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Exhibit 10.2
TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT ("Agreement") is entered into as of ,
2000, by and between Fluor Corporation, a Delaware corporation, which shall be
renamed "Massey Energy Company" in connection with the transactions
contemplated herein (together with its successors and permitted assigns,
"Parent"), and Fluor Corporation, a newly organized Delaware corporation
(together with its successors and permitted assigns, "New Fluor").
WITNESSETH
WHEREAS, as of the date hereof, Parent is the common parent of an affiliated
group of corporations which has elected to file consolidated Federal Income Tax
Returns;
WHEREAS, Parent and New Fluor have entered into a Distribution Agreement
setting forth the corporate transactions pursuant to which Parent will
distribute all of the outstanding shares of common stock of New Fluor to Parent
shareholders in a transaction intended to qualify as a tax-free distribution
under section 355 of the Code (as defined below);
WHEREAS, as a result of the Transactions (as defined below), members of the
New Fluor Group and members of the Massey Group will become members of the same
affiliated group and will be members of the same affiliated group for a portion
of Parent's taxable year that includes the Distribution Date;
WHEREAS, as a result of the Distribution, New Fluor and its subsidiaries
will cease, effective as of the day after the Distribution Date, to be members
of the affiliated group of which Parent is the common parent; and
WHEREAS, the Companies desire to provide for and agree upon the allocation
between the parties of liabilities for Taxes (as defined below) arising prior
to, as a result of, and subsequent to the Transactions, and to provide for and
agree upon other matters relating to Taxes.
NOW THEREFORE, in consideration of the mutual agreements contained herein,
the parties hereby agree as follows:
Section 1. Definition of Terms.
(a) General. For purposes of this Agreement (including the recitals hereof),
the following terms have the following meanings:
"Accounting Cutoff Date" means, with respect to any entity, any date as
of the end of which there is a closing of the financial accounting records
for such entity.
"Accounting Firm" shall have the meaning provided in Section 15.
"Adjustment Request" means any formal or informal claim or request filed
with any Tax Authority, or with any administrative agency or court, for the
adjustment, refund, or credit of Taxes including (i) any amended Tax Return
claiming adjustment to the Taxes as reported on the Tax Return or, if
applicable, as previously adjusted, or (ii) any claim for refund or credit
of Taxes previously paid.
"Affiliate" means any entity (and its predecessors) that, directly or
indirectly, is "controlled" by the person or entity in question. "Control"
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of a person, whether
through ownership of voting securities, by contract or otherwise. Except as
otherwise provided herein, the term "Affiliate" shall refer to Affiliates
of a person as determined immediately after the Distribution.
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"Agreement" shall mean this Tax Sharing Agreement.
"Audit Adjustment" means any change to a Tax Item or the Tax liability
as previously reported or reflected on a Tax Return that is required or
otherwise results from or is attributable to an audit, examination or other
review of such Tax Return by a Tax Authority, whether such audit,
examination or other review is initiated by a Tax Authority or a member of
a Group.
"A.T. Massey" means A.T. Massey Coal Company, Inc., a Virginia
corporation.
"Base Rate" means the base rate on corporate loans charged by Citibank,
N.A., New York, New York from time to time, compounded daily on the basis
of a year of 365 or 366 (as applicable) days and actual days elapsed.
"Carryback" means any net operating loss, net capital loss, foreign tax,
excess tax credit, or other Tax Item which may or must be carried back from
one Tax Period to another Tax Period under the Code or other applicable Tax
Law.
"Carryover" means any net operating loss, net capital loss, foreign tax,
excess tax credit or other Tax Item which may or must be carried forward
from one Tax Period to another Tax Period under the Code or other
applicable Tax Law.
"Code" means the U.S. Internal Revenue Code of 1986, as amended, or any
successor Law.
"Companies" means Parent and New Fluor, collectively, and "Company"
means any one of Parent and New Fluor.
"Consolidated or Combined Tax" means any Tax which applies on a basis
whereby one or more members of both Groups are consolidated or combined
into a single group (including through a unitary Tax Return), other than a
consolidation or combination in which the members of one Group are subject
to the Tax only because members of the other Group are so subject.
"Consolidated or Combined Tax Return" means any Tax Return which relates
to a Consolidated or Combined Tax.
"Consolidated Tax Liability" means, (i) with respect to any consolidated
Federal Income Tax Return, the "tax liability of the group" as that term is
used in Treasury Regulation Section 1.1552-1(b), including any applicable
alternative minimum tax, interest, additions to tax, additional amounts
and/or penalties as provided under the Code, and (ii) with respect to any
Consolidated or Combined Tax Return other than a Tax Return described in
the foregoing clause (i), the consolidated or combined tax liability of the
group as determined under applicable Tax Laws.
"Distribution" means the distribution to Parent shareholders on the
Distribution Date of all of the outstanding stock of New Fluor owned by
Parent.
"Distribution Agreement" means the agreement, dated as of the date
hereof, as amended from time to time, setting forth the corporate
transactions required to effect the distribution to Parent shareholders of
New Fluor Common Shares, and to which this Tax Sharing Agreement is
attached as an exhibit.
"Distribution Date" means the "Distribution Date" as that term is
defined in the Distribution Agreement.
"Federal Income Tax" means any Income Tax imposed on corporations under
the Code.
"Foreign Income Tax" means any Income Tax imposed on corporations by any
foreign country or any possession of the United States, or by any political
subdivision of any foreign country or United States possession.
"Group" means the Parent Group or the New Fluor Group, as the context
requires.
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"Income Tax" means any Tax based upon, measured by, or calculated with
respect to (i) net income or profits (including any capital gains Tax,
minimum Tax and any Tax on items of tax preference, but not including
sales, use, real or personal property, gross or net receipts, transfer or
similar Taxes) or (ii) multiple bases, if one or more of the bases upon
which such Tax may be based, measured by, or calculated with respect to, is
described in the foregoing clause (i), in each case inclusive of any
interest, penalties, additions to tax or additional amounts in respect of
or related to the foregoing.
"Joint Adjustment" means any adjustment proposed by a Tax Authority or
any claim for refund asserted in a Tax Contest which is neither a New Fluor
Adjustment nor a Parent Adjustment.
"Law" means any Federal, state, local or other law or governmental
requirement of any kind and the rules, regulations and orders
(administrative or judicial) promulgated thereunder.
"Massey Group" means A.T. Massey and its direct and indirect
subsidiaries which would be included in its affiliated group pursuant to
Code section 1504 if A.T. Massey were the parent of such group, provided,
however, for purposes of this Agreement said Code section 1504 shall be
applied by (i) substituting "50 percent" for "80 percent" at each place
where the words "80 percent" appear in Code section 1504(a)(2), and (ii)
treating as an "includible corporation" any corporation which otherwise
would not constitute an includible corporation pursuant to Code section
1504(b).
"New Fluor Adjustment" means any adjustment to a Tax Item or Tax
liability proposed by a Tax Authority or any claim for refund asserted in a
Tax Contest to the extent New Fluor would be exclusively liable for any
resulting Tax under this Agreement and exclusively entitled to receive any
resulting Tax Benefit under this Agreement.
"New Fluor Group" means (i) for periods up to and including the
Distribution Date, Parent and its direct and indirect subsidiaries which
are included in its affiliated group pursuant to Code section 1504, but
excluding members of the Massey Group and (ii) for periods after the
Distribution Date, New Fluor and its direct and indirect subsidiaries which
are included in its affiliated group pursuant to section 1504 of the Code,
provided, however, for purposes of this Agreement said Code section 1504
shall be applied by (i) substituting "50 percent" for "80 percent" at each
place where the words "80 percent" appear in Code section 1504(a)(2), and
(ii) treating as an "includible corporation" any corporation which
otherwise would not constitute an includible corporation pursuant to Code
section 1504(b).
"Other Company" means, with respect to a Tax Return, the Company which
is not the Responsible Company with respect to that Tax Return.
"Parent Adjustment" means any adjustment to a Tax Item or Tax liability
proposed by a Tax Authority or any claim for refund asserted in a Tax
Contest to the extent Parent would be exclusively liable for any resulting
Tax under this Agreement and exclusively entitled to receive any resulting
Tax Benefit under this Agreement.
"Parent Group" means (a) for periods up to and including the
Distribution Date, the Massey Group and (b) for periods after the
Distribution Date, Parent and the Massey Group.
"Payment Date" means (i) with respect to any consolidated Federal Income
Tax Return which includes members of both the Parent Group and the New
Fluor Group, the due date for any required installment of estimated taxes
determined under Code section 6655, the due date (determined without regard
to extensions) for filing the return determined under Code section 6072,
and the date the return is filed, and (ii) with respect to any other
Consolidated or Combined Tax Return, the corresponding dates determined
under the applicable Tax Law.
"Present Value" shall mean, with respect to any Tax Benefit, the present
value, based on a discount rate equal to the Base Rate at the time of
determination and assuming that the party, with respect to which the Tax
Benefit is determined, will be liable for Taxes at all relevant times at
the highest marginal rate, of any Income Tax benefit (for this purpose, an
Income Tax benefit shall include depreciation and amortization deductions
attributable to an increase in tax basis as well as a tax deduction (to the
extent
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available for a prior or subsequent taxable year), whether or not such
benefit results in an actual receipt of a refund).
"Responsible Company" means, with respect to any Tax Return, the Company
which is responsible for preparing and filing the Tax Return under this
Agreement.
"Restructuring Tax" means any Tax described in Sections 2.04(a)(ii)
relating to Taxes imposed on or with respect to any income or gain
recognized as a result of any one or more of the Transactions.
"Ruling" means the private letter ruling issued by the Internal Revenue
Service in response to the Ruling Request, including any amendments or
supplements to such private letter ruling.
"Ruling Request" means the letter filed by Parent with the Internal
Revenue Service requesting a ruling from the Internal Revenue Service
regarding certain tax consequences of the Transactions (including all
attachments, exhibits, and other materials submitted with such ruling
request letter) and any amendments or supplements to such ruling request
letter.
"Section" means Sections of this Agreement, except where otherwise
indicated.
"Separate Company Tax" means any Tax applicable only to a member or
members of a single Group.
"Separate Company Tax Return" means any Tax Return which relates to a
Separate Company Tax.
"State Income Tax" means any Income Tax imposed on corporations by any
State of the United States or by any political subdivision of any such
State.
"Straddle Period" means any Tax Period which includes one or more
members of the New Fluor Group or the Parent Group for the entire Tax
Period and which includes one or more members of the other Group for only a
portion of such Tax Period.
"Tax" or "Taxes" means any income, gross income, gross receipts,
profits, capital stock, franchise, withholding, payroll, social security,
workers compensation, unemployment, disability, property, ad valorem,
stamp, excise, severance, occupation, service, sales, use, license, lease,
transfer, import, export, value added, alternative minimum, estimated or
similar tax (including any fee, assessment, or other charge in the nature
of or in lieu of any tax) imposed by any governmental entity or political
subdivision thereof, and any interest, penalties, additions to tax, or
additional amounts in respect of or related to the foregoing.
"Tax Authority" means, with respect to any Tax, the governmental entity
or political subdivision thereof that imposes such Tax, and the agency (if
any) charged with the collection of such Tax for such entity or
subdivision.
"Tax Benefit" means any refund, credit, or other reduction in otherwise
required Tax payments (including any reduction in estimated Tax payments),
including, without limitation, any reduction in a past, present or future
Tax liability attributable to deductions resulting from expenses,
depreciation, amortization or other sources.
"Tax Contest" means an audit, review, examination, or any other
administrative or judicial proceeding with the purpose or effect of
redetermining Taxes of any of the Companies or their Affiliates (including
any administrative or judicial review of any claim for refund) for any Tax
Period ending on or before, or including, the Distribution Date and any
Straddle Period.
"Tax Item" means, with respect to any Income Tax, any item of income,
gain, loss, deduction, or credit.
"Tax Law" means the Law of any governmental entity or political
subdivision thereof relating to any Tax.
"Tax Period" means, with respect to any Tax, the period for which the
Tax is reported as provided under the Code or other applicable Tax Law.
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"Tax Records" means Tax Returns, Tax Return workpapers, documentation
relating to any Tax Contests, and any other books of account or records
required to be maintained under the Code or other applicable Tax Laws or
under any record retention agreement with any Tax Authority.
"Tax Return" means any report of Taxes due, any claims for refund of
Taxes paid, any information return with respect to Taxes, or any other
similar report, statement, declaration, or document required to be filed
under the Code or other Tax Law, including any attachments, exhibits or
other materials submitted with any of the foregoing, and including any
amendments or supplements to any of the foregoing.
"Transactions" means the transactions contemplated by the Distribution
Agreement.
"Treasury Regulations" means the regulations promulgated from time to
time under the Code as in effect for the relevant Tax Period.
"With/Without Allocation Method" means, with respect to any Consolidated
or Combined Tax, the methodology for allocating the liability for such Tax
among and between the Parent Group and the New Fluor Group in accordance
with the principles and provisions of Section 2.01 or Section 2.02,
whichever may be applicable.
(b) Other Definitional Provisions.
(i) Any term not defined above shall have the meaning ascribed thereto
in the text of this Agreement where such term is first used.
(ii) The words "hereof", "herein", and "hereunder"and words of similar
import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
(iii) Terms defined in the singular shall have a comparable meaning when
used in the plural, and vice versa.
Section 2. Allocation of Tax Liabilities.
2.01 Allocation of United States Federal Income Tax. Except as provided in
Section 2.04 and subject to Section 3:
(a) Separate Tax Periods. Insofar as the New Fluor Group and/or the
Parent Group file consolidated Federal Income Tax Returns for any Tax
Periods which do not include any member of the other Group, the filing
Group shall be liable for (and shall indemnify and hold the other Group
harmless from) any Federal Income Tax that is attributable to such Tax
Periods .
(b) Combined Taxable Years. If one or more members of the New Fluor
Group and one or more members of the Parent Group are included in the same
consolidated Federal Income Tax Return:
(i) Allocation of Tax. For any relevant taxable year beginning after
October 31, 2000, the Consolidated Tax Liability for the entire taxable
year shall be computed (1) by excluding the New Fluor Group (the
"Federal Without Amount") and (2) by including the New Fluor Group (but
only for the portion of such taxable year during which the New Fluor
Group is included in the consolidated Federal Income Tax Return) but
without taking into account losses or other deductions or credits of
the Parent Group not used in calculating the Consolidated Tax Liability
when the New Fluor Group is excluded, whether such losses, deductions
or credits arise in such taxable year or are carried forward or back
from another taxable year (the "Federal With Amount"). The Parent Group
shall be allocated and liable for the Federal Without Amount. The New
Fluor Group shall be allocated and liable for the excess, if any, of
the Federal With Amount over the Federal Without Amount. If the Federal
With Amount exceeds the Federal Without Amount, New Fluor shall pay the
excess amount to Parent in accordance with the applicable provisions of
Section 5. If the Federal With Amount is less than the Federal Without
Amount, Parent shall pay the amount of the difference to New Fluor in
accordance with the applicable provisions of Section 5. For the taxable
year ending
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on October 31, 2000 (if relevant), the preceding provisions of this
Section 2.01(b)(i) shall be applied by substituting "Parent" and
"Parent Group" for "New Fluor" and "New Fluor Group" and vice versa.
The allocation of Tax liabilities under this Section 2.01(b)(i) is the
"Federal Allocation Method".
(ii) Allocation of Consolidated Federal Tax Adjustments. If there is
any Audit Adjustment to any Tax Item for any relevant Tax Period
beginning after October 31, 2000, the Federal With Amount and the
Federal Without Amount shall be recalculated, in accordance with the
principles of Section 2.01(b)(i), to reflect such Audit Adjustment. New
Fluor shall be allocated and liable for, and shall pay to Parent in
accordance with the provisions of Section 5, the amount described in
whichever one (but not more than one) of the following three clauses
that is applicable: (1) the amount by which the excess of the Federal
With Amount over the Federal Without Amount as recalculated is greater
than such excess as previously (and most recently) calculated under
this Section 2.01(b), (2) the amount by which the excess of the Federal
Without Amount over the Federal With Amount as recalculated is less
than such excess as previously (and most recently) calculated, or (3)
the sum of the excess of the Federal With Amount over the Federal
Without Amount as recalculated plus the excess of the Federal Without
Amount over the Federal With Amount as previously (and most recently)
calculated. Parent shall be allocated and liable for, and shall pay to
New Fluor in accordance with the provisions of Section 5, the amount
described in whichever one (but not more than one) of the following
three clauses that is applicable: (1) the amount by which the excess of
the Federal With Amount over the Federal Without Amount as recalculated
is less than such excess as previously (and most recently) calculated
under this Section 2.01(b), (2) the amount by which the excess of the
Federal Without Amount over the Federal With Amount as recalculated is
greater than such excess as previously (and most recently) calculated,
or (3) the sum of the excess of the Federal Without Amount over the
Federal With Amount as recalculated plus the excess of the Federal With
Amount over the Federal Without Amount as previously (and most
recently) calculated. The parties agree and understand that their
respective obligations to make payments hereunder resulting from Audit
Adjustments shall apply in circumstances wherein there is no additional
net Tax liability payable to a Tax Authority attributable to the
adjustment of one or more Tax Items on the applicable Tax Return but
the adjustments result in changes to the Federal With Amount and/or
Federal Without Amount as recalculated to reflect all such Audit
Adjustments. In the case of any Tax Period ending on October 31, 2000
(if relevant), the preceding provisions of this Section 2.01(b)(ii)
shall be applied by substituting "Parent" for "New Fluor" and vice
versa.
2.02 Allocation of State Income Taxes and Foreign Income Taxes. Except as
provided in Section 2.04 and subject to Section 3, State Income Taxes and
Foreign Income Taxes shall be allocated as follow:
(a) Separate Company Taxes. In the case of any State Income Tax or
Foreign Income Tax which is a Separate Company Tax, the Parent Group and
the New Fluor Group shall be allocated and liable for such Tax imposed on
any member or members of their respective Groups, but only for such periods
as such membership existed. For such purposes, the parties agree that New
Fluor shall be allocated and liable for all State Income Taxes and Foreign
Income Taxes of Parent with respect to all Tax Periods (or portions
thereof) through the Distribution Date, provided further, however, for such
purposes any Tax Period of Parent that includes but does not end on the
Distribution Date shall be treated as ending on the Distribution Date, with
New Fluor to be allocated and liable for only the State Income Tax
liability or Foreign Income Tax liability (as applicable) with respect to
the Tax Items apportioned to the portion of such Tax Period through the
Distribution Date in accordance with the principles of Section 3. All such
Separate Company Taxes shall be paid by the party to whom they are
allocated hereunder in accordance with the provisions of Section 5.
(b) Consolidated or Combined Taxes. The parties do not expect that any
State Income Tax or Foreign Income Tax will be a Consolidated or Combined
Tax. However, in the case of any State Income
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Tax or Foreign Income Tax which is a Consolidated or Combined Tax, the
liability of the parties with respect to such Tax for any Tax Period shall
be computed and allocated as follows:
(i) Allocation of Tax. For any relevant taxable year beginning after
October 31, 2000, the Consolidated or Combined State Income Tax or
Foreign Income Tax (whichever may be applicable) for the entire taxable
year shall be computed (1) by excluding the New Fluor Group (the
"State/Foreign Without Amount") and (2) by including the New Fluor
Group (but only for the portion of such taxable year during which the
New Fluor Group is included in the Consolidated or Combined Tax Return)
but without taking into account losses or other deductions or credits
of the Parent Group not used in calculating the Consolidated or
Combined Tax when the New Fluor Group is excluded, whether such losses,
deductions or credits arise in such taxable year or are carried forward
or back from another taxable year (the "State/Foreign With Amount").
The Parent Group shall be allocated and liable for the State/Foreign
Without Amount. New Fluor shall be allocated and liable for the excess,
if any, of the State/Foreign With Amount over the State/Foreign Without
Amount. If the State/Foreign With Amount exceeds the State/Foreign
Without Amount, New Fluor shall pay the excess amount to Parent in
accordance with the provisions of Section 5. If the State/Foreign With
Amount is less than the State/Foreign Without Amount, Parent shall pay
the amount of the difference to New Fluor in accordance with the
provisions of Section 5. For the taxable year ending on October 31,
2000 (if relevant), the preceding provisions of this Section 2.02(b)(i)
shall be applied by substituting "Parent" and "Parent Group" for "New
Fluor" and "New Fluor Group" and vice versa.
(ii) Allocation of Combined or Consolidated State Income Tax and
Foreign Income Tax Adjustments. If there is any Audit Adjustment to any
Tax Item for any relevant Tax Period beginning after October 31, 2000,
the State/Foreign With Amount and the State/Foreign Without Amount
shall be recalculated, in accordance with the principles of Section
2.02(b)(i), to reflect such Audit Adjustment. With respect to each such
recalculation, New Fluor shall be allocated and liable for, and shall
pay to Parent in accordance with the provisions of Section 5, the
amount described in whichever one of the following three clauses is
applicable: (1) the amount by which the excess of the State/Foreign
With Amount over the State/Foreign Without Amount as recalculated is
greater than such excess as previously (and most recently) calculated
under this Section 2.02(b), (2) the amount by which the excess of the
State/Foreign Without Amount over the State/Foreign With Amount as
recalculated is less than such excess as previously (and most recently)
calculated or (3) the sum of the excess of the State/Foreign With
Amount over the State/Foreign Without Amount as recalculated plus the
excess of the State/Foreign Without Amount over the State/Foreign With
Amount as previously (and most recently) calculated. With respect to
each such recalculation, Parent shall be allocated and liable for, and
shall pay to New Fluor in accordance with the provisions of Section 5,
the amount described in whichever one of the following three clauses is
applicable: (1) the amount by which the excess of the State/Foreign
With Amount over the State/Foreign Without Amount as recalculated is
less than such excess as previously (and most recently) calculated
under this Section 2.02(b), (2) the amount by which the excess of the
State/Foreign Without Amount over the State/Foreign With Amount as
recalculated is greater than such excess as previously (and most
recently) calculated, or (3) the sum of the excess of the State/Foreign
Without Amount over the State/Foreign With Amount as recalculated plus
the excess of the State/Foreign With Amount over the State/Foreign
Without Amount as previously (and most recently) calculated. The
parties agree and understand that their respective obligations to make
payments hereunder resulting from Audit Adjustments shall apply in
circumstances wherein there is no additional net Tax liability payable
to a Tax Authority attributable to the adjustment of one or more Tax
Items on the applicable Tax Return but the Audit Adjustments result in
changes to the State/Foreign With Amount and/or State/Foreign Without
Amount as recalculated to reflect such Audit Adjustments. In the case
of any relevant Tax Period ending on October 31, 2000 (if relevant),
the preceding provisions of this Section 2.02(b)(ii) shall be applied
by substituting "Parent" for "New Fluor" and vice versa.
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2.03 Allocation of Other Taxes. Except as provided in Section 2.04, all
Taxes other than those allocated pursuant to Sections 2.01 and 2.02, (herein
"Other Taxes") shall be allocated to the legal entity on which the legal
incidence of the Other Tax is imposed. For such purposes, the parties agree
that New Fluor shall be allocated and liable for all such Other Taxes imposed
on Parent with respect to all Tax Periods (or portions thereof) through the
Distribution Date, provided further, however, for such purposes any Tax Period
of Parent that includes but does not end on the Distribution Date shall be
treated as ending on the Distribution Date, with New Fluor to be allocated and
liable for only the Other Tax liability with respect to the Tax Items
apportioned to the portion of such Period through the Distribution Date in
accordance with the principles of Section 3. As between the parties to this
Agreement, New Fluor shall be allocated and liable for all Other Taxes imposed
on any member of the New Fluor Group and, except as expressly provided
otherwise in the immediately preceding sentence with respect to Other Taxes
imposed on Parent with respect to portions of a Tax Period through the
Distribution Date, Parent shall be allocated and liable for all Other Taxes
imposed on any member of the Parent Group. The Companies believe that there is
no Other Tax not allocated pursuant to this Section 2.03 which is legally
imposed on more than one legal entity (e.g., joint and several liability);
provided, however, if there is any such Other Tax, it shall be allocated in
accordance with past practices as reasonably determined by the affected
Companies, or in the absence of such practices, in accordance with any
allocation method agreed upon by the affected Companies, it being agreed that
"with and without" principles comparable to those described in Sections 2.01
and 2.02 will be applied unless to do so would be clearly inequitable. All such
Other Taxes shall be paid by the party to whom they are allocated hereunder in
accordance with the provisions of Section 5.
2.04 Transaction Taxes and Certain Other Taxes.
(a) Equal Sharing of Tax Liability. Except as otherwise provided in this
Section 2.04, Parent and New Fluor each shall be liable for and obligated
hereunder to pay 50% of any liability for Taxes imposed on any member of
the Parent Group or the New Fluor Group as a result of or with respect to
any of the Transactions, including, without limitation:
(i) any sales and use, gross receipts, or other transfer Taxes
imposed on or with respect to any transfers occurring pursuant to the
Transactions; and
(ii) any Tax resulting from any income or gain recognized as a
result of any of the Transactions, but excluding any Tax resulting from
any income or gain recognized under Treasury Regulation Sections
1.1502-13 or 1.1502-19 (or any corresponding provisions of other
applicable Tax Laws) as a result of, but not generated by, the
Transactions. Without limitation on the foregoing, and except to the
extent provided otherwise under Sections 2.04(b) and 2.04(d), if,
pursuant to applicable Federal Income Tax Laws or State Income Tax
Laws, the Distribution does not qualify for tax-free treatment under
Code section 355 and/or comparable State Income Tax Laws and as a
result the Distribution is treated for Income Tax purposes as a taxable
exchange with respect to which Parent is required to recognize taxable
income, the resulting Tax liability shall be allocated 50% to Parent
and 50% to New Fluor.
(b) Certain Other Allocations. New Fluor and Parent shall each be
allocated and shall each be solely liable and obligated hereunder to pay
any liability for any Restructuring Tax to the extent that such liability
arises from:
(i) any breach of New Fluor's or Parent's, as the case may be,
representations or covenants under Section 11 or under the Distribution
Agreement; or
(ii) the intentional inaccuracy of factual statements or
representations made by such Company in the Ruling Request, but only to
the extent that such inaccuracy arises from facts in existence prior to
the Distribution Date.
(c) Tax Liability in Connection with Appalachian Synfuel, LLC. Parent
shall be allocated and shall be solely liable hereunder for all Taxes which
arise in connection with, or as a result of the transfer (by dividend or
otherwise) by Fluor Enterprises, Inc., a member of the New Fluor Group, of
all or part of its
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ownership interest in Appalachian Synfuel, LLC to Parent or a member or
members of the Parent Group. Such Taxes shall include Taxes resulting from
Fluor Enterprises, Inc.'s deferred intercompany gain which arises in
connection with such transfer.
(d) Allocation of Tax Incurred Pursuant to Code Section 355(e). If
Parent incurs a Restructuring Tax liability as a result of the application
of the provisions of Code section 355(e) or a comparable provision of
succeeding Law, Parent shall be allocated and solely liable hereunder to
pay 100% of such Restructuring Tax liability if it is incurred because of a
plan (or series of related transactions) pursuant to which one or more
persons acquire, directly or indirectly, stock or assets representing a 50%
or greater interest (within the meaning of Code section 355(e)) in Parent.
New Fluor shall be allocated and solely liable hereunder to pay 100% of
such Restructuring Tax liability if it is incurred because of a plan (or
series of related transactions) pursuant to which one or more persons
acquire, directly or indirectly, stock or assets representing a 50% or
greater interest (within the meaning of Code section 355(e)) in New Fluor.
For purposes of this Section 2.04(d), the value of any Tax Benefits used or
lost by reason of Parent's recognition of gain under Code section 355(e)
will be treated as a Restructuring Tax liability.
(e) Payment. All Tax liabilities allocated pursuant to the foregoing
provisions of this Section 2.04 shall be paid by the party to whom they are
allocated in accordance with the provisions of Section 5.
Section 3. Proration of Taxes for Straddle Periods. In the case of any
Straddle Period, Tax Items shall be apportioned between (i) the portion of
such Straddle Period during which one or more members of each of the New Fluor
Group and the Parent Group were included in the Consolidated or Combined Tax
Return and (ii) the portion of such Straddle Period during which only members
of one Group were so included. This apportionment shall be in accordance with
the principles of Treasury Regulation Section 1.1502-76(b) as reasonably
interpreted and applied by the Companies. No election shall be made under
Treasury Regulation Section 1.1502-76(b)(2)(ii) (relating to ratable
allocation of a year's items). If the Distribution Date is not an Accounting
Cutoff Date, the provisions of Treasury Regulation Section 1.1502-
76(b)(2)(iii) will be applied to ratably allocate the items (other than
extraordinary items) for the month which includes the Distribution Date.
Section 4. Preparation and Filing of Tax Returns.
4.01 General. Except as otherwise provided in this Section 4, Tax Returns
shall be prepared and filed when due (including extensions) by the person
obligated to file such Tax Returns under the Code or applicable Tax Law. Each
Company shall assist and cooperate (and shall cause its Affiliates to do
likewise) with the other Company in accordance with Section 7 with respect to
the preparation and filing of Tax Returns, including providing information
required to be provided in Section 7. Except as otherwise provided herein,
neither Company shall amend a Tax Return for which the other Company has
responsibility pursuant to this Section 4 unless written consent (which shall
not be unreasonably withheld) to such amended return is secured from the other
Company before the amended return is filed.
4.02 New Fluor's Responsibility. New Fluor has the exclusive obligation and
right to prepare and file the following Tax Returns (including original and
amended returns and refund claims) or to cause such Tax Returns to be prepared
and filed:
(a) Consolidated or Combined Tax Returns for all Tax Periods ending on
or before October 31, 2000;
(b) Separate Company Tax Returns for any member or members of the New
Fluor Group; and
(c) All Tax Returns, for periods ending on or after October 31, 2000,
for Massey Coal Company, a Delaware limited partnership that will be
wholly-owned by members of the New Fluor Group following the Distribution.
In preparing any such Consolidated or Combined Tax Returns described in
Section 4.02(a), New Fluor shall accept the pro forma Tax returns, Tax
workpapers and other Tax Item positions and calculations that pertain
exclusively to the Massey Group as prepared and furnished to New Fluor by A.T.
Massey or (after the
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Distribution Date) by Parent, provided that such materials are prepared in
accordance with the requirements of Sections 4.04 and 4.05, and provided
further, that New Fluor shall not be obligated to report any Tax Item as
proposed by A.T. Massey or Parent (whichever is applicable) if New Fluor
believes in good faith that there is no reasonable basis for the tax treatment
of such Tax Item as proposed by A.T. Massey or by Parent (whichever is
applicable), provided, however, if such Tax Item relates to a tax shelter as
defined in section 6662(d)(2)(C) of the Code, New Fluor shall not be obligated
to report such Tax Item as proposed by A.T. Massey or Parent (whichever is
applicable) if New Fluor reasonably concludes that it is more likely than not
that the tax treatment of such Tax Item as proposed by A.T. Massey or Parent
(whichever is applicable) does not comply with applicable Tax Laws.
4.03 Parent's Responsibility. Parent has the exclusive obligation and right
to prepare and file the following Tax Returns (including original and amended
returns and refund claims) or to cause such Tax Returns to be prepared and
filed:
(a) Consolidated or Combined Tax Returns for all Tax Periods beginning
on or after November 1, 2000; and
(b) Separate Company Tax Returns for any member or members of the Parent
Group.
In preparing any such Consolidated or Combined Tax Returns described in
Section 4.03(a), Parent shall accept the pro forma Tax Returns, Tax workpapers
and other Tax Item positions and calculations that pertain exclusively to the
New Fluor Group as prepared and furnished to Parent by New Fluor, provided that
such materials are prepared in accordance with the requirements of Sections
4.04 and 4.05, and provided further, that Parent shall not be obligated to
report any Tax Item as proposed by New Fluor if Parent believes in good faith
that there is no reasonable basis for the tax treatment of such Tax Item as
proposed by New Fluor, provided, however, if such Tax Item relates to a tax
shelter as defined in section 6662(d)(2)(C) of the Code, Parent shall not be
obligated to report such Tax Item as proposed by New Fluor if Parent reasonably
concludes that it is more likely than not that the tax treatment of such Tax
Item as proposed by New Fluor does not comply with applicable Tax Laws.
4.04 Tax Accounting Practices.
(a) General Rule. Except as otherwise provided in this Section 4.04,
Consolidated or Combined Tax Returns shall be prepared in accordance with
past Tax accounting practices used with respect to such Tax Returns (unless
such past practices are no longer permissible under the Code or other
applicable Tax Law) and, to the extent any items are not covered by past
practices (or, in the event such past practices are no longer permissible
under the Code or other applicable Tax Law), in accordance with reasonable
Tax accounting practices selected by (i) New Fluor, to the extent such
election applies solely to members of the New Fluor Group, (ii) Parent, to
the extent such election applies solely to members of the Parent Group, or
(iii) in the case of any election not described in the foregoing clause (i)
or clause (ii), the agreement of Parent and New Fluor (or pursuant to
Section 15 if no such agreement is reached).
(b) Reporting Transaction Tax Items. The Tax treatment reported on Tax
Returns of Tax Items relating to the Transactions shall be consistent with
the treatment of such items in the Ruling (or, if no Ruling is issued,
consistent with the tax opinion letter issued by Ernst & Young LLP with
respect to the Transactions), unless such treatment is not permissible
under the Code. To the extent there is a Tax Item relating to the
Transactions which is not covered by the IRS Ruling (or, if no such Ruling
is issued, by the Ernst & Young LLP tax opinion letter), the Companies
shall agree on the Tax treatment of any such Tax Item reported on any Tax
Return. For this purpose, the Tax treatment of such Tax Items on a Tax
Return shall be determined by the Responsible Company with respect to such
Tax Return and shall be agreed to by the other Company unless either (i)
there is no reasonable basis for such Tax treatment, or (ii) such Tax
treatment is inconsistent with the Tax treatment contemplated in the Ruling
Request or the Ruling (or, if applicable, the opinion letter). Such Tax
Return shall be submitted for review pursuant to Section 4.06(a), and any
dispute regarding such proper Tax treatment shall be referred for
resolution pursuant to Section 15
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sufficiently in advance of the filing date of such Tax Return (including
extensions) to permit the timely filing of the Tax Return.
4.05 Consolidated or Combined Tax Returns. Neither Company shall elect or
join, and shall cause their respective Affiliates not to elect or join, in
filing consolidated, unitary, combined, or other similar joint Tax Returns with
any member of the other Group, except to the extent that the filing of such Tax
Returns is consistent with past reporting practices or, in the absence of
applicable past practices, is required by Tax Law.
4.06 Right to Review Tax Returns.
(a) General. In the case of any Tax Return which relates to any extent
to (i) Taxes for which the Other Company may be liable in whole or in part
or (ii) a Tax Benefit to which the Other Company may be entitled in whole
or in part, the Responsible Company shall, at least 30 days prior to the
filing of any such Tax Return, make such Tax Return and related work papers
available for review by the Other Company. The Other Company shall be
entitled to provide written comments to the Responsible Company with
respect to any items covered by any such Tax Return which the Other Company
determines are not being properly reported in whole or in part and/or are
not being reported in a manner consistent with the provisions of this
Agreement, and, in any such case, the Companies shall attempt in good faith
to resolve any disagreement with respect to any such items prior to the
filing of such Tax Return. If the parties are not able to reach an
agreement with respect to any such item prior to the filing of such Tax
Return, such dispute shall be subject to the provisions of Section 15,
provided, however, that the Responsible Company shall be entitled to file
such Tax Return reflecting such item as reasonably determined by the
Responsible Company, provided further, however, such determination must be
consistent with the provisions of this Agreement, and if, following the
filing of such Tax Return, the Accounting Firm shall determine that the
item in dispute was not reflected in such Tax Return in a manner consistent
with applicable Tax Law and the provisions of this Agreement, the
Responsible Company shall be obligated, unless agreed otherwise by the
Other Company in writing, to file an amended Tax Return reflecting the
items as determined by the Accounting Firm.
(b) Execution of Returns Prepared by Other Party. In the case of any Tax
Return which is required to be prepared and filed by one Company under this
Agreement and which is required by law to be signed by another Company or a
member of such Other Company's Group (or by an authorized representative
thereof), the Company (or such member) which is legally required to sign
such Tax Return shall not be required under this Agreement to sign such Tax
Return if, with respect to any material Tax Item, such Company believes in
good faith that there is no reasonable basis for the tax treatment of such
Tax Item as proposed to be reported on the Tax Return.
Section 5. Tax Liability Payments and Tax Benefit Payments.
5.01 Payment of Taxes With Respect to Consolidated or Combined Tax Returns
Filed After the Distribution Date. In the case of any Consolidated or Combined
Tax Returns for which the due date (including extensions) is after the
Distribution Date:
(a) Computation and Payment of Tax Due. Subject to the provisions of
Section 4.06, at least three business days prior to any Payment Date
pertaining to such a Tax Return the Responsible Company shall compute the
amount of Tax required to be paid on such Payment Date to the applicable
Tax Authority with respect to such Tax Return (whether for estimated Tax, a
request for an extension of the time to file or the original Tax Return for
the Tax Period) and shall notify the Other Company of its allocable share
of such Tax as determined in accordance with the provisions of this
Agreement, including, without limitation, the provisions of Sections 4.04
and 4.05. On or before such Payment Date, the Responsible Company shall pay
such Tax to the applicable Tax Authority (whether or not it has theretofore
received, pursuant to Section 5.01(b), payment from the Other Company of
its allocable share of such Tax payment).
(b) Intercompany Payments With Respect to Allocations of Tax
Liabilities. Within five business days following the applicable Payment
Date, the Other Company shall pay to the Responsible Company
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the excess (if any) of (i) the portion of the Tax liability determined as
of such Payment Date with respect to the applicable Tax Period that is
allocable to the Other Company as determined by the Responsible Company in
accordance with the provisions of this Agreement (the "Allocated Tax
Liability"), over (ii) the cumulative net payment with respect to such Tax
Period made prior to such Payment Date by the Other Company (the
"Cumulative Tax Payment"). The Other Company also shall pay to the
Responsible Company, together with the Tax liability payment required
hereunder, interest thereon at the Base Rate calculated from the Payment
Date to the date of the Other Company's payment hereunder to the
Responsible Company. If the Other Company's Cumulative Tax Payment is in
excess of the Other Company's Allocated Tax Liability for such Tax Period
as of such Payment Date (such excess, the "Other Company Overpayment"),
then the Responsible Company shall pay the dollar amount of such Other
Company Overpayment to the Other Company within thirty days following the
date (herein the "Overpayment Tax Benefit Date") as of which the
Responsible Company receives any Tax refund and/or is credited with or
otherwise receives the benefit of any Tax reduction and/or other Tax
Benefit (inclusive of the Present Value of a future Tax Benefit) which is
attributable to or otherwise corresponds to all or any portion of the Other
Company Overpayment. The Responsible Company also shall pay to the Other
Company, together with the foregoing payment required hereunder, interest
thereon calculated at the Base Rate from the Overpayment Tax Benefit Date
to the date of the Responsible Company's payment hereunder to the Other
Company.
5.02 Intercompany Payments Resulting From Audit Adjustments. In the event
that, as a result of an audit or examination by any Tax Authority, there are
Audit Adjustments of one or more Tax Items on a Consolidated or Combined Tax
Return, whether or not such Audit Adjustments result in an additional
Consolidated or Combined Tax liability being imposed or assessed with respect
to the Tax Period covered by such Tax Return (a "Tax Underpayment Liability"),
the parties agree that the allocation of each party's share of the liability
for such Consolidated or Combined Tax liability as so adjusted, including any
Tax Underpayment Liability and the Consolidated or Combined Tax liability as
previously (and most recently) adjusted and allocated (collectively, the
"Adjusted Consolidated or Combined Tax Liability"), shall be redetermined and
reallocated in accordance with the With/Without Allocation Method of Section
2.01 or Section 2.02 and subject to the provisions of Section 2.04 and Section
3 (whichever of such Sections may be applicable and to the extent thereof) and
giving effect to such Audit Adjustments. The Company which is the Responsible
Company with respect to such Tax Return (i) shall, if there is a Tax
Underpayment Liability, pay such Tax Underpayment Liability to the applicable
Tax Authority on or before the applicable Payment Date therefor, and (ii) shall
compute and determine the allocation or reallocation of the Adjusted
Consolidated or Combined Tax Liability as hereinabove provided. Within five
days following conclusion of the audit or other examination proceedings leading
to such Audit Adjustment (inclusive, if applicable, the conclusion of any Tax
Contest seeking to modify any such Audit Adjustments as proposed by a Tax
Authority), the Responsible Company shall give written notice (a "Tax Liability
Reallocation Notice") to the Other Company specifying (v) each Company's
allocable share of the Adjusted Consolidated or Combined Tax Liability,
including all relevant calculations and data required to reasonably inform the
Other Company of the manner in which the Tax liability has been reallocated,
(w) the amount, if any (a "Reallocation Deficit"), which is payable by New
Fluor to Parent, or Parent to New Fluor, in accordance with the provisions of
Section 2.01(b) or Section 2.02(b) and/or subject to the provisions of Section
2.04 and Section 3 (whichever of such Sections may be applicable and to the
extent thereof), and (x) if applicable, evidence of payment by the Responsible
Company of any Tax Underpayment Liability. Within 30 days following the date of
such Tax Liability Reallocation Notice, New Fluor shall pay to Parent, or
Parent shall pay to New Fluor (whichever may be applicable), the full amount of
the Reallocation Deficit. The Company required to make such payment (the "First
Company") shall, together with its payment of the Reallocation Deficit amount,
pay to the other Company (the "Second Company") (y) to the extent the
Reallocation Deficit involves a shifting or reallocation of Tax liabilities
from that as previously (and most recently) allocated, interest on such
reallocated portion of the Reallocation Deficit calculated at the Base Rate
from the due date (determined without regard to extensions) for the Tax Return
to which the Audit Adjustments apply to the date of payment of such interest
hereunder, and (z) to the extent the Reallocation Deficit involves a Tax
Underpayment Liability paid by the Second Company, interest on such portion of
the Reallocation Deficit
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calculated at the Base Rate from the date of such payment of the Tax
Underpayment Liability to the date of payment of such interest hereunder. By
way of illustration (and not limitation) of the foregoing provisions, if: (1)
on the original Consolidated or Combined Tax Return there was a Consolidated or
Combined Tax Liability of $50,000,000 consisting of a $30,000,000 Federal
Without Amount allocated to Parent and a balance of $20,000,000 allocated to
New Fluor; (2) in connection with a Tax audit, the New Fluor Group has
increased income items and/or decreased deduction items of $1,000,000 which are
offset by decreased income items and/or increased deduction items of the Parent
Group in the amount of $1,000,000; and (3) as a result of giving effect to all
of such increases and decreases, the Federal With Amount remains at
$50,000,000, the Federal Without Amount is reduced to $29,650,000 and the
balance of $20,350,000 is allocated to the New Fluor Group, then New Fluor
shall be obligated to pay a Reallocation Deficit to Parent in the amount of
$350,000, plus interest at the Base Rate on $350,000 from the due date
(determined without regard to extensions) of the Tax Return to which the Audit
Adjustments apply to the date of payment of the Reallocation Deficit hereunder.
5.03 Payment of Separate Company Taxes. On or before the required payment
date therefore, each Company shall pay, or shall cause to be paid, to the
applicable Tax Authority all Separate Company Taxes which are allocable to and
payable by such Company or a member of such Company's Group in accordance with
the provisions of this Agreement, including any Separate Company Taxes which
are assessed or imposed by a Tax Authority as a result of any audit or
examination of a Separate Company Tax Return.
5.04 Carrybacks, Carryovers and Audit Adjustment Benefits.
(a) Carrybacks. If any member of the New Fluor Group incurs a Carryback
item which may be carried back to (i) a Tax Period ending on or before, or
which includes, the Distribution Date with respect to which a Separate
Company Tax Return was filed by or on behalf of the New Fluor Group or any
member thereof, or (ii) a Tax Period with respect to which a Consolidated
or Combined Tax Return was filed, the New Fluor Group (or such member
thereof) shall be entitled, to the extent permitted or required by Law, to
carry back such Carryback item to the Tax Period covered by such Tax
Return. Such member's right hereunder shall include, but not be limited to,
the filing of a refund claim pursuant to Code Section 6411, the filing of
amended Tax Returns, and the filing of refund claims based on the
applicable Carryback item, in each case to the extent such a filing is
permissible (any such filing, a "Carryback Adjustment Request"). In the
event that any such filing of a Carryback Adjustment Request or other
action with respect to the Carryback item must be filed or taken by Parent
to be effective, Parent shall effect such filing or take such action as
reasonably requested by New Fluor, and Parent shall otherwise cooperate
with the New Fluor Group in seeking from the appropriate Tax Authority any
Tax refund or other Tax Benefit that may reasonably be attributable to the
Carryback item. Tax refunds or other Tax Benefits resulting from Carrybacks
with respect to Separate Company Returns, and Tax refunds, Tax Benefits and
reallocations of Consolidated or Combined Tax liabilities resulting from
Carrybacks to Consolidated or Combined Tax Returns, shall be paid, credited
and/or allocated in accordance with, and otherwise shall be subject to, the
provisions of Section 5.04(d). The New Fluor Group (or applicable members
thereof) may, at its sole discretion, choose not to carry back any one or
more Carryback items as to which it is entitled hereunder to file a
Carryback Adjustment Request. Parent and the members of the Parent Group
shall have identical rights, and New Fluor shall have identical
obligations, with respect to Carryback items incurred by Parent or any
other member of the Parent Group which may be carried back to (i) a Tax
Period ending on or before, or which includes, the Distribution Date with
respect to which a Separate Company Tax Return was filed by or on behalf of
the Parent Group or any member thereof, or (ii) a Tax Period covered by a
Consolidated or Combined Tax Return..
(b) Carryovers. The New Fluor Group and its members shall be entitled to
the benefit, following the Distribution, of any Carryover item incurred by
any such member in (i) any Tax Period ending on or before, or which
includes, the Distribution Date with respect to which a Separate Company
Tax Return was filed by or on behalf of the New Fluor Group or any member
thereof, and (ii) any Tax Period covered by a Consolidated or Combined
Return. Any such member which incurred any such Carryover item shall be
entitled, to the extent permitted or required by Law, to obtain the benefit
of such Carryover item by
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filing amended returns or refund claims based on the applicable Carryover
item with the appropriate Tax Authority (any such filing, a "Carryover
Adjustment Request"). In the event that any such filing of such a Carryover
Adjustment Request or other action must be filed or taken by Parent to be
effective, Parent shall effect such filing or take such action as is
reasonably requested by New Fluor, and Parent shall otherwise cooperate
with the New Fluor Group in seeking from the appropriate Tax Authority any
Tax refund or other Tax Benefits that may reasonably be attributable to the
Carryover item. Tax refunds or other Tax Benefits resulting from Carryovers
to Separate Company Returns, and Tax refunds, Tax Benefits and
reallocations of Consolidated or Combined Tax liabilities resulting from
Carryovers to Consolidated or Combined Tax Returns, shall be paid, credited
and/or allocated in accordance with, and shall be otherwise subject to, the
provisions of Section 5.04(d). Parent and the members of the Parent Group
shall have identical rights, and New Fluor shall have identical
obligations, with respect to Carryover items incurred by Parent or any
other member of the Parent Group in (i) any Tax Period ending on or before,
or which includes, the Distribution Date with respect to which a Separate
Company Tax Return was filed by or on behalf of the Parent Group or any
member thereof, or (ii) any Tax Period covered by a Consolidated or
Combined Tax Return. The parties agree that the Tax Benefits attributable
to any Carryover items which Parent has as of the Distribution Date with
respect to any Tax Periods (or portions thereof) through the Distribution
Date shall be allocable to New Fluor, and the provisions of this Section
5.04(b) shall apply to such Carryover items as if incurred by members of
the New Fluor Group.
(c) Other Audit Adjustment Requests. In the case of Tax Items other than
Carrybacks and Carryovers, in the event that any member of the New Fluor
Group determines that it is entitled to a Tax refund or other Tax Benefit
pertaining to (i) a Tax Period ending on or before, or which includes, the
Distribution Date with respect to which a Separate Company Tax Return was
filed by or on behalf of the New Fluor Group or any member thereof, or (ii)
a Tax Period with respect to which a Consolidated or Combined Tax Return
was filed, whether such determination results from an audit or examination
of any such Tax Return by any Tax Authority or from a determination by the
applicable New Fluor Group member that one or more Tax Items were not
properly reported and treated on any such Tax Return, then the New Fluor
Group or the applicable member thereof shall be entitled, to the extent
permitted or required by Law, to obtain the benefit of such Tax refund or
other Tax Benefit by filing amended returns or refund claims based on the
applicable adjusted Tax Items with the appropriate Tax Authority (any such
filing, an "Audit Adjustment Request"). It is intended that the provisions
of this Section 5.04(c) shall apply (but not be limited) to an Audit
Adjustment Request that results from and corresponds to an adjustment made
by a Tax Authority in connection with any such Tax Return. By way of
illustration, and without limitation, if, as a result of an examination of
New Fluor Group's consolidated Federal income tax return for its 1997
taxable year, the Internal Revenue Services requires the New Fluor Group to
capitalize an item that had been deducted on such return, the New Fluor
Group shall be entitled hereunder to require the Parent to file an
Adjustment Request for the 1998 taxable year (and later years, if
applicable) to obtain a Tax refund or other Tax Benefit attributable to
depreciation or amortization deductions in such years related to such items
capitalized in 1997. In the event that any such filing of an Audit
Adjustment Request or other action must be filed or taken by Parent to be
effective, Parent shall effect such filing or take such action as is
reasonably requested by New Fluor, and Parent shall otherwise cooperate
with the New Fluor Group in seeking from the appropriate Tax Authority any
such Tax refund or other Tax Benefits. Tax refunds or other Tax Benefits
resulting from such Audit Adjustment Requests with respect to Separate
Company Returns, and Tax refunds, Tax Benefits and reallocations of
Consolidated or Combined Tax liabilities resulting from such Audit
Adjustment Requests with respect to Consolidated or Combined Tax Returns,
shall be paid, credited and/or allocated in accordance with, and shall be
otherwise subject to, the provisions of Section 5.04(d). Parent and the
members of the Parent Group shall have identical rights, and New Fluor
shall have identical obligations, with respect to Audit Adjustment Requests
by any member of the Parent Group related to (i) any Tax Period ending on
or before, or which includes, the Distribution Date with respect to which a
Separate Company Tax Return was filed by or on behalf of the Parent Group
or any member thereof, and (ii) any Tax Period covered by a Consolidated or
Combined Return.
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(d) Audit Adjustment Reallocations and Payments.
(i) General. The parties agree that any Tax refund or other Tax
Benefit resulting from or attributable to an Audit Adjustment of a
Separate Company Tax Return of the New Fluor Group shall be payable or
otherwise allocable to New Fluor or other applicable members of the New
Fluor Group, and any Tax refund or other Tax Benefit resulting from or
attributable to an Audit Adjustment of a Separate Company Tax Return of
the Parent Group shall be payable or otherwise allocable to Parent or
other applicable member of the Parent Group, provided, however, such
Tax refund or Tax Benefit shall be allocated to New Fluor to the extent
it relates to a Separate Company Tax of the Parent with respect to a
Tax Period ending on or before the Distribution Date (or any portion
thereof treated as ending on the Distribution Date pursuant to Section
2.02(a) or Section 2.03) for which New Fluor is liable pursuant to the
provisions of Section 2. In the case of any Audit Adjustments with
respect to a Consolidated or Combined Tax Return resulting from a
Carryback Request, Carryforward Request or Audit Adjustment Request,
the following provisions shall apply: (A) the Responsible Company shall
recompute and reallocate the Consolidated or Combined Tax liability, as
adjusted, and issue a Tax Liability Reallocation Notice, in accordance
with the principles and provisions of Section 5.02; (B) any
Reallocation Deficit, together with interest thereon, shall be paid by
New Fluor or Parent, as the case may be, in accordance with the
provisions of Section 5.02; (C) in applying the With/Without Allocation
Method, the Tax Benefits attributable to any Audit Adjustment shall be
those which result from the application of the Audit Adjustment to a
Tax Return as previously adjusted, if applicable; for example, if one
Company (the "First Company") incurs a Carryback to a Consolidated or
Combined Tax Return that absorbs the full Tax Benefit available on such
Tax Return with respect to that type of Carryback, and subsequently the
second Company (the "Second Company") incurs a similar Carryback which
would have generated a Tax Benefit on such Consolidated or Combined Tax
Return had the First Company's Carryback not occurred, for purposes of
this Agreement such Second Company's Carryback shall not be deemed to
result in any Tax Benefit on such Consolidated or Combined Tax Return
and there shall be no reallocation or apportionment required with
respect to the Tax Benefit derived by the First Company from its prior
Carryback adjustment; and (D) if, as a result of such Audit
Adjustments, a member of one Group (the "First Group Member") receives
a Tax refund, Tax reduction, interest payment and/or other Tax Benefit
which, under the foregoing principles, is payable or allocable to a
member of the other Group (the "Second Group Member"), the First Group
Member shall pay the amount or value thereof to the Second Group Member
in accordance with the following provisions of Section 5.04(d).
(ii) Tax Refunds. If a member of the Parent Group receives from a
Tax Authority a Tax refund payment and/or a payment of interest with
respect to a Tax refund or other Tax adjustment (any such refund or
interest payment, a "Tax Adjustment Payment") and a member of the New
Fluor Group is entitled to such Tax Adjustment Payment pursuant to the
provisions of Section 5.04(d)(i) and other applicable provisions of
this Agreement, Parent shall pay, or cause to be paid, to New Fluor the
full amount of such Tax Adjustment Payment within 30 days following
receipt of the Tax Adjustment Payment by Parent or other member of the
Parent Group. Parent also shall pay to New Fluor, together with its
payment to New Fluor of such Tax Adjustment Payment, interest on the
amount of such Tax Adjustment Payment calculated at the Base Rate from
the date of Parent's (or other Parent Group member's) receipt of the
Tax Adjustment Payment to the date of Parent's payment hereunder to New
Fluor. New Fluor shall have an identical obligation to pay to Parent
any Tax Adjustment Payment, together with interest thereon, to which
any member of the Parent Company is entitled pursuant to the provisions
of Section 5.04(d)(i) and other applicable provisions of this
Agreement.
(iii) Tax Reductions. If, in lieu of a Tax Adjustment Payment that,
if paid, would be payable to New Fluor pursuant to Section 5.04(d)(ii),
a member of the Parent Group receives a reduction of Taxes otherwise
payable by such member, including but not limited to a reduction of an
interest obligation or other credit against interest obligations
otherwise payable by such member (any such reduction or credit, a "Tax
Adjustment Credit"), Parent shall pay to New Fluor, within 30 days
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following the date on which the applicable Tax Authority gives effect
to such Tax Adjustment Credit, the full amount of such Tax Adjustment
Credit. Parent also shall pay to New Fluor, together with its payment
to New Fluor of the amount of such Tax Adjustment Credit, interest on
the amount of such Tax Adjustment Credit calculated at the Base Rate
from the date on which such Tax Authority gives effect to such Tax
Adjustment Credit to the date of Parent's payment hereunder to New
Fluor. New Fluor shall have an identical obligation to pay to Parent
the amount of any Tax Adjustment Credit, together with interest
thereon, which any member of the New Fluor Group receives in lieu of a
Tax Adjustment Payment that, if paid to a member of the New Fluor
Group, would be payable by New Fluor to Parent pursuant to Section
4.07(d)(ii).
(iv) Future Tax Benefits. If any member of the Parent Group receives
or is credited with any Tax Benefit that will or may be used by such
Parent Group member in future Tax Periods and which is payable or
allocable to a member of the New Fluor Group pursuant to the provisions
of Section 5.04(d)(i) and other applicable provisions of this
Agreement, Parent shall pay to New Fluor, within 30 days following the
date on which the applicable Tax Authority credits or otherwise
notifies the Parent Group member of such future Tax Benefit, the
Present Value of such future Tax Benefit. Parent also shall pay to New
Fluor, together with its payment to New Fluor of such Present Value
amount, interest thereon calculated at the Base Rate from the date of
such action by such Tax Authority to the date of Parent's payment
hereunder to New Fluor. New Fluor shall have an identical obligation to
pay to Parent the Present Value of any future Tax Benefits credited by
any Tax Authority to a member of the New Fluor Group which are payable
or allocable to members of the Parent Group pursuant to the provisions
of Section 5.04(d)(i) and other applicable provisions of this
Agreement.
(v) Certain Transferred Obligation Tax Benefits. The parties agree as
follows:
(A) In connection with the Transactions and pursuant to the
provisions of the Distribution Agreement and/or its related agreements
among the parties, certain fixed or contingent obligations of Parent
relating to periods prior to the Distribution Date, including, without
limitation, compensation and benefit related obligations other than
obligations related to New Fluor Substituted Equity Incentives as
provided for under Section 5.04(d)(vi), are being assigned to and
assumed by New Fluor and/or other members of the New Fluor Group
(collectively, the "Transferred Obligations"). Any Tax deduction or
other Tax Benefit resulting from or attributable to the payment or
other satisfaction of all or any portion of any such Transferred
Obligation shall be allocable to the New Fluor Group member which pays
or otherwise satisfies such Transferred Obligation. Unless required
otherwise by applicable Tax Law or the actions of a Tax Authority, the
parties agree that the New Fluor Group shall be entitled to claim such
Tax Benefit on the appropriate New Fluor Group Tax Return filed after
the Distribution Date, and, except as provided under Section
5.04(d)(v)(B) below, the Parent Group shall not claim any such Tax
Benefit on any Tax Return of the Parent Group.
(B) If, pursuant to applicable Tax Law or the actions of a Tax
Authority, a member of the Parent Group is required to, or if New Fluor
and Parent mutually agree that Parent shall, claim a deduction or other
Tax Benefit attributable to the payment or other satisfaction by a New
Fluor Group member of a Transferred Obligation, Parent shall pay to New
Fluor the amount of any Tax refund, Tax reduction or other Tax Benefit
(inclusive of the Present Value of any future Tax Benefit) which the
Parent Group obtains as a result of or which is otherwise attributable
to claiming such deduction or other Tax Benefit on its Tax Returns,
(such aggregate Tax Benefit amount, the "Transferred Obligation Tax
Benefit Amount"). Such Transferred Obligation Tax Benefit Amount shall
be paid by Parent to New Fluor within thirty days following the date
(herein the "Transferred Obligation Tax Benefit Date") as of which the
Parent Group receives any such Tax refund and/or is credited with or
otherwise receives the benefit of any such Tax reduction or other
current or future Tax Benefit (which Date, in the case of a Parent Tax
Return on which Parent originally claims a deduction or other Tax
Benefit attributable to the payment or other satisfaction of a
Transferred Obligation, shall be the due
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date (determined without regard to extensions) for the filing of such
Return). Parent also shall pay to New Fluor, together with such payment
to New Fluor, interest on such Transferred Obligation Tax Benefit
Amount calculated at the Base Rate from the Transferred Obligation Tax
Benefit Date to the date of the payment hereunder. If, pursuant to an
Audit Adjustment, a Tax Authority disallows a Tax Benefit claimed by
the New Fluor Group on its Tax Returns with respect to the payment or
other satisfaction of such a Transferred Obligation, New Fluor shall be
entitled to require Parent to seek to obtain the Tax Benefits
attributable thereto pursuant to the provisions of Section 5.04(c), in
which case Parent shall be obligated to pay to New Fluor the amount or
value of any Tax Benefits obtained, together with interest, in
accordance with the provisions of this Section 5.04(d)(v)(B) and the
foregoing provisions of this Section 5.04(d).
(C) In connection with its payment or other satisfaction of all or
any portion of a Transferred Obligation, New Fluor shall pay, make,
withhold and/or deposit all employment and payroll Taxes and Tax
withholdings as required under applicable Tax Laws. If, pursuant to
applicable Tax Law or the actions of a Tax Authority, a member of the
Parent Group is required to, or if New Fluor and Parent mutually agree
that Parent shall, claim a deduction or other Tax Benefit attributable
to the payment or other satisfaction of all or any portion of a
Transferred Obligation, or if a member of the Parent Group is otherwise
required to pay employment or payroll Taxes with respect to the payment
or other satisfaction of all or any portion of a Transferred
Obligation, then New Fluor shall reimburse Parent for the full amount
of such employment and payroll Taxes paid by Parent, with such
reimbursement to be made within three business days following New
Fluor's receipt of demand therefor from Parent.
(vi) Certain Equity Incentive Tax Benefits. The parties agree as
follows:
(A) In connection with the Transactions and pursuant to the
provisions of the Distribution Agreement and/or its related agreements
among the parties, certain Pre-Distribution Equity Incentives (as
defined herein) will be cancelled and in lieu thereof New Fluor will,
effective as of the Distribution, issue or grant New Fluor Substituted
Equity Incentives (as defined herein) to the parties holding such
cancelled Pre-Distribution Equity Incentives immediately prior to the
Distribution. Any Tax deduction or other Tax Benefit resulting from or
attributable to the vesting, exercise, purchase, cancellation, payment
or other disposition or satisfaction of all or any portion of a New
Fluor Substituted Equity Incentive, including, without limitation, a
payment of cash in lieu of issuing a New Fluor Substituted Equity
Incentive (any such action or event, a "Satisfying" or "Satisfaction")
shall be allocable to the New Fluor Group member which Satisfies such
New Fluor Substituted Equity Incentive. Unless required otherwise by
applicable Tax Law or the actions of a Tax Authority, the parties agree
that the New Fluor Group shall be entitled to claim such deduction or
other Tax Benefit on the appropriate New Fluor Group Tax Return filed
after the Distribution Date, and, except as provided under
Section 5.04(d)(vi)(B) below, the Parent Group shall not claim any such
deduction or other Tax Benefit on any Tax Return of the Parent Group.
(B) If, pursuant to applicable Tax Law or the actions of a Tax
Authority, a member of the Parent Group is required to, or if New Fluor
and Parent mutually agree that Parent shall, claim a deduction or other
Tax Benefit attributable to the Satisfaction by a New Fluor Group
member of a New Fluor Substituted Equity Incentive, Parent shall pay to
New Fluor the amount of any Tax refund, Tax reduction or other Tax
Benefit (inclusive of the Present Value of any future Tax Benefit)
which the Parent Group obtains as a result of, or which is otherwise
attributable to, claiming such deduction or other Tax Benefit on its
Tax Returns (such aggregate Tax Benefit amount, the "Substituted
Incentive Tax Benefit Amount"). Such Substituted Incentive Tax Benefit
Amount shall be paid by Parent to New Fluor within thirty days
following the date (herein the "Substituted Incentive Tax Benefit
Date") as of which the Parent Group receives any such Tax refund and/or
is credited with or otherwise receives the benefit of any such Tax
reduction or other current or future Tax Benefit (which Date, in the
case of a Parent Tax Return on which Parent originally claims a
deduction or other Tax
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Benefit attributable to the Satisfaction of a New Fluor Substituted
Equity Incentive, shall be the due date (determined without regard to
extensions) for the filing of such Return). Parent also shall pay to
New Fluor, together with such payment to New Fluor, interest on such
Substituted Incentive Tax Benefit Amount calculated at the Base Rate
from the Substituted Incentive Tax Benefit Date to the date of the
payment hereunder. If, pursuant to an Audit Adjustment, a Tax Authority
disallows a Tax Benefit claimed by the New Fluor Group on its Tax
Returns with respect to the Satisfaction of such a New Fluor
Substituted Equity Incentive, New Fluor shall be entitled to require
Parent to seek to obtain the Tax Benefits attributable thereto pursuant
to the provisions of Section 5.04(c), in which case Parent shall be
obligated to pay to New Fluor the amount or value of any Tax Benefits
obtained, together with interest, in accordance with the provisions of
this Section 5.04(d)(vi)(B) and the foregoing provisions of this
Section 5.04(d). The parties agree that if, pursuant to the foregoing
provisions, Parent claims a Tax Benefit on behalf of New Fluor with
respect to an unvested New Fluor Substituted Equity Incentive and
subsequently such Tax Benefit is disallowed and recaptured to any
extent by reason of a termination of employment by the holder of such
Incentive prior to satisfaction of all or any portion of the applicable
vesting requirement, the recaptured Tax Benefit shall be a Disallowed
Tax Benefit subject to the provisions of Section 5.04(f)(i)(B).
(C) In connection with its Satisfaction of any New Fluor Substituted
Equity Incentive, New Fluor shall pay, make, withhold and/or deposit
all employment and payroll Taxes and Tax withholdings as required under
applicable Tax Laws. If, pursuant to applicable Tax Law or the actions
of a Tax Authority, a member of the Parent Group is required to, or if
New Fluor and Parent mutually agree that Parent shall, claim a
deduction or other Tax Benefit attributable to the Satisfaction of a
New Fluor Substituted Equity Incentive, or if a member of the Parent
Group is otherwise required to pay employment or payroll Taxes with
respect to a Satisfaction of a New Fluor Substituted Equity Incentive,
then New Fluor shall reimburse Parent for the full amount of such
employment and payroll Taxes paid by Parent, with such reimbursement to
be made within three business days following New Fluor's receipt of
demand therefor from Parent.
(D) For purposes of this Section 5.04(d)(vi), the following
definitions shall apply:
(1) The term "Equity Incentive" shall mean any restricted stock
(or related unit), stock appreciation right, stock option, shadow
stock or other equity-based compensation which is issued, granted or
otherwise transferred by a corporation to its (or its Affiliate's)
employees, directors or consultants.
(2) The term "New Fluor Substituted Equity Incentive" shall mean
an Equity Incentive which was issued or granted by New Fluor in
exchange or substitution for a Pre-Distribution Equity Incentive.
(3) The term "Pre-Distribution Equity Incentive" shall mean an
Equity Incentive which was issued or granted by Parent and which is
outstanding immediately prior to the Distribution.
(vii) Other Tax Benefits. If any member of one group (the "First Group
Member") receives or is credited with any Tax Benefit not described in the
foregoing clauses (i), (ii), (iii), (iv), (v) and (vi) but which is payable
or allocable to a member of the other Group (the "Second Group Member") in
accordance with the principles underlying the Tax liability and Tax Benefit
allocation provisions of Section 2 and the foregoing provisions of this
Section 5, such First Group Member shall pay the amount (or, if applicable,
the Present Value) of such Tax Benefit to the Second Group Member within 30
days following the date on which the applicable Tax Authority pays, credits
or otherwise gives effect to such Tax Benefit to or for the benefit of the
First Group Member. Such First Group Member shall also pay to the Second
Group Member, together with such payment, interest thereon calculated at
the Base Rate from the date of such action by such Tax Authority to the
date of the First Group Member's payment hereunder to the Second Group
Member.
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(e) Offset For Federal Tax Burdens. Notwithstanding the provisions of
Section 5.04 specifying the amount of payment to be made by one Group (the
"First Group") to a member of the other Group (the "Second Group") by
reason of the receipt or accrual by the First Group of a Tax refund, Tax
reduction or other Tax Benefit that under this Agreement is allocable to
the Second Group (any such refund, reduction or other benefit, the
"Reallocable Tax Benefit"), if (i) the First Group is required, for Federal
Income Tax purposes, to recognize income with respect to its receipt or
accrual of all or any portion of such Reallocable Tax Benefit (any such
portion, the "Taxable Portion"), and (ii) such Taxable Portion exceeds the
amount of the Federal Income Tax deduction to which the First Group is
entitled by reason of its payment of (or accrual of the obligation to pay)
the Reallocable Tax Benefit to the Second Group (such excess, the "Taxable
Excess"), then (iii) the amount of the Reallocable Tax Benefit shall be
reduced by the Federal Income Tax liability attributable to such Taxable
Excess (determined by assuming that Federal Income Taxes are incurred at
the highest marginal corporate Federal Income Tax rate).
(f) Additional Audit Adjustment Rules. Notwithstanding the foregoing
provisions of this Section 5.04, the parties agree as follows:
(i) If a member of one Group (the "First Group Member") is required,
pursuant to the provisions of subsection (a), (b), (c), (d)(v)(B) or
(d)(vi)B) of this Section 5.04, to file amended returns or refund
claims or to take other actions to obtain a Tax refund or other Tax
Benefit on behalf of a member of the other Group (the "Second Group
Member"), the following provisions shall apply:
(A) The reasonable costs and expenses incurred by such First
Group Member in connection with such filing or other action shall be
paid by the Second Group Member, and to the extent such costs and
expenses have not been paid at the time of any payment pursuant to
Section 5.04(d), the amount of such costs and expenses may be offset
against such payment; and
(B) If, pursuant to the actions of any Tax Authority, all or any
portion of the Tax Benefit obtained by the First Group Member on
behalf of the Second Group Member is disallowed or otherwise
reversed (such portion, the "Disallowed Tax Benefit), then (1) if
the relevant Tax Benefit payment has not yet been paid by the First
Group Member to the Second Group Member, such Tax Benefit payment
shall be reduced by the amount of the Federal Income Tax liability
incurred by the First Group Member as a result of the disallowance
or other reversal of the Disallowed Tax Benefit, with such liability
determined by assuming that Federal Income Taxes are incurred at the
highest marginal corporate Federal Income Tax rate (such liability,
the "Disallowed Tax Benefit Tax Liability") or (2) if such Tax
Benefit payment has been paid, the Second Group Member shall pay to
the First Group Member an amount equal to the Disallowed Tax Benefit
Tax Liability plus interest at the Base Rate on the amount of such
Disallowed Tax Benefit Tax Liability from the date of the payment of
the Tax Benefit by the First Group Member to the Second Group Member
to the date of payment hereunder of said Disallowed Tax Benefit Tax
Liability to the First Group Member.
(ii) If a member of the Parent Group or a member of the New Fluor
Group, as the case may be, receives a Carryback Adjustment Request,
Carryforward Adjustment Request or an Audit Adjustment Request from a
member of the other Group, the party receiving such request may, in
lieu of filing or otherwise processing the amended return or refund
claim or taking any other action so requested, pay to the requesting
party the amount of the Tax refund, interest payment or other Tax
Benefit which the requesting party wishes to obtain pursuant to the
applicable Adjustment Request.
5.05 Treatment of Intercompany Payments; Tax Gross-Up; Certain Tax Offsets.
(a) General. The parties agree that, except as otherwise contemplated
under Section 5.05(b) or as otherwise required pursuant to a change in
applicable Tax Laws or an action of a Tax Authority following the
Distribution Date, any payment by a member of one Group to a member of the
other Group pursuant to Section 5.01, Section 5.02 or Section 5.04 shall be
treated for income tax purposes by the payor and the
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recipient as a non-taxable capital contribution or non-taxable
distribution, as appropriate, occurring prior to the Distribution, but only
to the extent such payment does not relate to a Tax allocated to the payor
in accordance with Treasury Regulation 1.1502-33(d) or under comparable
principles of other applicable Tax Laws.
(b) Interest Payments. The parties agree as follows:
(i) To the extent that any payment pursuant to Section 5.04 by a
member of one Group to a member of the other Group is attributable to
interest received by or credited to the payor from a Tax Authority,
then to the extent permitted by Law the parties shall either (A) treat
the payor as receiving such interest portion as agent for the
recipient, in which case the recipient shall treat such interest
portion as interest income to the recipient (includable in income to
the extent provided by Law), or (B) both payor and recipient shall
treat such interest portion of the payment as an expense paid by the
payor (deductible to the extent provided by Law) and income to the
recipient (includable in income to the extent provided by Law).
(ii) To the extent that any payment pursuant to Section 5.02 by a
member of one Group to a member of the other Group is attributable to
interest paid by the recipient to a Tax Authority, then to the extent
permitted by Law the parties shall either (A) treat the recipient as
paying such interest portion to the Tax Authority as agent for the
payor, in which case the recipient shall not treat such interest
portion as interest income to or interest expense of the recipient and
the payor shall treat such interest portion as interest expense of the
payor (deductible to the extent provided by Law), or (B) both payor and
recipient shall treat such interest portion of the payment as an
expense paid by the payor (deductible to the extent provided by Law)
and income to the recipient (includable in income to the extent
provided by Law).
(iii) To the extent that any payment pursuant to Section 5.01 or
Section 5.02 or Section 5.04 constitutes (A) a payment of interest by
the payor under Section 5.01 or Section 5.02 with respect to the period
from the date the recipient paid a Tax liability allocable to the payor
until the date of the payment under Section 5.01 or Section 5.02, or
(B) a payment of interest by the payor under Section 5.04 with respect
to the period from the date the payor received a Tax Benefit allocable
to the recipient until the date of the payment under Section 5.04, both
payor and recipient shall treat such interest portion of the payment as
interest expense paid by the payor (deductible to the extent provided
by law) and interest income to the recipient (includible in income to
the extent provided bylaw).
(c) Gross-Up. If, notwithstanding the tax treatment contemplated under
Section 5.05(a) with respect to payments made by a member of one Group (the
"First Group Member") to a member of the other Group (the "Second Group
Member"), the Second Group member is required as a result of a change in
the Tax Laws or an action by a Tax Authority to treat as taxable income any
portion of the payment from the First Group Member other than any interest
portion thereof as described in Section 5.05(b) (such taxable portion, the
"Taxable Intercompany Payment"), then the First Group Member shall be
obligated to pay to the Second Group Member an additional payment in an
amount such that (x) the sum of such additional payment plus the Taxable
Intercompany Payment, less (y) the amount of Income Taxes payable by the
recipient with respect to the accrual or receipt of such additional payment
and the Taxable Intercompany Payment, equals the amount of the Taxable
Intercompany Payment.
(d) Offset For Certain Federal Tax Benefits. Notwithstanding the
provisions of Section 5.01 through 5.04 specifying the amount of payments
(inclusive of interest, penalties and additions) from one Group to the
other Group related to State Income Taxes, Foreign Income Taxes or other
Taxes other than Federal Income Taxes (any such payment, an "Intergroup
Non-Federal Tax Payment"), if (i) the Group receiving such Intergroup Non-
Federal Tax Payment (the "Recipient Group") is entitled to claim a Tax
deduction or Tax credit for Federal Income Tax purposes with respect to its
payment or accrual of all or any portion of the Tax to which such
Intergroup Non-Federal Tax Payment pertains (any such portion of such Tax,
the "Federal Tax Benefited Amount"), and (ii) all or any portion of such
Federal Tax Benefited
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Amount is not deductible for Federal Income Tax purposes by the paying
Group and is not includible in income of the Recipient Group for Federal
Income Tax purposes (such portion not deductible and not includable, the
"Nontaxable Portion"), then (iii) the amount of such Intergroup Non-Federal
Tax Payment shall be reduced by the value of the Federal Income Tax Benefit
attributable to such Nontaxable Portion, with such value to be determined
assuming that the Federal Income Tax Benefit will reduce income taxable at
the highest marginal corporate Federal Income Tax rate. By way of
illustration of the foregoing, if New Fluor is otherwise obligated under
this Agreement to make a payment of $1,000,000 to Parent related to a State
Income Tax that is allocable under this Agreement to the New Fluor Group
but as to which (x) Parent will be entitled to claim a Federal Income Tax
deduction, and (y) in accordance with the principles of Section 5.05(a),
such payment from New Fluor to Parent is neither deductible by New Fluor
nor includible in income by Parent, then (y) the amount of the payment from
New Fluor to Parent shall be reduced to $650,000 if the highest marginal
corporate Federal income Tax rate is 35%.
5.06 Method of Payment. All payments made by one Company (or its Affiliates)
to the other Company (or its Affiliates) under this Agreement shall be made in
immediately available funds.
5.07 Late Payments. Any amount payable by one party to another party under
this Agreement which is not paid when due shall bear interest at the Base Rate
plus two percent, compounded semiannually, from the due date of the payment to
the date paid. To the extent interest required to be paid under this Section
5.07 duplicates interest required to be paid under any other provision of this
Agreement, interest shall be computed at the higher of the interest rate
provided under this Section 5.07 or the interest rate provided under such other
provision.
Section 6. Intentionally Omitted.
Section 7. Assistance and Cooperation.
7.01 General. After the Distribution Date, each Company shall cooperate (and
cause its respective Affiliates to cooperate) with the other Company and with
the other Company's agents, including accounting firms and legal counsel, in
connection with Tax matters relating to the other Company and its Affiliates,
including, without limitation, (i) the preparation and filing of Tax Returns,
(ii) determining the liability for and amount of any Taxes due (including
estimated Taxes) or the right to and amount of any refund of Taxes,
(iii) examinations of Tax Returns, and (iv) any administrative or judicial
proceeding in respect of Taxes assessed or proposed to be assessed. Such
cooperation shall include making all information and documents in their
possession relating to the other Company and its Affiliates available to such
other Company as provided in Section 8.02. Each Company shall also make
available to the other Company, as reasonably requested and available,
personnel (including officers, directors, employees and agents of the Company
or its Affiliates) responsible for preparing, maintaining, and interpreting
information and documents relevant to Taxes, and personnel reasonably required
as witnesses or for purposes of providing information or documents in
connection with items (i) through (iv) in the first sentence of this Section
7.01. Any information or documents provided under this Section 7 shall be kept
confidential by the Company receiving the information or documents, except as
may otherwise be necessary in connection with the filing of Tax Returns or in
connection with any administrative or judicial proceedings relating to Taxes.
7.02 Income Tax Return Information. Each of the Companies will provide
information and documents relating to its Group to the other Company as
required for Tax Return preparation purposes. New Fluor and Parent shall cause
the members of their respective Groups to provide Tax Return information to the
Responsible Company in a form suitable for filing (except for consolidating and
other adjustments which would normally be made by the Responsible Company) at
least seventy-five days prior to the due date (including extensions) of the
particular Tax Return.
Section 8. Tax Records.
8.01 Retention of Tax Records. The Companies shall preserve and keep all Tax
Records and supporting information and documentation relating to their
respective Groups for Tax Periods ending before, on or
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including the Distribution Date for so long as the contents thereof may become
material in the administration of any matter under the Code or other applicable
Tax Law, but in any event until the later of (i) the expiration of any
applicable statute of limitation (including extensions thereof) or (ii) seven
years after the Distribution Date. If, prior to the expiration of the
applicable statute of limitation (including extensions thereof) and such seven-
year period, a Company reasonably determines that any Tax Records which it is
required to preserve and keep under this Section 8 are no longer material in
the administration of any matter under the Code or other applicable Tax Law,
such Company may dispose of such records upon 90 days prior notice to the other
Company. Such notice shall include a list of the records to be disposed of
describing in reasonable detail each file, book, or other record accumulation
which is to be disposed of. The notified Company shall have the opportunity, at
its cost and expense, to copy or remove, within such 90-day period, all or any
part of such Tax Records.
8.02 Access to Tax Records. The Companies and their respective Affiliates
shall make available to each other for inspection and copying, during normal
business hours and upon reasonable notice, all Tax Records in their possession
to the extent reasonably required by the other Company in connection with the
preparation of Tax Returns, refund claims, audits, litigation, or the
resolution of any matter under this Agreement.
8.03 Copies of Consolidated or Combined Tax Returns. Within ten days after
filing any Consolidated or Combined Tax Return, the Responsible Company shall
provide a true and correct copy of such Tax Return to the Other Company.
Section 9. Tax Contests.
9.01 Notice Requirement. A party to this Agreement (the "First Party") shall
provide, within fifteen business days after such First Party (or any member of
the First Party's Group) receives official written notification thereof, notice
to the other party (the "Second Party") of any pending or threatened Tax audit,
assessment or proceeding or other Tax Contest related to Taxes which are, or
may reasonably be expected to be, allocable to and payable by such Second Party
pursuant to the provisions of this Agreement. Such notice shall contain factual
information (to the extent known by the First Party) describing any asserted
Tax liability in reasonable detail and shall be accompanied by copies of any
notices or other documents received from any Tax Authority in respect of any
such matters. If the First Party fails to give the Second Party such notice of
such asserted Tax liability, then (i) if the Second Party is precluded from
contesting the asserted Tax liability in all otherwise available forums as a
result of the failure to give such notice, the Second Party shall have no
obligation to pay to the First Party any Taxes arising out of such asserted Tax
liability which are otherwise allocable to the Second Party under this
Agreement, unless the Tax Committee (as defined in Section 9.02(b)) determines
that it is highly unlikely that contesting the Tax liability would have
materially reduced the amount of the Tax liability allocable to the Second
Party, and (ii) if the Second Party is not precluded from contesting the
asserted Tax liability in all otherwise available forums, but such failure to
give such notice results in a monetary detriment to the Second Party, then any
amount which the Second Party is otherwise required to pay to the First Party
pursuant to this Agreement shall be reduced by the amount of such detriment, as
established to the reasonable satisfaction of the Tax Contest Committee.
9.02 Control of Tax Contests.
(a) Separate Company Taxes. In the case of any Tax Contest with respect
to any Separate Company Tax, the Company having liability for the Tax shall
have exclusive control over the Tax Contest, including exclusive authority
with respect to any settlement of any matters involved in such Tax Contest.
(b) Consolidated or Combined Taxes. In the case of any Tax Contest with
respect to any Consolidated or Combined Tax, (i) Parent shall control the
defense or prosecution of the portion of the Tax Contest directly and
exclusively related to any Parent Adjustment, including settlement of any
such Parent Adjustment and (ii) New Fluor shall control the defense or
prosecution of the portion of the Tax Contest directly and exclusively
related to any New Fluor Adjustment, including settlement of any such New
Fluor Adjustment, and (iii) a committee constituted as provided herein (the
"Tax Contest Committee") shall
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control the defense or prosecution of Joint Adjustments and any and all
administrative matters not directly and exclusively related to any Parent
Adjustment or New Fluor Adjustment. The Tax Contest Committee shall be
comprised of two persons, one person selected by Parent (as designated in
writing to New Fluor) and one person selected by New Fluor (as designated
in writing to Parent). Each person serving on the Tax Contest Committee
shall continue to serve unless and until he or she is replaced by the party
designating such person. Any and all matters to be decided by the Tax
Contest Committee shall require the agreement of both persons serving on
the Tax Contest Committee. In the event the Tax Contest Committee shall be
deadlocked on any matter, the provisions of Section 15 of this Agreement
shall apply. A Company shall not agree to any Tax liability for which the
other Company may be liable under this Agreement, or compromise any claim
for any Tax Benefit to which another Company may be entitled under this
Agreement, without such other Company's written consent (which consent may
not be unreasonably withheld).
(c) Powers of Attorney. Each member of the Parent Group shall execute
and deliver to New Fluor and/or the members of the Tax Contest Committee,
and each member of the New Fluor Group shall execute and deliver to Parent
and/or to the members of the Tax Contest Committee, any power of attorney
reasonably requested by any such party or person as necessary to allow
it/them to control the defense or prosecution of a Tax Contest in
accordance with the provisions of Section 9.02(b), provided, however, that
such power of attorney shall not expand the rights of such controlling
party or person beyond that provided for under Section 9.02(b).
Section 10. Effective Date. This Agreement shall be effective on the
Distribution Date.
Section 11. Certain Representations and Covenants.
(a) No Inconsistent Plan or Intent. Each of Parent and New Fluor hereby
represents and warrants to the other party that:
(i) it has not taken, and as of the Distribution Date has no plan or
intention to take, any action that would result in any Tax liability being
imposed with respect to the Distribution pursuant to the application of the
provisions of Code section 355(e); and
(ii) neither it, nor any of its Affiliates, has taken, or as of the
Distribution Date has any plan or intent to take, any other action which is
inconsistent with any material factual statements or representations in the
Ruling Request.
(b) Restriction on Prohibited Actions. Each of Parent and New Fluor hereby
covenants and agrees that it will not take any action, and it will cause its
Affiliates to refrain from taking any action, which would result in a Tax
treatment of the Transactions that is inconsistent in any material respect with
the Tax treatment of the Transactions as contemplated in the Ruling Request or,
if different, in the Ruling (any such action, a "Prohibited Action"), unless
such Prohibited Action is required by Law or the person acting has obtained the
prior written consent of the other party to this Agreement.
(c) Restriction on Certain Other Actions. In the case of any action or event
which, if it were taken or it occurred following the Distribution Date, would
give rise to a breach of any of a party's representations under Section 11(a)
if such party knew or had reason to know of such action or event as of the
Distribution Date, and notwithstanding that such party does not have any such
knowledge (or reason to have such knowledge) as of the Distribution Date, and
thus the taking of such action or the occurrence of such event would not
constitute a breach of a representation under Section 11(a), each of New Fluor
and Parent hereby covenants and agrees that it will not take, and it will cause
its Affiliates to refrain from taking, any such action on or before the last
day of the calendar year ending after the second anniversary of the
Distribution Date, other than as permitted in this Section 11.
(d) Restriction on Amending or Supplementing Ruling Request. Each of Parent
and New Fluor hereby covenants and agrees that it will not file, and it will
cause its Affiliates to refrain from filing, any amendment or
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supplement to the Ruling Request subsequent to the Distribution Date without
the written consent of the other party to this Agreement.
Section 12. Survival of Obligations. The representations, warranties,
covenants and agreements set forth in this Agreement shall be unconditional and
absolute and shall remain in effect without limitation as to time.
Section 13. Employee Matters. Each of the Companies agrees to utilize, or
cause its Affiliates to utilize, the alternative procedure set forth in Revenue
Procedure 96-60, 1996-2 C.B. 399 (if such Revenue Procedure is applicable),
with respect to wage reporting for employees who transfer from a member of one
Group to a member of the other Group in connection with the Transactions.
Section 14. Mutual Covenants and Indemnifications.
(a) New Fluor. New Fluor hereby covenants and agrees that it will (i)
perform or cause to be performed all obligations of the members of the New
Fluor Group under his Agreement, including, without limitation, the obligations
of the members of the New Fluor Group to pay, when due, Tax liability payments
to Tax Authorities and payments to members of the Parent Group in accordance
with the provisions of Section 5, and (ii) indemnify and hold harmless Parent
and all other members of the Parent Group from and against any Losses (as
defined hereinbelow) incurred by any member of the Parent Group as a result of
any breach of any covenant, representation or warranty of New Fluor under this
Agreement or any failure by any member of the New Fluor Group to fully perform
its obligations under this Agreement.
(b) Parent. Parent hereby covenants and agrees that it will (i) perform or
cause to be performed all obligations of the members of the Parent Group under
this Agreement, including, without limitation, the obligations of the members
of the Parent Group to pay, when due, Tax liability payments to Tax Authorities
and payments to members of the New Fluor Group in accordance with the
provisions of Section 5, and (ii) indemnify and hold harmless New Fluor and all
other members of the New Fluor Group from and against any Losses incurred by
any member of the New Fluor Group as a result of any breach of any covenant,
representation or warranty of Parent under this Agreement or any failure by any
member of the Parent Group to fully perform its obligations under this
Agreement.
(c) Losses. For purposes of this Section 14, the term "Losses" means any and
all losses, damages, injuries, harm, detriment, declines in value, liabilities,
exposures, claims, demands, proceedings, settlements, judgments, awards,
punitive damage awards, fines, penalties, fees, charges, payments of Taxes,
costs or expenses (including, without limitation, reasonable costs of
attempting to avoid or in opposing the imposition thereof, interest, penalties,
costs of preparation and investigation, and the reasonable fees, disbursements
and expenses of attorneys, accountants and other professional advisors, but not
including the cost of "in-house" attorneys, accountants and other employees of
a party.).
Section 15. Disputes; Governing Law; Consent to Jurisdiction; Attorneys' Fees.
(i) Referral to Accounting Firm. If the parties cannot agree on the
application of this Agreement to any matter in dispute (a "Dispute"), then,
subject to the rights of the parties to seek a judicial resolution or remedy,
the Dispute shall be referred to Ernst & Young LLP (the "Accounting Firm") for
resolution. The Accounting Firm shall furnish written notice (the "Accounting
Firm Notice") to the parties of its resolution of any such Dispute as soon as
practical, but in any event no later than 45 days after its acceptance of the
matter for resolution, with such notice to set forth in writing the grounds and
reasoning underlying the Accounting Firm's decision. Each party shall pay its
own fees and expenses (including the fees and expenses of its representatives)
incurred in connection with the referral of the matter to the Accounting Firm.
All fees and expenses of the Accounting Firm in connection with such referral
shall be shared equally by the parties. Notwithstanding any decision of the
Accounting Firm, each party shall retain its rights to seek a judicial
resolution of (and/or any available judicial remedies with respect to) any
Dispute or any other matter under this Agreement, it being
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understood that any party may seek such judicial resolution or remedies at any
time, whether before or after submission of a Dispute to the Accounting Firm.
If any such judicial action with respect to a Dispute is commenced prior to the
submission of the matter for resolution by the Accounting Firm, or if
submitted, prior to the Accounting Firm rendering its decision, the Dispute
shall not be submitted to the Accounting Firm or the Accounting Firm shall
cease activity on the Dispute without rendering a decision (whichever may be
applicable). All offers, promises, conduct and statements, whether oral or
written, made in the course of any submission of the Dispute to the Accounting
Firm by either party or the Accounting Firm or their respective agents,
members, managers, directors, officers, employees, experts or attorneys, will
be confidential, privileged and inadmissible for any purpose, including
impeachment, in any judicial proceedings related to the Dispute, provided,
however, that otherwise admissible or discoverable evidence will not be
rendered inadmissible or non-discoverable as a result of its use in any such
submission to the Accounting Firm.
(ii) Governing Law. This Agreement and the transactions contemplated hereby
shall be construed in accordance with, and governed by, the Laws of the State
of New York without reference to choice of Law principles.
(iii) Consent to Jurisdiction. Each of the parties hereto hereby irrevocably
submits to the nonexclusive jurisdiction of any United States Federal or New
York State court sitting in New York County in any action or proceeding arising
out of or relating to this Agreement, and irrevocably agrees that all claims in
respect of any such action or proceeding may be heard and determined in any
such United States Federal or New York State court. Each of the parties hereto
agrees to commence any action, suit or proceeding relating hereto either in the
United States District Court for the Southern District of New York or, if for
jurisdictional reasons such suit, action or other proceeding may not be brought
in such court, in the Supreme Court of the State of New York, New York County.
Each of the parties hereto further agrees that service of any process, summons,
notice or document by United States registered mail to such party's respective
address set forth in Section 18.01 shall be effective service of process for
any action, suit or proceeding in the State of New York with respect to any
matters to which it has submitted to jurisdiction as set forth above in the
immediately preceding sentence. Each of the parties hereto irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in (a) the Supreme Court of the State of New York, New York County or
(b) the United States District Court for the Southern District of New York, and
hereby further irrevocably and unconditionally waives and agrees not to plead
or claim in any such court that any action, suit or proceeding brought in any
such court has been brought in an inconvenient forum.
(iv) Attorneys' Fees. In the event any party to this Agreement brings an
action or proceeding for the breach or enforcement of this Agreement, the
prevailing party in such action or proceeding, whether or not such action or
proceeding proceeds to final judgment, shall be entitled to recover as an
element of its costs, and not as damages, such reasonable attorneys' fees as
may be awarded in the action, proceeding or appeal in addition to whatever
other relief the prevailing party may be entitled. For purposes of this
Section, the "prevailing party" shall be the party who is entitled to recover
its costs; a party not entitled to recover its costs shall not recover
attorneys' fees. [No sum for attorneys' fees shall be counted in calculating
the amount of the judgment for purposes of determining whether a party is
entitled to recover its costs or attorneys' fees. As used herein the term
"attorneys' fees" shall not include the cost of "in-house" attorneys of any
party--Note: bracketed language is not in Distribution Agreement.]
Section 16. Intentionally Omitted.
Section 17. Expenses. Except as otherwise provided herein, each party and
its Affiliates shall bear their own expenses incurred in connection with
preparation of Tax Returns, Tax Contests, and other matters related to Taxes
under the provisions of this Agreement, provided, however, that (i) Parent
shall bear all expenses reasonably incurred by New Fluor or its Affiliates with
respect to the portion of any Tax Contest that is directly and exclusively
related to any Parent Adjustment and (ii) New Fluor shall bear all expenses
reasonably incurred
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by Parent or its Affiliates with respect to the portion of any Tax Contest that
is directly and exclusively related to any New Fluor Adjustment. For purposes
of this Agreement, expenses shall include out-of-pocket expenses, but shall not
include employee and other "in-house" resource costs.
Section 18. General Provisions.
18.01 Addresses and Notices. Any notice, demand, request or report
(collectively, a "Notice") required or permitted to be given or made to any
party under this Agreement to the other party shall be in writing and shall be
deemed given or made (i) on the date of delivery, if delivered in person to a
party at such party's address as specified hereunder by Federal Express, United
Parcel Service or other nationally recognized courier service; or (ii) two days
following the date on which the Notice is sent, if sent by first class mail
return receipt requested, postage prepaid and properly addressed to the party's
address as specified hereunder; or (iii) upon receipt of confirmation of
transmission if transmitted by facsimile to the facsimile number specified
hereunder, in each case to the relevant party's address and to the attention of
the General Counsel and the Chief Financial Officer (one copy to each) as
follows:
If to Parent:Massey Energy Company
4 North 4th Street
Richmond, VA 23219
Att'n: General Counsel
Facsimile: (804) 788-1804
Att'n: Chief Financial Officer
Facsimile (804) 788-1853
If to New Fluor: Fluor Corporation
One Enterprise Drive
Aliso Viejo, CA 92656-2606
Att'n: General Counsel
Facsimile: (949) 349-5454
Att'n: Chief Financial Officer
Facsimile: (949) 349-5525
A party may change the address and/or facsimile number for receiving Notices
under this Agreement by providing written notice of the change of address to
the other party.
18.02 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Neither party may assign all or any part of its rights or interests
under this Agreement or delegate all or any part of its duties under this
Agreement without the express prior written consent of the other party. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
person or entity, other than the parties hereto, their Affiliates and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.
18.03 Waiver. No failure by any party to insist upon the strict performance
of any obligation under this Agreement or to exercise any right or remedy under
this Agreement shall constitute a waiver of any such obligation, right, or
remedy or of any other obligations, rights, or remedies under this Agreement.
18.04. Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity,
legality, and enforceability of the remaining provisions contained herein shall
not be affected thereby.
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18.05 Further Action. The parties shall execute and deliver all documents,
provide all information, and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement.
18.06 Integration. This Agreement constitutes the entire agreement among the
parties pertaining to the subject matter of this Agreement and supersedes all
prior agreements and understandings pertaining thereto. In the event of any
inconsistency between this Agreement and the Distribution Agreement or any
other agreements relating to the transactions contemplated by the Distribution
Agreement, the provisions of this Agreement shall control.
18.07 Construction. The language in all parts of this Agreement shall in all
cases be construed according to its fair meaning and shall not be strictly
construed for or against any party.
18.08 No Double Recovery; Subrogation. No provision of this Agreement shall
be construed to provide an indemnity or other recovery for any costs, damages,
or other amounts for which the damaged party has been fully compensated under
any other provision of this Agreement or under any other agreement or action at
Law or equity. A party shall not be required to exhaust all remedies available
under other agreements or at Law or equity before recovering under the remedies
provided in this Agreement. Subject to any limitations provided in this
Agreement, a party making a payment hereunder to or for the benefit of the
other party shall be subrogated to all rights of the other party for recovery
from any third party.
18.09 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which,
taken together, shall constitute one and the same instrument.
18.10 Amendments. This Agreement may be amended, modified or supplemented
only by a written agreement signed by the parties hereto.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers as of the date set forth above.
Fluor Corporation
(to be named "Massey Energy Company"
following the Distribution)
By: _________________________________
Name:
Title:
Fluor Corporation
By: _________________________________
Name:
Title:
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