; (xv) employee contracts, including any
rights thereunder to restrict an employee from competing in certain respects;
(xvi) licenses and authorizations issued by any governmental authority; (xvii)
all apparatus, computers and other electronic data processing equipment,
fixtures, machinery, equipment, furniture, office equipment, automobiles,
trucks, aircraft, rolling stock, vessels, motor vehicles and other
transportation equipment, special and general tools, test devices, prototypes
and models and other tangible personal property; (xviii) all written
technical information, data, specifications, research and development
information, engineering drawings, operating and maintenance manuals, and
materials and analyses prepared by consultants and other third parties; (xix)
all computer applications, programs and other software, including operating
software, network software, firmware, middleware, design software, design
tools, systems documentation and instructions (excluding, for purposes of the
definition of Construction Assets, any property of PKSIS); (xx) all cost
information, sales and pricing data, customer prospect lists, supplier
records, customer lists, customer and vendor data, correspondence and lists,
product literature, artwork, design, development and manufacturing files,
vendor and customer drawings, (xxi) formulations and specifications, quality
records and reports and other books, records, studies, surveys, reports,
plans and documents; and (xxii) except as otherwise expressly provided
herein, all rights under insurance policies and all rights in the nature of
insurance, indemnification or contribution.
Certificate Amendments: the Initial Certificate Amendment and the Post-
Transaction Certificate Amendment.
Class C Stock: the Class C Construction & Mining Group Restricted
Redeemable Convertible Exchangeable Common Stock of PKS, par value $.0625 per
share.
Class D Stock: the Class D Diversified Group Convertible Exchangeable
Common Stock of PKS, par value $.0625 per share.
Class R Stock: the Class R Convertible Common Stock of PKS, par value
$.01 per share, proposed to be authorized pursuant to the Initial Certificate
Amendment and issued pursuant to the Class R Distribution.
Class R Distribution: the distribution, as a dividend, by PKS of the
Class R Stock pursuant to Section 3.06.
Class R Distribution Record Date: January 2, 1998, or such other date
occurring after the Debenture Conversion Date but before the Excess Purchase
Date, which is selected by the PKS Board as the record date for determining
holders of record of Class C Stock entitled to receive the Class R
Distribution.
Code: the Internal Revenue Code of 1986, as amended, or any successor
legislation, together with the rules and regulations promulgated thereunder.
Construction Assets: all of the Assets utilized immediately prior to the
Exchange Date by any member of the Construction Group in connection with the
Construction Business.
Construction Business: all of the businesses and operations conducted at,
or at any time before, the Exchange Date by PKS or any Subsidiary of PKS, the
principal focus of which are or were construction or construction management
activities.'
Construction Group: PKS Holdings, KCG and the Subsidiaries of KCG as of
the Exchange Date.
Construction Indemnitees: any member of the Construction Group, any
Construction Individual and any Affiliate of any member of the Construction
Group.
Construction Individual: any individual who at any time prior to the
Exchange Date was a director, officer or employee of any member of the
Construction Group, but solely to the extent that any Loss incurred by such
Person is incurred in that capacity.
Construction Liabilities: all of the Liabilities arising out of or
resulting from the Construction Business, and any Liability which any member of
the Construction Group is obligated to assume pursuant to Section 5.02.
Construction Securities Transactions: the offer to sell or the sale of
Class C Stock, PKS Holdings Stock or debentures convertible into Class C Stock
or PKS Holdings Stock.
Diversified Assets: all of the Assets utilized immediately prior to the
Exchange Date by any member of the Diversified Group in connection with the
Diversified Business.
Diversified Business: all of the businesses and operations conducted at,
or at any time before, the Exchange Date, by PKS, other than the Construction
Business.
Diversified Group: PKS, KDG and all of the Subsidiaries of KDG as of the
Exchange Date.
Diversified Indemnitees: any member of the Diversified Group, any
Diversified Individual and any Affiliate of any member of the Diversified
Group.
Diversified Individual: any individual who at any time prior to the
Exchange Date was a director, officer or employee of any member of the
Diversified Group, but solely to the extent that any Loss incurred by such
Person is incurred in that capacity.
Diversified Liabilities: all of the Liabilities arising out of or
resulting from the Diversified Business, and any Liability which any member of
the Diversified Group is obligated to assume pursuant to Section 5.02.
Diversified Securities Transaction: the offer to sell or the sale of
Class D Stock, Class R Stock or debentures convertible into Class D Stock,
including the issuance of any stock option convertible into Class D Stock.
Dividend Condition: with respect to the distribution in connection with
the Class R Distribution and the distribution in connection with the Share
Exchange, a determination by the PKS Board that such distribution by PKS will
(a) comply with the PKS Certificate, as then amended and/or restated, (b) will
be made out of surplus, within the meaning of Section 170 of the Delaware
General Corporation Law and (c) will not result in the insolvency of PKS under
applicable fraudulent conveyance or fraudulent transfer statutes.
Exchange Act: the Securities Exchange Act of 1934, together with the
rules and regulations promulgated thereunder.
Exchange Date: the date on which the Share Exchange is made, which will
be a date determined by the PKS Board that occurs after satisfaction of all of
the conditions set forth in Section 2.08.
Exchange Record Date: the date selected by the PKS Board for determining
holders of record of Class C Stock entitled to receive PKS Holdings Stock in
the Share Exchange.
Group: either of the Construction Group or the Diversified Group.
Indemnifying Party: a Person who or which is obligated under Article IV
to provide indemnification.
Indemnitee: a Person entitled to indemnification under Article IV.
Indemnity Payment: an amount that an Indemnifying Party is required to
pay to an Indemnitee pursuant to Article IV.
Information: all 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, 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), computer data and other technical, financial, employee or
business information.
Initial PKS Certificate Amendment: an amendment to the PKS Certificate in
the form of Appendix E-I to the Joint Prospectus/Proxy Statement.
Joint Prospectus/Proxy Statement: the joint prospectus/proxy statement
included in the Registration Statement and mailed to the holders of Class C
Stock and Class D Stock in connection with the Transaction.
Liabilities: all debts, liabilities and obligations, whether absolute or
contingent, matured or unmatured, liquidated or unliquidated, accrued or
unaccrued, known or unknown, whenever or however arising, and whether or not
the same would properly be reflected on a balance sheet, including all related
costs and expenses.
Losses: all losses, Liabilities, damages, actions, claims, suits,
demands, proceedings, inquiries, investigations, judgments or settlements of
any nature or kind, known or unknown, fixed, accrued, absolute or contingent,
liquidated or unliquidated, including all related costs and expenses (legal,
accounting or otherwise as such costs are incurred) suffered by an Indemnitee.
PKS Board: the board of directors of PKS (or the executive committee of
the board of directors of PKS, if the executive committee of the board of
directors of PKS has the authority to take the action required under this
Agreement).
PKS Certificate: the Restated Certificate of Incorporation of PKS, as in
effect on the date of this Agreement.
PKS Holdings Certificate Amendment: an amendment to and restatement of
the Certificate of Incorporation of PKS Holdings in the form of Appendix D to
the Joint Prospectus/Proxy Statement.
PKS Holdings Stock: the common stock of PKS Holdings, $.01 par value.
PKS Stockholders: the holders of Class C Stock, the holders of Class D
Stock and, if applicable, the holders of Class R Stock, taken together.
PKSIS: PKS Information Services, Inc., a Delaware corporation, and a
Subsidiary of KDG.
Person: an individual, a partnership, a limited partnership, a joint
venture, a limited liability company, a corporation, a trust, an unincorporated
organization, any other entity or a government or any department or agency
thereof.
Post-Transaction PKS Certificate Amendment: an amendment to and
restatement of the PKS Certificate, as amended by the Initial Certificate
Amendment, in the form of Appendix E-II to the Joint Prospectus/Proxy
Statement.
Registration Statement: the registration statement filed by PKS and PKS
Holdings on Form S-4 (Registration No. 333-34627) pursuant to the Securities
Act, as amended from time to time.
Representative: with respect to any Person, any of such Person's
affiliates, directors, officers, employees, agents, consultants, advisors,
accountants, attorneys and representatives.
SEC: the Securities and Exchange Commission.
Secretary of State: the Secretary of State of the State of Delaware.
Securities Act: the Securities Act of 1933, as amended, together with the
rules and regulations promulgated thereunder.
Service: the United States Internal Revenue Service.
Separation Transactions: the transactions described in Section 3.01
through 3.08 of this Agreement.
Share Exchange: the exchange of PKS Holdings Stock for Class C Stock in
accordance with the Exchange Provision (as defined in Section 3.09).
Special Meeting: the special meeting of stockholders of PKS held on
December 8, 1997 to consider the matters described in Section 2.02.
Stock Option Plan Amendment: an amendment to and restatement of the 1995
Class D Stock Plan of PKS in the form approved by the PKS Board on October 22,
1997, as amended by the Executive Committee of the PKS Board on November 10,
1997.
Subsidiary: with respect to any specified Person, any corporation or
other legal entity of which such Person or any of its Subsidiaries controls or
owns, directly or indirectly, more than 50% of the stock or other equity
interest entitled to vote on the election of members to the board or similar
governing body.
Tax: as defined in the Tax Allocation Agreement.
Tax Allocation Agreement: a tax allocation agreement between the
Diversified Group and the Construction Group to be entered into as of the
Exchange Date, in form and substance mutually satisfactory to all of the
Parties.
Termination Date: the date upon which the Transaction will be abandoned
if not consummated, which will be October 15, 1998, unless that date is
extended by a duly adopted resolution of the PKS Board.
Third-Party Claim: any claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal asserted by a
Person who is not a member of a Group.
Transaction: all of the transactions contemplated by this Agreement,
taken together.
ARTICLE II
CONDITIONS TO TRANSACTION; ABANDONMENT
2.01 Registration Statement/Joint Prospectus/Proxy Statement. PKS and
PKS Holdings have prepared and filed the Registration Statement with the SEC,
the SEC has declared the Registration Statement effective, and PKS and PKS
Holdings have mailed the Joint Prospectus/Proxy Statement to all PKS
Stockholders.
2.02. Special Meeting. At the Special Meeting, PKS submitted (i) the
Transaction, (ii) the Initial PKS Certificate Amendment, (iii) the Post-
Transaction PKS Certificate Amendment and (iv) the Stock Option Plan Amendment
to votes of the PKS Stockholders, and each matter was ratified or approved by
the requisite vote of the PKS Stockholders.
2.03 Ruling Request. PKS has submitted to the Service a request for
certain rulings in connection with the Transaction (as amended from time to
time by PKS, the "Ruling Request"). The PKS Board may determine, at any time
after the date of this Agreement, to request an opinion of federal income tax
counsel to PKS, confirming any or all of the matters subject to the Ruling
Request, as the PKS Board deems appropriate (the "Tax Opinion"). If (a) either
the Service denies the Ruling Request or the Service does not grant the Ruling
Request before the Termination Date, and (b) the PKS Board has not requested
and received the Tax Opinion on or before the Termination Date, the Parties
will abandon the Transaction.
2.04 Nebraska Ruling Request. PKS is preparing for submission to the
State of Nebraska Department of Revenue a request for certain rulings in
connection with the Transaction (as amended from time to time by PKS, the
"Nebraska Ruling Request"). The PKS Board may determine, at any time after the
date of this Agreement, to request an opinion of Nebraska tax counsel to PKS,
confirming any or all of the matters subject to the Nebraska Ruling Request, as
the PKS Board deems appropriate (the "Nebraska Tax Opinion"). If (a) either
the Nebraska Ruling Request is denied or is not granted before the Termination
Date, and (b) the Nebraska Tax Opinion is not requested and received on or
before the Termination Date, the PKS Board will review the benefits of the
Transaction in light of the failure of the Nebraska Department of Revenue to
approve the Nebraska Ruling Request or the failure of the PKS Board to request
and receive the Tax Opinion, and will abandon the Transaction if the PKS Board
determines, by a duly adopted resolution, that consummation of the Transaction
is no longer in the best interest of all PKS Stockholders.
2.05 Termination Date. The Parties will abandon the Transaction if
the Share Exchange is not consummated on or before the Termination Date.
2.06 PKS Board Right to Defer, Modify or Abandon Transaction.
Notwithstanding any other provision of this Agreement, (a) prior to
consummation of the Transaction, the Parties will defer or modify the
Transaction or this Agreement in any respect deemed appropriate by the PKS
Board, and (b) the Parties will abandon the Transaction at any time if the PKS
Board, by a duly adopted resolution, determines that consummation of the
Transaction is no longer in the best interest of all PKS Stockholders. Nothing
herein shall limit or otherwise affect the PKS Board's ability to proceed with
the Transaction at a later date.
2.07 Consequences of Abandonment. If the Parties abandon the
Transaction (whether pursuant to Section 2.03, 2.04, 2.05 or 2.06), Articles
III, IV, V and VI of this Agreement will terminate and have no further force or
effect, the Parties will not be obligated to consummate any of the Separation
Transactions that have not then been consummated, and only this Section 2.07
and Articles I, VII and VIII of this Agreement will remain binding on the
Parties and have any further force or effect.
2.08 Conditions to Share Exchange. The Share Exchange will be
consummated only if (a) PKS has received either the rulings subject to the
Ruling Request and/or the Tax Opinion, (b) the Dividend Condition has been
satisfied with respect to the Share Exchange, (c) the Separation Transactions
have been consummated, and (d) the PKS Board has not determined to abandon the
Transaction. The condition set forth in clause (a) of the preceding sentence
shall not be waived.
ARTICLE III
THE SEPARATION TRANSACTIONS;
THE SHARE EXCHANGE
3.01 1997 Class C Stock Conversions. (a) Under Section VI.D.(10) of
the PKS Certificate, holders of Class C Stock may convert any or all of their
Class C Stock into Class D Stock by tendering a written conversion notice to
PKS between October 15, 1997 and December 15, 1997 (the "1997 Conversion
Period"). Under Section VI.D.(10)(f) of the PKS Certificate, PKS may elect, in
lieu of effecting the conversion, to purchase any shares of Class C Stock so
tendered by providing written notice to the tendering stockholders of such
election. If PKS makes such an election, the tendering stockholder may
withdraw the tender of the Class C Stock if he is then eligible under Section
VI.D.(1) of the PKS Certificate to own Class C Stock (an "Eligible Class C
Stockholder").
(b) PKS intends to permit conversion of no more than 3,000,000
shares of Class C Stock (the "Conversion Cap") tendered during the 1997
Conversion Period and to repurchase (on a pro rata basis among tendering
holders of Class C Stock) shares of Class C Stock tendered in excess of the
Conversion Cap ("Excess Class C Stock"). PKS will notify holders of Excess
Class C Stock of their pro rata share of Excess Class C Stock promptly after
the end of the 1997 Conversion Period, and will permit holders of Excess Class
C Stock who have indicated to PKS that they intend to remain Eligible
Shareholders through April 1, 1998 to withdraw Excess Class C Stock in
accordance with Section VI.D.(10)(f) of the Certificate by providing written
notice of withdrawal on or before the fifteenth calendar day after the date of
such notice.
(c) PKS will purchase any Excess Class C Stock not withdrawn
pursuant to Section 3.01(b), and will permit holders of any such Excess Class C
Stock to elect either (i) to receive cash in exchange for Excess Class C Stock
so purchased in accordance with Section VI.D.(10)(f) of the PKS Certificate, or
(ii) to receive unsecured promissory notes of PKS, maturing on January 15, 1999
and bearing interest, payable at maturity, at a rate of no less than 6% per
annum ("Short Term Notes"), in exchange for Excess Class C Stock. Each Short
Term Note will provide that the obligations under the Short Term Note will be
assumed by PKS Holdings if the Share Exchange is consummated. PKS will not
consummate the purchase of any Excess Class C Stock until after the Class R
Distribution Record Date, and all holders of such Excess Class C Stock will be
entitled to receive the Class R Distribution with respect to such Excess Class
C Stock.
(d) If PKS purchases Excess Class C Stock and the Transaction
is abandoned, PKS will file, within 90 calendar days after the date upon which
the Transaction is abandoned, a Form S-8 registration statement under the
Securities Act for an offering of Class D Stock to holders of purchased Excess
Class C Stock. Upon filing of that registration statement, PKS will offer to
each such holder the opportunity to elect, within 30 calendar days of the
filing, to purchase, at the Class D Per Share Price (as defined in the PKS
Certificate) as of January 1, 1998, a number of shares of Class D Stock equal
to the number of shares of Class D Stock into which his purchased Excess Class
C Stock could have been converted on the Conversion Date but for the
application of the Conversion Cap. The PKS Board may permit holders to offset
the purchase price for such shares of Class D Stock against the outstanding
principal amount and accrued interest payable pursuant to a Short Term Note.
(e) On the date of consummation of the purchase of all Excess
Class C Stock (the "Excess Purchase Date"), KCG will distribute to PKS cash in
an amount equal to all cash payments for Excess Class C Stock pursuant to
Sections 3.01(b)(i).
(f) On the Exchange Date, PKS Holdings will assume all of the
obligations of PKS under each Short Term Note, if any.
(g) Within 30 calendar days after the expiration of the 1997
Conversion Period, KCG will distribute to PKS, and PKS will contribute to KDG,
cash in an amount equal to the aggregate Class C Per Share Price (as defined in
the PKS Certificate) of the Class C Stock converted into Class D Stock during
the 1997 Conversion Period (subject to adjustment following delivery of audited
financial statements for PKS for 1997, in a manner consistent with past
practice).
3.02 Accelerated Conversion of Debentures. (a) PKS has outstanding
Series 1993 through Series 1996 Class C Convertible Debentures (the
"Debentures"). The Debentures are convertible into Class C Stock, during a one
month period in the fifth year of their terms, at a rate specified in the
Debentures. PKS will accelerate the conversion period for the Debentures to
permit holders of the Debentures ("Converting Debenture Holders") to tender for
conversion, during a ten day period beginning on December 16, 1997 and ending
on December 25, 1997 (the "Debenture Conversion Period"), any or all Debentures
into Class C Stock at the otherwise applicable conversion rate. PKS will issue
all Class C Stock with respect to all Debentures so elected to be converted on
December 26, 1997 (the "Debenture Conversion Date"). All Converting Debenture
Holders will be entitled to receive the Class R Distribution with respect to
Class C Stock issued upon conversion of the Debentures. Any Debentures not
tendered for conversion during the Debenture Conversion Period will remain
outstanding and governed by the original terms of the Debentures, and holders
of any such Debentures will not be entitled to receive the Class R Distribution
with respect to the Debentures or the related Class C Stock. If the
Transaction is consummated, PKS and PKS Holdings will use their best efforts to
agree upon an arrangement whereby the financial benefits and burdens associated
with any Debentures remaining outstanding will be borne by PKS Holdings.
(b) KCG or one of its Subsidiaries will make available to each
Converting Debenture Holder on the Debenture Conversion Date, a loan in an
amount equal to the principal amount of each Debenture (a "Debenture Loan").
Each Debenture Loan will be evidenced by a non-interest bearing promissory note
and secured pursuant to a pledge agreement in such forms as determined by KCG.
The entire principal balance of each Debenture Loan will be due and payable on
the earlier of the last day of the conversion period of the related Debenture,
as originally issued and before any modification pursuant to Section 3.02(a),
on the date of the sale or other disposition by the Converting Debenture Holder
of the related Class C Stock to PKS (other than pursuant to the Share
Exchange), or (if the Share Exchange is consummated) the related PKS Holdings
Stock to PKS Holdings, or the termination of employment of the holder.
3.03 1997 Debentures. PKS issued, on or about November 1, 1997, its
Series 1997 Class C Convertible Debentures (the "1997 Debentures"). Each 1997
Debenture will provide that if the Share Exchange is consummated, the 1997
Debentures automatically will become, without any action by PKS, PKS Holdings
or the holder thereof, a debenture of PKS Holdings (the "Replacement
Debentures") convertible into the number of shares of PKS Holdings Stock as it
was previously convertible into Class C Stock, and that PKS will no longer have
any obligation or liability under the 1997 Debentures. On or before the
Exchange Date, PKS and PKS Holdings will agree to a mutually acceptable
arrangement pursuant to which PKS Holdings will assume, or otherwise become
liable for, the obligations of PKS under the related Indenture.
3.04 Sales of Class C Stock by Eligible Class C Stockholders. (a)
Under Section VI.D.3(a) of the PKS Certificate, PKS is obligated to purchase,
at the Class C Per Share Price, any Class C Stock tendered for purchase during
the first fifteen calendar days of each month. On the Exchange Date, PKS will
deliver to PKS Holdings a schedule that sets forth the name of each Eligible
Class C Stockholder (determined as of the Exchange Date) from whom PKS has
purchased Class C Stock ("Purchased Class C Stock") between the Class R
Distribution Date and the Exchange Date (a "Selling Shareholder"), the date of
such purchase, the number of shares of Class C Stock so purchased and the total
amount paid to each such Eligible Class C Shareholder for all shares of Class C
Stock so purchased.
(b) PKS Holdings will promptly notify PKS if PKS Holdings
sells PKS Holdings Stock to any Selling Shareholder at any time between the
Exchange Date and the first anniversary of the Exchange Date (a "Subsequent
Sale"). PKS Holdings will take any action reasonably requested by PKS to
ensure that any Class R Stock distributed to the Selling Shareholder with
respect to Purchased Class C Stock becomes attached to such shares of PKS
Holdings Stock purchased in a Subsequent Sale on a pro rata basis, as
contemplated by the Certificate Amendments.
(c) In connection with Subsequent Sales of PKS Holdings Stock
to Canadians ("Canadian Shareholders"), PKS Holdings or a Subsidiary thereof
may offer to provide loans to such Canadian Shareholders, on terms acceptable
to all Parties. Within 30 calendar days after the date of each such loan, PKS
Holdings will provide PKS with a schedule that sets forth, in detail reasonably
acceptable to PKS, the terms and conditions of any and all such loans.
3.05 Initial Certificate Amendment. PKS will file the Initial
Certificate Amendment with the Secretary of State as promptly as practicable
after the Special Meeting.
3.06 Class R Distribution. (a) Subject to the satisfaction of the
Dividend Condition with respect to the Class R Distribution, PKS will declare a
dividend, payable to holders of Class C Stock as of the Class R Distribution
Record Date, of .8 of one share of Class R Stock for each share of Class C
Stock held as of the Class R Distribution Record Date.
(b) PKS will record the Class R Distribution, and register all
persons entitled to the Class R Distribution as holders of Class R Stock, on
the books and records maintained by or on behalf of PKS for the registration of
ownership of the capital stock of PKS, effective as of the Class R Distribution
Record Date. PKS will not issue certificates or other instruments to evidence
Class R Stock unless and until the Share Exchange is consummated. If the Share
Exchange is consummated, PKS will issue and distribute certificates evidencing
the Class R Stock. If the Class R Distribution is consummated, but the
Transaction is later abandoned, PKS will exercise its rights to repurchase all
of the Class R Stock under Section IX.M of the Initial Certificate Amendment as
promptly as practicable after abandonment of the Transaction.
3.07 PKSIS Reorganization. On or before the Exchange Date, KDG will
cause PKSIS to undertake such corporate reorganization as is then described in
or contemplated by the Ruling Request.
3.08 PKS Holdings Transactions. (a) From the date of this Agreement
to the Exchange Date, KCG will make such distributions to PKS as are necessary
to permit PKS to make such capital contributions and provide such other funds
to PKS Holdings as may be necessary or desirable to permit PKS Holdings to
perform and discharge its obligations under this Agreement.
(b) On or before the Exchange Date, PKS, in its capacity as
the sole shareholder of PKS Holdings, (i) will adopt the PKS Holdings
Certificate Amendment, and (ii) will elect to the board of directors of PKS
Holdings those persons designated as directors of PKS Holdings in the Joint
Prospectus/Proxy Statement, with such substitutions or additions as may be
approved by the PKS Board after the date of this Agreement.
(c) On the Exchange Date, PKS Holdings will file the PKS
Holdings Certificate Amendment with the Secretary of State.
(d) On the Exchange Date, PKS will make a capital contribution
to PKS Holdings of (i) all of the capital stock of KCG held by PKS, and (ii)
such other assets as agreed to by the Parties and described on a Schedule to be
attached to the Agreement on or before the Exchange Date. On the Exchange
Date, PKS Holdings will distribute to PKS a sufficient number of shares of PKS
Holdings Stock, evidenced by a single certificate, so that, together with such
shares previously issued to PKS, PKS will hold shares of PKS Holdings Stock
equal to the number of shares of Class C Stock outstanding on the Exchange
Record Date.
3.09 Share Exchange. (a) Not more than 60 calendar days, but not less
than 30 calendar days, prior to the Exchange Date, PKS shall give each holder
of Class C Stock the notice contemplated by Section III.D.(3)(a) of the PKS
Certificate (the "Exchange Provision"). Each notice will set forth the
Exchange Record Date and the information required by the Exchange Provision,
and will establish such procedures for the Share Exchange as are permitted by
the Exchange Provision and otherwise deemed appropriate by PKS.
(b) On the Exchange Date, PKS will exchange, pursuant to the
Exchange Provision, one share of the PKS Holdings Common Stock received
pursuant to Section 3.11(a) for each share of Class C Common Stock outstanding
as of the Exchange Date. On and after the Exchange Date, all rights of holders
of Class C Stock will be governed by the Exchange Provisions.
(c) The Share Exchange will be consummated only after
consummation of all of the Separation Transactions intended to be consummated
on the Exchange Date.
3.10 Post-Transaction Certificate Amendment. If the Share Exchange is
consummated, PKS will file the Post-Transaction Certificate Amendment with the
Secretary of State on the Exchange Date.
3.11 Certificate Surrender and Distribution. (a) As promptly as
practicable after the Exchange Date, PKS Holdings will deliver to PKS, in
exchange for the PKS Holdings Stock certificate described in Section 3.08(d),
certificates for PKS Holdings Stock in names and denominations sufficient to
permit PKS to distribute certificates for PKS Holdings Stock to each holder of
Class C Stock in the same denominations as the Class C Stock then held by such
holder, subject, in each case, to surrender by such holder in accordance with
the Exchange Provision of the certificates evidencing the related shares of
Class C Stock.
(b) PKS will coordinate delivery of share certificates with
any lending institution to which shares of Class C Stock have been pledged. PKS
will arrange for delivery of the shares of Class C Stock to be exchanged and
will, if directed in writing by the holder of such shares of Class C Stock,
deliver shares of PKS Holdings Stock and Class R Stock directly to such lending
institution.
3.12 Class R Stock Provisions. (a) So long as any shares of Class R
Stock remain outstanding, PKS will take all necessary action (i) to obtain
and keep effective any and all permits, consents and approvals of
governmental agencies and authorities and to make filings under federal and
state securities acts and laws, which may be or become requisite in
connection with the issuance, sale, transfer and delivery of the shares of
Class D Stock issued upon conversion of shares of Class R Stock, and (ii) if
the Class D Stock is Publicly Traded (as defined in the PKS Certificate), to
have the shares of Class D Stock, immediately upon their issuance upon
conversion of the shares of Class R Stock, listed on each national securities
exchange, the NASDAQ National Market or the NASDAQ Small Cap Market on which
the Class D Stock is then listed or traded. So long as any shares of Class R
Stock remain outstanding and if required in order to comply with the
Securities Act or state securities laws, PKS will file such post-effective
amendments to the Registration Statement as may be necessary to permit the
Corporation to deliver to each person converting shares of Class R Stock a
prospectus meeting the requirements of Section 10(a)(3) of the Securities Act
and otherwise complying therewith, and, if required in order to comply with
the Securities Act or state securities laws, will deliver such a prospectus
to each such person.
(b) PKS will not, by amendment of the PKS Certificate, or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any voluntary action, seek to
avoid the observance or performance of any of its obligations with respect to
the Class R Stock.
(c) After the date upon which the Class R Stock becomes
convertible into Class D Stock, and in order to provide holders of Class R
Stock a means to determine the Conversion Ratio when the Class D Stock is
Publicly Traded (as both such terms are defined in the PKS Certificate), PKS
shall establish reasonable measures intended to enable holders of Class R
Stock to obtain information at any time during normal business hours.
ARTICLE IV
INDEMNIFICATION
4.01 Indemnification. (a) From and after the Exchange Date, PKS and
KDG will indemnify, defend and hold harmless each Construction Indemnitee from
and against all Losses incurred or suffered by any Construction Indemnitee
arising out of or due to, directly or indirectly, (i) any breach by PKS or KDG
of any obligation under this Agreement, (ii) the Diversified Assets, (iii) the
Diversified Business, (iv) Diversified Securities Transactions, (v) Diversified
Liabilities, (vi) the Covent Liabilities (as defined in Section 5.10(f)) and
(vii) such other matters as are specifically agreed by the Parties and
described on a Schedule attached to the Agreement on or before the Exchange
Date.
(b) From and after the Exchange Date, PKS Holdings and KCG
will indemnify, defend and hold harmless each Diversified Indemnitee from and
against all Losses incurred or suffered by any Diversified Indemnitee arising
out of or due to, directly or indirectly, (i) any breach by PKS Holdings or KCG
of any obligation under this Agreement, (ii) the Construction Assets, (iii) the
Construction Business, (iv) Construction Securities Transactions, (v)
Construction Liabilities, and (vi) such other matters as are specifically
agreed by the Parties and described on a Schedule attached to the Agreement on
or before the Exchange Date.
(c) This Section 4.01 shall not apply to any matter or item
specifically covered by indemnification or risk allocation provisions of the
Continuing Agreements.
(d) If an Indemnitee realizes a Tax benefit or detriment by
reason of having incurred a Loss for which such Indemnitee receives an
Indemnity Payment from an Indemnifying Party or by reason of receiving an
Indemnity Payment, such Indemnitee shall pay to such Indemnifying Party an
amount equal to the Tax benefit, or such Indemnifying Party shall pay to such
Indemnitee an additional amount equal to the Tax detriment (taking into account
any Tax detriment resulting from the receipt of such additional amounts), as
the case may be. If, in the opinion of counsel to an Indemnifying Party
reasonably satisfactory in form and substance to the affected Indemnitee, there
is a substantial likelihood that the Indemnitee will be entitled to a Tax
benefit by reason of an Indemnifiable Loss, the Indemnifying Party promptly
shall notify the Indemnitee and the Indemnitee promptly shall take any steps
(including the filing of such returns, amended returns or claims for refunds
consistent with the claiming of such Tax benefit) that, in the reasonable
judgment of the Indemnifying Party, are necessary and appropriate to obtain any
such Tax benefit. If, in the opinion of counsel to an Indemnitee reasonably
satisfactory in form and substance to the affected Indemnifying Party, there is
a substantial likelihood that the Indemnitee will be subjected to a Tax
detriment by reason of an Indemnification Payment, the Indemnitee promptly
shall notify the Indemnifying Party and the Indemnitee promptly shall take any
steps (including the filing of such returns or amended returns or the payment
of Tax underpayments consistent with the settlement of any Liability for Taxes
arising from such Tax detriment) that, in the reasonable judgment of the
Indemnitee, are necessary and appropriate to settle any Liabilities for Taxes
arising from such Tax detriment. If, following a payment by an Indemnitee or
an Indemnifying Party pursuant to this Section 4.01(d) in respect of a Tax
benefit or detriment, there is an adjustment to the amount of such Tax benefit
or detriment, then each of the Indemnifying Party and the Indemnitees shall
make appropriate payments to the other to reflect such adjustments.
(e) The amount which an Indemnifying Party is required to pay
to any Indemnitee pursuant to this Section 4.01 will be reduced (including
retroactively) by any insurance proceeds and other amounts actually recovered
by such Indemnitee in reduction of the related Loss, it being understood and
agreed that the members of each Group will use their commercially reasonable
efforts to collect any such proceeds or other amounts to which they are
entitled, without regard to whether it is the Indemnifying Party hereunder. If
an Indemnitee receives an Indemnity Payment in respect of an Indemnifiable Loss
and subsequently receives insurance proceeds or other amounts in respect of
such Indemnifiable Loss, then such Indemnitee shall pay to such Indemnifying
Party an amount equal to the difference between (i) the sum of the amount of
such Indemnity Payment and the amount of such insurance proceeds or other
amounts actually received and (ii) the amount of such Loss, adjusted (at such
time as appropriate adjustment can be determined) in each case to reflect any
premium adjustment attributable to such claim.
(f) No person other than an Indemnitee is intended to be a
beneficiary of the indemnification provisions set forth above, and no insurer
will be relieved thereby of any obligation to pay any claims to which it is
obligated or be entitled to any right of subrogation with respect to any amount
paid hereunder.
4.02 Procedure for Indemnification. (a) If any Indemnitee determines
that it is or may be entitled to indemnification by any Indemnifying Party
(other than in connection with any Third Party Claim), the Indemnitee will
deliver to the Indemnifying Party a written notice specifying, to the extent
reasonably practicable, the basis for its claim for indemnification and the
amount for which the Indemnitee reasonably believes it is entitled to be
indemnified. Within 60 calendar days after receipt of such notice, the
Indemnifying Party will pay the Indemnitee such amount in cash or other
immediately available funds unless the Indemnifying Party objects to the claim
for indemnification or the amount by written notice setting forth the grounds
therefor within such 60 calendar day period. If the Indemnifying Party does
not give the Indemnified Party written notice objecting to such indemnity claim
and setting forth the grounds therefor within 60 calendar days after receipt of
such notice, the Indemnifying Party will be deemed to have acknowledged its
liability for such claim and the Indemnitee may exercise any and all of its
rights under applicable law to collect such amount.
(b) If any Indemnitee receives notice of the assertion of any
Third-Party Claim with respect to which an Indemnifying Party is obligated
under this Agreement to provide indemnification, such Indemnitee will give such
Indemnifying Party notice thereof promptly after becoming aware of such Third-
Party Claim; provided, however, that the failure of any Indemnitee to give such
notice will not relieve any Indemnifying Party of its obligations under this
Article IV, except to the extent that such Indemnifying Party is actually
prejudiced by such failure to give notice. Such notice will describe such
Third-Party Claim in reasonable detail and, if practicable, will indicate the
estimated amount of the Indemnifiable Loss that has been or may be sustained by
such Indemnitee.
(c) An Indemnifying Party, at such Indemnifying Party's own
expense and through counsel chosen by such Indemnifying Party (which counsel
shall be reasonably satisfactory to the Indemnitee), may elect to defend any
Third-Party Claim. If an Indemnifying Party elects to defend a Third-Party
Claim, then, within fifteen calendar days after receiving notice of such Third-
Party Claim (or sooner, if the nature of such Third-Party Claim so requires),
such Indemnifying Party will notify the Indemnitee of its intent to do so, and
such Indemnitee shall cooperate in the defense of such Third-Party Claim. Such
Indemnifying Party will pay such Indemnitee's reasonable out-of-pocket expenses
incurred in connection with such cooperation. After notice from an
Indemnifying Party to an Indemnitee of its election to assume the defense of a
Third-Party Claim, such Indemnifying Party will not be liable to such
Indemnitee under this Article IV for any legal or other expenses subsequently
incurred by such Indemnitee in connection with the defense thereof; provided,
however, that such Indemnitee will have the right to employ one law firm as
counsel to represent such Indemnitee (which firm shall be reasonably acceptable
to the Indemnifying Party) if, in such Indemnitee's reasonable judgment, either
a conflict of interest between such Indemnitee and such Indemnifying Party
exists in respect of such claim or there may be defenses available to such
Indemnitee which are different from or in addition to those available to such
Indemnifying Party, and in that event (i) the reasonable fees and expenses of
such separate counsel shall be paid by such Indemnitee and (ii) each of such
Indemnifying Party and such Indemnitee shall have the right to run its own
defense in respect of such claim. If an Indemnifying Party elects not to
defend against a Third-Party Claim, or fails to notify an Indemnitee of its
election as provided in this Section 4.02 within the period of fifteen calendar
days described above, such Indemnitee may defend, compromise and settle such
Third-Party Claim; provided, however, that no such Indemnitee may compromise or
settle any such Third-Party Claim without the prior written consent of the
Indemnifying Party, which consent shall not be withheld unreasonably.
Notwithstanding the foregoing, the Indemnifying Party shall not, without the
prior written consent of the Indemnitee, (i) settle or compromise any Third-
Party Claim or consent to the entry of any judgment which does not include as
an unconditional term thereof the delivery by the claimant or plaintiff to the
Indemnitee of a written release from all liability in respect of such Third-
Party Claim or (ii) settle or compromise any Third-Party Claim in any manner
that in the reasonable judgment of the Indemnifying Party, is likely to
adversely affect the Indemnitee.
(d) If for any reason the indemnification provided by this
Agreement is unenforceable, the Indemnifying Party will contribute to the
amount payable by the Indemnitee as a result of the related losses an amount
appropriate to reflect equitable considerations.
4.03 Remedies Cumulative. The remedies provided in this Article IV
will be cumulative and will not preclude assertion by any Indemnitee of any
other rights or the seeking of any other remedies against any Indemnifying
Party.
ARTICLE V
ADDITIONAL COVENANTS
5.01 Further Assurances. Each of the Parties will use its best
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, all things, reasonably necessary, proper or advisable under applicable
laws, regulations and agreements to consummate and make effective the
Transactions. Each Party will cooperate with the other Parties, and execute
and deliver, or use its best efforts to cause to be executed and delivered, all
instruments, including instruments of conveyance, assumption, assignment and
transfer, and to make all filings with, and to obtain all consents, approvals
or authorizations of, any governmental or regulatory authority or any other
Person under any permit, license, agreement, indenture or other instrument, and
take all such other actions as such Party may reasonably be requested to take
by any other Party, consistent with the terms of this Agreement, in order to
effectuate the provisions and purposes of this Agreement.
5.02 Transfer of Assets; Assumption of Liabilities. (a) The Parties
intend that, upon consummation of the Share Exchange, (i) one or more members
of the Construction Group, and not any member of the Diversified Group, will
hold all right, title and interest in and to all Construction Assets, and that
one or more members of the Construction Group, and not any member of the
Diversified Group, will have the sole liability for Construction Group
Liabilities; and (ii) one or more members of the Diversified Group, and not any
member of the Construction Group, will hold all right, title and interest in
and to all Diversified Assets, and one or more members of the Diversified
Group, and not any member of the Construction Group, will have the sole
liability for all Diversified Group Liabilities.
(b) Prior to the Exchange Date, each Party will take any
action, and will cause their Subsidiaries to take any action, requested by any
member of the other Group entitled under Section 5.02(a) to obtain an Asset or
to be relieved of a Liability, reasonably necessary to transfer any such Asset
or to assume any such Liability. If any such transfer or assumption of Assets
or Liabilities is not consummated on or before the Exchange Date, the Party
retaining such Asset or Liability will hold such Asset in trust for the use and
benefit of the Party entitled thereto (at the expense of the Party entitled
thereto), or will retain such Liability for the account of the Party by whom
such Liability is to be assumed pursuant hereto, as the case may be, and will
take such other action as may be reasonably requested by the Party to whom such
Asset is to be transferred (including licensing, contracting and leasing
arrangements), or by whom such Liability is to be assumed, in order to place
such Party, insofar as reasonably possible, in the same position as if such
Asset or Liability had been transferred as contemplated hereby. If and when
any such Asset or Liability becomes transferable, such transfer will be
effected as promptly as possible.
(c) Notwithstanding any other provision of this Agreement,
this Agreement will not constitute an agreement to transfer any Asset or assume
any Liability if an assignment of the Asset or the assumption of the Liability
violates any law, rule or regulation or constitutes a breach of any agreement
relating to such Asset or Liability.
5.03 No Representations or Warranties. Each Group understands and
agrees that no member of the other Group is, in this Agreement, representing or
warranting in any way as to the Assets, the Business or the Liabilities of the
Group or as to any consents or approvals required in connection with the
consummation of the transactions contemplated by this Agreement, it being
agreed and understood that each Group is taking all of its Assets "as is, where
is" and that each Group will bear the economic and legal risk that the title of
any member of the Group to any Assets shall be other than good and marketable
and free from encumbrances.
5.04 Terminated Agreements. On or before the Exchange Date, the
Parties will agree to a schedule of agreements, contracts and arrangements that
will terminate and have no further force or effect as of the Exchange Date.
Each Party shall, at the reasonable request of another Party, take or cause to
be taken, such other actions as may be necessary to effect the termination of
such agreements.
5.05 Continuing Agreements. Neither this Agreement nor the Share
Exchange shall modify, amend or otherwise affect any agreements contemplated by
Section 5.11 or Section 5.12 or any other agreement between a member or members
of the Construction Group, on one hand, and a member or members of the
Diversified Group, on the other hand (together, the "Continuing Agreements"),
except for those agreements terminated pursuant to the provisions of Section
5.04. If there is a conflict between this Agreement and a Continuing
Agreement, the Continuing Agreement shall control.
5.06 Intercompany Accounts. Effective as of the close of business on
the day prior to the Exchange Date, all intercompany receivables or payables
and loans then existing between any member of one Group and any member of the
other Group will be settled by way of payment, cancellation or capital
contribution.
5.07 HSR Act. PKS Holdings will file any notification and report
forms and other material required by the Hart Scott Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") with respect to the shares
of PKS Holdings Stock to be distributed in the Share Exchange prior to the
Exchange Date, and will seek early termination of the waiting period under the
HSR Act.
5.08 Kiewit Name. (a) Not later than the first business day after the
Exchange Date (i) PKS will change its corporate name to another name not
including "PKS" or "Kiewit" as part of the name, and, (ii) except as provided
in Section 5.08(b), will cause all of its Subsidiaries to change their
corporate names if necessary to corporate names not including "PKS" or "Kiewit"
as part of the name. As soon as reasonably practicable after the Exchange
Date, and except as provided in Section 5.08(b), PKS will use its best efforts
to, and will cause its Subsidiaries to use their best efforts to, cease using
"PKS" or "Kiewit" in connection with the business activities of the Diversified
Group.
(b) Notwithstanding Section 5.08(a), (i) the members of the
Diversified Group will have the right to use "PKS" or "Kiewit" for a period of
one year from the Exchange Date to the extent reasonably necessary in
accordance with its past practice in connection with legal, regulatory or
contract matters relating to Diversified Group business activities in existence
on the Exchange Date, and (ii) PKSIS and its current information services
Subsidiaries will not be required to comply with Section 5.08(a), and will have
the right to continue to use "PKS" in accordance with its past practice in
connection with its businesses until the second anniversary of the Exchange
Date.
(c) As of the Exchange Date, PKS assigns, and will cause each
of its Subsidiaries to execute any agreement or instrument reasonably requested
by PKS Holdings to assign, any and all of its right, title and interest in and
to any corporate name, trademark or tradename using "PKS" or "Kiewit," and any
and other proprietary rights to those names or related symbols.
5.09 Sales of Class C Stock. Except as contemplated by Section 3.02,
PKS will not offer to sell, sell or issue any Class C Stock between the date of
this Agreement and the Class R Record Date.
5.10 Insurance. (a) As of the Exchange Date, directors and officers
of the members of the Construction Group will no longer be covered by the
directors and officers liability insurance maintained by PKS for directors and
officers of PKS and its subsidiaries (the "PKS D&O Policy") for acts occurring
on and after the Exchange Date. PKS Holdings will obtain, effective not later
than the Exchange Date, directors and officers liability insurance for all
directors and officers of the members of the Construction Group, on such terms
and conditions and providing such coverages as PKS Holdings deems appropriate.
PKS shall obtain a separate directors and officers liability insurance policy
("Tail Policy") for all present and past directors and officers of the
Construction Group in effect for a minimum of 5 years from the Exchange Date.
The cost of the premiums payable with respect to the Tail Policy shall be
allocated 82.5% to the Diversified Group and 17.5% to the Construction Group.
(b) No Party shall, without the consent of the other Parties, provide
any insurance carrier with a release, or amend, modify or waive any rights
under any such policy or agreement, if such release, amendment, modification or
waiver would adversely affect any rights or potential rights of another Group;
provided, however, that the foregoing shall not preclude a Party either from
presenting any claim or from exhausting any policy limit.
(c) This Agreement shall not be considered as an attempted assignment
of any policy of insurance or as a contract of insurance and shall not be
construed to waive any right or remedy of the Parties in respect of any
insurance policy or any other contract or policy of insurance.
(d) From and after the Exchange Date, PKS Holdings shall be entitled
to the benefit of any reserves held by any insurance carrier with respect to
the Construction Liabilities, and PKS shall be entitled to the benefit of any
reserves held by any insurance carrier with respect to the Diversified
Liabilities.
(e) On or before the Exchange Date, the Parties will agree upon the
insurance policies in which PKS is the lead named insured which will be amended
to substitute PKS Holdings as the lead named insured effective as of the
Exchange Date. Each Party shall, at the reasonable request of another Party,
take or cause to be taken, such other actions as may be necessary to effectuate
such change.
(f) By agreement dated November 30, 1992 (the "Transfer Agreement"),
Covent Vermont Insurance Company ("Covent"), then a subsidiary of KDG,
transferred to Global Surety and Insurance Co. ("Global"), a subsidiary of KCG,
all reinsurance business liabilities held by Covent ("Covent Liabilities"), in
exchange for certain cash payments and other consideration. It is the intent of
the Parties to reverse the transfer of the Covent Liabilities, thereby
returning to KDG all responsibility originally held by Covent for the Covent
Liabilities, and releasing Global of any and all further liability and
responsibility for the Covent Liabilities. In this regard, the Parties agree to
work together to effect such reversal, effective as soon as possible.
(g) Notwithstanding any other provision hereof, each Group shall
retain all rights of any insured party under each insurance policy and
insurance contract owned or maintained by PKS under which any member of such
Group is a named insured, including any right of indemnity and the right to be
defended by or at the expense of the insurer. Each Party shall pay its
allocable share of any retrospectively-rated premiums arising out of any claims
made by such Party under such insurance policies.
(h) The Parties agree to cooperate and provide reasonable assistance
to each other with regard to any dispute with any third party (including
insurers or third-party administrators) regarding any matter related to any of
the above insurance policies.
5.11 Unresolved Matters. The Parties agree to negotiate in good faith
and enter into on or before the Exchange Date, mutually acceptable agreements
or arrangements with respect to certain unresolved matters, including the
matters described below (the "Unresolved Matters"), and will amend and restate
this Agreement to the extent necessary or desirable to conform with those
agreements or arrangements. The unresolved matters include: (i) the lease by
KDG of office space from KCG in the KCG headquarters building at Kiewit Plaza,
Omaha, Nebraska; (ii) the provision by KCG of aircraft flight and maintenance
services to KDG; (iii) the provision by KCG of interim stock registrar and
transfer agent services to PKS; (iv) the treatment of employees of KDG who are
participants prior to the Exchange Date in the 401(k) and profit sharing plans
maintained by KCG; (v) the administration of the Kiewit Royalty Trust; (vi) the
ownership of Kiewit Investment Management Corp. (vii) modifications to the mine
management agreement dated January 8, 1992 by and between Kiewit Coal
Properties Inc. and Kiewit Mining Group Inc.; and (viii) administration of
insurance claims with respect to policies maintained for the benefit of both
Business Groups prior to the Exchange Date.
5.12 Tax Allocation Agreement. The Parties agree to negotiate in good
faith and enter into the Tax Allocation Agreement on or before the Exchange
Date.
ARTICLE VI
INFORMATION
6.01 Access to Information. (a) As soon as practicable following the
Exchange Date, and to the extent requested, each Group shall provide to the
other Group any documents, contracts, books, records and data (including but
not limited to minute books, stock registers, stock certificates and documents
of title) in its possession relating to such other Group or such other Group's
business and affairs; provided that if any such documents, contracts, books,
records or data relate to both Groups or the business and operations of both
Groups, each such Group shall provide to the other Group true and complete
copies of such documents, contracts, books, records or data.
(b) After the Exchange Date, each Group will afford to the
other Group and to the other Group's Representatives reasonable access and
duplicating rights during normal business hours to all Information within such
Group's possession relating to such other Group's businesses, insofar as such
access is reasonably required by such other Group. In addition, PKS Holdings
shall have access during such time to Information of historical significance
that relates to the Construction Business. Without limiting the foregoing,
Information may be requested under this Section for audit, accounting, claims,
litigation and tax purposes, as well as for purposes of fulfilling disclosure
and reporting obligations.
6.02 Production of Witnesses. After the Exchange Date, each Group
will use reasonable efforts to make available to the other Group its
Representatives as witnesses to the extent that any such Person may reasonably
be required in connection with any legal, administrative or other proceedings
in which the requesting Party may from time to time be involved and will
otherwise cooperate with the other Group, to the extent reasonably required in
connection with any such proceeding.
6.03 Retention of Records. Except as otherwise required by law or
agreed in writing, or as otherwise provided in the Continuing Agreements, each
Group will retain, for a period of at least ten years following the
Distribution Date, all significant Information in such Group's possession or
under its control relating to the business of the other Group and, after the
expiration of such ten year period, prior to destroying or disposing of any
such Information, (a) the Group proposing to dispose of or destroy any such
Information shall provide no less than 90 calendar days' prior written notice
to the other Group, specifying the Information proposed to be destroyed or
disposed of, and (b) if, prior to the scheduled date for such destruction or
disposal, the other Group requests in writing that any of the Information
proposed to be destroyed or disposed of be delivered to such other Group, the
Group proposing to dispose of or destroy such Information promptly shall
arrange for the delivery of the requested Information to a location specified
by, and at the expense of, the requesting Group.
6.04 Reimbursement. Each Group providing information or witnesses to
the other Group, or otherwise incurring any expense under Section 6.01, 6.02 or
6.03, including costs and expenses paid to third parties for storage of
Information on behalf of the other Group, will be entitled to receive from the
other Group, upon the presentation of invoices therefor, payment for all out-
of-pocket costs and expenses as may be reasonably incurred in providing such
information, witnesses or cooperation.
6.05 Confidentiality. From and after the Exchange Date, each Group
will hold, and shall use its reasonable best efforts to cause its
Representatives to hold, in confidence all Information concerning the other
Party obtained by it prior to the Exchange Date or furnished to it by such
other Party pursuant to this Agreement or the Continuing Agreements, and will
not release or disclose such Information to any other Person, except its
Representatives, who will be bound by the provisions of this Section; provided,
however, that each Group may disclose such Information to the extent that (a)
disclosure in the opinion of such Group's counsel, is required or advisable
under applicable law (including the federal securities laws), or (b) such Group
can show that such Information was (i) available to such Group on a
nonconfidential basis prior to its disclosure by the other Group, (ii) in the
public domain through no fault of such Group or (iii) lawfully acquired by such
Party from other sources after the time that it was furnished to such Party
pursuant to this Agreement or the Continuing Agreements. Notwithstanding the
foregoing, each Group will be deemed to have satisfied its obligations under
this Section with respect to any Information if it exercises the same care with
regard to such Information as it takes to preserve confidentiality for its own
similar Information.
ARTICLE VII
EXPENSES
7.01 General. The Parties have agreed to allocate the financial
burden of Covered Expenses 82.5% to the Diversified Group and 17.5% to the
Construction Group (the "Expense Sharing Ratio"), whether the Transaction is
consummated or abandoned. All other costs or expenses incurred by any Party in
connection with the Transaction will be borne by the Party incurring the cost
or expense.
7.02 Covered Expenses. (a) The following costs and expenses incurred
by any Party will be considered to be "Covered Expenses":
(i) fees and expenses of U.S. corporate counsel to PKS,
Willkie Farr & Gallagher, Canadian corporate counsel to PKS, Blake, Cassels &
Graydon, and Delaware counsel to PKS, Morris, Nichols, Arsht & Tunnel, in each
case to the extent allocated to the Transaction in accordance with Section
7.02(c);
(ii) fees and expenses of U.S. tax counsel to PKS, Skadden
Arps, Slate, Meagher & Flom, Canadian tax counsel to PKS, Blake, Cassels &
Graydon, and Nebraska tax counsel to PKS, McGrath, North, Mullin & Kratz, P.C.,
in each case to the extent allocated to the Transaction in accordance with
Section 7.02(c);
(iii) fees and expenses of the certified public accountants
for PKS, Coopers & Lybrand, to the extent allocated to the Transaction in
accordance with Section 7.02(c);
(iv) fees and expenses of Gleacher NatWest, financial
advisor to PKS, incurred pursuant to the engagement letter of Gleacher NatWest
dated as of June 1, 1997, to the extent allocated to the Transaction in
accordance with Section 7.02(c);
(v) all registration fees or other similar expenses payable
to the SEC, any state securities commission, or the Service, and all fees and
expenses in connection with any filing under the HSR Act;
(vi) all costs and expenses incurred in connection with the
printing and distribution of the Joint Prospectus/Proxy Statement;
(vii) all costs and expenses of the proxy solicitation and
the Special Meeting;
(viii) a non-accountable cost allowance in an amount to be
mutually agreed upon by the Parties for costs and expenses incurred by PKS
Holdings in connection with the Debenture Loans; and
(ix) a non-accountable cost allowance in an amount to be
mutually agreed upon by the Parties for costs and expenses incurred by PKS
Holdings in connection with certain loans to its Canadian shareholders.
(b) The Parties acknowledge that certain of the fees and
expenses of the advisors described in (i), (ii), (iii) and (iv) of Section
7.02(a) are to be incurred solely for the account of certain of the Parties,
and will not be considered to be Covered Expenses. Each such Advisor will
allocate its fees and expenses between Covered Expenses and costs and expenses
incurred solely for the account of one of the Parties, and such allocation will
be binding on each of the Parties.
7.03 Actual Payment of Covered Expenses. KCG will make actual payment
of the Covered Expenses described in items (viii) and (ix) of Section 7.02(a).
KDG will make actual payment of all other Covered Expenses ("Other Covered
Expenses").
7.04 Covered Expense True-Up. KDG will prepare and submit to KCG,
within 120 calendar days after the date of abandonment of the Transaction or
the Exchange Date, as the case may be, a schedule of the Other Covered
Expenses, together with such supporting documentation with respect to the Other
Covered Expenses as KCG reasonably requests. Within five calendar days after
the submission of that schedule, KDG will pay KCG in cash an amount sufficient
to ensure that the financial burden of the Covered Expenses has been allocated
between KCG and KDG in proportion to the Expense Sharing Ratio.
ARTICLE VIII
MISCELLANEOUS
8.01 Complete Agreement. This Agreement, the Exhibits and Schedules
hereto and the agreements and other documents referred to herein will
constitute the entire agreement between the Parties with respect to the subject
matter hereof and will supersede all previous negotiations, commitments and
writings with respect to such subject matter.
8.02 Survival of Agreements. All covenants and agreements of the
Parties contained in this Agreement will survive the Share Exchange.
8.03 Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of Nebraska (other than the laws
regarding choice of laws and conflicts of laws) as to all matters, including
matters of validity, construction, effect, performance and remedies.
8.04 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable
telegram, telex or other standard form of telecommunications, or by registered
or certified mail, postage prepaid, return receipt requested, addressed as
follows:
If to PKS or KDG:
Vice President - Legal
Kiewit Diversified Group Inc.
Suite 200
3555 Farnam Street
Omaha, NE 68131
with a copy to:
President
Kiewit Diversified Group Inc.
Suite 200
3555 Farnam Street
Omaha, NE 68131
If to PKS Holdings:
General Counsel
Kiewit Construction Group Inc.
1000 Kiewit Plaza
Omaha, NE 68131
with a copy to:
President
Kiewit Construction Group Inc.
1000 Kiewit Plaza
Omaha, NE 68131
8.05 Amendment and Modifications. This Agreement may be amended,
modified or supplemented, and any provision of this Agreement may be waived,
only by a written agreement signed by all of the Parties.
8.06 Successors and Assigns; No Third-Party Beneficiaries. This
Agreement and all of the provisions hereof will be binding upon and inure to
the benefit of the Parties, their successors and permitted assigns, but neither
this Agreement nor any of the rights, interest and obligations hereunder may be
assigned by any Party without the prior written consent of each of the other
Parties (which consent shall not be unreasonably withheld). This Agreement is
solely for the benefit of the Parties (and Indemnitees) and is not intended to
confer any rights or remedies upon any other Persons.
8.07 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
8.08 Interpretation. (a) The Article and Section headings contained
in this Agreement are solely for the purpose of reference, are not part of the
agreement of the Parties and shall not in any way affect the meaning or
interpretation of this Agreement.
(b) The Parties intend that the Share Exchange will be a
distribution pursuant to Section 355(a) and Section 368(a)(1)(D) of the Code,
and all provisions of this Agreement will be so interpreted.
8.09 Legal Enforceability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction will, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction will not invalidate or render
unenforceable such provision in any other jurisdiction. Each Party
acknowledges that money damages would be an inadequate remedy for any breach of
the provisions of this Agreement and agrees that the obligations of the Parties
under this Agreement will be specifically enforceable.
8.10 Dispute Resolution. Except to the extent that a Party seeks
injunctive relief to enforce any particular provision of this Agreement, if, in
the event of any dispute or controversy arising out of this Agreement, its
performance, or breach, the Parties are unable to settle the dispute
themselves, within thirty (30) calendar days after the dispute arises, then the
dispute shall be referred for resolution by agreement between the Chief
Executive Officer of PKS Holdings and the President of PKS. In the event that
the foregoing officers are unable to resolve such dispute within thirty (30)
calendar days, then the Parties shall be free to pursue any other rights or
remedies to which they may be entitled.
8.11 Schedules. All schedules referred to herein are a part of this
Agreement as if fully set forth herein.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the date first above written.
PETER KIEWIT SONS', INC.
By /s/ Walter Scott, Jr.
Walter Scott, Jr., President
KIEWIT DIVERSIFIED GROUP INC.
By /s/ James Q. Crowe
James Q. Crowe, President
PKS HOLDINGS, INC.
By /s/ Kenneth E. Stinson
Kenneth E. Stinson, President
KIEWIT CONSTRUCTION GROUP INC.
By /s/ Kenneth E. Stinson
Kenneth E. Stinson, President
AMENDMENT TO SEPARATION AGREEMENT
This Amendment to Separation Agreement ("Amendment) is made and entered
into as of the 18th day of March, 1998, by and among Peter Kiewit Sons',
Inc., a Delaware corporation ("PKS"), Level 3 Communications, Inc. (formerly,
Kiewit Diversified Group Inc.), a Delaware corporation ("Level 3"), PKS
Holdings, Inc., a Delaware corporation ("PKS Holdings") and Kiewit
Construction Group Inc., a Delaware corporation ("KCG," and together with
PKS, Level 3, and PKS Holdings, collectively the "Parties" or individually a
"Party").
PRELIMINARY STATEMENT. The Parties have previously entered into a
Separation Agreement dated as of December 8, 1997 (the "Separation
Agreement"), with respect to a series of transactions (collectively, the
"Transaction") intended to separate the construction businesses of PKS and
the diversified businesses of PKS into two separate and independent
companies. The Parties desire to amend the Separation Agreement to provide
for the modification of certain cost allocation provisions thereof, in the
event of the occurrence of certain specified events.
NOW, THEREFORE, in consideration of the premises, the Parties hereby
agree as follows:
1. Section 1.01 of the Separation Agreement is hereby amended by
adding the following definitions:
"Conversion Event: the issuance of shares of Class D Stock in exchange for
all of the outstanding shares of Class R Stock pursuant to the approval by
the PKS Board, or any successor, of a "Forced Conversion" ( as defined in the
PKS Certificate)."
"Forced Conversion Date: the date of issuance of shares of Class D Stock
pursuant to the Conversion Event."
2. Section 3.06(b) of the Separation Agreement is hereby amended in
its entirety to read as follows:
"(b) PKS will record the Class R Distribution, and register all
persons entitled to the Class R Distribution as holders of Class R Stock, on
the books and records maintained by or on behalf of PKS for the registration of
ownership of the capital stock of PKS, effective as of the Class R Distribution
Record Date. PKS will not issue certificates or other instruments to evidence
Class R Stock unless and until the Share Exchange is consummated, and in any
event, no sooner than June 30, 1998. If the Share Exchange is consummated, PKS
will issue and distribute certificates evidencing the Class R Stock. If the
Class R Distribution is consummated, but the Transaction is later abandoned,
PKS will exercise its rights to repurchase all of the Class R Stock under
Section IX.M of the Initial Certificate Amendment as promptly as practicable
after abandonment of the Transaction."
3. Section 7.01 of the Separation Agreement is amended in its
entirety to read as follows:
"7.01 General. The Parties have agreed to allocate the financial
burden of Covered Expenses 82.5% to the Diversified Group and 17.5% to the
Construction Group (the "Expense Sharing Ratio"), whether the Transaction is
consummated or abandoned; provided, however, that in the event that the Forced
Conversion Date occurs on or before July 15, 1998, the Expense Sharing Ratio
shall be modified so that the Construction Group incurs 100% of the Covered
Expenses. In such event, the Construction Group will reimburse the Diversified
Group for any Covered Expenses paid by the Diversified Group prior to the
Forced Conversion Date. All other costs or expenses incurred by any Party in
connection with the Transaction will be borne by the Party incurring the cost
or expense."
4. A paragraph shall be added as Section 7.02 (c)of the Separation
Agreement and shall read in its entirety as follows:
"(d) The Parties acknowledge that in the event the Forced
Conversion Date occurs on or before July 15, 1998, and the Expense Sharing
Ratio is modified as provided in Section 7.01 above, any success fees, mark-
ups, bonuses, equity participation or amounts in excess of regularly billable
hours, payable to the advisors described in (i), (ii), (iii) and (iv) of
Section 7.02(a), shall be incurred solely for the account of the Diversified
Group, and shall not be considered to be Covered Expenses.
5. Section 7.04 of the Separation Agreement is amended in its entirety to
read as follows:
"7.04 Covered Expense True-Up. KDG will prepare and submit to KCG,
within 120 calendar days after the date of abandonment of the Transaction or
the Exchange Date, as the case may be, a schedule of the Other Covered
Expenses, together with such supporting documentation with respect to the Other
Covered Expenses as KCG reasonably requests. Within five calendar days after
the submission of that schedule, KDG or KCG, as the case may be, will pay KCG
or KDG, as the case may be, in cash, an amount sufficient to ensure that the
financial burden of the Covered Expenses has been allocated between KCG and KDG
in proportion to the Expense Sharing Ratio."
6. Unless otherwise specified, capitalized terms used herein shall
have the meanings specified in the Separation Agreement.
7. Any other changes or modifications to the Separation Agreement
necessary to conform such agreement to this Amendment are hereby deemed to be
made. In all other respects, not inconsistent with this Amendment, the terms
of the Separation Agreement, not specifically or by necessary implication
amended or modified hereby, shall be and remain in full force and effect as
modified hereby.
IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly
executed as of the date first above written.
PETER KIEWIT SONS', INC.
By: /s/ Walter Scott, Jr.
Walter Scott, Jr., President
LEVEL 3 COMMUNICATIONS, INC.
By: /s/ James Q. Crowe
James Q. Crowe, President
PKS HOLDINGS, INC.
By: /s/ Kenneth E. Stinson
Kenneth E. Stinson, President
KIEWIT CONSTRUCTION GROUP INC.
By: /s/ Kenneth E. Stinson
Kenneth E. Stinson, President
RESTATED CERTIFICATE OF INCORPORATION
OF
PETER KIEWIT SONS', INC.
Peter Kiewit Sons', Inc., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as
follows:
1. The name of the Corporation is Peter Kiewit Sons', Inc.
The original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of Delaware on August 4, 1997,
under the name PKS Holdings, Inc.
2. This Restated Certificate of Incorporation has been duly
authorized and adopted pursuant to Section 245 of the General
Corporation Law of the State of Delaware.
3. This Restated Certificate of Incorporation restates and
integrates, but does not further amend the provisions of the
Corporation's Restated Certificate of Incorporation as theretofore
amended or supplemented, and there is no discrepancy between those
provisions and the provisions of this Restated Certificate of
Incorporation.
4. The text of the Corporation's Restated Certificate of
Incorporation is hereby restated to read in its entirety as
follows:
ARTICLE FIRST
NAME
The name of the Corporation (which is hereinafter referred to
as the "Corporation") is: Peter Kiewit Sons', Inc.
ARTICLE SECOND
DELAWARE OFFICE AND REGISTERED AGENT
The registered office of the Corporation in the State of
Delaware is to be located at 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent
therein is The Corporation Trust Company, and the address of said
registered agent is 1209 Orange Street in said City, County and
State.
ARTICLE THIRD
PURPOSES
The nature of the business or purposes to be conducted or
promoted is:
To engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
ARTICLE FOURTH
CAPITAL STOCK
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 125,250,000 shares; of
which 250,000 shares shall be Preferred Stock, with no par value
per share and of which 125,000,000 shares shall be Common Stock,
with a par value of $0.01 per share (the "Common Stock").
A description of the different classes of stock and a
statement of the designations, powers, preferences, rights,
qualifications, limitations and restrictions of each of said
classes of stock are as follows:
I.
PREFERRED STOCK
Subject to the limitations prescribed by Delaware law and this
Certificate of Incorporation, the Board of Directors of the
Corporation is authorized to issue the Preferred Stock from time to
time in one or more series, each of such series to have such
powers, designations, preferences and relative, participating,
optional or other rights, and such qualifications, limitations or
restrictions thereof, as shall be determined by the Board of
Directors in a resolution or resolutions providing for the issuance
of such Preferred Stock; provided, however, that no series of the
Preferred Stock shall have any voting rights or be convertible into
shares of stock having any voting rights.
II.
COMMON STOCK
(A) Dividends. After any dividend has been declared and set
aside for payment or paid on any series of Preferred Stock having a
preference over the Common Stock with respect to the payment of
dividends, the holders of the Common Stock shall be entitled to
receive out of the funds legally available therefor, when, as and
if declared by the Board of Directors. The
payment of dividends on the Common Stock shall be at the sole
discretion of the Board of Directors.
(B) Liquidation. Upon the liquidation, dissolution or
winding up of the affairs of the Corporation, whether voluntary or
involuntary, after there shall have been paid or set apart for the
holders of any series of Preferred Stock having a preference over
the Common Stock with respect to distributions upon liquidation the
full amount to which they are entitled, the remaining assets
available for distribution to the Corporation's stockholders shall
be distributed to the Common stockholders pro rata on the basis of
the numbers of Common shares held by such stockholders.
III.
VOTING RIGHTS AND CHANGES IN CAPITAL STRUCTURE
(A) Voting Rights. Except as may otherwise be provided by
statute, the holders of the Common Stock shall exclusively possess
voting power for the election of directors and for other purposes,
the holders of record of each share being entitled to one vote for
each share, and the holders of the Preferred Stock shall have no
voting rights nor shall they be entitled to notice of meetings of
stockholders.
(B) Changes in Capital Structure. The Corporation reserves
the right to create new classes of stock, to eliminate classes of
stock, to increase or decrease the amount of authorized stock of
any class or classes, and to otherwise change the powers,
designations, preferences and relative, participating, optional or
other rights, and the qualifications, limitations or restrictions
of any class or classes of stock by the affirmative vote of the
holders of four-fifths of the Common Stock issued and outstanding
(C) Non-Redeemable Series. Ten shares of the Common Stock
are hereby designated as Common Stock, Non-Redeemable Series. The
rights, powers, preferences, privileges and limitations of Common
Stock, Non-Redeemable Series shall be identical to those of all
other shares of Common Stock, except as described in ARTICLE
SIXTH hereof.
ARTICLE FIFTH
DIRECTORS AND OFFICERS
(A)(1) Number, Quorum, Required Votes. The number of
directors of the Corporation which shall constitute the whole Board
of Directors shall at all times be not less than ten (10) nor more
than fifteen (15). Subject to such minimum and maximum limitations,
the number of directors shall be fixed by, or in the manner
provided in, the by-laws. A majority of the whole Board of
Directors shall constitute a quorum for the transaction of
business. Unless this Certificate of Incorporation shall
specifically require a vote of a greater number, the affirmative
vote of a majority of the whole Board of Directors shall be
required to constitute the act of the Board of Directors.
(2) Qualifications of Directors.
(a) No more than three (3) directors may be non-
inside directors, and the balance must be inside directors, as
defined in this subparagraph (A)(2).
(b) An "inside director" is a director who is
either a current inside director or a former inside director, as
each of such terms is defined in this subparagraph (A)(2).
(c) A "current inside director" is a director who
(i) is a current Common stockholder of the Corporation; (ii) is
currently an officer of either (A) the Corporation or (B) a
Subsidiary which is engaged primarily in the construction, mining
or materials businesses; and (iii) was continuously employed by the
Corporation, its predecessor, former parent corporation or such a
Subsidiary for at least eight (8) years before becoming a director.
(d) If a current inside director ceases to be a
current inside director, such director may continue to serve as a
director so long as there is a sufficient number of other inside
directors so that the limitation on non-inside directors required
by subparagraph (A)(2)(a) is satisfied. However, if as a result of
the change in such director's status such non-inside director
limitation would be exceeded, then such director shall
automatically be deemed to have resigned as and shall cease to be a
director. The remaining directors shall thereupon act promptly to
fill the vacancy created by such resignation. Such a vacancy may be
filled with a former inside director, as defined in subparagraph
(A)(2)(e) below. If the director whose resignation created such
vacancy qualifies as a former inside director pursuant to
subparagraph (A)(2)(e), such director may be appointed to fill such
vacancy.
(e) A "former inside director" is a person who:
(i) was at one time a current inside director; (ii) served as an
inside director for at least eight (8) years; and (iii) is declared
to be a former inside director by a majority vote of the directors
holding office at the time of such declaration.
(3) Nomination Procedures. The incumbent directors
shall nominate a slate of directors for election at each annual
meeting of the stockholders of the Corporation. In nominating such
election slates, the directors shall give due consideration to
selecting nominees from each of the principal business segments
represented by the activities of the Corporation and its
Subsidiaries.
(B) Cumulative Voting. At any election for directors every
holder of Common Stock entitled to vote at such election shall have
the right to vote, in person or by proxy, the number of shares
owned by him for as many persons as there are directors to be
elected and for whose election he has a right to vote, or to
cumulate his votes by giving one candidate as many votes as the
number of such directors multiplied by the number of his shares
shall equal, or by distributing such votes on the same principle
among any number of such candidates.
(C) Officers. The Corporation shall have such officers as
the by-laws may provide, except, however, that the Corporation
shall have an officer or officers who shall be empowered to sign
instruments and stock certificates of the Corporation and shall
have an officer who shall have the duty to record the proceedings
of stockholders' meetings and meetings of the Board of Directors.
Officers shall be chosen in such manner and shall hold their
offices for such terms as the by-laws may prescribe or as shall be
determined by the Board of Directors.
ARTICLE SIXTH
POWERS OF THE CORPORATION AND OF THE
DIRECTORS AND STOCKHOLDERS
The following provisions are inserted for the management of
the business and for the conduct of the affairs of the Corporation,
and in further creation, definition, limitation and regulation of
the powers of the Corporation, its directors and stockholders:
(A) Indemnification.
(1) Fullest Extent Permitted by Law. The Corporation
shall indemnify each person who is or was a director, officer or
Employee of the Corporation (including the heirs, executors,
administrators or estate of such person) or is or was serving at
the request of the Corporation as a director, officer or employee
of another corporation, partnership, joint venture, trust or other
enterprise to the fullest extent permitted under subsections
145(a), (b), (c) and (e) of the Delaware General Corporation Law or
any successor statute.
(2) Non-Exclusivity of Rights. The indemnification
provided by this paragraph (A) of ARTICLE SIXTH shall not be deemed
exclusive of any other rights to which any of those seeking
indemnification or advancement of expenses may be entitled under
any by-law, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director,
officer, Employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(3) Repeal or Modification. Any repeal or modification
of paragraph (A) of this ARTICLE SIXTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a
director, officer or Employee of the Corporation existing at the
time of such repeal or modification.
(B) Powers of Board. In furtherance and not in limitation of
the powers conferred by statute, the Board of Directors is
expressly authorized:
(1) By-Laws. To make, alter and repeal the by-laws of
the Corporation by affirmative vote of two-thirds of the whole
Board of Directors;
(2) Mortgages, Liens, and Pledges. To authorize and
cause to be executed mortgages and liens on the real and personal
property and pledges of personal property of the Corporation
without the assent or vote of the stockholders;
(3) Payments. In its discretion to pay for any property
or rights acquired by the Corporation, either wholly or partly in
money, stock, bonds, debentures or other securities of the
Corporation;
(4) Determination of Amount Constituting Capital. To
fix and determine from time to time what part of the consideration
received by the Corporation on any issue of stock without par value
shall constitute capital;
(5) Bonds, Debentures, and Other Obligations. Without
the assent or vote of the stockholders, to issue bonds, debentures,
or other obligations of the Corporation from time to time, without
limit as to amount, for any of the objects or purposes of the
Corporation and if desired, to secure the same or any part thereof
by mortgage, pledge, deed of trust or otherwise on any part or all
of its property and to cause the Corporation to guarantee bonds,
debentures, notes, indebtedness or other obligations of persons,
firms and/or other corporations;
(6) Convertible Obligations. To create and issue
obligations of the Corporation that shall confer upon the holders
or owners thereof the right to convert the same into shares of
stock of the Corporation, and to fix the rate at which such
obligations may be so converted and the period or periods of time
during which any such right of conversion shall exist, and any
shares of stock issued upon the conversion of any such obligations
shall be conclusively deemed to be fully paid stock and not liable
to any further call or assessment, and the holder thereof shall not
be liable for any further payment in respect thereof;
(7) Performance-Based Obligations. To create and issue
obligations of the Corporation that shall confer upon the holders
or owners thereof the right to receive interests based in whole or
in part upon the financial performance of the Corporation or any
part, division or subsidiary thereof, and to fix the term,
conditions for sale and repurchase, applicable performance
standards, interest rate and such other conditions, rights and
restrictions for such obligations as it shall determine;
(8) Inspections by Stockholders. To determine from time
to time whether and to what extent and at what times and places and
under what conditions and regulations the accounts and books of the
Corporation, or any of them, shall be open to inspection of the
stockholders; and no stockholder shall have any right to inspect
any account or book or document of the Corporation, except as
expressly conferred by the laws of the State of Delaware, unless
and until authorized so to do by resolution of the Board of
Directors, or by resolution of the Common stockholders;
(9) Committees. By resolution or resolutions, passed by
an affirmative vote of two-thirds of the whole Board of Directors,
to designate one or more committees, each committee to consist of
two or more of the directors of the Corporation, which, to the
extent provided in said resolution or resolutions, or in the by-
laws of the Corporation, shall, to the extent permitted by Delaware
Corporation Law, have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the
Corporation, except the powers to amend the by-laws, to declare
dividends and to act contrary to any action previously undertaken
by the Board of Directors, and may have power to authorize the seal
of the Corporation to be affixed to all papers which may require
it, said committee or committees to have such name or names as may
be stated in the by-laws of the Corporation or as may be determined
from time to time by resolution adopted by the Board of Directors;
and
(10) Additional Powers. The Corporation may in its by-
laws confer powers upon its Board of Directors in addition to the
foregoing and in addition to the powers and authorities expressly
conferred upon it by statute.
(C) Limitations on Powers of Board. In limitation of those
powers conferred by statute regarding the matters described in this
paragraph (C), the Board of Directors is authorized to act as
follows:
(1) Substantial Acquisitions. To acquire for the
Corporation any property, rights or privileges at such price and
for such consideration and generally upon such terms and conditions
as it thinks fit; provided, however, an affirmative vote of two-
thirds of the whole Board of Directors shall be required for the
Corporation to make a substantial acquisition not in the primary,
ordinary and regular course of its business activities; and
provided further that for the purposes of this subparagraph (1)
"substantial acquisition" shall mean an acquisition (or a series of
acquisitions which, in light of the period of time over which they
are effected and the intentions of the Board of Directors in making
them, should be characterized for the purposes of this subparagraph
(1) as a single acquisition) with a price (excluding the amount of
any assumed obligation and any amount paid out of the proceeds of a
loan under the terms of either of which the lender has recourse
only against the asset or assets being acquired) in excess of ten
(10%) percent of the total stockholders' equity of the Corporation,
determined on a consolidated basis as of the fiscal year end
immediately preceding such acquisition;
(2) Substantial Dispositions. To dispose of for the
Corporation any property, rights or privileges at such price and
for such consideration and generally upon such terms and conditions
as it thinks fit; provided, however, an affirmative vote of two-
thirds of the whole Board of Directors shall be required for the
Corporation to make a substantial disposition not in the primary,
ordinary and regular course of its business activities; and
provided that for the purpose of this subparagraph (2) "substantial
disposition" shall mean a disposition (or a series of dispositions
which, in light of the period of time over which they are effected
and the intentions of the Board of Directors in making them, should
be characterized for the purposes of this subparagraph (2) as a
single disposition) with a price in excess of ten (10%) percent of
the total stockholders' equity of the Corporation, determined on a
consolidated basis as of the fiscal year end immediately preceding
such disposition; provided further, however, such sale or
disposition shall not constitute a sale or disposition of all or
substantially all of the Corporation's property and assets, the
approval for which is hereinafter provided;
(3) Sale of All or Substantially All Assets. To sell,
lease or exchange all or substantially all of the Corporation's
property and assets, including its good will and its corporate
franchises, upon such terms and conditions and for such
considerations, which may be in whole or in part shares of stock
in, and/or other securities of, any other corporation or
corporations, as said Board of Directors shall deem expedient and
in the best interests of the Corporation, only when and as
authorized by the affirmative vote of the holders of four-fifths of
the Common Stock issued and outstanding;
(4) Offers of Common Stock to Non-Employees. To offer
to sell the Common Stock of the Corporation to persons other than
Employees of the Corporation, in any manner, including but not
limited to a "public offering" within the meaning of the United
States Securities Act of 1933, as it may be amended from time to
time, only when and as authorized by the affirmative vote of the
holders of four-fifths of the Common Stock issued and outstanding;
(5) Change In Stock Price Formula. To change the
formula for determining the Formula Value or the Common Share
Price, only when and as authorized by the affirmative vote of the
holders of four-fifths of the Common Stock issued and outstanding;
(6) Mergers and Consolidations. To merge or consolidate
the Corporation with a corporation other than a Subsidiary, only
when and as authorized by the affirmative vote of the holders of
four-fifths of the Common Stock issued and outstanding; and
(7) Dissolution. To dissolve the Corporation, only when
and as authorized by the affirmative vote of the holders of four-
fifths of the Common Stock issued and outstanding.
(D) Stock Ownership and Transfer Restrictions. The following
restrictions on the ownership and transfer of the Common Stock of
the Corporation are hereby imposed:
(1) Ownership Restrictions. All shares of Common Stock
sold by the Corporation shall be subject to a repurchase agreement,
the terms of which shall be determined by the Board of Directors.
With the prior approval of the Board of Directors and subject to
paragraph (D)(3), Employees, fiduciaries for the benefit of the
Employee's spouse and/or children, corporations one hundred (100%)
percent owned by Employees or Employees and their spouse and/or
children, and fiduciaries for the benefit of such corporations,
charities and fiduciaries for charities designated by any such
persons shall be eligible to own Common Stock of the Corporation.
(2) Transfers to Charitable Organizations. The holders
of the Common Stock may transfer such stock to tax-exempt
charitable organizations approved as such by the Internal Revenue
Service; provided, that any such transfer shall be subject to a
repurchase agreement which provides, in part, that said charitable
owners shall agree not to transfer, assign, pledge, hypothecate, or
otherwise dispose of such stock except in a sale to the
Corporation, and said charitable owners shall at any time upon five
(5) days' written notice and demand by the Corporation sell such
stock to the Corporation. The Corporation shall be obligated to
accept any offer made by the charitable owners to sell such stock
to the Corporation. The purchase price for the Common Stock shall
be the Share Price. Payment of the purchase price shall be made by
the Corporation within sixty (60) days of its acquiring of any such
stock, without interest.
(3) Transfer Restrictions On Common Stock.
(a) Sales to Corporation. The holders of Common
Stock shall not sell, transfer, assign, pledge, hypothecate or
otherwise dispose of such stock except in a sale to the Corporation
or in a transfer to an authorized transferee approved by the Board
of Directors pursuant to subparagraph (D)(1) above or a transfer in
accordance with subparagraph (D)(2) above. Holders of Common Stock
may, at any time on or prior to the 15th day of any calendar month,
offer to sell part or all of their Common Stock to the Corporation
by delivering the certificate or certificates representing such
stock to the Corporation along with a written notice offering such
stock to the Corporation. Such offer must be accepted by the
Corporation, and payment shall be made for such stock within sixty
(60) days after the receipt of such stock and such written notice
by the Corporation, without interest. The rights of redemption
provided for in this subparagraph (D)(3)(a), and each other right
of redemption of Common Stock provided for in this Certificate of
Incorporation, shall be subject to the requirement that no shares
of any class shall be redeemed, either at the option of the holder
thereof or of the Corporation, unless after giving effect to such
redemption there remain outstanding at least 1,000 shares of stock
of the Corporation having full voting power.
(b) Termination. Upon the termination of the
employment of any Employee with the Corporation for any reason
other than death, the Employee or his authorized transferee shall
sell and deliver the Common Stock held by such Employee or his
authorized transferee to the Corporation within ten (10) days after
the date of a written notice from the Corporation to sell and
deliver such stock (a "Repurchase Notice"). The Corporation shall
give such Repurchase Notice within the period commencing on the day
of termination and ending on the 90th day after such termination.
Payment for such stock shall be made within sixty (60) days after
the date of such Repurchase Notice, without interest.
(c) Death. Upon the death of any Employee, the
estate, successor or personal representative of such Employee or
the authorized transferee of such Employee shall sell and deliver
the Common Stock previously held by such Employee or held by his
authorized transferee to the Corporation within ten (10) days after
the date of a written notice from the Corporation to sell and
deliver such stock. The Corporation shall give the notice to sell
and deliver within the period commencing on the day of death of
such Employee and ending on the 180th day after said death. Payment
for such stock shall be made within sixty (60) days after the date
of said notice, without interest. Upon the death of an Employee
holding stock of the Corporation on the day of his death, the
Employee's estate, successor or personal representative and any
authorized transferee of such deceased Employee shall have the
option to defer the purchase by the Corporation of its Common Stock
to a date or dates later than that provided for in this
subparagraph (D)(3) but prior to the January 10th next succeeding
the fiscal year during which the Employee's death occurred.
(d) Ownership of Excessive Amount. Upon a
determination by the Board of Directors that the amount of Common
Stock held by an Employee and/or his authorized transferee is
excessive in view of the Corporation's policy that the level of an
Employee's stock ownership should reflect certain factors,
including but not limited to (i) the relative contribution of that
Employee to the economic performance of the Corporation, (ii) the
effort being put forth by such Employee, and/or (iii) the level of
responsibility of such Employee, the Corporation shall have the
option to purchase from such Employee and/or his authorized
transferee an amount of Common Stock sufficient to decrease the
amount of such stock owned by such Employee or his authorized
transferee to an amount that the Board of Directors, in its sole
discretion, believes is appropriate. In the event that the
Corporation elects to exercise this option, it shall give the
Employee and/or his authorized transferee written notice to that
effect and the Employee and/or his authorized transferee shall sell
and deliver the amount of stock specified in such notice to the
Corporation within ten (10) days after the date of the notice, with
payment to be made for such stock within sixty (60) days after the
date of said notice, without interest.
(e) Pledges. Notwithstanding anything contained in
this subparagraph (D)(3) to the contrary, an Employee may pledge
Common Stock for loans in connection with the ownership of the
Corporation's stock.
(f) Authorized Transferee. For purposes of this
subparagraph (D)(3), the term "authorized transferee" shall mean
any stockholder permitted to own stock of the Corporation pursuant
to paragraph (D)(1) above.
(g) Failures to Meet Time Limits. No failure by
the Corporation, a stockholder, an authorized transferee, or the
estate, successor, or personal representative of a stockholder to
take any action within any time period prescribed by this
subparagraph (D)(3) shall render the Common Stock of the
Corporation transferable other than in conformance with the
provisions of this subparagraph (D)(3) or preclude the Corporation
from exercising its right to purchase any such stock.
(4) Stock Price. The Corporation shall purchase or sell
any share of Common Stock for a price equal to the Common Share
Price. The consideration paid for such Common Stock shall be in
cash or such other form as mutually agreed upon by the Corporation
and the Common stockholder.
(5) Limitations On Amount of Ownership. No more than
ten (10%) percent of the shares of the Common Stock issued and
outstanding shall at any time be owned of record, or voted, by or
for the account of any one Employee as hereinbefore described. For
purposes of calculation of said ten (10%) percent limitations
Common Stock of the Corporation owned by an Employee's spouse,
children, grandchildren, parents, grandparents and spouses of such
persons (collectively, an Employee's "family members"), fiduciaries
for the benefit of an Employee or his family members, fiduciaries
for charities designated by an Employee or his family members, and
any entity which an Employee or his family members have created or
control, directly or indirectly, or in which an Employee or his
family members have a beneficial or reversionary interest, shall be
counted as being owned by the Employee. All calculations regarding
the ten (10%) percent limitation (including both the numerator and
denominator of the calculations) shall be on a fully diluted basis
(i.e., all stock that in the future will be issued upon the
conversion of any then-issued and outstanding Convertible
Debentures of the Corporation shall be included in the
calculations). The ten (10%) percent limitations shall be
calculated as of the 1st day of January of each year, and any
stockholder who owns more Common Stock than the ten (10%) percent
limitation permits shall be so notified by the Corporation and
shall, at the stockholder's option, be permitted to hold the excess
stock until the next succeeding January 1, and on or before said
January 1, the stockholder shall take the action described in
subparagraph (D)(6) below .
(6) Sales of Excess Stock. In the event that any
stockholder through his own action or the action of others becomes
an owner of more than ten (10%) percent, as defined in subparagraph
(D)(5) above, of the Common Stock, he shall offer to the
Corporation, and the Corporation shall purchase within sixty (60)
days of such offer, at the price defined in subparagraph (D)(4)
above, such amount of his stock that is in excess of said ten (10%)
percent limitation. In the event that a stockholder shall fail to
offer such stock to the Corporation within the period described in
subparagraph (D)(5) above, the Corporation shall, within sixty (60)
days following the end of such period, purchase such excess stock
holdings.
(7) Termination of Certain Owners. Any stockholder-
Employee of the Corporation who owns two (2%) percent or more of
the Common Stock issued and outstanding shall not be terminated
from employment of the Corporation except by an affirmative vote of
two-thirds of the whole Board of Directors. The Board of Directors
shall have the right to reduce said two (2%) percent requirement in
the by-laws of the Corporation to a lower percentage requirement by
an affirmative vote of two-thirds of the whole Board of Directors.
For purposes of calculation of this percentage requirement, the
attribution rules specified in paragraph (D)(5) above regarding the
ten (10%) percent limitation on ownership shall apply.
(8) Suspension of Repurchase Duties. Notwithstanding
anything in this ARTICLE SIXTH to the contrary, in the event that
the Board of Directors determines that the Formula Value to be
determined at the end of the fiscal year during which such
determination is made is likely to be less than (i) the Formula
Value determined at the end of the prior fiscal year less (ii) the
aggregate amount of dividends declared on the Common Stock since
the end of the prior fiscal year, the Board may suspend the
Corporation's duty to repurchase shares of Common Stock in
accordance with this paragraph (D)(8). Any such suspension shall
not extend for a period longer than three hundred sixty-five (365)
days from the date of the Board's declaration of suspension. During
any such suspension period, the Corporation shall not repurchase
any shares of Common Stock tendered or required to be tendered for
repurchase pursuant to the second sentence of subparagraph
(D)(3)(a). During any such suspension period, the Corporation shall
continue to repurchase Common Stock tendered to the Corporation
pursuant to any other provision of this Certificate of
Incorporation, but (a) payment for such repurchases shall not be
required until sixty (60) days after the end of the suspension
period, (b) such payment shall be made without interest, and (c)
the repurchase price shall be the Common Share Price determined as
of (i) the end of the prior fiscal year, in the case of a
suspension period that ends before July 1 of the fiscal year,
(provided that such computation of the Share Price shall be reduced
by the amount of dividends per share declared on the Common Stock
since the end of the prior fiscal year), or (ii) in the case of a
suspension period that ends after June 30 of a fiscal year, the end
of the fiscal year during which the suspension period ends.
(9) Non-Redeemable Series. Notwithstanding any other
provision hereof with respect to the Common Stock, in no event
shall (i) any holder of Common Stock, Non-Redeemable Series have
any right to require the Corporation to repurchase such holder's
shares of Common Stock, Non Redeemable Series or be required to
offer such shares to the Corporation for repurchase; or (ii)
Common Stock, Non-Redeemable Series be subject to any redemption.
(E) Payments Where Stock Price Not Yet Computed. If the
price at which the Corporation is to purchase stock pursuant to any
provision in this Certificate of Incorporation has not been
computed within the time period prescribed for payment for such
stock because the preparation of the audited Consolidated Financial
Statements of the Corporation and Consolidated Subsidiaries has not
yet been completed, the Corporation shall, within the time period
prescribed for payment for such stock, make an initial payment in
an amount equal to the price that would have been paid for such
stock if it had been purchased by the Corporation during the next
preceding fiscal year. The balance shall be paid within ten (10)
days after the date on which the price at which the Corporation is
to purchase such stock has been computed. In the event that the
price at which the Corporation is to purchase such stock is less
than the amount paid by the Corporation, in the "initial payment"
provided for in this paragraph (E), the Corporation shall be
entitled to recover the difference between the two amounts. Such
difference shall be paid by the person or entity to whom the
Corporation made the "initial payment" within ten (10) days of the
date of a written notice from the Corporation to pay such amount,
without interest.
(F) Ratification By Stockholders. Any contract, transaction
or act of the Corporation or of the directors, which shall be
ratified by a majority of a quorum of the stockholders then
entitled to vote at any annual meeting or at any special meeting
called for such purpose, shall, so far as permitted by law and by
this Certificate of Incorporation, be as valid and as binding as
though ratified by every stockholder entitled to vote at such
meeting.
(G) Meetings, Offices, and Books Outside State of Delaware.
The stockholders and the Board of Directors may hold their meetings
and the Corporation may have one or more offices outside of the
State of Delaware, and subject to the provisions of the laws of
said state, may keep the books of the Corporation outside of said
state and at such places as may be from time to time designated by
the Board of Directors.
(H) Removal of Directors. At any meeting of the holders of
the Common Stock called for the purpose, any one or more of the
directors may, by a majority vote of the holders of the Common
Stock at the time, be removed from office, with or without cause,
and another director or other directors be elected by such majority
vote of said holders of the Common Stock in the place or places of
the person or persons so removed, to serve for the remainder of his
or their term or terms, as the case may be; provided, however, that
if less than all the directors are to be removed, no individual
director shall be removed without cause when the votes cast against
his removal would be sufficient to elect him if then cumulatively
voted at an annual election of all the directors.
(I) By-Law Provisions for Conduct of Business. The
Corporation may in its by-laws make any other provisions or
requirements for the conduct of the business of the Corporation,
provided the same be not inconsistent with the provisions of this
Certificate of Incorporation, or contrary to the laws of the State
of Delaware. The by-laws may be amended by affirmative vote of two-
thirds of the whole Board of Directors or by affirmative vote of
the holders of two-thirds of the Common Stock issued and
outstanding.
(J) Requirements of Votes Greater Than Required By-Law.
Whenever this Certificate of Incorporation contains provisions
requiring for any corporate action the vote of a larger portion of
the stock or a larger portion of the directors than is required by
the General Corporation Law of the State of Delaware, the
provisions of this Certificate of Incorporation shall govern and
control.
(K) Amendments of Certificate. Subject to any limitations
herein contained, the Corporation reserves the right to amend,
alter, change or repeal any provision contained in this Certificate
of Incorporation, or in any amendment thereto by an affirmative
vote of the holders of two-thirds of the Common Stock issued and
outstanding,, and all rights conferred upon stockholders in said
Certificate of Incorporation or any amendment thereto, are granted
subject to this reservation; provided, however, that the provisions
of this Certificate of Incorporation requiring for action by the
stockholders a vote greater than such two-thirds vote shall not be
amended except by such greater vote; and provided further that this
Paragraph (K) shall not be amended except by an affirmative vote of
the holders of four-fifths of the Common Stock issued and
outstanding.
ARTICLE SEVENTH
LIMITATION OF LIABILITY
A director of this Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Corporation
or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law
is amended after approval by the stockholders of this ARTICLE
SEVENTH to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of
a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law as
so amended. Any repeal or modification of this paragraph by the
stockholders of the Corporation shall not adversely affect any
right or protection of a director of the Corporation existing at
the time of such repeal or modification.
ARTICLE EIGHTH
DEFINITIONS
As used in this Certificate of Incorporation, the following
meanings (with terms defined in the singular having comparable
meaning when used in the plural and vice versa), unless another
definition is provided or the context otherwise requires:
"Formula Value" means the sum of:
(a) the total stockholders' equity as shown on the
consolidated balance sheet contained in the Consolidated Financial
Statements of the Corporation and Consolidated Subsidiaries,
prepared in conformity with generally accepted accounting
principles applied on a consistent basis for the Corporation and
its consolidated Subsidiaries as of the fiscal year end immediately
preceding the date of determination (the "prior year end") and
audited and certified by an independent firm of certified public
accountants selected and engaged by the Board of Directors; minus
(b) the sum of: (i) the book value of Property, Plant
and Equipment as of the prior year end; plus (ii) the total
stockholders' equity attributable to any issued and outstanding
Preferred Stock, as reflected on the consolidated balance sheet,
plus the amount of any accrued, accumulated and undeclared
dividends thereon, all as of the date of determination.
"Common Share Price" with respect to any share of Common
Stock, means the amount determined by dividing:
(a) the sum of (i) the Formula Value plus (ii) the face
amount of any outstanding Convertible Debentures convertible into
Common Stock , determined as of the fiscal year end immediately
preceding the date of determination (the "prior year end"); by
(b) the sum of (i) the total number of issued and
outstanding shares of Common Stock, plus (ii) the total number of
shares of Common Stock reserved for the conversion of outstanding
Convertible Debentures convertible into Class C Stock, in each case
determined as of the prior year end;
and deducting from the quotient (rounded to the nearest $0.05) the
amount of any dividends per share declared on Common Stock
subsequent to the prior year end.
"Convertible Debenture" means any debenture or other
instrument evidencing indebtedness of the Corporation convertible
at any time into shares of the Common Stock.
"Employee" means an individual employed by (i) the
Corporation, any Subsidiary or Twenty Percent Subsidiary or any
joint venture in which the Corporation and/or any Subsidiary or
Twenty Percent Subsidiary has a twenty percent or more interest
or (ii) Kiewit Coal Properties, Inc. or any subsidiary thereof or
any joint venture in which Kiewit Coal Properties, Inc. or any
such subsidiary has a twenty percent or more interest. An
Employee shall also include any person serving on the Board of
Directors of the Corporation or of any Subsidiary; provided,
however, that such person shall have previously owned stock of
the former parent corporation of the Corporation or the
Corporation as an employee; and, provided further, that such
person shall not be eligible to purchase additional stock of the
Corporation.
"Property, Plant and Equipment" means those assets included
within such classification as reflected on the consolidated balance
sheets contained as a part of the Consolidated Financial Statements
of the Corporation and Consolidated Subsidiaries, that are utilized
in or associated with the Corporation's ordinary and regular course
of construction activities.
"Subsidiary" means a corporation, partnership or other entity
with respect to which the Corporation holds, directly or
indirectly, at least a majority of the issued and outstanding
capital stock or other equity interests, measured in terms of total
dollar value if such entity has outstanding more than one class of
capital stock or other equity interests.
"Twenty Percent Subsidiary" means a corporation, partnership,
or other entity with respect to which the Corporation owns,
directly or indirectly, twenty percent or more of the issued and
outstanding capital stock or other equity interests, measured in
terms of total dollar value if such corporation, partnership or
other entity has outstanding more than one class of capital stock
or other equity interests.
IN WITNESS WHEREOF, Peter Kiewit Sons', Inc. has caused this
Restated Certificate of Incorporation, to be signed and attested by
its duly authorized officers as of the 31st day of March, 1998.
PETER KIEWIT SONS', INC.
By: /s/ Kenneth E. Stinson
_____________________________
Kenneth E. Stinson, President
ATTEST:
By: /s/ Michael F. Norton
________________________________
Michael F. Norton, Secretary
AMENDED AND RESTATED
BY-LAWS
OF
PETER KIEWIT SONS', INC.*
Adopted March 19, 1998
*Amended March 31, 1998 to Change the Corporation's Name
TABLE OF CONTENTS
TO
AMENDED AND RESTATED
BY-LAWS
OF
PETER KIEWIT SONS', INC.
Sections Page
1-2 Offices............................ 1
3 Seal............................. 1
4-12 Stockholders' Meetings....................... 1
13-16 Directors............................ 2
17 Honorary Directors....................... 3
18 Board Committee....................... 4
19 Executive Committee....................... 4
20 Compensation Committee...................... 5
21 Audit Committee........................ 6
22-23 Compensation of Directors.................... 8
24-27 Meetings of the Board...................... 8
28-37 Officers............................. 8
38 Shares of Stock........................... 10
39 Certificates of Stock...................... 10
40 Transfers of Stock......................... 10
41 Fixing Record Date....................... 11
42 Registered Stockholders...................... 11
43 Lost Certificates......................... 11
44 Checks............................ 11
45 Fiscal Year........................... 11
46-47 Dividends.......................... 11
48-49 Notices........................... 12
50 Amendments........................... 12
51 Indemnification.......................... 12
BY-LAWS
OF
PETER KIEWIT SONS', INC.
OFFICES
1. The registered office of the corporation shall be in the
City of Wilmington, County of New Castle, State of Delaware, and
the name of the registered agent in charge thereof is The
Corporation Trust Company.
2. The corporation shall also have an office in the City of
Omaha, State of Nebraska, and also offices at such other places as
the board of directors may from time to time designate.
SEAL
3. The corporate seal shall have inscribed thereon the name
of the corporation, the year of its organization and the words
"Corporate Seal, Delaware." Said seal may be used by causing it or
a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
STOCKHOLDERS' MEETINGS
4. The annual meeting of the stockholders of the
corporation shall be held at such date, place and time as may be
determined by the board of directors and as may be designated in
the notice of such meeting for the purpose of electing a board of
directors and the transaction of such other business as may
properly be brought before the meeting.
5. Special meetings of the stockholders may be held at such
time and place as shall be stated in the notice of the meeting.
6. The holders of a majority of the stock issued and
outstanding, and entitled to vote thereat, present in person, or
represented by proxy, shall be requisite and shall constitute a
quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute, by the Restated
Certificate of Incorporation or by these By-laws. If, however, such
quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote thereat, present in
person, or by proxy, shall have power to adjourn the meeting from
time to time without notice other than announcement at the meeting,
until a quorum shall be present. At such adjourned meeting at which
a quorum shall be present any business may be transacted which
might have been transacted at the meeting as originally notified.
7. Each stockholder at every meeting of the stockholders
shall be entitled to one vote in person or by proxy for each share
of the capital stock entitled to vote held by such stockholder, but
no proxy shall be voted on after three (3) years from its date,
unless the proxy provides for a longer period.
At each election for directors every stockholder
entitled to vote at such election shall have the right to vote, in
person or by proxy, the number of shares owned by him for as many
persons as there are directors to be elected and for whose election
he has a right to vote, or to cumulate his votes by giving one
candidate as many votes as the number of such directors multiplied
by the number of his shares shall equal, or by distributing such
votes on the same principle among any number of such candidates.
8. Notice of the annual meeting of the stockholders shall
be given by the Secretary or an Assistant Secretary of the
corporation as required by law.
9. A complete list of the stockholders entitled to vote at
every meeting of the stockholders shall be prepared, at least ten
(10) days before every meeting, by the officer who has charge of
the stock ledger of the corporation. The list shall be arranged in
alphabetical order and shall show the address of each stockholder
and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days
prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice
of the meeting, or, if not so specified, at the place where the
meeting is to be held. This list shall also be produced and kept at
the time and place of the meeting during the whole time thereof,
and may be inspected by any stockholder who is present.
10. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute, may be called by
the chairman of the board and shall be called by the chairman of
the board or secretary at the request in writing of a majority of
the board of directors, or at the request in writing of
stockholders owning a majority in amount of the entire capital
stock of the corporation issued and outstanding and entitled to
vote. Such request shall state the purpose or purposes of the
proposed meeting.
11. Business transacted at all special meetings shall be
confined to the objects stated in the call.
12. Written notice of a special meeting of stockholders,
stating the time and place and object thereof, shall be served upon
or mailed at least ten (10) days before such meeting to each
stockholder entitled to vote thereat at such address as appears on
the books of the corporation.
DIRECTORS
13. The number of directors of the corporation which shall
constitute the whole board shall be such number, not less than ten
(10) nor more than fifteen (15), as the board of directors may from
time to time fix by resolution. The directors shall be elected at
the annual meeting of the stockholders, and each director shall be
elected to serve until his successor shall be elected and shall
qualify. Newly created directorships resulting from any increase in
the authorized number of directors may be filled by a majority of
the directors then in office, and the directors so elected shall
hold office until the next annual election and until their
successors are duly elected and shall qualify.
13A. Nominations for the election of directors shall be made
by the board of directors or a stockholder entitled to vote for the
election of directors. However, a stockholder may nominate one or
more persons for election as directors at a meeting held to elect
directors only if written notice of such stockholder's intent to
make each such nomination has been received by the Secretary of the
corporation not later than (i) with respect to an election to be
held at the annual meeting of stockholders, sixty (60) days before
such meeting, and (ii) with respect to an election to be held at a
special meeting of stockholders, the close of business on the
seventh day following the date on which notice of such meeting is
first given to stockholders.
Each such notice from the stockholder to the Secretary shall
set forth: (a) the name and address of the stockholder who intends
to make the nomination and of the person or persons to be
nominated; (b) a representation that the stockholder is a holder of
record of stock of the corporation entitled to vote at such meeting
and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (c) the
written consent of each nominee to serve as a director of the
corporation if so elected; (d) a description of all arrangements or
understandings between the stockholder and each nominee and any
other person or persons (naming each such person) pursuant to which
the nomination or nominations are to be made by the stockholder;
(e) such other information regarding each nominee proposed by such
stockholder as would be required to be included in a preliminary
proxy statement filed pursuant to the proxy rules of the Securities
and Exchange Commission, had the nominee been nominated, or
intended to be nominated, by the board of directors; and (f) such
additional information about each such nominee as the board of
directors may reasonably request to determine the eligibility of
the nominee. The chairman of the meeting may refuse to acknowledge
the nomination of any person not made in compliance with the
foregoing procedure.
14. The directors may hold their meetings and keep the books
of the corporation outside of Delaware at the office of the
corporation in the City of Omaha, Nebraska, or at such other places
as they may from time to time determine.
15. If the office of any director or directors becomes
vacant by reason of death, resignation, retirement,
disqualification, removal from office, or otherwise, a majority of
the remaining directors, though less than a quorum, may choose a
successor or successors, who shall hold office for the unexpired
term in respect to which such vacancy occurred or until the next
election of directors. However, if the stockholders remove a
director, the vacancy shall be filled only upon the election of a
successor director by the stockholders.
16. The property, business and affairs of the corporation
shall be managed by its board of directors which may exercise all
lawful powers of the corporation and do all such lawful acts and
things as are not by statute or by the Restated Certificate of
Incorporation or by these By-laws directed or required to be
exercised or done by the stockholders.
HONORARY DIRECTORS
17. The board of directors by resolution may create an
advisory board of directors and appoint one or more persons to such
advisory board of directors. Persons appointed to said advisory
board shall be considered honorary directors of the corporation.
Members of said advisory board shall be entitled to attend regular
and special meetings of the board of directors and participate in
such meetings by their offering advice and consultation; but
members of said advisory board shall not be entitled to vote on any
matter being considered by the board of directors. A member of the
advisory board of directors shall not be considered in any way a
member of the board of directors or an officer or employee of the
corporation.
BOARD COMMITTEES
18. The board of directors may by resolution passed by an
affirmative vote of two-thirds of the whole board designate
committees of the board, each consisting of two (2) or more of its
members. Such committees shall include, but are not limited to, an
executive committee, a compensation committee, and an audit
committee. The board of directors shall designate the chairman of
each committee and all of the members of the committee shall serve
at the pleasure of the board of directors.
A majority of each committee shall constitute a quorum. Each
committee shall adopt its own rules of procedure and shall meet at
stated times as provided by its rules of procedure or upon the call
of the chairman of the committee or of any two members of the
committee. Notice of each such meeting, stating the place, date,
and hour thereof, shall be served personally on each member of the
committee, or shall be mailed, telegraphed or telephoned to his
address on the books of the corporation, at least twenty-four (24)
hours before the meeting. A notice need not state the business
proposed to be transacted at the meeting. No notice of the time or
place of any meeting of the committee need be given to any member
thereof who attends in person or who, in writing executed and filed
with the records of the meeting either before or after the holding
thereof, waives such notice. No notice need be given of an
adjourned meeting of the committee. Meetings of the committee may
be held at such place or places, either within or outside of the
City of Omaha, State of Nebraska, as the committee shall determine,
or as may be specified or fixed in the respective notices or
waivers thereof. Each committee shall keep appropriate minutes of
its proceedings and report all significant actions to the board of
directors at the regular meetings thereof held next after such
actions have been taken. Vacancies on such committee shall be
filled by the board of directors. Members of such committee may be
removed by the board of directors at any time with or without
cause.
EXECUTIVE COMMITTEE
19. The executive committee shall have and may exercise all
or any of the powers of the board of directors in the management of
the normal and ordinary business and affairs of the corporation at
all times when the board of directors is not in session, and in
connection therewith, the executive committee shall have full
charge of the property, interest, business and transactions of the
corporation. Specifically, but not by way of limitation, the
executive committee shall have the following powers, duties and
responsibilities while the board of directors is not in session:
(a) To fix all remuneration of the officers and employees of
the corporation, other than its executive officers,
within the guidelines recommended by the management
compensation committee and approved by the board of
directors.
(b) To maintain general charge and control of all accounting
and data processing affairs of the corporation.
(c) To maintain general charge and control of all major
financial arrangements, and of acquisitions and
dispositions of property which are not in the ordinary,
routine, and regular course of business of the
corporation and to make recommendations as to all
matters within the purview of this subparagraph (c) to
the board of directors.
(d) To maintain general charge of and to supervise the
financial affairs of the corporation, including the
budgetary, accounting, and statistical methods and
procedures of the company, financial policies, practices
and problems of the corporation and to make
recommendations as to such financial or related matters
as shall be referred to it by the board of directors, or
which shall be raised by the committee on its own
initiative.
(e) To supervise the borrowing of money, and the issuance of
bonds, notes, or other obligations and evidences of
indebtedness therefor.
(f) To assure compliance with ethical standards.
(g) To supervise the investment of funds of this corporation
in the purchase and acquisition of stocks, bonds, and
other securities, in the name and in behalf of this
corporation, and to sell and dispose of the stocks,
bonds, and other securities owned by this corporation,
at such times and upon such terms as it may deem wise
and advantageous to this corporation.
The executive committee shall not have the power or authority of
the board of directors in reference to amending the Restated
Certificate of Incorporation, amending the By-laws, declaring
dividends, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all
or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation
or a revocation of a dissolution, authorizing the issuance of stock
or to act contrary to any action previously undertaken by the board
of directors, and shall not have the specific powers conferred upon
other committees by these By-laws or by resolution of the board
pursuant to the Restated Certificate of Incorporation of the
corporation. The executive committee shall not have the authority
to inaugurate reversals of, or departures from, fundamental
policies and methods of conducting the business of the corporation,
as prescribed by the board. It shall have the power to authorize
the seal of the corporation to be affixed to all papers and
documents which may require it. All actions of the executive
committee shall be subject to revision or alteration by the board
of directors provided that no rights or acts of third parties shall
be affected by any such revision or alteration.
COMPENSATION COMMITTEE
20. The compensation committee shall consist entirely of
directors who are neither holders of Common Stock nor employees of
the corporation or its subsidiaries. Under the direction of the
board of directors, the committee shall have the following
functions:
(a) To review, and approve or disapprove, all compensation
of whatever nature to be paid to the executive officers
of the corporation, i.e. the employee directors of the
corporation and any other persons whom the board of
directors specifically designate as executive officers.
(b) To review the ownership of the corporation's securities
by employee stockholders and make determinations
concerning excessive stock ownership pursuant to Article
Sixth (D)(3)(d) of the Restated Certificate of
Incorporation.
(c) At the specific request of the board of directors or the
chairman of the board, conduct investigations, make
recommendations, or perform other functions as
requested.
(d) To recommend to the board of directors the compensation
ranges of the management personnel of the corporation.
(e) To make recommendations to the board of directors about
the salaries and bonuses to be paid to all key
management personnel and the terms and conditions of
their employment.
(f) To make recommendations to the board of directors about
any other plans affecting employees' remuneration,
including fringe benefits, as well as ownership of the
corporation's stock and convertible debentures.
(g) To review and approve all requests by stockholders of
the corporation to transfer stock of the corporation to
transferees within the guidelines established by Section
38 of these By-laws.
AUDIT COMMITTEE
21. None of the members of the audit committee shall be
directly involved in the supervision or management of the financial
affairs of the corporation or any of its subsidiaries. The audit
committee shall have the following duties and responsibilities
while the board of directors is not in session:
(1) To recommend to the board of directors for appointment,
retention or termination by the board of directors
independent public accountants to audit the books,
records, and accounts of the corporation.
(2) To examine and make recommendations to the board of
directors with respect to the overall scope of the audit
conducted by the corporation's independent public
accountants, the audit procedures which will be followed
during the course of the audit, their final opinion and
the compensation to be paid for the services of the
independent public accountants.
(3) To review all recommendations made by the corporation's
independent public accountants to the board of directors
with respect to the accounting methods used by the
corporation or any other accounting matters and to
advise the board of directors with respect thereto.
(4) To review the following matters with the independent
public accountants, upon completion of their audit:
(a) the financial statements and any report or opinion
proposed to be rendered in connection therewith,
(b) the independent public accountant's perceptions of
the company's financial and accounting personnel,
(c) the cooperation which the independent public
accountants receive during the course of their
audit,
(d) the extent to which the resources of the company
were or should be utilized to minimize the audit
fee,
(e) any significant transactions which were not in the
ordinary, routine, and regular course of business
of the corporation,
(f) any change in accounting principles, policies or
standards,
(g) all significant adjustments proposed by the
independent public accountants,
(h) general policies and procedures utilized by the
corporation with respect to internal auditing and
financial controls, and
(i) any recommendations which the independent
accountants may have with respect to internal
financial controls, choice of accounting policies
and principles, or management reporting systems.
(5) To meet with the company's financial and accounting
staff periodically to review and discuss the scope of
internal accounting procedures and controls then in
effect and the extent which any recommendations made by
the internal audit department or by the independent
public accountants have been implemented.
(6) To meet with appropriate internal audit department
personnel periodically to review the audit results and
plans, and evaluate the internal audit department's
effectiveness. The audit committee shall emphasize the
policy pursuant to which the internal audit department
reports to the audit committee, in order to protect such
independence as is necessary to work in compliance with
recognized standards of internal auditing.
(7) To direct and supervise any investigation of any matter
brought to its attention within the scope of its duties.
The audit committee may retain outside consultants in
connection with any such investigation.
(8) To prepare and present to the board of directors a
report covering its activities twice yearly at regular
board meetings, specified by board resolution, or more
often, when considered necessary, to report a material
irregularity.
COMPENSATION OF DIRECTORS
22. No stated salary or other compensation for services as a
director shall be paid to a director who (a) is a stockholder of
this corporation and (b) holds a corporate officer position of this
corporation. Any director without these qualifications, by
resolution of the board, may be paid an annual sum for services as
a director and such director may also be paid a fixed sum and
expenses for each board meeting attended. A director shall not be
precluded from serving the corporation in any other capacity and
receiving compensation therefor.
23. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
MEETINGS OF THE BOARD
24. The first meeting of each newly elected board shall be
held at Omaha, Nebraska after the adjournment of the annual
stockholders' meeting or at such other time and place either within
or without the State of Delaware as shall be fixed by the newly
elected directors, and no notice of such meeting shall be
necessary.
25. Regular meetings of the board may be held at such places
within or without the State of Delaware and at such times as the
board may from time to time determine, and if so determined notices
thereof need not be given.
26. Special meetings of the board may be called by the
chairman of the board on three (3) days' notice to each director,
either personally or by mail or by telegraph; special meetings
shall be called by the chairman of the board of secretary in like
manner and on like notice on the written request of two (2)
directors.
27. At all meetings of the board of directors a majority of
the whole board of directors shall constitute a quorum for the
transaction of business and the affirmative vote of a majority of
the whole board shall be required to constitute the act of the
board of directors, except as may be otherwise specifically
provided by statute or by the Restated Certificate of Incorporation
or by these By-laws.
OFFICERS
28. The officers of the corporation shall be a president,
vice president, secretary and treasurer. In addition the board of
directors may elect a chairman of the board, one or more vice
chairmen of the board, a chairman of any committee designated by
the board, additional vice presidents, one or more of whom may be
executive vice presidents, one or more assistant vice presidents, a
controller, one or more assistant secretaries, assistant
treasurers, assistant controllers and such other subordinate
officers, and may appoint such other agents, as the board of
directors may deem necessary.
29. The president, vice president, secretary and treasurer
shall be elected annually by the board of directors at the first
meeting of the board following the stockholders' annual meeting, or
as soon thereafter as is conveniently possible. Other officers of
the corporation may be elected by the board of directors from time
to time. Agents of the corporation may be appointed by the board of
directors from time to time. Each officer shall serve until his
successor shall have been elected and qualified, or until his
death, resignation or removal.
30. Any officer or agent may be removed from office, with or
without cause, at any time by the affirmative vote of a majority of
the board of directors then in office.
31. Any vacancy in any office from any cause may be filled
for the unexpired portion of the term by the board of directors.
32. The compensation of all executive officers of the
corporation shall be fixed by the executive compensation committee
of the board of directors. The compensation of all other officers
of the corporation shall be fixed by the executive committee of the
board of directors within the compensation ranges recommended by
the management compensation committee and approved by the board of
directors. No executive officer shall be ineligible to receive such
compensation by reason of the fact that he is also a director of
the corporation and receiving compensation therefor.
33. The board of directors shall determine who shall preside
at all meetings of the board of directors and shall also determine
who shall preside at all meetings of the stockholders.
34. The officers of the corporation shall hold such powers
and perform such duties as from time to time may be assigned them
by the board of directors.
35. The chairman of the board, vice chairman of the board,
chairman of the executive committee of the board, president, vice
presidents, including the executive vice presidents, and assistant
vice presidents, shall be empowered to sign contracts, bids,
proposals, certificates and other instruments of the corporation.
The secretary and assistant secretaries shall be empowered to
attest to such documents.
36. The board of directors may from time to time delegate
the powers and duties of any officer to any other officer, director
or other person whom it may select.
37. Any officer, agent or employee of the corporation, if so
required by the board of directors, shall be bonded for the
faithful performance of his duties, with such penalties, conditions
and security as the board may require.
SHARES OF STOCK
38. The following restrictions on the ownership and transfer
of the Common Stock of the corporation are hereby imposed:
(1) Shares of Common Stock may be sold by the corporation
only to employees. With the prior approval of the board
of directors, an employee owning such stock having a
value of $2,000,000 or more may transfer stock (a) to a
fiduciary for the benefit of members of the stockholder-
employee's spouse and/or children, (b) to a corporation
100 percent owned by the stockholder-employee or the
stockholder-employee and his spouse and/or children, or
(c) to a fiduciary for the benefit of such a
corporation; provided, however, that no employee may
have in existence at any one time more than four trusts
owning shares of Common Stock of the corporation. With
the prior approval of the board of directors, Common
stockholders may transfer stock to a tax-exempt
charitable organization approved as such by the Internal
Revenue Service.
(2) Common stockholder-employees may pledge such stock for
loans in connection with the ownership of the
corporation's stock.
(3) All Common Stock of the corporation shall be issued and
held at all times subject to the corporation's standard
applicable repurchase agreements.
CERTIFICATES OF STOCK
39. The certificates of stock of the corporation shall be
numbered and shall be entered in the books of the corporation as
they are issued. They shall exhibit the holder's name and number of
shares and shall be signed by the president or a vice president and
the treasurer or an assistant treasurer, or the secretary or an
assistant secretary. Any or all of the signatures on the
certificate may be by facsimile. They shall have noted on their
face or back a reference to any repurchase agreement to which the
shares of stock they represent are subject. If the corporation has
a transfer agent or an assistant transfer agent or a transfer clerk
acting on its behalf and a registrar, the signature of any such
officer may be by facsimile. There shall be set forth on the face
or back of the certificates of stock of the corporation a statement
that the corporation will furnish without charge to each
stockholder who so requests, a description of the powers,
designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences
and/or rights.
TRANSFERS OF STOCK
40. Subject to the transfer restrictions applicable thereto,
upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, cancel the
old certificate and record the transaction upon its books.
FIXING RECORD DATE
41. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to
corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a
record date, which shall not be more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty
days prior to any other action. A determination of stockholders of
record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
REGISTERED STOCKHOLDERS
42. The corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact
thereof, and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such share on the part
of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of
Delaware.
LOST CERTIFICATES
43. The board of directors may direct a new certificate or
certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have
been lost or destroyed, upon the making of an affidavit of the fact
by the person claiming the certificate of stock to be lost or
destroyed. When authorizing such issue of a new certificate or
certificates, the board of directors may, in its discretion and as
a condition precedent to the issuance thereof, require the owner of
such lost or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall
require and/or give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been
lost or destroyed.
CHECKS
44. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such
other person or persons as the board of directors may from time to
time designate.
FISCAL YEAR
45. The fiscal year shall end on the last Saturday of
December in each year.
DIVIDENDS
46. Dividends upon the capital stock of the corporation,
subject to the provisions of the Restated Certificate of
Incorporation, if any, may be declared by the board of directors at
any regular or special meeting, pursuant to law. Dividends may be
paid in cash, in property, or in shares of the capital stock.
47. Before payment of any dividend there may be set aside
out of any funds of the corporation available for dividends such
sum or sums as the directors from time to time, in their absolute
discretion, think proper as a reserve fund to meet contingencies,
or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to
the interest of the corporation, and the directors may abolish any
such reserve in the manner in which it was created.
NOTICES
48. Whenever under the provisions of these By-laws notice is
required to be given to any director or stockholder, it shall not
be construed to mean personal notice, but such notice may be given
in writing, by either personal delivery or mail. If mailed, notice
is given when deposited in the United States mail, postage prepaid,
directed to the stockholder or director at his address as it
appears on the records of the corporation. No notice is required to
be given to a stockholder to whom notices of two consecutive annual
meetings (and any other written notice sent between those meetings)
have been mailed addressed to him at his address as shown on the
corporate records and have been returned undeliverable.
49. Any notice required to be given under these By-laws may
be waived in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein. Any
person in attendance at any meeting in person or by proper proxy
shall be deemed to have duly waived any notice thereof.
AMENDMENTS
50. These By-laws may be amended by the affirmative vote of
two-thirds of the whole board of directors or by the affirmative
vote of the holders of two-thirds of the Common Stock issued and
outstanding
INDEMNIFICATION
51. (a) Actions, Suits or Proceedings Not by or in the
Right of the Corporation. The corporation shall indemnify any
person who was or is a party or is threatened to be made a party to
any threatened pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or investigative (other
than an action by or in the right of the corporation) by reason of
the fact that he is or was a director, officer or employee of the
corporation, or is or was serving at the request of the corporation
as a director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding (including appeals)
if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe his conduct was
unlawful.
(b) Actions or Suits by or in the Right of the
Corporation. The corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer or employee of the
corporation, or is or was serving at the request of the corporation
as a director, officer or employee of another corporation,
partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees), judgments, fines, and amounts
paid in settlement actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit
(including appeals) if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests
of the corporation and except that no indemnification shall be made
under this paragraph (b) in respect of any claim, issue or matter
as to which the person seeking indemnification shall have been
adjudged to be liable to the corporation unless and only to the
extent that the Court of Chancery or the court in which such action
or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to
indemnity for such indemnification which the Court of Chancery or
such other court shall deem proper. No indemnity shall be paid
under this paragraph (b) with respect to any claim, issue or matter
arising out of any action by the person seeking indemnification
which was knowingly fraudulent or deliberately dishonest or which
involved willful misconduct, or arising out of such person's
gaining any personal profit or advantage to which he was not
legally entitled.
(c) Indemnification Against Expenses of Successful
Party. Notwithstanding the other provisions of this Section 51, to
the extent that a director, officer or employee of the corporation
has been successful on the merits or otherwise, including the
dismissal of an action without prejudice, in defense of any action,
suit or proceeding or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(d) Advances of Expenses. Expenses incurred by an
officer or director in defending a civil or criminal action, suit
or proceeding shall be paid by the corporation in advance of the
final disposition of such action, suit or proceeding if the person
seeking the advance shall undertake to repay such amount in the
event that it is ultimately determined, as provided herein, that
such person is not entitled to indemnification. Such expenses
incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the board of directors deems
appropriate.
(e) Right to Indemnification Upon Application;
Procedure Upon Application. Any indemnification under paragraphs
(a), (b), or (c), or advance under paragraph (d) of this Section
51, shall be made promptly, and in any event within ninety days of
a claim under paragraph (a), (b), or (c) and within thirty days of
a claim under paragraph (d), upon the written request of the person
seeking the indemnification or advance, unless with respect to
applications under paragraph (a) or (b) a determination is made
within ninety days (i) by the board of directors by a majority vote
of a quorum consisting of directors who were not parties to such
action suit or proceeding, or (ii) if such a quorum is not
obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written
opinion, or (iii) by the shareholders, that such person acted in
bad faith or in a manner that such person did not believe to be in
or not opposed to the best interests of the corporation, or with
respect to any criminal proceeding, that such person believed or
had reasonable cause to believe that his conduct was unlawful. In
the event that no quorum of disinterested directors is obtainable,
the board of directors shall promptly direct that independent legal
counsel shall decide whether the person seeking the indemnification
acted in the manner set forth in paragraphs (a) and (b). The right
to indemnification and advances granted by this Section 51 shall be
enforceable in any court of competent jurisdiction, if the
corporation denies the claim, in whole or in part, or if no
disposition of such claim is made within the ninety or thirty day
time period specified in this paragraph (e). In any action to
enforce the rights to indemnification and advancement of expenses
created by this Section 51, a denial of the claim by the
corporation shall not create any presumption that the person
bringing the action did not act in a manner that would entitle him
to such indemnification and advancement of expenses. In any such
action, or in any suit by the corporation to recover an advancement
of expenses pursuant to the terms of an undertaking, the burden of
proving that the person seeking indemnification or an advancement
of expenses is not entitled to such indemnification or advancement
of expenses, under this Section 51 or otherwise, shall be on the
corporation. Expenses incurred in successfully establishing a right
to indemnification or advances, in whole or in part, in any such
proceeding shall also be indemnified by the corporation.
(f) Non-Exclusivity of Rights; Extent and Nature of
Rights. The indemnification and advancement of expenses provided by
this Section 51 shall not be deemed exclusive of any other rights
to which any person seeking indemnification or advancement of
expenses may be entitled under any by-laws, agreement, vote of
shareholders or disinterested directors or otherwise, both as to
action in his official capacity and as to action in another
capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer or employee and
shall inure to the benefit of the heirs, executors and
administrators of such a person. All rights to indemnification and
advances of expenses under this Section 51 shall be deemed to be
provided by a contract between the corporation and the director,
officer or employee who serves in such capacity at any time while
these By-laws are in effect, and shall inure to the benefit of such
person, his heirs, personal representatives, and estate, and shall
be binding on any successor to the corporation. Neither any repeal
or modification of these By-laws nor the merger or consolidation of
the corporation with any other entity shall affect any rights or
obligations in effect at the time of the repeal, modification,
merger or consolidation. Notwithstanding any other provisions of
this Section 51, except as provided in paragraph (e) hereof with
respect to proceedings to enforce rights to indemnification, the
corporation shall not indemnify any person in connection with a
proceeding (or part thereof) initiated by such person unless such
proceeding (or part thereof) was authorized by the board of
directors of the corporation.
(g) Other Enterprises, Fines, and Serving at
Corporation's Request. For purposes of this Section 51, references
to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a
person with respect to any employee benefit plan; and references to
"serving at the request of the corporation" shall include any
service as a director, officer or employee of the corporation which
imposes duties on, or involves services by, such director, officer
or employee with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best
interests of the corporation" as referred to in this Section 51.
(h) Savings Clause. If this Section 51 or any portion
thereof shall be invalidated on any ground by any court of
competent jurisdiction, then the corporation shall nevertheless
indemnify each agent of the corporation as to expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, to the full extent
permitted by any applicable portion of this Section 51 that shall
not have been invalidated or by any applicable law.
TAX SHARING AGREEMENT
This Tax Sharing Agreement (the "Agreement"),
dated as of this 26th day of March, 1998, by and between
Peter Kiewit Sons', Inc., a Delaware corporation ("PKS")
and PKS Holdings, Inc., a Delaware corporation, is en-
tered into in connection with the Split-Off (as defined
below).
WHEREAS PKS has received the IRS Ruling (as
defined below) and the Tax Opinion (as defined below)
regarding the tax-free nature of the Split-Off;
WHEREAS, in connection with the Split-Off,
Kiewit Diversified Group Inc., a Delaware corporation,
which changed its name to Level 3 Communications, Inc. on
January 19, 1998 ("KDG"), will merge with and into PKS
(the "Liquidation");
WHEREAS, following the Liquidation, PKS will
change its name to Level 3 Communications, Inc. ("Level
3"), and PKS Holdings, Inc., will change its name to
Peter Kiewit Sons', Inc. ("Kiewit"); and
WHEREAS the parties hereto desire to set forth
their agreement on the proper allocation among Level 3
and Kiewit and their subsidiaries of federal, state,
foreign and local taxes;
NOW, THEREFORE, in consideration of their
mutual promises, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall
have the following meanings (such meanings to be equally
applicable to both the singular and the plural forms of the terms
defined):
"AAA" is defined in Section 6.2.
"After-Tax Basis" means, with respect to any indemnity
payment or reimbursement hereunder, taking into account any Taxes
imposed upon receipt of such indemnity payment or reimbursement
and any Tax Benefit or Tax Detriment resulting to the indemnified
or reimbursed party due to such indemnification or reimbursement.
For this purpose, the applicable State Income Tax rate (taking
into account the deductibility of State Income Taxes for federal
Income Tax purposes) shall be assumed to equal 3%.
"Aircraft" means that certain Dassault Falcon 900
aircraft, FAA registration number N349K, together with three
installed Garrett model TFE 731-5BR-1C engines and together with
all other equipment, accessories, parts and property, installed
in or appurtenant to such aircraft or its engines.
"Class B Stock" means Class B Construction & Mining
Group Nonvoting Restricted Redeemable Convertible Exchangeable
Common Stock of PKS, par value $.0625 per share.
"Class C Stock" means Class C Construction & Mining
Group Restricted Redeemable Convertible Exchangeable Common Stock
of PKS, par value $.0625 per share.
"Class D Stock" means Class D Diversified Group
Convertible Exchangeable Common Stock of PKS, par value $.01 per
share.
"Class R Common Stock" means Class R Convertible Common
Stock of PKS, par value $.01 per share.
"Code" means the Internal Revenue Code of 1986 (or, if
relevant, the Internal Revenue Code of 1954), as amended, or any
successor thereto, as in effect for the taxable period in
question.
"Combined Group" means all the corporations included in
a particular Combined State Income Tax Return.
"Combined Jurisdiction" means, for any taxable period,
any jurisdiction in which a Combined State Income Tax Return is
filed or required to be filed.
"Combined State Income Tax Return" means any combined,
unitary, or consolidated return or report used in the determina-
tion or reporting of a State Income Tax or Net Worth Tax
liability (including as a result of a State Determination) with
respect to which the Combined Group consists of two or more of
the following: (i) a member of the Kiewit Group, (ii) a member of
the PKS Group and (iii) a member of the Level 3 Group.
"Combined State Income Tax Liability" is defined in
Section 3.3(a).
"Computer" means PKS Computer Services, Inc., a
Delaware corporation.
"Consolidated Group" means the affiliated group of
corporations (within the meaning of Section 1504 of the Code) of
which PKS is the common parent.
"Construction Business" means the construction business
conducted by KCG and its subsidiaries.
"Conversion Event" means final approval by the board of
directors of Level 3 prior to June 30, 1998, of the exchange of
all of the outstanding Class R Common Stock for Common Stock of
Level 3, par value $.01 per share.
"Covent Agreements" means (i) the Agreement among
Covent Vermont Insurance Company, a Vermont corporation which has
since been liquidated, Global Surety & Insurance Co., a Nebraska
insurance company, and KDG, dated as of November 30, 1992, and
(ii) the Indemnification Agreement between KCG and KDG, dated as
of December 25, 1993.
"Crown Agreements" means the Settlement Agreement dated
December 10, 1992, among Crown Cork & Seal Company, Inc.,
Continental Holdings Inc. and PKS, the Purchase Price Adjustment
Agreement, dated December 10, 1992, among Crown Cork & Seal
Company, Inc., Crown Beverage Packaging, Inc., Continental
Holdings Inc. and PKS and all prior agreements modified by such
agreements.
"Due Date" means, with respect to any Tax Return or
payment of Taxes, the date on which such Tax Return or payment
is required, under applicable law, to be filed or remitted to the
appropriate Taxing Authority, taking into account any applicable
extensions.
"Excess Loss Account" is defined in Treasury
Regulations Section 1.1502-19.
"Extending Party" is defined in Section 5.2(k).
"Federal Tax Sharing Agreements" means (i) the C Group
Federal Tax Sharing Agreement, dated December 29, 1991, among
PKS, KCG and KMG, (ii) the PKS-IS Federal Tax Sharing Agreement,
dated December 29, 1991, between PKS and PKS-IS and (iii) the D
Group Federal Tax Sharing Agreement, dated December 29, 1991,
between PKS and KDG.
"Final Federal Determination" means the final
resolution of liability for any federal Income Tax for a taxable
period, by (i) Internal Revenue Service Form 870 or 870-AD (or
any successor forms thereto), on the date of acceptance by or on
behalf of the IRS; (ii) a decision, judgment, decree, or other
order by a court of competent jurisdiction, which has become
final and unappealable; (iii) a closing agreement or accepted
offer in compromise under Section 7121 or Section 7122 of the
Code; (iv) any allowance of a refund or credit in respect of an
overpayment of Tax, but only after the expiration of all periods
during which such refund may be recovered (including by way of
offset) by the jurisdiction imposing such Tax; or (v) any other
final disposition, including by reason of the expiration of the
applicable statute of limitations.
"Income Taxes" means all domestic taxes imposed on net
income (including, without limitation, United States federal
taxes imposed under Subtitle A of the Code and state and local
income taxes imposed under any similar laws of any state or local
Taxing Authority).
"Indemnified Party" is defined in Section 7.1.
"Indemnifying Party" is defined in Section 7.1.
"Integration" means PKS Systems Integration, Inc., a
Delaware corporation.
"Intercompany Transaction" is defined in Treasury
Regulations Section 1.1502-13.
"IRS" means the Internal Revenue Service.
"IRS Ruling" means the private letter ruling issued to
PKS by the IRS, dated February 27, 1998, as amended March 9,
1998, with respect to certain federal Income Tax aspects of the
Split-Off.
"KCG" means Kiewit Construction Group Inc., a Delaware
corporation.
"KCP" means KCP, Inc., a Delaware corporation (employer
identification number 47-0532558), formerly known as Kiewit Coal
Properties Inc.
"KDG" is defined in the recitals hereto.
"Kiewit" is defined in the recitals hereto.
"Kiewit Group" means the entities set forth in Section
1 of Exhibit 3.2(a) hereto.
"Kiewit Group State Pro-Forma Return" is defined in
Section 3.3(c).
"Kiewit Group Tax Liability" is defined in Section
3.2(b).
"Kiewit Loss" means any net operating loss of a member
of the Kiewit Group arising in any taxable period ending after
the Split-Off Date that can be carried back, for federal or state
Income Tax purposes, to any taxable year for which a Consolidated
Group federal Income Tax Return was filed or with respect to
which State Income Tax was paid by a Combined Group.
"Kiewit Non-Apportioned Liability" is defined in
Section 3.3(d).
"Kiewit Pro-Forma Liability" is defined in Section
3.3(b).
"KMG" means Kiewit Mining Group Inc., a Delaware
corporation, incorporated on December 13, 1991.
"Level 3 Group" means the entities set forth in Section
3 of Exhibit 3.2(a) hereto. In addition, (i) with respect to any
taxable period, or portion thereof, after the Split-Off Date, the
Level 3 Group shall include Level 3 (the former PKS) and (ii) if
the Liquidation occurs prior to the Split-Off Date, all Tax Items
of Level 3 that (x) arise after the date of the Liquidation and
prior to the day after the Split-Off Date and (y) relate to
assets or liabilities received by Level 3 pursuant to the
Liquidation, shall be treated as Tax Items of the Level 3 Group.
"Level 3 Group State Pro-Forma Return" is defined in
Section 3.3(b).
"Level 3 Loss" means any net operating loss of a member
of the Level 3 Group arising in any taxable period ending after
the Split-Off Date that can be carried back, for federal or state
Income Tax purposes, to any taxable year for which a Consolidated
Group federal Income Tax Return was filed or with respect to
which State Income Tax was paid by a Combined Group.
"Level 3 Non-Apportioned Liability" is defined in
Section 3.3(d).
"Level 3 Pro-Forma Liability" is defined in Section
3.3(c).
"Liability Issue" is defined in Section 5.1(c).
"Liquidation" is defined in the recitals hereto.
"Mergers" means the mergers of each of Integration and
Computer, with and into a single-member limited liability company
of which PKS-IS is the only member, in connection with the Split-
Off.
"MFS" means MFS Communications Company, Inc, a Delaware
corporation.
"MFS Spin-Off" means the distribution on September 30,
1995, by KDG to PKS of all of the stock of MFS owned by it and
the distribution by PKS of such stock to its shareholders.
"MFS Tax Sharing Agreement" means the tax sharing
agreement, dated December 26, 1992, between KDG and MFS.
"Nebraska Tax Credit Program" means the Employment and
Investment Growth Act Project Agreements signed December 30,
1987, and March 21, 1996, between PKS and the State of Nebraska.
"Net Worth Tax" means any Tax determined on the basis
of net worth or capital stock.
"NOL Refund" is defined in Section 3.8(b).
"Non-Apportioned Income" means, with respect to any
member of the Kiewit Group, the PKS Group or the Level 3 Group,
such member's separately determined, apportioned and/or allocated
income or loss.
"Non-Apportionment State Income Tax Liability" means
any State Income Tax liability reported on a Combined State
Income Tax Return where the income, loss, Tax Items,
apportionment factors, allocable income and apportioned income
(other than any intercompany adjustments) are determined on a
separate basis for each member of the Combined Group.
"Non-Combined Liability" is defined in Section 3.3(g).
"Non-U.S. Income Taxes" means Canadian federal and
provincial income tax, Canadian large corporation Tax, Canadian
provincial capital Tax and all other income taxes imposed by a
foreign Taxing Authority.
"Objecting Party" is defined in Section 5.2(k).
"Other Taxes" means all Taxes other than Income Taxes
and Transfer Taxes.
"PKS" is defined in the recitals hereto.
"PKS Group" means the entities set forth in Section 2
of Exhibit 3.2(a) hereto for all taxable periods or portions
thereof ending on or before the Split-Off Date.
"PKS Group Tax Liability" is defined in Section 3.2(b).
"PKS-IS" means PKS Information Services, Inc., a
Delaware Corporation.
"Proposed Extension" is defined in Section 5.2(k).
"RAR" means any revenue agent's report with respect to
federal Income Taxes.
"Recapitalization" means the distribution by PKS of
shares of Class R Common Stock with respect to outstanding shares
of Class C Stock.
"Ruling Request" means the private letter ruling
request filed by PKS with the IRS on October 29, 1997, as
supplemented from time to time (including, without limitation,
supplements filed with the IRS on January 5, 1998, January 23,
1998, February 5, 1998, February 12, 1998, and February 23,
1998), with respect to certain federal Income Tax aspects of the
Split-Off.
"Separation Agreement" means the Separation Agreement
entered into between PKS, Kiewit, KDG and KCG, dated as of
December 8, 1997, as amended.
"Split-Off" means the distribution by PKS of all the
issued and outstanding common stock of Kiewit in a transaction
intended to qualify as a tax-free distribution under Sections 355
and 368(a)(1)(D) of the Code and related restructuring
transactions described in the Ruling Request, including, without
limitation, the Recapitalization and the Mergers.
"Split-Off Date" means the date determined by the PKS
Board of Directors as of which the Split-Off shall be effected.
"Split-Off Taxes" means (i) corporate-level Taxes
attributable to the failure of the Split-Off to qualify as a
distribution and reorganization within the meaning of Sections
355 and 368 of the Code or a similar provision under state law,
(ii) federal Income Taxes and State Income Taxes attributable to
recognition of gain under Section 367(e) of the Code or a similar
provision under state law as a result of the Split-Off, and (iii)
federal Income Taxes and State Income Taxes attributable to the
recognition of gains with respect to Intercompany Transactions or
Excess Loss Accounts or similar items under state law as a result
of the Split-Off.
"State Determination" means the final resolution of
State Income Tax liability determined on the basis of a Combined
Group by (i) any settlement with any state or local Taxing
Authority, (ii) any decision by any state or local agency which
becomes final and unappealable, (iii) a decision, judgment,
decree or other order of any court of competent jurisdiction
which becomes final and unappealable, (iv) a refund or credit in
respect of an overpayment of State Income Tax, but only after the
expiration of all periods during which such refund may be
recovered (including by way of offset) or (v) any other final
disposition, including by reason of the expiration of the
applicable statute of limitation.
"State Federal Audit Adjustment" means any federal
Income Tax adjustment which must be reported because of the
filing of an amended federal Income Tax Return for the
Consolidated Group or a non-consolidated affiliate or a Final
Federal Determination for the Consolidated Group or a non-
consolidated affiliate that must be reported for purposes of any
State Income Tax or state Other Tax for any taxable period ending
before or including the Split-Off Date.
"State Income Taxes" means all Income Taxes imposed by
any state or political subdivision thereof.
"Subsidiary" of any party means (i) a corporation of
which more than 50% of the voting or capital stock is owned,
directly or indirectly, by such party and (ii) any partnership,
limited liability company, association or other entity in which
such party owns, directly or indirectly, more than 50% of the
equity interests or has the power to elect a majority of the
members of the governing body of such entity, but only with
respect to entity-level Taxes, if any, imposed on such
partnership, limited liability company, association or other
entity.
"Tax" and "Taxes" means all Income Taxes, payroll and
employee withholding taxes (imposed under Chapters 21 and 24 of
the Code or any similar or comparable payroll and employee
withholding taxes (including disability withholding taxes imposed
by the laws of any Taxing Authority)), other domestic and foreign
withholding taxes, sales and use taxes, excise taxes, real and
personal property taxes and any other governmental imposition
generally referred to as a tax, whether arising before, on, or
after the Split-Off Date. Except as otherwise provided herein,
any reference to a particular type of tax (or refund thereof)
includes interest, additions to tax and penalties that may be
payable in respect thereof.
"Tax Attribute" means any net operating loss, net
capital loss, investment tax credit, foreign tax credit,
charitable deduction or any other deduction, credit or tax
attribute that could reduce Taxes (including, without limitation,
deductions and credits related to alternative minimum Taxes).
"Tax Benefit" means a reduction in the Tax liability of
a corporation (or of the consolidated or combined group of which
it is a member) for any taxable period that arises as a result of
any adjustment to, or addition or deletion of, a Tax Item in the
computation of the Tax liability of the taxpayer (or the
consolidated or combined group of which it is a member).
"Tax Controversy" means any assessment, proposed
assessment, adjustment, determination, protest, litigation or any
other similar action or proceeding that has the purpose or effect
of redetermining liability for Taxes other than any agent-level
audit, review or examination with respect to Taxes.
"Tax Detriment" means an increase in the Tax liability
of a corporation (or of the consolidated or combined group of
which it is a member) for any taxable period that arises as a
result of any adjustment to, or addition or deletion of, a Tax
Item in the computation of the Tax liability of the taxpayer (or
the consolidated or combined group of which it is a member).
"Tax Item" means any item of income, gain, loss, deduc-
tion, credit, recapture of credit, or any other item affecting
the determination of Taxes.
"Tax Opinion" means the opinion issued by Skadden,
Arps, Slate, Meagher & Flom LLP, tax counsel to PKS, dated March
31, 1998, with respect to certain federal Income Tax aspects of
the Recapitalization.
"Tax Practices" is defined in Section 2.1 hereof.
"Tax Return" means any return, filing, questionnaire or
other document filed or required to be filed, including claims
for refund or amended returns that may be filed, for any taxable
period with any Taxing Authority in connection with any Tax or
Taxes (whether or not a payment is required to be made with
respect to such filing).
"Taxable Year 1997" means the taxable period ending on
December 27 or December 31, 1997, as applicable.
"Taxable Year 1998" means the taxable period ending on
the Split-Off Date or December 26 or 31, 1998, as applicable.
"Taxing Authority" means a national, municipal,
governmental, state, federal, foreign or other body responsible
for imposition or collection of any Tax.
"Transfer Tax" means any state, local or foreign Tax
imposed to record a transfer of property other than any sales or
use Tax.
"Treasury Regulations" means the temporary and final
Income Tax Regulations promulgated under the Code.
"WorldCom" means WorldCom, Inc., a Georgia corporation.
ARTICLE II
PREPARATION AND FILING OF TAX RETURNS
Section II.1. Manner of Filing. All Tax Returns filed
after the Split-Off Date shall be prepared on a basis that is
consistent with the IRS Ruling and the Tax Opinion. All Income
Tax Returns relating to taxable periods ending before or
including the Split-Off Date and filed, or caused to be filed,
after the date of this Agreement by Level 3, Kiewit or their
respective controlled affiliates shall be (i) prepared (in the
absence of a controlling change in law or circumstance) in a
manner that is consistent with (a) elections, accounting methods,
conventions and principles of taxation used for the most recent
taxable periods for which Income Tax Returns involving similar
items have been filed prior to the Split-Off Date (other than
with respect to Tax Items attributable to MFS) and (b) the entity
combinations mutually agreed upon by the parties hereto, unless
the parties mutually agree to change such elections, accounting
methods, conventions, principles of taxation or entity
combinations (collectively the "Tax Practices") and (ii) filed on
a timely basis (including extensions) by the party responsible
for such filing hereunder. Notwithstanding the foregoing, such
Tax Returns shall not be required to be prepared in a manner
consistent with the Tax Practices to the extent such elections,
methods, conventions, principles or entity combinations are al-
tered by any IRS audit, Final Federal Determination, state audit
or State Determination, in which event the practices required by
such audits or determinations may be utilized.
Section II.2. Federal Income Tax Returns.
(a) Kiewit shall prepare, or cause to be prepared, all
Tax Returns (other than claims for refund or amended returns) for
the Consolidated Group, California Private Transportation Company
L.P. and Express Lanes, Inc., relating to federal Income Taxes
for the Taxable Year 1997. Such Tax Returns shall include the
Tax Items required to be reported on such Tax Returns for all
members of the Level 3 Group, the PKS Group and the Kiewit Group
for the Taxable Year 1997. Level 3 shall provide Kiewit with the
information set forth in Exhibit 2.2(a) hereto on or before the
dates indicated in such Exhibit 2.2(a) and, as soon as reasonably
practicable, any additional information reasonably requested by
Kiewit relating to Tax Items for any member of the Level 3 Group
or the PKS Group for use by Kiewit in preparing such Tax Returns.
Kiewit shall prepare the Tax Returns consistently with such
information provided by Level 3 to the extent such information is
reasonable. On or before the date that is 30 days prior to the
Due Date for such Tax Returns Kiewit shall deliver to Level 3
such Tax Returns, and Level 3 shall file such Tax Returns;
provided, however, that if the information described above is
provided by Level 3 later than the relevant date set forth in
Exhibit 2.2(a), Kiewit shall have an additional number of days
equal to the days by which Level 3 was late in providing such
information within which to deliver such Tax Returns to Level 3.
(b) Level 3 shall prepare and file, or cause to be
prepared and filed, all Tax Returns for the Consolidated Group
(other than Tax Returns that include only members of the Kiewit
Group) relating to federal Income Taxes for the Taxable Year
1998. Such Tax Returns shall include all Tax Items required to
be reported on such Tax Returns for all members of (i) the Kiewit
Group for the short taxable year ending on the Split-Off Date,
(ii) the PKS Group and (iii) the Level 3 Group. On or before the
date that is 90 days prior to the Due Date for such Tax Returns
for the Taxable Year 1998, Kiewit shall provide Level 3 with its
pro-forma federal Income Tax Returns and supporting schedules
(other than foreign income information, which shall be provided
on the date that is 45 days prior to such Due Date) for the
portion of the taxable period beginning December 28, 1997 (for
Kiewit Group members with taxable years ending on the last
Saturday in December) or January 1, 1998 (for other Kiewit Group
members) and, in each case, ending on and including the Split-Off
Date. Such pro-forma Tax Returns and supporting schedules shall
show the federal Income Tax liability of the Kiewit Group,
computed as if the members of the Kiewit Group filed a
consolidated federal Income Tax Return on a stand-alone basis and
taking into account Tax Items only to the extent such Tax Items
are attributable to the Kiewit Group, for use by Level 3 in
preparing and filing federal Income Tax Returns for the
Consolidated Group for the Taxable Year 1998. As soon as
reasonably practicable, Kiewit shall provide Level 3 with any
other information reasonably requested by Level 3 relating to Tax
Items for any member of the Kiewit Group for use by Level 3 in
preparing such Consolidated Group Tax Returns. Level 3 shall
file the Tax Returns for the Consolidated Group for the Taxable
Year 1998 consistently with such pro-forma Tax Returns,
supporting schedules and additional information, as applicable,
provided by Kiewit to the extent such pro-forma Tax Returns,
supporting schedules and additional information are reasonable.
Level 3 shall deliver to Kiewit copies of each such Consolidated
Group Tax Return 30 days prior to Level 3's filing of such Tax
Return with the IRS; provided, however, that if the information
described above is provided by Kiewit later than the relevant
date set forth above, Level 3 shall have an additional number of
days equal to the days by which Kiewit was late in providing such
information within which to deliver copies of such Tax Returns to
Kiewit.
(c) Level 3 shall prepare and file, or cause to be
prepared and filed, all claims for refund and amended Tax Returns
relating to federal Income Taxes of the Consolidated Group for
all taxable periods. As soon as reasonably practicable after
request therefor, Kiewit shall provide Level 3 with any
information reasonably requested by Level 3 for use by Level 3 in
preparing such claims for refund and amended Tax Returns.
Section II.3. State Income and Non-U.S. Income Tax
Returns.
(a) Except as otherwise provided in this Section 2.3,
Kiewit and Level 3 each shall prepare and file, or cause to be
prepared and filed, all appropriate Tax Returns relating to all
State Income Taxes or Non-U.S. Income Taxes imposed on any member
of the Kiewit Group or the Level 3 Group, respectively.
(b) Kiewit shall prepare or cause to be prepared any
Tax Returns (other than claims for refund or amended returns)
relating to State Income Taxes and Non-U.S. Income Taxes imposed
upon any member of the Kiewit Group, the PKS Group or the Level 3
Group for the Taxable Year 1997 if a member of the Kiewit Group
prepared a similar Tax Return for such member in the immediately
preceding taxable year. On or before the date that is 15 days
prior to the Due Date for any such State Income Tax or Non-U.S.
Income Tax Return, Kiewit shall deliver to Level 3 (i) any such
Tax Return required to be filed by any member of the Level 3
Group or the PKS Group, and Level 3 shall file, or cause to be
filed, such Tax Return and (ii) a copy of any such Tax Return
that includes a member of the PKS Group or the Level 3 Group
required to be filed by any member of the Kiewit Group, and
Kiewit shall file, or cause to be filed, such Tax Return;
provided, however, that if the information described in
subsection (c) below is provided by Level 3 later than May 15 or
September 1, 1998, as applicable, Kiewit shall have an additional
number of days equal to the days by which Level 3 was late
providing such information within which to deliver such Tax
Returns or copies thereof to Level 3.
(c) No later than May 15, 1998, Level 3 shall provide
Kiewit with all information that has been reasonably requested by
Kiewit as of the date hereof to determine State Income Tax, Net
Worth Tax, apportionment factors or foreign income and any other
data necessary to prepare any Tax Return required to be prepared
by Kiewit pursuant to Section 2.3(b) above, including, but not
limited to, all information required to claim any credits
pursuant to the Nebraska Tax Credit Program; provided, however,
that Level 3 shall not be required to provide Kiewit with
information described in Section 6 of Exhibit 2.2(a) until
September 1, 1998.
(d) For any Combined Jurisdiction, Level 3 shall
prepare each Combined State Income Tax Return for the taxable
year including the Split-Off Date (which Tax Returns shall
include such entities as are mutually agreed upon by Kiewit and
Level 3) and, except as provided in Section 2.3(e), all claims
for refund and amended Tax Returns with respect to Combined State
Income Tax Returns for all prior periods. On or before June 1,
1999, Kiewit shall provide Level 3 with all information that has
been reasonably requested by Level 3 to determine State Income
Tax, Net Worth Tax, apportionment factors and any other data
necessary to prepare any such Tax Return (other than foreign
income information, which shall be provided on or before August
15, 1999), including, but not limited to, all information
relating to any member of the Kiewit Group that is required to
claim any credits pursuant to the Nebraska Tax Credit Program.
Level 3 shall prepare any such Tax Return consistently with the
information provided by Kiewit to the extent such information is
reasonable. Level 3 shall deliver to Kiewit a copy of any such
Combined State Income Tax Return no later than 15 days prior to
the Due Date of such Tax Return, and Level 3 or the appropriate
member of the Level 3 Group shall file such Tax Return; provided,
however, that if the information described above is provided by
Kiewit later than June 1 or August 15, 1999, as applicable, Level
3 shall have an additional number of days equal to the days by
which Kiewit was late providing such information within which to
deliver a copy of such Tax Return to Kiewit.
(e) Kiewit and Level 3 shall each be responsible for
any State Federal Audit Adjustment with respect to any member of
the Kiewit Group or the Level 3 Group, respectively, other than a
State Federal Audit Adjustment affecting a Combined State Income
Tax Return. Kiewit shall prepare or cause to be prepared, where
mutually agreed by the parties, any Combined State Income Tax
Return required to be filed as a result of a State Federal Audit
Adjustment for any taxable period ending on or before December
31, 1997, and any such Tax Return shall be filed by the
appropriate entity. Level 3 shall prepare or cause to be
prepared, where mutually agreed by the parties, any Combined
State Income Tax Return required to be filed as a result of a
State Federal Audit Adjustment for the taxable year that includes
the Split-Off Date, and any such Tax Return shall be filed by the
appropriate entity.
Section II.4. Estimated Tax Returns. Level 3 shall
prepare and file, or cause to be prepared and filed, all Tax
Returns relating to installments of estimated federal Income
Taxes for the Taxable Year 1998 and installments of estimated
State Income Taxes for any Combined Group for the Taxable Year
1998. Kiewit shall provide to Level 3 all information requested
by Level 3 that relates to the Kiewit Group and is necessary for
the determination of such estimated Tax installments on or before
the date that is 5 days prior to the Due Date for such Tax
Returns. Kiewit shall assist Level 3 in preparing Tax Returns
relating to installments of estimated State Income Tax for the
first quarter of the Taxable Year 1998.
Section II.5. Post-Split-Off Income Tax Returns.
Kiewit shall prepare and file, or cause to be prepared and filed,
all Tax Returns relating to Income Taxes for the Kiewit Group for
all taxable periods beginning after the Split-Off Date. Level 3
shall prepare and file, or cause to be prepared and filed, all
Tax Returns relating to Income Taxes for the Level 3 Group or the
PKS Group for all taxable periods ending after December 27 or
December 31, 1997, as applicable.
Section II.6. Transfer and Other Tax Returns.
(a) Transfer Taxes. Kiewit and Level 3 shall prepare
and file, or cause to be prepared and filed, all Tax Returns
relating to Transfer Taxes imposed with respect to members of the
Kiewit Group or the Level 3 Group, respectively, for all
transfers, whether occurring before, on or after the Split-Off
Date.
(b) Other Taxes. Kiewit and Level 3 shall prepare and
file, or cause to be prepared and filed, on a timely basis, all
Tax Returns relating to Other Taxes imposed with respect to any
member of the Kiewit Group or the Level 3 Group, respectively,
except that Kiewit shall prepare and file, or cause to be
prepared and filed, all Other Tax Returns relating to the
Nebraska Tax Credit Program for the Taxable Year 1997.
Section II.7. Other Party's Approval Prior to Filing.
Notwithstanding anything in this Agreement to the contrary, each
Tax Return prepared by any member of the Kiewit Group pursuant to
Sections 2.2, 2.3 or 2.6 hereunder shall be subject to the
approval (which shall not be unreasonably withheld) of Level 3,
prior to filing of such Tax Return, with respect to portions of
such Tax Return that relate primarily to any member of the Level
3 Group or the PKS Group, and each Tax Return prepared by any
member of the Level 3 Group pursuant to Sections 2.2, 2.3, 2.4,
2.5 or 2.6 hereunder that relates to any taxable period ending
prior to or including the Split-Off Date shall be subject to the
approval (which shall not be unreasonably withheld) of Kiewit,
prior to filing of such Tax Return, with respect to portions of
such Tax Return that relate primarily to any member of the Kiewit
Group or the PKS Group. A party shall be deemed to have
unreasonably withheld its approval of a Tax Return unless, as the
basis for withholding such approval, the party demonstrates (by
means of a written explanation in sufficient detail to permit
such conclusion to be verified) that there is no reasonable basis
for a position taken in such Tax Return or that the other party
has failed to comply with the requirements of Section 2.1 hereof
with respect to the relevant portions of such Tax Return. The
failure of a party to propose any changes to any such Tax Return
within 10 days after receipt thereof shall be deemed to
constitute approval thereof. The parties shall attempt in good
faith to resolve any disagreements regarding such portions of
such Tax Return prior to the Due Date for filing thereof;
provided, however, that if any such disagreements are not
resolved prior to such date, the party responsible for filing the
Tax Return hereunder shall file, or cause to be filed, such Tax
Return in the form and manner in which it was prepared (or as
revised to reflect resolution of any such disagreements which
were resolved). Any disagreements regarding such portions of
such Tax Return which are not resolved prior to the filing
thereof shall be resolved promptly pursuant to Article VI hereof.
ARTICLE III
LIABILITY, PAYMENTS, REFUNDS AND DEFICIENCIES
Section III.1. Liability. Except to the extent that
the parties may agree otherwise in writing, the Level 3 Group and
the Kiewit Group shall be liable for their respective shares of
Income Taxes, Transfer Taxes and Other Taxes as provided in this
Article III.
Section III.2. Allocation of Federal Income Taxes.
(a) In General. Except as otherwise expressly
provided herein, for each taxable period ending before or
including the Split-Off Date for which PKS or Level 3 filed or
will file a consolidated federal Income Tax Return that includes
any member of the Kiewit Group or the PKS Group, the Consolidated
Group's federal Income Tax liability shall be allocated between
the Level 3 Group and the Kiewit Group as set forth below.
(b) Kiewit Group Tax Liability. Except as provided in
Section 3.2(e), the Kiewit Group's allocable share of the
Consolidated Group's federal Income Tax liability shall equal the
Kiewit Group Tax Liability (as defined below) for the applicable
taxable year, as increased to reflect the Kiewit Group's "limited
items" and 50% of the PKS Group's "limited items" that cannot be
utilized by the Consolidated Group for the applicable taxable
year. Such "limited items" may include, but are not limited to,
limits on percentage depletion, limits on charitable
contributions, current year and carryover/carryback net operating
losses and capital losses (including separate return limitation
years), other special deductions and current year and
carryover/carryback credits (e.g., foreign tax credits,
investment tax credits, etc.). If the Consolidated Group is
subject to the alternative minimum Tax for any applicable year
other than the Taxable Year 1998, Kiewit will also be allocated a
portion of such Tax based on its alternative minimum taxable
income over the Consolidated Group's alternative minimum taxable
income plus 50% of the PKS Group's alternative minimum taxable
income over the Consolidated Group's alternative minimum taxable
income. The Kiewit Group will then be liable for the Kiewit
Group's allocable share of the alternative minimum Tax plus 50%
of the PKS Group's allocable share of the alternative minimum Tax
in addition to the Kiewit Group Tax Liability.
(i) The "Kiewit Group Tax Liability" means the regular
Tax liability computed by taking into account all Tax Items
of the Kiewit Group and 50% of all Tax Items of the PKS
Group as if all such Tax Items were included in a
consolidated federal Income Tax Return on a stand-alone
basis and disregarding the computation of the alternative
minimum Tax.
(ii) If the Kiewit Group has foreign Tax credits that
are "limited items" because foreign Tax credits attributable
to the Level 3 Group are utilized by the Consolidated Group
for the applicable taxable year under applicable Treasury
Regulations, it shall be assumed, solely for purposes of
this Article III (including for all prior and subsequent
taxable periods), that the Consolidated Group utilizes the
foreign Tax credits attributable to the Kiewit Group prior
to utilizing foreign Tax credits attributable to the Level 3
Group.
(c) Level 3 Group Tax Liability. Except as provided
in Section 3.2(e), the Level 3 Group's allocable share of the
Consolidated Group's federal Income Tax liability shall equal the
excess of the Consolidated Group's federal Income Tax Liability
over the Kiewit Group's allocable share, as determined under
Section 3.2(b) above, of such liability.
(d) Tax Savings- Liability by Level 3 Group to Kiewit
Group. Subject to the provisions of Section 3.8, the Level 3
Group shall be liable to the Kiewit Group for an amount equal to
the reduction in the Consolidated Group's federal Income Tax
liability for the applicable year resulting from Tax Benefits
generated by the Kiewit Group plus 50% of the Tax Benefits
generated by the PKS Group, but only to the extent such Tax
Benefits have not been used in reducing the Kiewit Group's
allocable share of the Consolidated Group's federal Income Tax
liability under Section 3.2(b).
(e) Recomputation of Allocations. Except as otherwise
provided in Section 3.8, amounts allocated between the parties
with respect to the Consolidated Group's federal Income Tax
liability for any taxable period ending before or including the
Split-Off Date shall be recomputed under this Section 3.2 when
necessary to reflect adjustments (whether by means of Tax
Returns, Tax audits or Final Federal Determinations) in the
Consolidated Group's federal Income Tax Liability or in the
Kiewit Group Tax Liability or the Level 3 Group Tax Liability.
For purposes of such recomputation and Section 3.6, it shall be
assumed that any prior allocation was consistent with this
Section 3.2, that all required payments were made by the
appropriate parties and that any additional Income Tax imposed
upon the Consolidated Group as a result of PKS' non-distribution
of earnings shall be allocated to the Level 3 Group. In any case
where the Consolidated Group elects to pay an asserted Tax
deficiency, the amounts allocated hereunder shall be computed at
the time of such payment and then recomputed, if necessary, at
the time of the Final Federal Determination.
Section III.3. Allocation of State Income Taxes.
(a) In General. Except as otherwise expressly
provided herein, for each taxable period (or portion thereof)
ending before or including the Split-Off Date for which the State
Income Tax liability of the members of the Level 3 Group, the
Kiewit Group or the PKS Group is determined on a Combined State
Income Tax Return basis, the aggregate State Income Tax liability
of the Level 3 Group, the PKS Group and the Kiewit Group in a
particular state (other than any Non-Apportionment State Income
Tax Liability) (the "Combined State Income Tax Liability") shall
be allocated between the Level 3 Group and the Kiewit Group as
set forth below. Notwithstanding the foregoing, if any Net Worth
Tax is reported on a Combined State Income Tax Return, such Net
Worth Tax shall be allocated consistently with the principles of
this Section 3.3 relating to State Income Taxes.
(b) Kiewit Group Liability. Except as provided in
Sections 3.3(e), (f) or (g) and 3.5, the Kiewit Group's allocable
share of the Combined State Income Tax Liability in each
applicable state shall be equal to the Kiewit Pro-Forma Liability
for such state, as modified below. The "Kiewit Pro-Forma
Liability" shall equal the Combined State Income Tax Liability
less the liability reflected on the Level 3 Group State Pro-Forma
Return. The "Level 3 Group State Pro-Forma Return" means a
combined Tax Return computed on a pro-forma basis for the Level 3
Group utilizing the combined apportionment factor applicable in
the Combined State Income Tax Return and taking into account all
income, loss and other Tax Items of the Level 3 Group and 50% of
the income, loss and other Tax Items of the PKS Group, in each
case utilizing such Tax Items to the same extent that they are
utilized in the Combined State Income Tax Return, notwithstanding
that such pro-forma computation may result in a negative Kiewit
Pro-Forma Liability. The Kiewit Group's allocable share of the
Combined State Income Tax Liability shall equal the Kiewit Pro-
Forma Liability, except that, to the extent that (i) the Kiewit
Pro-Forma Liability is less than zero, the Kiewit Group's
allocable share of the Combined State Income Tax Liability shall
equal zero and (ii) the Kiewit Pro-Forma Liability is greater
than the Combined State Income Tax Liability, the Kiewit Group's
allocable share of the Combined State Income Tax Liability shall
be 100% and any excess of such Kiewit Pro-Forma Liability over
the Combined State Income Tax Liability shall be paid by Kiewit
to Level 3.
(c) Level 3 Group Liability. Except as provided in
Sections 3.3(e), (f) or (g) and 3.5, the Level 3 Group's
allocable share of the Combined State Income Tax Liability in
each applicable state shall be equal to the Level 3 Pro-Forma
Liability for such state, as modified below. The "Level 3 Pro-
Forma Liability" shall equal the Combined State Income Tax
Liability less the liability reflected on the Kiewit Group State
Pro-Forma Return. The "Kiewit Group State Pro-Forma Return"
means a combined Tax Return computed on a pro-forma basis for the
Kiewit Group utilizing the combined apportionment factor
applicable in the Combined State Income Tax Return and taking
into account all income, loss and other Tax Items of the Kiewit
Group and 50% of the income, loss and other Tax Items of the PKS
Group, in each case utilizing such Tax Items to the same extent
that they are utilized in the Combined State Income Tax Return,
notwithstanding that such pro-forma computation may result in a
negative Level 3 Pro-Forma Liability. The Level 3 Group's
allocable share of the Combined State Income Tax Liability shall
equal the Level 3 Pro-Forma Liability, except that, to the extent
that (i) the Level 3 Pro-Forma Liability is less than zero, the
Level 3 Group's allocable share of the Combined State Income Tax
Liability shall equal zero and (ii) the Level 3 Pro-Forma
Liability is greater than the Combined State Income Tax
Liability, the Level 3 Group's allocable share of the Combined
State Income Tax Liability shall be 100% and any excess of such
Level 3 Pro-Forma Liability over the Combined State Income Tax
Liability shall be paid by Level 3 to Kiewit.
(d) Non-Apportionment States. Except as provided in
Sections 3.3(e) and (f) and Section 3.5, the Kiewit Group's share
of the Non-Apportioned State Income Tax Liability (the "Kiewit
Non-Apportioned Liability") shall equal the sum of each Kiewit
Group member's, and 50% of each PKS Group member's, separately
determined State Income Tax liability computed on its respective
Non-Apportioned Income, notwithstanding that such separately
determined liability may be negative. Except as provided in
Sections 3.3(e) and (f) and Section 3.5, the Level 3 Group's
share of the Non-Apportioned State Income Tax Liability (the
"Level 3 Non-Apportioned Liability") shall equal the sum of
each Level 3 Group member's, and 50% of each PKS Group member's,
separately determined State Income Tax liability computed on its
respective Non-Apportioned Income, notwithstanding that such
separately determined liability may be negative. To the extent
that the Kiewit Non-Apportioned Liability is a negative amount,
Level 3 shall pay Kiewit for only the amount of credit or loss
utilized to reduce (but not below zero) the Non-Apportioned State
Income Tax Liability. To the extent that the Level 3 Non-
Apportioned Liability is a negative amount, Kiewit shall pay
Level 3 for only the amount of credit or loss utilized to reduce
(but not below zero) the Non-Apportioned State Income Tax
Liability. If the Combined State Income Tax Return results in a
net loss, Kiewit's share of such net loss shall equal the Kiewit
Group's and 50% of the PKS Group's separate Non-Apportioned
Income to the extent that such separate Non-Apportioned Income
reduces the combined Non-Apportioned Income below zero. If the
Combined State Income Tax Return results in a net loss, Level 3's
share of such net loss shall equal the Level 3 Group's and 50% of
the PKS Group's separate Non-Apportioned Income to the extent
that such separate Non-Apportioned Income reduces the combined
Non-Apportioned Income below zero.
(e) Intercompany Distributions. To the extent that a
PKS Group member has received a distribution from a member of the
Kiewit Group or the Level 3 Group that results in any additional
Combined State Income Tax Liability, then, for purposes of (and
notwithstanding anything to the contrary in) Sections 3.3 (b) and
(c), the amount of such distribution that is treated as taxable
income of such Combined Group shall be allocated 100% to the
group that includes the member that made such distribution. To
the extent that a PKS Group member has received a distribution
from a member of the Kiewit Group or the Level 3 Group that
results in any additional (i) State Income Tax liability with
respect to a member of the PKS Group (other than pursuant to a
Combined State Income Tax Return) or (ii) Non-Apportioned State
Income Tax Liability, then, for purposes of (and notwithstanding
anything to the contrary in) Sections 3.3(d) and (j), the amount
of such additional State Income Tax liability or Non-Apportioned
State Income Tax Liability shall be allocated 100% to the group
that includes the member that made such distribution.
(f) Recomputation of Allocations. Except as otherwise
provided in Section 3.8, amounts allocated between the parties
with respect to any Combined State Income Tax Return shall be
recomputed under this Section 3.3 if adjustments are made to such
Combined State Income Tax Return as a result of Tax Returns,
State Federal Audit Adjustments, State Determinations or Tax
audits. For purposes of such recomputation and Section 3.6, it
shall be assumed that any prior allocation was consistent with
this Section 3.3, that all required payments were made by the
appropriate parties and that any additional State Income Tax
imposed upon a Combined Group as a result of PKS' non-
distribution of earnings shall be allocated to the Level 3 Group.
Any increase or decrease in Combined State Income Tax Liability
or Non-Apportionment State Income Tax Liability arising from a
State Determination shall, to the extent that it reflects a
percentage settlement of multiple proposed deficiencies or
overpayments, be allocated between the groups in proportion to
the manner in which the settled deficiencies or overpayments
would have been allocated if settled for the full amount of such
deficiencies or overpayments. In any case where the Combined
Group elects to pay an asserted Tax deficiency, the amounts
allocated hereunder shall be computed at the time of such payment
and then recomputed, if necessary, at the time of the State
Determination.
(g) Change in Group Members. Notwithstanding anything
herein to the contrary other than Section 3.3(d), in the event
that a State Determination results in a Combined Group where a
Combined State Income Tax Return was not filed as the original
Tax Return, and if such combination of entities results in a
greater State Income Tax liability than if such entities had not
been combined, then neither the Kiewit Group nor the Level 3
Group shall be allocated any lesser amount of the Combined State
Income Tax Liability resulting from such State Determination than
such group's "Non-Combined Liability." Each group's "Non-
Combined Liability" shall equal the aggregate amount of State
Income Tax that all members of such group would have paid to such
state for such year had such members not been combined (except to
the extent previously combined in the original Tax Returns), but
taking into account all other adjustments to Tax Items reflected
in the State Determination (whether included as a result of the
state audit or included as the result of prior amended Tax
Returns) as if included in the original Tax Returns filed in such
state for such year.
(h) Kiewit Group Separate Tax Returns. For each
taxable period (or portion thereof) relating to State Income
Taxes imposed on any member of the Kiewit Group, except for State
Income Taxes with respect to Combined Jurisdictions, such Taxes
shall be allocated solely to the Kiewit Group.
(i) Level 3 Group Separate Tax Returns. For each
taxable period (or portion thereof) relating to State Income
Taxes imposed on any member of the Level 3 Group, except for
State Income Taxes with respect to Combined Jurisdictions, such
Taxes shall be allocated solely to the Level 3 Group.
(j) PKS Group Separate Tax Returns. Except as
provided in Section 3.5, for each taxable period (or portion
thereof) relating to State Income Taxes imposed on any member of
the PKS Group, except for State Income Taxes imposed with respect
to jurisdictions in which such member of the PKS Group is
included in a Combined State Income Tax Return, the Kiewit Group
and the Level 3 Group each shall be allocated 50% of such State
Income Taxes.
Section III.4. Transfer Taxes and Other Taxes. Except
as provided in Section 3.5, for all taxable periods or portions
thereof ending on or before the Split-Off Date, (i) the Level 3
Group shall be liable for all Transfer Taxes and Other Taxes
imposed on any member of the Level 3 Group, (ii) the Kiewit Group
shall be liable for all Transfer Taxes and Other Taxes imposed on
any member of the Kiewit Group and (iii) the Level 3 Group and
the Kiewit Group shall each be liable for 50% of the Transfer
Taxes and Other Taxes imposed on any member of the PKS Group.
For all subsequent taxable periods, the Level 3 Group shall be
liable for all Transfer Taxes and Other Taxes relating to the
Level 3 Group and the PKS Group, and the Kiewit Group shall be
liable for all Transfer Taxes and Other Taxes relating to the
Kiewit Group.
Section III.5. Split-Off Taxes. Except as otherwise
provided in Sections 4.2 and 4.3, Split-Off Taxes shall be
allocated between the Level 3 Group and the Kiewit Group as set
forth below.
(a) General Allocation. 82.5% of any Split-Off Taxes
shall be allocated to the Level 3 Group and 17.5% of any Split-
Off Taxes shall be allocated to the Kiewit Group.
(b) Conversion Event Allocation. Notwithstanding
subsection (a) above, if a Conversion Event has occurred, 50% of
any Split-Off Taxes shall be allocated to the Level 3 Group and
50% of any Split-Off Taxes shall be allocated to the Kiewit
Group.
Section III.6. Payment of Taxes.
(a) Federal Income Taxes. For the Taxable Year 1997
and the Taxable Year 1998, Kiewit shall pay to Level 3, prior to
the Due Date of the corresponding Tax Return, an amount equal to
(i) the amount of the federal Income Tax liability allocated to
the Kiewit Group under this Article III for the relevant period,
less (ii) any estimated Tax, deposits or other amounts paid by a
member of the Kiewit Group to the IRS or a member of the Level 3
Group or the PKS Group in respect of such Tax for such periods.
Level 3 shall be responsible for the payment to the IRS of the
federal Income Tax liability of the Consolidated Group for the
Taxable Year 1997 and the Taxable Year 1998.
(b) Adjustment of Amounts Paid for Taxable Year 1997.
As soon as reasonably practicable following the Due Date of the
applicable Tax Return, Kiewit shall redetermine its allocable
share of the Consolidated Group's federal Income Tax liability
for the Taxable Year 1997 under this Article III and, if such
share is greater or less than the amount previously paid by
Kiewit to Level 3 pursuant to Section 3.6(a), then Kiewit or
Level 3, as the case may be, shall pay to the other the
difference as soon as reasonably practicable after Kiewit makes
such determination.
(c) Estimated Federal Income Tax Payments. For the
Taxable Year 1998, Kiewit shall determine the amount of the
estimated federal Tax installment payments due as a result of the
federal Income Tax that is allocable to the Kiewit Group under
this Article III, and Kiewit shall, prior to April 15, 1998, pay
to Level 3 the amount so determined. Level 3 shall be
responsible for the payment to the IRS of all estimated federal
Income Tax installments of the Consolidated Group for the Taxable
Year 1998. On or before June 15, 1998, Kiewit shall redetermine
the Kiewit Group's estimated allocable share of the Consolidated
Group's federal Income Tax liability for the Taxable Year 1998 as
provided herein and, if such share is greater or less than the
amount of estimated installments previously paid by Kiewit to
Level 3 pursuant to this Section 3.6(c), then Kiewit or Level 3,
as the case may be, shall pay to the other the difference as soon
as practicable after Kiewit makes such determination. Prior to
the Due Date for the Consolidated Group's federal Income Tax
Return for the Taxable Year 1998, Kiewit shall redetermine the
Kiewit Group's allocable share of the Consolidated Group's
federal Income Tax liability for the Taxable Year 1998 under this
Article III and, if such share is greater or less than the amount
of estimated installments previously paid by Kiewit to Level 3
pursuant to this Section 3.6(c), as previously adjusted pursuant
to this Section 3.6(c), then Kiewit or Level 3, as the case may
be, shall pay to the other the difference as soon as reasonably
practicable after Kiewit makes such determination and in no event
later than such Due Date.
(d) Federal Income Tax Deficiencies and Overpayments.
In the event of a federal Income Tax deficiency or overpayment
with respect to the Consolidated Group as a result of an audit or
Final Federal Determination (notwithstanding that a deficiency
and an overpayment may offset each other): (i) Level 3 shall be
responsible for the timely payment of any such federal Income Tax
deficiency, and Kiewit shall pay to Level 3 the Kiewit Group's
allocable share of such deficiency within 5 days of Level 3's
payment to the IRS with respect to such deficiency; provided,
however, that Kiewit instead may pay its allocable share of such
deficiency directly to the IRS to the extent permitted under
applicable law; and (ii) the Level 3 Group or the Kiewit Group,
as the case may be, shall pay to the other its allocable share of
any such overpayment within 5 days of receiving such overpayment.
(e) State Income Taxes.
(i) Combined State Income Tax Returns. For any
taxable period (or portion thereof) that ends before or
includes the Split-Off Date and for which a State Income Tax
is determined on the basis of a Combined State Income Tax
Return, (x) where Level 3 or a member of the Level 3 Group
is the entity responsible for filing the Combined State
Income Tax Return, Level 3 shall be responsible for the
timely payment of the estimated and total Combined State
Income Tax Liability and Non-Apportionment State Income Tax
Liability of the Combined Group to the appropriate Taxing
Authority and (y) where Kiewit or a member of the Kiewit
Group is the entity responsible for filing the Combined
State Income Tax Return, Kiewit shall be responsible for the
timely payment of the estimated and total Combined State
Income Tax Liability and Non-Apportionment State Income Tax
Liability of the Combined Group to the appropriate Taxing
Authority. Prior to the Due Date of any such Combined State
Income Tax Return that is filed by or the responsibility of
Level 3 or a member of the Level 3 Group hereunder, Kiewit
shall pay to Level 3 an amount equal to (x) the Taxes, if
any, allocated to the Kiewit Group under this Article III
with respect to such Combined State Income Return, less (y)
any estimated Tax, deposits or other amounts paid (or deemed
to be paid under Section 3.3(f)) by a member of the Kiewit
Group to the appropriate state Taxing Authority or to a
member of the Level 3 Group or the PKS Group in respect of
such Taxes for such period. Prior to the Due Date of any
such Combined State Income Tax Return that is filed by or
the responsibility of Kiewit or a member of the Kiewit Group
hereunder, Level 3 shall pay to Kiewit an amount equal to
(x) the Taxes, if any, allocated to the Level 3 Group under
this Article III with respect to such Combined State Income
Tax Return, less (y) any estimated Tax, deposits or other
amounts paid (or deemed to be paid under Section 3.3(f)) by
a member of the Level 3 Group to the appropriate Taxing
Authority or to a member of the Kiewit Group in respect of
such Taxes for such period.
(ii) Kiewit Group State Income Tax Returns.
Kiewit shall be responsible for the timely payment of the
estimated and total State Income Tax liabilities of any
member of the Kiewit Group for any taxable period that ends
prior to or includes the Split-Off Date and for which a
State Income Tax of any member of the Kiewit Group is deter-
mined on a basis other than a Combined State Income Tax
Return.
(iii) Level 3 Group and PKS Group State Income
Tax Returns. Level 3 shall be responsible for the timely
payment of the estimated and total State Income Tax
liabilities of any member of the Level 3 Group or the PKS
Group for any taxable period that ends prior to or includes
the Split-Off Date and for which a State Income Tax of any
member of the Level 3 Group or the PKS Group is determined
on a basis other than a Combined State Income Tax Return.
(f) Estimated State Income Tax Payments. For the
Taxable Year 1998, with respect to any State Income Tax liability
of any member of the Level 3 Group, the Kiewit Group or the PKS
Group which is determined on the basis of a Combined State Income
Tax Return, the entity responsible for filing such Combined State
Income Tax Return shall reasonably estimate the amount of any
estimated State Income Tax installment allocable to the other
group under the principles of this Article III, and Kiewit or
Level 3, as the case may be, shall, on or before the Due Date of
the corresponding estimated Tax payment to the state or local
Taxing Authority, pay to the other party the amount so
determined. If either group's allocable share of the Combined
State Income Tax Liability or Non-Apportionment State Income Tax
Liability for the Taxable Year 1998 is less than the amount of
estimated installments paid by such group, then such group shall
pay such difference to the other group before the Due Date of the
Combined State Income Tax Return.
(g) State Income Tax Deficiencies. In the event of a
State Income Tax deficiency or a State Income Tax overpayment
with respect to a Combined Group as a result of an audit, State
Determination or State Federal Audit Adjustment (notwithstanding
that a deficiency and an overpayment may offset each other): (i)
the party responsible for payment to the applicable Taxing
Authority with respect to any Combined State Income Tax Liability
or Non-Apportionment State Income Tax Liability hereunder shall
be responsible for payment of any such deficiency with respect to
such Combined State Income Tax Liability or Non-Apportionment
State Income Tax Liability, and the other party shall pay to the
responsible party such other party's allocable share of such
deficiency within 5 days of payment to the applicable Taxing
Authority with respect to such deficiency; provided, however,
that the other party instead may pay its allocable share of such
deficiency directly to the applicable Taxing Authority to the
extent permitted under applicable law; and (ii) the Level 3 Group
or the Kiewit Group, as the case may be, shall pay to the other
its allocable share of any such overpayment within 5 days of
receiving such overpayment.
(h) Transfer Taxes and Other Taxes. For any taxable
period (or portion thereof) that ends before or includes the
Split-Off Date, Kiewit and Level 3 shall make payments with
respect to Transfer Taxes and Other Taxes in accordance with the
principles of Section 3.4. Level 3 shall make all payments for
any member of the PKS Group.
Section III.7. Liability for Taxes with Respect to
Post-Split-Off Taxable Periods. Unless otherwise provided in
this Agreement, the Level 3 Group shall pay all Taxes and shall
be entitled to receive and retain all refunds of Taxes with
respect to taxable periods beginning after the Split-Off Date
that are attributable to members of the Level 3 Group. Unless
otherwise provided in this Agreement, the Kiewit Group shall pay
all Taxes and shall be entitled to receive and retain all refunds
of Taxes with respect to taxable periods beginning after the
Split-Off Date that are attributable to members of the Kiewit
Group.
Section III.8. Refunds and Carrybacks as to
Consolidated Group Tax Returns and Combined State Income Tax
Returns.
(a) Refunds. With respect to the Consolidated Group
refunds for the taxable years 1984 through 1990 that were issued
by the IRS to PKS in 1997 in the total amount of $122,319,455,
Kiewit shall be entitled to (i) if a Conversion Event has not
occurred, $13,850,000 of such refund plus interest accrued after
July 31, 1997, at a rate of LIBOR plus 87 1/2 basis points, and (ii)
if a Conversion Event has occurred, $4,950,000 of such refund
plus interest accrued after July 31, 1997, at a rate of LIBOR
plus 87 1/2 basis points. Level 3 shall pay, or cause to be paid,
such amounts to Kiewit no later than June 30, 1998.
(b) Carrybacks.
(i) If a Conversion Event has not occurred, (x)
Level 3 shall be entitled to 100% of any refund for any Tax
obtained by the Consolidated Group (or any member of the
Consolidated Group in a Combined Jurisdiction), whether by
refund, offset against other Taxes or otherwise (an "NOL
Refund"), as a result of the carryback of Level 3 Losses to
offset income attributable to the Level 3 Group for any
taxable period ending before or including the Split-Off
Date; (y) Kiewit shall be entitled to 100% of any NOL Refund
obtained as a result of the carryback of Kiewit Losses to
offset income attributable to the Kiewit Group for any
taxable period ending before or including the Split-Off
Date; and (z) each of Level 3 and Kiewit shall be entitled
to 50% of any other NOL Refund. For purposes of this
subsection (i), (x) Level 3 Losses shall be deemed to offset
income generated by the Level 3 Group first, then income
generated by the PKS Group, and then income generated by the
Kiewit Group last, and (y) Kiewit Losses shall be deemed to
offset income generated by the Kiewit Group first, then
income generated by the PKS Group, and then income generated
by the Level 3 Group last.
(ii) If a Conversion Event has occurred, (x)
Kiewit shall be entitled to 100% of any NOL Refund obtained
as a result of the carryback of any Kiewit Loss to offset
income attributable to the Kiewit Group for any taxable
period ending before or including the Split-Off Date; and
(y) Level 3 shall be entitled to 100% of any NOL Refund
obtained as a result of the carryback of any Level 3 Loss to
offset income attributable to the Level 3 Group, the PKS
Group or the Kiewit Group for any taxable period ending
before or including the Split-Off Date. For purposes of
this subsection (ii), Kiewit Losses shall be deemed to
offset income generated by the Kiewit Group first.
(iii) The application of any such carrybacks by
any member of the Kiewit Group or the Level 3 Group shall be
in accordance with the Code and the consolidated return
Treasury Regulations promulgated thereunder or applicable
state or other Tax laws. To the extent permissible under
applicable law, Kiewit Losses first shall offset income
attributable to the Kiewit Group, and Level 3 Losses first
shall offset income attributable to the Level 3 Group.
(iv) The amount of any NOL Refund is limited to
the net amount received (by refund, offset against other
Taxes or otherwise), net of any net Tax cost incurred by or
allocated to either party resulting from such refund,
including, without limitation, any alternative minimum Tax.
The party receiving any NOL Refund shall pay the amount to
which the other party is entitled to the other party within
5 business days after payment is received from a Taxing
Authority.
(v) To the extent that the Kiewit Group realizes
a Tax Benefit as the result of a carryback of a Level 3 Loss
hereunder, Kiewit shall pay to Level 3 the amount of such
Tax Benefit on the Due Date for the applicable Tax Return of
the member of the Kiewit Group utilizing such Tax Benefit.
In the event that, subsequent to any such payment, any
portion of such Tax Benefit is disallowed, Level 3 shall
repay to Kiewit the amount paid by Kiewit with respect to
that portion of the Tax Benefit.
(vi) Notwithstanding this Section 3.8(b), each of
the Kiewit Group and the Level 3 Group shall have the right,
in its sole discretion, to make any available election,
including the election under Section 172(b)(3) of the Code
or Treasury Regulations Section 1.1502-21T(b)(3), which
would eliminate or limit the carryback of any loss or credit
generated by such group to any taxable period ending before
or including the Split-Off Date.
(c) Filing Refund Claim. Notwithstanding anything
herein to the contrary, the party making any refund claim
pursuant to this Section 3.8 shall be responsible for preparing
such refund claim, and Level 3 shall be responsible for filing
such refund claim. Any such refund claim prepared by one party
shall be subject to approval by the other party pursuant to
Section 2.7.
Section III.9. Other Allocations and Payments in
Respect of Tax Attributes.
(a) Tax Attributes determined on a consolidated
federal Income Tax basis for years ending before or including the
Split-Off Date shall be allocated to members of the Level 3
Group, the Kiewit Group and the PKS Group in accordance with the
Code and the Treasury Regulations promulgated thereunder. Level
3 and Kiewit jointly shall determine the amounts and proper allo-
cation of such Tax Attributes as of the Split-Off Date and Level
3 and Kiewit hereby agree to compute their federal Income Tax
liabilities for taxable years after the Split-Off Date consistent
with that determination and allocation unless otherwise required
pursuant to a Final Federal Determination.
(b) Tax attributes determined on a Combined State
Income Tax Return basis for years ending before or including the
Split-Off Date shall be allocated to members of the Level 3
Group, the PKS Group and the Kiewit Group in accordance with
applicable state or local law or regulation. Level 3 and Kiewit
jointly shall determine the amounts and proper allocation of such
attributes as of the Split-Off Date and Level 3 and Kiewit hereby
agree to compute their tax liabilities for taxable years after
the Split-Off Date consistent with that determination and
allocation unless otherwise required pursuant to a State
Determination or State Federal Audit Adjustment.
(c) Notwithstanding anything herein to the contrary,
to the extent permitted under applicable law, Level 3 or the
appropriate member of the Level 3 Group shall be entitled to
claim any available Income Tax deduction with respect to the
exercise of an employee stock option granted on or prior to the
Split-Off Date that originally entitled the holder to purchase
Class D Stock. For purposes of Sections 3.2 and 3.3, any such
deduction to which Level 3 is entitled under applicable law shall
be allocated 100% to the Level 3 Group. In the event that (i)
neither Level 3 nor any member of the Level 3 Group is entitled
to claim any such deduction under applicable law (including a
Final Federal Determination or a State Determination) and (ii) a
member of the Kiewit Group is entitled to claim such deduction,
Kiewit shall pay to Level 3 the amount by which the allocation of
federal and State Income Tax liability to the Kiewit Group is
reduced as a result of claiming such deduction.
(d) Notwithstanding anything herein to the contrary,
to the extent permitted under applicable law, Level 3 or the
appropriate member of the Level 3 Group shall be entitled to
claim any Income Tax deduction with respect to sales of Class D
Stock on or prior to the Split-Off Date. For purposes of
Sections 3.2 and 3.3, any such deduction to which Level 3 is
entitled under applicable law shall be allocated 100% to the
Level 3 Group. In the event that (i) neither Level 3 nor any
member of the Level 3 Group is entitled to claim any such
deduction under applicable law (including a Final Federal
Determination or a State Determination) and (ii) a member of the
Kiewit Group is entitled to claim any such deduction, Kiewit
shall pay to Level 3 the amount by which the allocation of
federal and State Income Tax liability to the Kiewit Group is
reduced as a result of claiming such deduction. Level 3 shall
indemnify Kiewit from and against any Tax payable by any member
of the Kiewit Group or the PKS Group with respect to sales of
Class D Stock prior to the Split-Off Date.
(e) Notwithstanding anything herein to the contrary,
to the extent permitted under applicable law, the appropriate
member of the Kiewit Group shall be entitled to claim any Income
Tax deduction with respect to sales of Class B Stock or Class C
Stock on or prior to the Split-Off Date. In the event that (i)
no member of the Kiewit Group is entitled to claim any such
deduction under applicable law (including a Final Federal
Determination or a State Determination) and (ii) Level 3 or any
member of the Level 3 Group is entitled to claim such deduction,
Level 3 shall pay to Kiewit the amount by which the allocation of
federal and State Income Tax liability to the Level 3 Group is
reduced as a result of claiming such deduction. Kiewit shall
indemnify Level 3 from and against any Tax payable by any member
of the Level 3 Group or the PKS Group with respect to sales of
Class B Stock or Class C Stock prior to the Split-Off Date.
(f) Notwithstanding anything herein to the contrary,
to the extent permitted under applicable law, (i) any of the
Level 3 Group, the Kiewit Group and the PKS Group may utilize
credits with respect to the Nebraska Tax Credit Program to offset
State Income Tax for taxable periods or portions thereof ending
on or prior to the Split-Off Date, and (ii) any such credits that
have not been so utilized or that become available as a result of
a Tax audit adjustment shall be allocated to the Level 3 Group.
(g) Notwithstanding anything herein to the contrary,
the Level 3 Group shall be liable for, and shall be entitled to
receive any payments, Tax Benefits or other benefits arising
from, the following: (i) any corporate-level Taxes imposed as a
result of the MFS Spin-Off, including, without limitation, (x)
corporate-level Income Taxes, if any, attributable to the failure
of the MFS Spin-Off to qualify as a distribution and
reorganization within the meaning of Sections 355 and 368 of the
Code or similar provisions under state law and (y) federal or
State Income Taxes attributable to recognition of gain under
Section 367(e) of the Code or a similar provision under state law
or attributable to Intercompany Transactions or Excess Loss
Accounts or similar items under state law; (ii) any payment due
or benefit arising as a result of a claim under the MFS Tax
Sharing Agreement or any of the Crown Agreements; and (iii) any
Taxes arising as a result of the initial public offering of MFS
stock in 1993.
(h) Notwithstanding anything herein to the contrary,
to the extent that Kiewit realizes a Tax Benefit or suffers a Tax
Detriment as the result of any payment made under either of the
Covent Agreements, Kiewit shall pay to Level 3 an amount equal to
such Tax Benefit or Level 3 shall pay to Kiewit an amount equal
to such Tax Detriment, as the case may be.
(i) In the event that one party makes a payment to the
other with respect to any Tax Benefit or Tax Detriment hereunder
and, subsequent to such payment, any portion of such Tax Benefit
is disallowed or any portion of such Tax Detriment is refunded,
the amount of such payment with respect to that portion of the
Tax Benefit or Tax Detriment shall be repaid.
(j) Notwithstanding anything herein to the contrary,
any Tax incurred by PKS as a result of the acquisition or use of
the Aircraft prior to the Split-Off Date shall be split equally
between the Level 3 Group and the Kiewit Group. Any Tax incurred
by PKS as a result of the transfer of a 40% undivided interest in
the Aircraft on March 30, 1998, shall be allocated to the Level 3
Group, and any Tax incurred by PKS as a result of the transfer of
a 60% undivided interest in the Aircraft to Kiewit shall be
allocated 1/6 to the Level 3 Group and 5/6 to the Kiewit Group.
For periods or portions thereof ending on or prior to the Split-
Off Date, federal air transportation excise Tax paid with respect
to usage of the Aircraft shall be allocated 75% to the Level 3
Group and 25% to the Kiewit Group.
ARTICLE IV
REPRESENTATIONS, RESTRICTIONS ON POST-SPLIT-OFF TRANSACTIONS AND
INDEMNIFICATION OBLIGATIONS
Section IV.1. Representations and Restrictions on Each
Party's Ability to Undertake Certain Post-Split-Off Transactions.
(a) Level 3 agrees that it will not, and will not
permit any member of the Level 3 Group to, enter into or engage
in any transaction or arrangement that would cause the Split-Off
to constitute part of a plan (or series of related transactions)
described in Section 355(e)(2)(A)(ii) of the Code.
(b) Kiewit agrees that it will not, and will not
permit any member of the Kiewit Group to, enter into or engage in
any transaction or arrangement that would cause the Split-Off to
constitute part of a plan (or series of related transactions)
described in Section 355(e)(2)(A)(ii) of the Code.
(c) In connection with the IRS Ruling and the Tax
Opinion, Level 3 shall be responsible for the representations
made by PKS in the Ruling Request set forth in Section 1 of
Exhibit 4.1(c), and Kiewit shall be responsible for the
representations made by PKS in the Ruling Request set forth in
Section 2 of Exhibit 4.1(c).
Section IV.2. Level 3's Tax Indemnification of Kiewit.
(a) Notwithstanding any other provision of this
Agreement to the contrary, Level 3 shall indemnify and hold
harmless, on an After-Tax Basis, each member of the Kiewit Group
from and against all Taxes imposed upon the Kiewit Group, the PKS
Group or the Level 3 Group that arise out of the failure of the
Split-Off to qualify as a distribution and reorganization within
the meaning of Sections 355 and 368 of the Code to the extent
that any such failure to qualify results from the breach of (i) a
representation set forth in Section 1 of Exhibit 4.1(c) or (ii)
Level 3's obligations under Section 4.1(a).
(b) Notwithstanding any other provision of this
Agreement to the contrary, Level 3 shall indemnify and hold
harmless, on an After-Tax Basis, any member of the Kiewit Group
with respect to any liability, cost or expenses, including,
without limitation, any fine, penalty, interest, charge or
accountant's or attorney's fee, arising out of fraudulent
preparation of any Tax Return required to be prepared by Level 3
or any member of the Level 3 Group hereunder.
Section IV.3. Kiewit's Tax Indemnification of Level 3.
(a) Notwithstanding any other provision of this
Agreement to the contrary, Kiewit shall indemnify and hold
harmless, on an After-Tax Basis, Level 3 and each member of the
Level 3 Group from and against all Taxes imposed upon the Level 3
Group, the PKS Group or the Kiewit Group that arise out of the
failure of the Split-Off to qualify as a distribution and
reorganization within the meaning of Sections 355 and 368 of the
Code to the extent that any such failure to qualify results from
the breach of (i) a representation set forth in Section 2 of
Exhibit 4.1(c) or (ii) Kiewit's obligations under Section 4.1(b).
(b) Notwithstanding any other provision of this
Agreement to the contrary, Kiewit shall indemnify and hold
harmless, on an After-Tax Basis, any member of the Level 3 Group
or the PKS Group with respect to any liability, cost or expenses,
including, without limitation, any fine, penalty, interest,
charge or accountant's or attorney's fee, arising out of
fraudulent preparation of any Tax Return required to be prepared
by Kiewit hereunder.
Section IV.4. Liquidated Damages for Shareholder-Level
Tax. In the event of a Final Federal Determination that the
Split-Off fails to qualify as a distribution and reorganization
within the meaning of Sections 355 and 368 of the Code, then (i)
if Level 3 is entitled to indemnification from Kiewit under
Section 4.3(a), Level 3 shall have no liability with respect to
such failure, (ii) if neither party is entitled to
indemnification from the other under Section 4.2(a) or 4.3(a),
Level 3 shall pay $7.5 million to Kiewit and (iii) if Kiewit is
entitled to indemnification under Section 4.2(a), Level 3 shall
pay $15 million to Kiewit. In each case, such payment shall be
in addition to any other amounts to which Kiewit is entitled
hereunder. Kiewit shall indemnify and hold harmless, on an
After-Tax Basis, any member of the Level 3 Group or the PKS Group
from and against any liability that may arise as the result of
any liability of any person or entity that is a shareholder of
Kiewit immediately after the Split-Off (or such shareholder's
successor) for any Tax incurred by such person or entity in such
capacity resulting from the failure of the Split-Off to qualify
as a distribution and reorganization within the meaning of
Sections 355 and 368 of the Code; provided, however, that if
Kiewit is entitled to indemnification under Section 4.2(a),
Kiewit's indemnification of Level 3 under this Section 4.4 shall
not exceed the amount paid by Level 3 to Kiewit pursuant to (iii)
above.
Section IV.5. Breach. Level 3 shall indemnify and
hold harmless each member of the Kiewit Group, and Kiewit shall
indemnify and hold harmless each member of the Level 3 Group, in
each case on an After-Tax Basis, from and against any payment
required to be made by the indemnified party, as the case may be,
as a result of the breach by a member of the Level 3 Group or the
Kiewit Group, as the case may be, of any payment obligation under
this Agreement.
ARTICLE V
COOPERATION AND EXCHANGE OF INFORMATION
SECTION V.1. Cooperation.
(a) Unless otherwise provided herein, Level 3 and
Kiewit shall cooperate (and shall cause each of their affiliates
to cooperate) fully at such times and to the extent reasonably
requested by the other party in connection with the preparation
and filing of any Tax Return or the conduct of any audit,
dispute, proceeding, suit or Tax action concerning any issues or
any other matter contemplated hereunder. Such cooperation shall
include, without limitation, (i) the provision by Level 3 or
Kiewit, as the case may be, upon reasonable request by the other
party (no later than 15 days following such request), of Tax
Returns, related work papers and accounting information, books,
records, documentation and other information in such party's
possession, as reasonably required by the requesting party for
the preparation of any Tax Return (including, without limitation,
the analysis or investigation of any Tax Item or potential Tax
Item) or for the handling of or participation in any audit or Tax
Controversy; (ii) the preparation and/or provision of additional
information with respect to an explanation of the Tax Practices
and material provided under clause (i) of this section (except in
either circumstance where an attorney-client or attorney work
product privilege exists with respect to such information); (iii)
the execution of any document that may be necessary or reasonably
helpful in connection with the filing of any Tax Return by any
member of the Level 3 Group, the PKS Group or the Kiewit Group,
or in connection with any audit, proceeding, suit or action
addressed in the preceding sentence; and (iv) the use of the
parties' reasonable best efforts to obtain any documentation from
a governmental authority or a third party that may be reasonably
necessary or helpful in connection with the foregoing. In
addition, each party shall make its employees and facilities
available on a mutually convenient basis to facilitate such
cooperation.
(b) In connection with Section 5.1(a) above, each
party agrees to maintain all Tax Returns and related workpapers,
supporting schedules and other documentation concerning Tax Items
or Tax Practices included in such Tax Returns until the later of
(x) the expiration of the applicable federal and state statutes
of limitation (giving effect to any extension, waiver, or
mitigation thereof) and (y) in the event any claim has been made
under this Agreement for which such information is relevant, the
occurrence of a Final Federal Determination or State
Determination with respect to such claim.
(c) Each party shall provide notice to the other party
of any Tax Controversy no more than 5 days after notification
thereof that relates to a Tax of the other party or could give
rise to the liability of the other party to make a payment
pursuant to this Agreement (a "Liability Issue"). Without
limiting the generality of the foregoing, Level 3 and Kiewit each
shall promptly furnish to the other a copy of any notice,
inquiry, correspondence or document relating to such Tax
Controversy, including, without limitation, any notice,
correspondence or document relating to any such Tax Controversy
received by Level 3 or any member of the Level 3 Group or by
Kiewit or any member of the Kiewit Group, as the case may be,
from any Taxing Authority or any other administrative, judicial,
or other governmental authority.
(d) To the extent that either party receives from a
third party any payment, notice, inquiry, correspondence or other
document that belongs to the other party, the party receiving the
payment, notice, inquiry, correspondence or other document shall
promptly deliver such item to the party to which it belongs.
(e) If a party fails to comply with the requirements
of the cooperation provisions set forth in this Section 5.1, such
party shall not be liable for such failure to the extent that the
other party is not prejudiced thereby. If a party inadvertently
destroys or loses books, records, documentation or other
information listed in Section 5.1(a) or (b) above, such party
shall not be liable to the other party for the failure to
maintain such information or to provide such information upon
request other than liability for any Tax imposed as a result of
the failure to provide such information to a Taxing Authority.
Section V.2. Audits and Tax Controversies. In
addition to the provisions of Section 5.1:
(a) Audits. Kiewit shall control the handling of any
agent-level audit, review or examination involving a Tax Return
of the Consolidated Group or a Combined State Income Tax Return
for taxable periods ending on or before December 31, 1997, prior
to the point in time, if any, when such audit, review or
examination gives rise to a Tax Controversy. Level 3 shall
control the handling of any agent-level audit, review or
examination involving Tax Returns of the Consolidated Group or a
Combined Group for taxable periods including the Split-Off Date
prior to the point in time, if any, when such audit, review or
examination gives rise to a Tax Controversy. In each case, the
group controlling audits will keep the other group reasonably
informed of issues relating to that other group and will allow
such other group to participate in the handling of such issues
where reasonable. In the event that an audit, review or
examination gives rise to a Tax Controversy, control of such Tax
Controversy shall be governed by the provisions in Sections
5.2(b) through (k) below.
(b) Federal Income Tax Controversies-- Kiewit. Kiewit
shall control the handling of any federal Income Tax Controversy
involving a federal Income Tax Return of the Consolidated Group
for taxable periods ending on or before December 31, 1997;
provided, however, that, to the extent any federal Income Tax
Controversy, the handling of which Kiewit controls pursuant to
this Section 5.2(b), relates to a Liability Issue for federal
Income Tax with respect to a member of the Level 3 Group or the
PKS Group, (i) Level 3 may participate in the handling of such
Tax Controversy and (ii) Kiewit shall not settle such Tax
Controversy with respect to such Liability Issue without Level
3's prior written consent (which shall not be unreasonably
withheld).
(c) Federal Income Tax Controversies- Level 3. Level
3 shall control the handling of any federal Income Tax
Controversy involving the federal Income Tax Return of the
Consolidated Group for the Taxable Year 1998; provided, however,
that, to the extent any federal Income Tax Controversy, the
handling of which Level 3 controls pursuant to this Section
5.2(c), relates to a Liability Issue for federal Income Tax with
respect to a member of the Kiewit Group or the PKS Group, (i)
Kiewit may participate in the handling of such Tax Controversy
and (ii) Level 3 shall not settle such Tax Controversy with
respect to such Liability Issue without Kiewit's prior written
consent (which shall not be unreasonably withheld).
(d) Combined State Income Tax Return Controversies--
Kiewit. Kiewit shall control the handling of any Tax Controversy
involving a Combined State Income Tax Return for taxable periods
ending on or before December 31, 1997; provided, however, that,
to the extent any Tax Controversy, the handling of which Kiewit
controls under this Section 5.2(d), relates to a Liability Issue
with respect to a member of the Level 3 Group or the PKS Group,
(i) Level 3 may participate in the handling of such Tax
Controversy and (ii) Kiewit shall not settle the Tax Controversy
with respect to such Liability Issue without Level 3's prior
written consent (which shall not be unreasonably withheld).
(e) Combined State Income Tax Return Controversies-
Level 3. Level 3 shall control the handling of any Tax
Controversy involving a Combined State Income Tax Return for a
taxable period including the Split-Off Date; provided, however,
that, to the extent any Tax Controversy, the handling of which
Level 3 controls under this Section 5.2(e), relates to a
Liability Issue with respect to a member of the Kiewit Group or
the PKS Group, (i) Kiewit may participate in the handling of such
Tax Controversy and (ii) Level 3 shall not settle the Tax
Controversy with respect to such Liability Issue without Kiewit's
prior written consent (which shall not be unreasonably withheld).
(f) Tax Controversy Resulting from Breach.
Notwithstanding the foregoing, in the event that a Tax
Controversy relates primarily to Taxes incurred as a result of
one party's breach of any of its obligations under Section 4.1 or
representations made by such party as set forth in Exhibit
4.1(c), such party shall control the handling of such Tax
Controversy; provided, however, that, to the extent such Tax
Controversy also relates to a Liability Issue with respect to the
other party, such other party may participate in the handling of
such Tax Controversy.
(g) Other Taxes of PKS- Audits and Controversies.
Kiewit shall control the handling of any agent-level audit,
review or examination relating to Other Taxes imposed on the PKS
Group and will keep Level 3 reasonably informed of issues
relating to the Level 3 Group and will allow Level 3 to
participate in the handling of such issues where reasonable. In
the event of a Tax Controversy relating to Other Taxes imposed on
the PKS Group, Kiewit shall control the handling of such Tax
Controversy; provided, however, that Level 3 may participate in
the handling of such Tax Controversy and Kiewit shall not settle
such Tax Controversy without Level 3's prior written consent
(which shall not be unreasonably withheld).
(h) Participation Rights. The participation rights
described in these Sections 5.2(b) through (g) shall include
participation in all conferences, meetings or proceedings with
the IRS or relevant Taxing Authority, the subject matter of which
includes the Liability Issue, participation in all appearances
before any court, the subject matter of which includes the
Liability Issue and participation in the preparation of
documentation, protests, memoranda of fact and law and briefs
with respect to the Liability Issue.
(i) Separate Return Tax Audits and Controversies.
Subject to Section 5.2(j), (i) Kiewit shall have absolute control
of any audit or Tax Controversy involving a Tax Return of a
member of the Kiewit Group other than a Tax Return of the
Consolidated Group or a Combined State Income Tax Return and (ii)
Level 3 shall have absolute control of any audit or Tax
Controversy involving a Tax Return of a member of the Level 3
Group other than a Tax Return of the Consolidated Group or a
Combined Group.
(j) Proposed Combinations. In the event that any
Taxing Authority proposes in writing (which shall include an
information document request, letter or other document that
inquires about the structure or tax filings of the other party's
group) that members of one group be included in a unitary,
combined or consolidated group with members of another group with
respect to a Tax Return that was not filed as a Combined State
Income Tax Return, (x) the party receiving notice of such
proposal shall promptly furnish to the other party a copy of such
request, letter or other document, and (y) the other party may
participate in the preparation of written responses with respect
to such proposal.
(k) Statute of Limitations Extensions. In the event
that one party is requested or wishes to extend the applicable
statute of limitations for assessment and/or refund with respect
to any federal Income Tax Return of the Consolidated Group or any
Combined State Income Tax Return (a "Proposed Extension"), the
party requested or wishing to extend the statute of limitations
(the "Extending Party") must promptly notify the other party of
its intent to extend such statute. The other party has 5 days
from the date of such notification to object to such Proposed
Extension. If the other party objects to such Proposed Extension
(the "Objecting Party"), the parties shall review, on a timely
basis, the Proposed Extension in light of potential Liability
Issues of the Objecting Party with respect to such Tax Return,
taking into account the following exclusive criteria: (A) the
facts relating to such Liability Issues; (B) the applicable law,
if any, with respect to such Liability Issues; (C) the position
of the applicable Taxing Authority with respect to any
assessment, proposed assessment, adjustment, determination,
protest, litigation, or settlement of such Liability Issues; (D)
the strength of the factual and legal arguments made by Extending
Party; (E) the strength of the factual and legal arguments being
made by the Objecting Party; (F) the effect of any adjustment
with respect to the Liability Issues on other taxable periods and
on other positions taken or proposed to be taken in Tax Returns
filed or proposed to be filed by the Objecting Party; (G) the
realistic possibility of avoiding examination of potential, non-
frivolous Liability Issues of the Objecting Party; and (H) the
benefits to the Extending Party in making the Proposed Extension,
and the strategy and rationale with respect to the Extending
Party's wish to make the Proposed Extension. If the parties
cannot mutually agree upon a course of action with respect to the
Proposed Extension, the issue shall be decided pursuant to
Article VI on a timely basis.
Section V.3. Information for Shareholders. Kiewit
shall prepare and deliver to Level 3, and Level 3 shall provide
to each shareholder that receives stock of Kiewit pursuant to the
Split-Off, the information necessary for such shareholder to
comply with the requirements of the Code and the Treasury
Regulations thereunder with respect to statements that such
shareholder must file with its federal Income Tax Returns in
connection with the Split-Off.
Section V.4. Earnings and Profits. The parties shall
mutually agree upon the amount of PKS's earnings and profits that
are properly allocated to the Level 3 Group and the Kiewit Group
at the time of the Split-Off under Treasury regulation Section
1.312-10.
Section V.5. Compensation.
(a) Level 3 has agreed to pay to Kiewit $900,000 plus
other reasonable out-of-pocket costs for services provided by
Kiewit hereunder through November, 1998, which shall include
Kiewit's preparation of Tax Returns hereunder for the Taxable
Year 1997, audits the handling of which Kiewit controls hereunder
and other routine items relating to Kiewit's obligations
hereunder.
(b) Notwithstanding the provisions in (a) above, Level
3 and Kiewit shall each bear 50% of the cost of hiring any
outside assistance necessary to prepare Tax Returns as mutually
agreed by the parties with respect to the Taxable Year 1997.
(c) With respect to any other services provided by one
party in connection with Taxes for which the other party is
liable hereunder, such other party shall reimburse the party
providing such services for its reasonable costs (including
reasonable compensation for its employees' time, out-of-pocket
expenses and other costs of providing such services).
ARTICLE VI
DISPUTE RESOLUTION
Section VI.1. Good Faith Negotiation. In the event of
any dispute or disagreement relating to this Agreement,
including, without limitation, any dispute or disagreement with
respect to the calculation or allocation of liability for Taxes
or Tax Attributes hereunder, the manner of preparing any Tax
Return or the meaning of any provision in this Agreement, senior
management of the parties shall negotiate in good faith and
attempt to resolve the dispute or disagreement.
Section VI.2. Arbitration. In the event that senior
management is unable to resolve any dispute or disagreement
pursuant to Section 6.1, the parties shall submit the matter to
an arbitration panel. The arbitration panel shall be composed of
three members; Level 3 and Kiewit shall each appoint one member
(who shall not be an employee, officer or director, professional
consultant (including, without limitation, outside attorney or
accountant) or otherwise related to the appointing party) within
15 days after the matter has been submitted to arbitration. If
either party fails to appoint its arbitrator within such 15 day
period, the other party may apply to the American Arbitration
Association (the "AAA") to appoint an arbitrator on behalf of the
party that has failed to appoint its arbitrator. The two
arbitrators appointed by or on behalf of the parties shall
jointly appoint a third arbitrator who shall chair the
arbitration panel. If the two arbitrators cannot agree on a
third arbitrator, the third arbitrator shall be appointed by the
AAA. The arbitration proceedings shall take place in Chicago,
Illinois, and shall be conducted in accordance with the
Commercial Arbitration Rules of the AAA. The decision of the
arbitration panel with respect to such dispute or disagreement
shall be final and binding on the parties hereunder. All
expenses of such arbitration proceedings shall be allocated
between Level 3 and Kiewit in proportion to each party's
liability with respect to the issue submitted to arbitration.
Section VI.3. Timing of Payments. All amounts
determined pursuant to Sections 6.1 or 6.2 to be payable by one
party to the other shall be due and payable on or before the date
that is 5 days after the determination that such amount is
payable.
ARTICLE VII
MISCELLANEOUS
Section VII.1. Timing of Certain Payments. Except as
otherwise provided herein, upon payment of any Taxes with respect
to which a party is entitled to receive indemnification
hereunder, such party (the "Indemnified Party") shall send the
other party (the "Indemnifying Party") a notice accompanied by
evidence of payment and a statement detailing the Taxes paid and
describing in reasonable detail the particular facts relating
thereto. Except as otherwise provided herein, the Indemnifying
Party (or one or more of its affiliates) shall remit payment for
Taxes for which the Indemnifying Party is liable hereunder to the
Indemnified Party (or one or more of its affiliates) no later
than 30 days of receipt of such notice, evidence of payment and
statement.
Section VII.2. Net of Tax Benefits. If any
Indemnified Party realizes a Tax Benefit or a Tax Detriment by
reason of having incurred any Tax for which such Indemnified
Party is entitled to receive indemnification hereunder (including
a Tax Detriment realized by reason of having received an
indemnity payment hereunder with respect to such Tax), then such
Indemnified Party shall pay to the Indemnifying Party an amount
equal to the Tax Benefit, or such Indemnifying Party shall pay to
such Indemnified Party an additional amount equal to the Tax
Detriment (taking into account any Tax Detriment resulting from
the receipt of such additional amounts), as the case may be. In
the event that, subsequent to such payment, any portion of such
Tax Benefit is disallowed or any portion of such Tax Detriment is
refunded, the amount paid by one party to the other with respect
to that portion of the Tax Benefit or Tax Detriment shall be
repaid.
Section VII.3. Characterization of Payments. The
parties agree to treat, and to cause their respective affiliates
to treat, (i) any payment between Level 3 and Kiewit required by
this Agreement (other than a payment pursuant to Section 7.4 or
Section 5.5) or by the Separation Agreement, where appropriate,
as either a contribution by Level 3 to Kiewit or a distribution
by Kiewit to Level 3, as the case may be, occurring immediately
prior to the Split-Off and (ii) any payment of interest or non-
federal Income Taxes by or to a Taxing Authority as taxable or
deductible, as the case may be, to the party entitled under this
Agreement to retain the economic benefit of such payment or
required under this Agreement to bear the economic burden of such
payment, in either case, except as otherwise mandated by
applicable law; provided, however, that in the event it is
determined as a result of a Final Federal Determination or State
Determination that any such treatment is not permissible, (x) the
payment in question shall be adjusted to place the parties in the
same after-Tax position in which they would have been prior to
such Final Federal Determination or State Determination and (y)
to the extent that the parties cannot be placed in such after-Tax
position, each of Kiewit and Level 3 shall be liable for 50% of
any Tax Detriment resulting from the disallowance of such
treatment.
Section VII.4. Interest on Overdue Payments. Any
payment that is required to be made pursuant to this Agreement
(i) by any member of the Kiewit Group to any member of the Level
3 Group or (ii) by any member of the Level 3 Group to any member
of the Kiewit Group that is not made on or prior to the date that
such payment is required to be made pursuant by this Agreement
shall thereafter bear interest at the rate established for
underpayments pursuant to Section 6621(c) of the Code, compounded
daily.
Section VII.5. Payments by Wire Transfer. Any payment
that is required to be made pursuant to this Agreement (i) by any
member of the Kiewit Group to any member of the Level 3 Group or
(ii) by any member of the Level 3 Group to any member of the
Kiewit Group, shall be made by wire transfer of immediately
available funds, provided, however, that if the amount of any
payment is less than $10,000, such payment may be made in a form
other than a wire transfer.
Section VII.6. No Double Recovery. Notwithstanding
anything herein to the contrary, no party shall be entitled to
indemnification hereunder for any amount to the extent such party
has otherwise been reimbursed for such amount.
Section VII.7. Notices. Any notice, demand, claim or
other communication under this Agreement shall be in writing and
shall be deemed given upon delivery if delivered personally, upon
mailing if sent by certified mail, return receipt requested,
postage prepaid, or upon completion of transmission if sent by
telecopy or facsimile, to the parties at the following address:
Level 3 at: Level 3 Communications, Inc.
3555 Farnam Street
Omaha, Nebraska 68131
Attn: Brian R. Hedlund, Esq.
Fax: 402-536-3637
Kiewit at: Peter Kiewit Sons', Inc.
1000 Kiewit Plaza
Omaha, Nebraska 68131
Attn: Tobin A. Schropp, Esq.
Fax: 402-271-2983
Section VII.8. Complete Agreement. This Agreement
constitutes the entire agreement of the parties concerning the
subject matter hereof, and supersedes all prior agreements,
whether or not written, in respect of any Tax between or among
any member or members of the Level 3 Group, on the one hand, and
any member or members of the Kiewit Group, on the other hand,
including, without limitation, the Federal Tax Sharing Agreements
and the State Tax Sharing Policy for taxable years beginning
after December 28, 1991, by and among Peter Kiewit Son's, Inc.,
KCG, KMG and KDG other than the Separation Agreement, to the
extent that any provision therein relates to Taxes, the Stock
Redemption Agreement between KDG and Kiewit Investment Management
Corp., dated March 31, 1998, the Amended and Restated Management
Service Agreement between KMG and KCP, dated March 31, 1998, and
any construction contract, or construction provision in any other
agreement, entered into in the ordinary course of business. This
Agreement may not be amended except by an agreement in writing,
signed by the parties hereto.
Section VII.9. Governing Law. This Agreement shall be
governed by and construed in accordance with, the laws of the
State of Delaware.
Section VII.10. Application to Subsidiaries. This
Agreement is entered into by Level 3 and Kiewit on behalf of
themselves and each member of the Level 3 Group and the Kiewit
Group, respectively. This Agreement constitutes a direct
obligation of each such member.
Section VII.11. Descriptive Titles and Headings.
Descriptive titles and section headings used in this Agreement
are for convenience and reference only and shall not affect the
construction of this Agreement.
Section VII.12. Successors and Assigns. A party's
rights and obligations under this Agreement may not be assigned
without the prior written consent of the other party. All of the
provisions of this Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and
permitted assigns.
Section VII.13. No Third-Party Beneficiaries. This
Agreement is solely for the benefit of the parties to this
Agreement and their respective subsidiaries and shall not be
deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those
existing without this Agreement.
Section VII.14. Legal Enforceability. Any provision
of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to
the extent of the prohibition or unenforceability without
invalidating the remaining provisions. Any prohibition or
unenforceability of any provision of this Agreement in any
jurisdiction shall not invalidate or render unenforceable the
provision in any other jurisdiction. In the event that any
provision of this Agreement is prohibited or unenforceable in any
jurisdiction, the parties agree to negotiate in good faith in
order to put themselves in the same positions that they would
have been in had such provision not been prohibited or
unenforceable.
Section VII.15. Expenses. Unless otherwise expressly
provided in this Agreement, each party shall bear any and all
expenses that arise from their respective obligations under this
Agreement.
Section VII.16. Confidentiality. Each party shall
hold and cause its consultants and advisors to hold in strict
confidence, unless compelled to disclose by judicial or
administrative process or, in the opinion of its counsel, by
other requirements of law, all information (other than any such
information relating solely to the business or affairs of such
party) concerning the other parties hereto furnished it by such
other party or its representatives whether pursuant to this
Agreement or otherwise (except to the extent that such
information can be shown to have been (a) previously known by the
party to which it was furnished, (b) in the public domain through
no fault of such party, or (c) later lawfully acquired from other
sources by the party to which it was furnished), and each party
shall not release or disclose such information to any other
person, except its auditors, attorneys, financial advisors,
bankers and other consultants and advisors who shall be advised
of the provisions of this Section 7.16. Each party shall be
deemed to have satisfied its obligation to hold confidential
information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality
for its own similar information.
Section VII.17. Agreement in Two Counterparts.
This Agreement may be signed in two counterparts, each of which
shall be an original, with the same effect as if the signature
thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first above written.
PETER KIEWIT SONS', INC.
/s/ James Q. Crowe
_______________________________
By: James Q. Crowe
Title: Executive Vice President
PKS HOLDINGS, INC.
/s/ Kenneth E. Stinson
_________________________________________
By: Kenneth E. Stinson
Title: President & Chief Executive Officer
