<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
FLUOR CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] Fee not required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
<PAGE> 2
FLUOR CORPORATION
3353 MICHELSON DRIVE
IRVINE, CALIFORNIA 92698
January 30, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders
which will be held on Tuesday, March 9, 1999, beginning at 9:00 a.m. at The
Hyatt Regency Hotel, 17900 Jamboree Road, Irvine, California. A map showing the
meeting location is included for your convenience on the back page of this
booklet.
Information about the meeting and the various matters on which the
shareholders will act is included in the Notice of Meeting and Proxy Statement
which follow. Also included is a Proxy/Voting Instruction Card and postage-paid
return envelope.
It is important that your shares be represented at the meeting. Whether or
not you plan to attend, we hope that you will complete and return your
Proxy/Voting Instruction Card in the enclosed envelope as promptly as possible.
Sincerely,
/s/ PHILIP J. CARROLL, JR.
----------------------------
PHILIP J. CARROLL, JR.
Chairman and Chief Executive
Officer
<PAGE> 3
FLUOR CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 9, 1999
The annual meeting of shareholders of Fluor Corporation will be held at The
Hyatt Regency Hotel, 17900 Jamboree Road, Irvine, California, on Tuesday, March
9, 1999, at 9:00 a.m. Pacific Standard Time, for the following purposes:
1. To elect four Class III directors to hold office for three years and
until their respective successors are elected and qualified. The Board
of Directors intends to nominate as directors the four persons
identified in the attached Proxy Statement.
2. To consider and act upon a proposal to ratify the appointment of Ernst &
Young LLP as auditors for the fiscal year ending October 31, 1999.
3. To consider and act upon a proposal to approve the Fluor Corporation
1999 Executive Performance Incentive Plan.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed January 12, 1999, as the record date for
determining the shareholders entitled to receive notice of and to vote at the
meeting.
SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
PLEASE COMPLETE, SIGN, AND DATE THE ACCOMPANYING PROXY/VOTING INSTRUCTION
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
/s/ LAWRENCE N. FISHER
--------------------------------
LAWRENCE N. FISHER
Senior Vice President -- Law and
Secretary
January 30, 1999
Irvine, California
<PAGE> 4
FLUOR CORPORATION
------------------------
PROXY STATEMENT
JANUARY 30, 1999
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of Fluor Corporation, 3353 Michelson Drive, Irvine,
California 92698 (the "Company" or "Fluor"), of your proxy for use at the annual
meeting of shareholders to be held March 9, 1999, or at any adjournment thereof
(the "Annual Meeting"). This proxy statement and the accompanying proxy/voting
instruction card are being mailed to all shareholders on or about January 30,
1999. The expense of the solicitation will be paid by the Company. Some officers
and regular employees may solicit proxies personally and by telephone. Georgeson
& Company Inc. has been engaged to assist in the solicitation for which it will
receive approximately $17,500 from the Company. Your proxy is revocable by
written notice to the Secretary of the Company at any time prior to exercise,
and it shall be suspended if you are a record shareholder or valid proxyholder
who attends the meeting and elects to vote in person.
On January 12, 1999, the record date fixed by the Board of Directors, the
Company had outstanding 75,792,554 shares of Common Stock. A majority of the
outstanding shares of Common Stock will constitute a quorum at the Annual
Meeting. Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction of business.
Abstentions are counted in tabulations of the votes cast on proposals presented
to shareholders, whereas broker non-votes are not counted for purposes of
determining whether a proposal has been approved. Shareholders have one vote for
each share on all business of the meeting, except that shareholders have
cumulative voting rights with respect to the election at the meeting of four
directors. Cumulative voting rights entitle a shareholder to give one nominee as
many votes as is equal to the number of directors to be elected multiplied by
the number of shares owned by the shareholder, or to distribute his or her votes
on the same principle among two or more nominees as the shareholder sees fit.
The four nominees for director receiving the highest number of votes at the
meeting will be elected. With respect to the other proposals, the affirmative
vote of the majority of shares represented in person or by proxy at the Annual
Meeting and entitled to vote is required for approval.
Unless otherwise directed in the accompanying proxy/voting instruction
card, the persons named therein will vote FOR the election of the four director
nominees listed below, FOR the proposal to ratify the appointment of Ernst &
Young LLP as auditors for the fiscal year ending October 31, 1999, and FOR the
proposal to approve the Fluor Corporation 1999 Executive Performance Incentive
Plan. As to any other business which may properly come before the meeting, they
will vote in accordance with their best judgment, although the Company does not
presently know of any other business.
ELECTION OF DIRECTORS
PROPOSAL 1
Under the Company's Certificate of Incorporation and Bylaws, which provide
for a "classified" Board, four Class III directors have been nominated for
election at the Annual Meeting to serve a three year term expiring at the annual
meeting in 2002 and until their respective successors are elected and qualified.
The Bylaws, as most recently amended by the Board on December 9, 1998, provide
for thirteen directors, five serving as Class I directors, four serving as Class
II directors, and four serving as Class III directors.
Each of the four nominees listed below presently serves as a Class III
director of the Company. If any of the nominees should decline or be unable to
act as a director, the persons named in the proxy will vote in accordance with
their best judgment. The Company knows of no reason why the nominees would not
be available for election or, if elected, would not be able to serve.
In the event anyone other than the four nominees listed below should be
nominated for election as a director, the persons named in the proxy may vote
cumulatively for less than all the nominees in order to elect the maximum number
of the nominees possible.
1
<PAGE> 5
BIOGRAPHICAL
The following biographical information is furnished with respect to each of
the four nominees for election at the Annual Meeting as Class III directors and
each of the other Class I and Class II directors whose terms will continue after
the Annual Meeting.
Class III Director Nominees(1):
[PHOTO]
DON L. BLANKENSHIP, age 48.
Director since 1996; member of Finance Committee.
President, Chief Executive Officer and Chairman of the Board of A. T. Massey
Coal Company, Inc.(2)since 1992; formerly President and Chief Operating Officer
of that subsidiary from 1990; formerly President of Massey Coal Services,
Inc.(3) from 1989; joined Rawl Sales & Processing Co.(4) in 1982.
Mr. Blankenship is a director of Witco Corporation, Greenwich, Connecticut.
[PHOTO]
PETER J. FLUOR, age 51.
Director since 1984; Chairman of Audit Committee and member of Executive and
Organization and Compensation Committees. Non-Executive Chairman of the Board,
January to July 1998. President and CEO of Texas Crude Energy, Inc., Houston,
Texas since 1980; joined that company in 1972.
Mr. Fluor also is a director of Seagull Energy Corporation, Houston, Texas; and
a member of the advisory board of Chase Bank of Texas, N.A., Houston, Texas.
[PHOTO]
BOBBY R. INMAN, age 67.
Director since 1985; Chairman of Organization and Compensation Committee and
member of Executive and Governance Committees.
Admiral, U.S. Navy (Retired).
Admiral Inman also is a director of Science Applications International
Corporation, La Jolla, California; SBC Communications Inc. (formerly
Southwestern Bell Corporation), San Antonio, Texas; Temple-Inland Inc., Diboll,
Texas; and Xerox Corporation, Stamford, Connecticut.
[PHOTO]
JAMES O. ROLLANS, age 56.
Director since 1997.
Chief Financial Officer since August 1998; formerly Chief Administrative Officer
since 1994; Senior Vice President since 1992; formerly Chief Financial Officer
from 1992 to 1994; formerly Vice President, Corporate Communications from 1982
to 1992; joined the Company in 1982.
Mr. Rollans also is a director of Flowserve Corporation, Dallas, Texas.
2
<PAGE> 6
Class I Directors -- Term Expires 2000(1):
PHILIP J. CARROLL, JR. age 61
Director, Chairman of the Board and Chief Executive Officer since July 1998;
Chairman of Executive Committee; joined the Company July 1998.
Mr. Carroll was formerly President and Chief Executive Officer of Shell Oil
Company, Houston, Texas, from 1993, and formerly in other positions with Shell
Oil Company for more than 35 years.
Mr. Carroll also is a director of Boise Cascade Corporation, Boise, Idaho.
DAVID P. GARDNER, age 65.
Director since 1988; Chairman of Governance Committee; member of Executive and
Organization and Compensation Committees.
President of the William and Flora Hewlett Foundation since 1993; formerly
President of the University of California from 1983; and formerly President of
the University of Utah from 1973.
Dr. Gardner also is a director of First Security Corporation, Salt Lake City,
Utah; and the United Funds, Shawnee Mission, Kansas.
THOMAS L. GOSSAGE, age 64.
Director since 1997; member of Finance and Organization and Compensation
Committees.
Retired Chairman, President and Chief Executive Officer of Hercules
Incorporated, Wilmington, Delaware, since 1997; formerly in such positions
from 1991.
Mr. Gossage also is a director of The Dial Corporation, Phoenix, Arizona; and
Alliant Techsystems, Inc., Hopkins, Minnesota.
VILMA S. MARTINEZ, age 55.
Director since 1993; member of Audit and Governance Committees.
Partner in Munger, Tolles & Olson, Los Angeles, California since 1982.
Ms. Martinez also is a director of Anheuser-Busch Companies, Inc., St. Louis,
Missouri; Burlington Northern Santa Fe Corp., Fort Worth, Texas; Sanwa Bank
California, Los Angeles, California; and Shell Oil Company, Houston, Texas.
DEAN R. O'HARE, age 56.
Director since 1997; member of Audit and Organization and Compensation
Committees.
Chairman and Chief Executive Officer of The Chubb Corporation, Warren, New
Jersey, since 1988.
Class II Directors -- Term Expires 2001(1):
CARROLL A. CAMPBELL, JR., age 58.
Director since 1995; member of Audit and Finance Committees.
President and Chief Executive Officer of the American Council of Life Insurance,
Washington, D.C.; formerly two-term Governor of South Carolina from 1986;
formerly four-term member of the U.S. House of Representatives from 1978.
Mr. Campbell also is a director of AVX Corporation, Myrtle Beach, South
Carolina; Norfolk Southern Corporation, Norfolk, Virginia, and Wackenhut
Corporation, West Palm Beach, Florida.
3
<PAGE> 7
LORD ROBIN W. RENWICK, age 61.
Director since 1997; member of Finance and Governance Committees; Chairman of
Fluor Daniel Limited(5) since 1996.
Former British Ambassador to the United States from 1991 to 1995.
Lord Renwick also is a director of Billiton Plc, London, England; British
Airways, London, England; Canal Plus, Paris, France; Compagnie Financiere
Richemont AG, Zug, Switzerland; Liberty International Holdings, Plc, London,
England; and Robert Fleming Holdings, Ltd., London, England.
MARTHA R. SEGER, age 66.
Director since 1991; Chairman of Finance Committee and member of Executive and
Governance Committees.
Economic consultant and principal of M.R. Seger & Associates, a financial and
economic consulting firm, since 1994. Distinguished Visiting Professor of
Finance, Northern Arizona University, commencing 1998. Formerly Visiting
Professor, Hillsdale College, from 1996; Distinguished Visiting Professor of
Finance, Central Michigan University, from 1995 and American Graduate School
of International Management, from 1993; formerly Member, Board of Governors of
the Federal Reserve System from 1984. Dr. Seger also is a director of Amoco,
Chicago, Illinois; Kroger Company, Cincinnati, Ohio; Tucson Electric Power
Company, Tucson, Arizona; and Xerox Corporation, Stamford, Connecticut.
JAMES C. STEIN, age 55.
Director since 1997.
President and Chief Operating Officer of Fluor Daniel, Inc.(6) since 1997;
formerly Group President, Diversified Services, of that company from 1994;
formerly President, Business Units, of that company from 1993; formerly
President, Industrial Sector, of that company from 1986; joined the Company in
1964.
- ---------------
(1) Except as otherwise indicated, all positions are with the Company.
(2) A. T. Massey Coal Company, Inc. ("A. T. Massey") is an indirectly
wholly-owned subsidiary of the Company, which, along with A. T. Massey's
subsidiaries, conducts A. T. Massey's coal-related businesses.
(3) Massey Coal Services, Inc. is a wholly-owned subsidiary of A. T. Massey.
(4) Rawl Sales & Processing Co. is a wholly-owned subsidiary of A. T. Massey.
(5) Fluor Daniel Limited, which provides engineering, procurement and
construction services in the United Kingdom of Great Britain, is an
indirectly wholly-owned subsidiary of the Company.
(6) Fluor Daniel, Inc., which provides design, engineering, procurement,
construction, maintenance and other diversified services to a wide range of
industrial, commercial, utility, natural resources, energy and governmental
clients, is an indirectly wholly-owned subsidiary of the Company.
4
<PAGE> 8
STOCK OWNERSHIP AND STOCK-BASED HOLDINGS OF EXECUTIVE OFFICERS AND DIRECTORS
The following information is furnished with respect to each director and
nominee for director, each person who served as Chief Executive Officer of the
Company for any portion of the last fiscal year and each of the four other most
highly compensated executive officers of the Company for the last completed
fiscal year (the "Named Executive Officers"), and all current directors and
executive officers of the Company as a group, as to ownership of shares of
Common Stock of the Company as of January 12, 1999 (including restricted shares,
shares which may be acquired within 60 days pursuant to the exercise of stock
options and interests in shares held as of November 30, 1998, in the Company's
Savings Investment Plan, by executive officers, with respect to which such
officers have sole voting and investment power). Except as otherwise noted, the
individual or his or her family members had sole voting and investment power
with respect to such shares. The last column of the table combines beneficial
ownership of shares of Company Common Stock with holdings of (i) Deferred
Directors' Fees held in an account economically equivalent to Common Stock, held
as of December 31, 1998, by certain non-employee directors (which are payable in
cash as described at page 22 hereof), (ii) Restricted Stock Units held by
directors and executive officers (which are payable in cash upon vesting of
tandem restricted stock), and (iii) Shadow Stock Units held by certain Named
Executive Officers (which are payable in cash). This column indicates the
alignment of the named individuals and group with the interests of the Company's
shareholders because the value of their total holdings will increase or decrease
correspondingly with the price of the Company's Common Stock.
<TABLE>
<CAPTION>
SHARES FLUOR
BENEFICIALLY STOCK-BASED
OWNED(1) HOLDINGS
------------ -----------
<S> <C> <C>
Class III Director Nominees:
Don L. Blankenship(2)..................................... 100,617 176,609
Peter J. Fluor............................................ 22,438 51,860
Bobby R. Inman............................................ 5,060 5,174
James O. Rollans(2)....................................... 148,198 157,968
Class I Directors:
Philip J. Carroll, Jr.(2)................................. 51,300 206,434
David P. Gardner.......................................... 4,315 9,624
Thomas L. Gossage......................................... 3,000 3,342
Vilma S. Martinez......................................... 2,487 8,718
Dean R. O'Hare............................................ 4,000 5,478
Class II Directors:
Carroll A. Campbell, Jr................................... 2,335 6,082
Lord Robin W. Renwick..................................... 2,200 3,917
Martha R. Seger........................................... 3,473 4,167
James C. Stein(2)......................................... 136,691 145,348
------- -------
486,114 784,721
======= =======
Other Named Executive Officers:
Lawrence N. Fisher........................................ 49,131 52,597
Leslie G. McCraw.......................................... 502,173 502,173
All directors and executive officers as a group (18
persons).................................................. 577,966 884,033
</TABLE>
- ---------------
(1) Each individual owns less than 0.7% and the group owns approximately 1% of
the outstanding shares of Common Stock of the Company. Included in the
number of shares beneficially owned by Messrs. Blankenship, Carroll,
Rollans, Stein and Fisher, and all directors and executive officers as a
group, are 71,707, 40,000, 120,640, 107,144, 38,542 and 410,712 shares,
respectively, which such persons have the right to acquire within 60 days
pursuant to the exercise of stock options.
(2) This individual is also a Named Executive Officer.
5
<PAGE> 9
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Management of the Company knows of no person, except as set forth below,
who is the beneficial owner of more than 5% of the Company's issued and
outstanding Common Stock. The table sets forth information known to the Company
as of January 13, 1999, with percentage of ownership calculated using the number
of outstanding shares on January 12, 1999.
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY OF
NAME AND ADDRESS OF BENEFICIAL OWNERS OWNED CLASS
------------------------------------- ------------ -------
<S> <C> <C>
FMR Corp. and related entities........................... 5,769,088(1) 7.6
Dodge & Cox, Inc......................................... 4,230,150(2) 5.6
</TABLE>
- ---------------
(1) Based on information provided by FMR Corp. ("FMR"), Edward C. Johnson 3d
("Mr. Johnson") and Abigail P. Johnson, ("Mrs. Johnson") included in their
joint Schedule 13G amendment dated January 7, 1999, and filed with the
Securities and Exchange Commission wherein they reported the beneficial
ownership of 5,769,088 shares at December 31, 1998. They state that:
Fidelity Management & Research Company ("Fidelity"), is the beneficial owner
of 5,083,000 shares as a result of acting as investment adviser to various
investment companies; Mr. Johnson, FMR and the funds each has sole power to
dispose of the 5,083,000 shares but neither FMR nor Mr. Johnson has the sole
power to vote or direct the voting of the shares owned directly by the
Fidelity Funds, which power resides with the Funds' Boards of Trustees and
is carried out by Fidelity; Fidelity Management Trust Company("FMTC") is the
beneficial owner of 684,888 shares as a result of its serving as investment
manager of institutional accounts; Mr. Johnson and FMR each has sole
dispositive power over 684,888 shares, sole power to vote 608,488 of them,
and no power to vote 76,400 shares owned by institutional accounts; and
Fidelity International Limited ("FIL") is the sole beneficial owner of 1,200
shares. The address of FMR, Mr. Johnson, Mrs. Johnson, Fidelity, and FMTC is
82 Devonshire Street, Boston, Massachusetts 02109. The address of FIL is
Pembroke Hall, 42 Crowlane, Hamilton, Bermuda.
(2) Based on information contained in a copy of a Schedule 13F, dated November
12, 1998, provided by Dodge & Cox, Inc., to the Company. Dodge & Cox, Inc.
has indicated to the Company that it is a registered investment adviser and
in such capacity has sole voting authority over 3,771,800 shares, shared
voting authority over 56,000 shares, and no voting authority over 402,350
shares held by institutional and mutual fund accounts. It has indicated that
it has sole dispositive power over all such shares. The address of Dodge &
Cox is One Sansome Street, 35th Floor, San Francisco, California 94104.
COMMITTEES OF THE BOARD
The standing committees of the Board consist of an Audit Committee,
Executive Committee, Finance Committee, Governance Committee and Organization
and Compensation Committee.
Audit Committee
The principal duties of the Audit Committee are to nominate the firm of
independent auditors for appointment by the Board; to meet with the independent
auditors to review and approve the scope of their audit engagement and the fees
related to such work; to meet with the Company's financial management, internal
audit management and independent auditors to review matters relating to internal
accounting controls, the internal audit program, the Company's accounting
practices and procedures and other matters relating to the financial condition
of the Company and its subsidiaries; and to report to the Board periodically any
conclusions or recommendations the Audit Committee may have with respect to such
matters. The members of the Audit Committee are Peter J. Fluor (Chairman),
Carroll A. Campbell, Jr., Vilma S. Martinez and Dean R. O'Hare, none of whom is
a current or former officer or employee of the Company or any of its
subsidiaries. The Audit Committee held five meetings during fiscal year 1998,
four regular meetings and a special meeting to review and approve the Company's
1997 Annual Report, Form 10-K and proxy materials. At the end of each of the
regular meetings, the members met privately with the Company's independent
auditors without any Company officers or other personnel present.
6
<PAGE> 10
Executive Committee
When the Board is not in session, the Executive Committee has all of the
power and authority of the Board except with respect to amending the Restated
Certificate of Incorporation; adopting an agreement of merger or consolidation;
recommending to the shareholders the sale, lease or exchange of all or
substantially all of the Company's property and assets; recommending to the
shareholders a dissolution of the Company or a revocation of the dissolution;
amending the Bylaws; declaring a dividend; or issuing stock. The members of the
Executive Committee are Philip J. Carroll, Jr. (Chairman), Peter J. Fluor, David
P. Gardner, Bobby R. Inman and Martha R. Seger. The Executive Committee held two
meetings, and took action by unanimous written consent on one occasion, during
fiscal year 1998.
Finance Committee
The function of the Finance Committee is to review and make recommendations
to the Board regarding the Company's financing needs and plans and dividend
policy, to review and, where delegated by the Board, approve new debt
financings, acquisitions and dispositions of business units and major capital
assets, to review the financial performance of acquisitions and equity
investments and to monitor the investment policy and performance of the
Company's employment and other benefit trust funds, and to review the Company's
risk management activities, including insurance coverage. The members of the
Finance Committee are Martha R. Seger (Chairman), Don L. Blankenship, Carroll A.
Campbell, Jr., Thomas L. Gossage and Lord Robin W. Renwick. The Finance
Committee held two meetings during fiscal year 1998.
Governance Committee
The function of the Governance Committee is to seek out, evaluate and
recommend to the Board qualified nominees for election as directors of the
Company; to recommend directors of the Company for election as members of
Committees of the Board; to recommend new Committees to the Board; and to
consider other matters including the size and composition of the Board and
Committees and other issues of corporate governance. The members of the
Governance Committee are David P. Gardner (Chairman), Bobby R. Inman, Vilma S.
Martinez, Lord Robin W. Renwick and Martha R. Seger. During fiscal year 1998,
the Governance Committee held three meetings. The Governance Committee will give
appropriate consideration to qualified persons recommended by shareholders for
nomination as directors of the Company provided that such recommendations are
accompanied by information sufficient to enable the Governance Committee to
evaluate the qualifications of the nominee.
Organization and Compensation Committee
The principal duties of the Organization and Compensation Committee are to
review corporate organizational structures; to review key employee compensation
policies, plans and programs; to monitor performance and compensation of
employee-directors and officers of the Company and other key employees; to
prepare recommendations and periodic reports to the Board concerning such
matters; and to function as the Committee which administers the long-term
incentive programs referred to in the Executive Compensation section hereof. The
members of the Organization and Compensation Committee are Bobby R. Inman
(Chairman), Peter J. Fluor, David P. Gardner, Thomas L. Gossage and Dean R.
O'Hare, none of whom is a current or former officer or employee of the Company
or any subsidiary. The Organization and Compensation Committee held eleven
meetings, and took action by unanimous written consent on seven occasions,
during fiscal year 1998.
NOTICE OF DIRECTOR NOMINATIONS
The Company's Bylaws also require that the Secretary must receive written
notice of all persons to be nominated as a director at an annual meeting, other
than nominations made at the direction of the Board of Directors, not less than
60 nor more than 90 days prior to the annual meeting at which the election will
take place (or not later than 10 days after public disclosure of such meeting if
such disclosure occurs less than 40 days prior to the date of such meeting). The
notice must set forth (a) the shareholder's name and address,
7
<PAGE> 11
and the number of shares of Common Stock beneficially owned by such shareholder,
(b) such information with respect to the nominee as would have to be included in
the Proxy Statement if such person were a nominee included in that Statement and
(c) a consent to serve as director signed by such nominee.
BOARD AND COMMITTEE ATTENDANCE
During fiscal year 1998, the Board held four regular meetings, one of which
was followed by an extensive strategic planning session, and held two meetings
via teleconference. The Board took action by unanimous written consent on four
occasions. Each of the directors attended at least 75% of the aggregate number
of meetings of the Board and of the Board Committees on which he or she served.
OTHER MATTERS
Vilma S. Martinez, a director of the Company, is a partner in the law firm
of Munger, Tolles and Olson. Certain subsidiaries of the Company retained the
law firm during fiscal year 1998 and have continued to retain the firm in fiscal
1999. The amount of fees paid to the firm in fiscal 1998 did not exceed five
percent of the law firm's gross revenues for the firm's last full fiscal year.
SECTION 16(b) Beneficial Ownership Reporting Compliance.
Based upon a review of forms received by the Company during and with
respect to the Company's most recent fiscal year, the Company is not aware of
any executive officer, director or beneficial owner of more than 10% of the
Company's stock that failed to file on a timely basis any Forms 3, 4 or 5.
ORGANIZATION AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
In fiscal 1998 the Company achieved an important turnaround by meeting its
earnings targets for the fiscal year as well as significantly improving upon the
disappointing results of fiscal 1997. Also, this Committee successfully
completed its search for a new Chairman and CEO in July of 1998 with the hiring
by the Board of Philip J. Carroll, Jr. former Chairman and CEO of Shell Oil
Company (U.S.) to that position.
The Company's compensation programs are designed to attract, motivate and
retain key employees with incentives that are linked to specific performance
measures in order to enhance shareholder value. The Company's executive
compensation program consists of three main components: (1) base salary; (2)
potential for an annual incentive based on overall Company performance and
individual performance; and (3) the opportunity to earn long-term cash and
stock-based incentives which are intended to encourage the achievement of
superior results over time and to align executive officer and shareholder
interests. The second and third elements constitute the "at-risk" portion of the
compensation program. To further align management's interests with those of the
shareholders, the Company has stock ownership targets for its officers. These
target guidelines are intended to encourage stock ownership by the Company's
management group.
The philosophy for establishing specific compensation levels for members of
senior management and other key employees is to link total compensation to
achievement of the Company's business goals and to measure total compensation
against that of a broad group of general industry companies of similar size.(1)
The overall philosophy and the appropriate bases for this benchmarking is
subject to ongoing review and evaluation by this Committee. To assist in making
these evaluations, this Committee uses the surveys of two of the major
compensation consulting firms, Hewitt Associates LLC and Towers Perrin, as
reference points. The current philosophy of the Committee is to position
executive base salaries at approximately the 50th percentile of the general
industry group, with salary plus bonus at the 50th to 60th percentile when
targeted performance is attained. Total compensation is positioned at the 75th
percentile range based upon stock price appreciation and achievement of earnings
exceeding target levels.
- ---------------
(1) This group covers a broad range of industries and is not limited to
companies in the Dow Jones Heavy Construction Group that is used for the
Performance Graph set forth on page 21 hereof.
8
<PAGE> 12
Annual Incentive Program
Under the Company's Executive Incentive Compensation Plan, a minimum rate
of return on average shareholders' equity must be achieved before bonuses can be
paid and further limits are placed on the maximum amount of earnings that can be
paid out as bonuses. Bonuses may not be paid unless net earnings, excluding
extraordinary, unusual or infrequently occurring items, exceed a return on
average shareholders' equity that is calculated on the basis of average yield
for the year on one year United States Treasury Bills. Further, the total amount
of bonuses paid together with accruals for the year under the Company's
long-term incentive program, may not exceed either (a) 20% of pre-tax earnings
(excluding extraordinary, unusual or infrequently occurring items and the award
fund itself) or (b) 10% of average shareholders' equity. The plan covers
approximately 800 management employees, including all Named Executive Officers
other than Mr. Blankenship.(2) The target amount payable out of the fund to each
executive is based on the executive's target bonus, with the actual amount paid
based upon a combination of various company performance criteria, and upon
individual performance. The bonus award for the CEO is determined by applying
the specific performance criteria established for him by this Committee and the
bonus award of each other executive officer is reviewed and approved by this
Committee.(3) Based upon the achievement of fiscal 1998 earnings targets, bonus
awards, when taken together with salary, were established at levels which put
each of the Named Executive Officers in the 50th to 60th percentile of the
general industry group. Due to his relatively short tenure in fiscal 1998 and
based upon his progress to date in determining a new strategic direction for the
Company, Mr. Carroll received a pro-rata portion of his targeted bonus for
fiscal 1998.
Long Term Incentive Program
Approximately 600 management employees, including all of the Named
Executive Officers, participate in the Company's long-term incentive program.
This program's primary purpose is to offer an incentive for the achievement of
superior operating results, to align executive officer and shareholder
interests, and to foster the retention of key management personnel. It is the
Committee's intent that all amounts to be awarded under this program qualify as
performance-based compensation under IRS definitions.
Under the long-term incentive program, the Committee may make grants of the
following: (a) cash incentive awards which are based upon meeting earnings or
other financial targets established by the Committee; (b) stock options which
become exercisable on terms established by the Committee and which have value
only if shareholder value is increased and (c) restricted stock which may be
awarded only if return on equity targets are achieved. The weighting of awards
between the earnings-based cash portion and the stock portion is primarily a
function of responsibility, with the more senior executives having a greater
portion of their awards dependent on stock performance. To achieve higher than
mid-range compensation up to the 75th percentile range would require performance
in excess of the established targets. Shortly after the close of fiscal 1998,
participating executives, including all of the Named Executive Officers other
than Mr. Carroll received a payout of a previously granted cash incentive award
which was based upon earnings targets previously established for the fiscal 1996
through 1998 period. These awards were materially impacted in a negative way by
the disappointing fiscal 1997 earnings performance.(4) Cash incentive awards for
the fiscal 1997-1999 period will be likewise affected. The 1998 LTI program for
Fluor Daniel was primarily focused on achieving increased margins. The
improvement shown in 1998 resulted in awards which were slightly below the
targeted amounts. To provide a vehicle for accomplishing the goals of the
long-term incentive program, and the Company's other compensation objectives,
the Committee has approved the Fluor Corporation 1999
- ---------------
(2) Mr. Blankenship participates in the A.T. Massey Bonus Plan which covers
management employees of A.T. Massey and provides annual bonus awards based
on individual and company performance. Mr. Blankenship's awards under the
A.T. Massey Bonus Plan are reviewed and approved by this Committee.
(3) Effective in fiscal 1999 this Committee has also established specific
performance criteria for each of the Named Executive Officers who report
directly to Mr. Carroll as well as for Mr. Carroll.
(4) Other than for Mr. Blankenship whose awards were based upon A.T. Massey
performance.
9
<PAGE> 13
Executive Performance Incentive Plan, which is described further under the
heading "Approval of Fluor Corporation 1999 Executive Performance Incentive
Plan" at page 23. This plan is designed to enable the Company to attract, retain
and motivate its management and other key employees.
Early in fiscal 1998, this Committee implemented a key employee retention
program. The primary purpose of this program was to facilitate management
continuity during the transition to new leadership and thereafter to provide
incentives for achieving substantial increases in shareholder value. The program
provided for stock-based awards for senior executives with vesting contingent
upon continued employment for a specified period. This vesting would be
accelerated if certain stock price appreciation goals established by this
Committee were achieved within a limited time frame. To further facilitate
management continuity, the Company has entered into employment agreements and/or
retention arrangements with certain of the Named Executive Officers. These
agreements and arrangements are described on pages 11 through 15 of this Proxy
Statement.
Conclusion
During fiscal 1998, the Company has made a successful transition to new
leadership and programs and agreements have been put in place which will support
and facilitate our refocused efforts to enhance shareholder value. As a
consequence of the improved fiscal 1998 financial performance of Fluor and its
two main operating units, Fluor Daniel and A.T. Massey, as well as the measures
taken to facilitate management continuity, the "at risk" compensation shown in
the Summary Compensation Table for the continuing Named Executive Officers
increased from $1,759,625 to $4,591,351 over the prior year. All amounts paid or
accrued during fiscal year 1998 under the above-described plans and programs are
included in the tables which follow. No member of this Committee is a former or
current officer or employee of the Company or any of its subsidiaries.
Section 162(m) of the Internal Revenue Code generally limits the corporate
tax deduction for compensation paid to executive officers named in the Summary
Compensation Table in the proxy statement to $1 million, unless certain
requirements are met. While the Company's incentive compensation programs are
designed to facilitate compliance with Section 162(m), and in most cases the
Committee intends to maximize the corporate tax deduction, the Committee
believes that the Company must attract and retain qualified executives to manage
the Company and that in some instances, the Committee may need the flexibility
to offer compensation which exceeds the Section 162(m) threshold for
deductibility.
ORGANIZATION AND COMPENSATION COMMITTEE
Bobby R. Inman David P. Gardner Dean R. O'Hare
Thomas L. Gossage Peter J. Fluor
January 30, 1999
10
<PAGE> 14
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Mr. Carroll. In July of 1998 the Organization and Compensation Committee
successfully completed its search for a new Chairman and Chief Executive
Officer. Effective as of July 1, 1998 the Company entered into an employment
agreement with Mr. Carroll to assume that position for a term commencing July
15, 1998 and ending July 14, 2003. The agreement provides for a starting base
salary of $900,000 per year, subject to adjustment in accordance with the
Company's customary practice for senior management employees. Mr. Carroll also
received a one-time signing bonus of $750,000 payable on July 1, 1998 in
consideration for his accepting employment with the Company.
Mr. Carroll is eligible for an annual bonus with a target level of not less
than $825,000, pro-rated for partial years of employment. Consistent with the
Company's annual bonus program, the bonus may range from zero up to two times
the target level, based on performance measured against specific criteria
established by the Organization and Compensation Committee. In addition, Mr.
Carroll will receive a non-discretionary annual incentive bonus of $100,000,
pro-rated for partial years of employment, which will be deferred under the
Company's Executive Deferred Compensation Program.
Mr. Carroll was made eligible for a cash long-term incentive award for the
1999-2001 three-year performance cycle at a target level of not less than
$240,000. Under the Long-Term Incentive Program, this award may range from zero
up to two times the target level, based on Company performance over the
performance cycle.
Upon commencement of his duties, Mr. Carroll was granted an option to
purchase 200,000 shares of the Company's common stock which became exercisable
20% on the date of grant and becomes exercisable 20% on each of the next four
anniversaries of the grant date. A portion of this grant, 10,925 shares, was
granted as an incentive stock option within the meaning of Section 422 of the
Internal Revenue Code. The agreement also provides for an additional grant of
stock options, restricted stock and restricted units to be determined by the
Organization and Compensation Committee of the Board within 180 days of the
effective date of the agreement. This grant was made on December 8, 1998, for
57,940 options, 11,300 shares of restricted stock and 6,500 restricted units.
The additional options will vest 25% on each of the next four anniversaries of
the date of grant, and the restricted stock and units vest 10% on each of the
next ten anniversaries of the grant date.
At the same time Mr. Carroll was also granted 148,634 shadow stock units
which become exercisable if Mr. Carroll remains continuously employed through
the full term of the agreement, or if Mr. Carroll's employment terminates due to
death or disability, is terminated by the Company without "cause", is terminated
by Mr. Carroll for "good reason", or is terminated following a "change of
control" (as such terms are defined in the agreement). In the event Mr.
Carroll's employment terminates prior to the expiration of the term for any
reason other than the foregoing, the units will become exercisable as of the
date of termination as to a pro-rata amount, pro-rated daily during the term.
The Company has also provided Mr. Carroll with a loan in the principal
amount of $5,000,000 to facilitate the purchase of a residence in the Southern
California area in connection with his relocation from Houston. The loan, which
is secured by a first trust deed on the residence, provides for an interest rate
of 5.68%, payable annually, with a balloon payment of the entire amount due on
January 15, 2004. The loan is subject to acceleration in the event of Mr.
Carroll's termination of employment for any reason prior to the expiration of
the term of the agreement.
The agreement also confirms Mr. Carroll's participation in various
incentive and employee benefit plans and programs as may be in effect from time
to time with respect to executives employed by the Company, including, but not
limited to, automobile use and expense reimbursement, reimbursement of
relocation expenses, and participation in the Company's deferred compensation
program, retirement plans, group health insurance plans and executive health
care plan. Mr. Carroll is also entitled to reimbursement for certain legal,
accounting and tax preparation services as well as reimbursement of certain
country club expenses. In addition, the agreement provides Mr. Carroll a death
benefit under the Company's Executive Supplemental Benefit Plan, which the
Committee has set at $5,000,000. For purposes of this Plan, termination of
11
<PAGE> 15
Mr. Carroll's employment by the Company without "cause" or by Mr. Carroll for
"good reason", shall constitute an approved early retirement.
The Company may terminate Mr. Carroll's employment at any time for "cause"
if a majority of the non-employee members of the Board vote in favor of such
termination or without "cause" on 30-days' notice by the Company. Mr. Carroll
may terminate his employment at any time for "good reason". "Good reason"
includes, among other things, a reduction in Mr. Carroll's base salary or other
benefit levels, a significant diminution in Mr. Carroll's duties and
responsibilities and the assignment to Mr. Carroll of duties and
responsibilities inconsistent with his position as Chairman and Chief Executive
Officer. Mr. Carroll may also terminate his employment at any time on 30-days'
notice but such termination would not be considered for "good reason" unless the
specific requirements for "good reason" were met.
The agreement also provides for stipulated payments in connection with the
termination of Mr. Carroll's employment. Upon termination for any reason, the
Company will be obligated to pay Mr. Carroll as a minimum amount all accrued and
unpaid base salary, any unpaid bonus, and certain other unpaid amounts, and will
provide Mr. Carroll title to the automobile provided by the Company under the
agreement (provided that Mr. Carroll was employed for at least two years prior
to the termination of his employment).
In the event of Mr. Carroll's termination of employment upon disability,
the Company will be obligated to pay Mr. Carroll, in addition to the minimum
amount, his base salary for a period of one year following such termination, a
pro-rated portion of the target bonus for the year in which the termination
occurs, a pro-rated portion of the long-term incentive award for each
performance cycle in which such termination of employment occurs, and long-term
disability payments equal to 60% of his base salary beginning one year after
such termination and continuing for two years, or until his death or attainment
of age 65, whichever occurs first. Mr. Carroll's reduced base salary payments
and long-term disability payments will be reduced by any long-term disability
payments he receives from any disability plan or programs contributed to by the
Company.
If Mr. Carroll's employment is terminated by the Company without "cause" or
by Mr. Carroll for "good reason", the Company will be obligated to pay Mr.
Carroll, in addition to the minimum amount, base salary for the lesser of three
years or the remaining term of the agreement, annual bonuses equal to the target
bonus for the year of his termination for the lesser of three years or the
remaining term of the agreement (including a pro-rated bonus for any partial
year), long-term incentive awards equal to the target award for each performance
cycle for the lesser of three years or the remaining term of the agreement, also
pro-rated, and a lump-sum cash payment amount equal to the excess, if any, of
(a) a pro-rata amount, pro-rated daily during the term, of Mr. Carroll's
$5,000,000 residence loan, over (b) the value at the date of termination of the
148,634 shadow stock units awarded to Mr. Carroll at the commence of his
employment. This conditional amount is only payable in the event of termination
by the Company without "cause" or termination by the executive for "good
reason". In addition, if a "change of control" occurs within two years after
such a termination, Mr. Carroll will be entitled to receive a lump-sum payment
of the foregoing amounts.
Mr. Blankenship. To strengthen the retention of the services of Mr.
Blankenship as Chairman and Chief Executive Officer of A.T. Massey Coal Company,
Inc. ("Massey"), the Company entered into an employment agreement with Mr.
Blankenship, effective October 1, 1998, for a term ending October 31, 2001. Mr.
Blankenship will receive a base salary of $650,000 per year, with adjustments to
$700,000 per year on January 1, 1999, $800,000 per year on January 1, 2000, and
$900,000 per year on January 1, 2001.
Mr. Blankenship is eligible for an annual bonus for fiscal years 1998,
1999, 2000 and 2001 with target amounts of not less than $540,000, $625,000,
$650,000 and $700,000, respectively, which will be based on meeting
predetermined performance goals and objectives established and mutually agreed
to by the Chairman and Chief Executive Officer of the Company and Mr.
Blankenship. The award payments will be made in accordance with standard
practices of Massey.
Mr. Blankenship will also be eligible for a Long-Term Incentive Award under
the Company's Long-Term Incentive Program. Mr. Blankenship's award for each
three-year performance cycle which commences during the term will have a target
value of $450,000, consisting of a cash element which will have a target value
of $67,350, 16,260 stock options, 3,170 shares of restricted stock and 1,820
restricted units.
12
<PAGE> 16
Mr. Blankenship was granted 60,000 shadow stock units on October 1, 1998,
and will also be granted 60,000 on October 1 of 1999, 2000 and 2001,
respectively. The units become vested if Mr. Blankenship remains continuously
employed by Massey through the expiration of the term, or his employment
terminates due to termination by the Company without "cause", or terminates
following a "change of control" (as such terms are defined in the agreement).
Upon vesting, the value of these units will be credited to Mr. Blankenship's
account under the Company's Executive Deferred Compensation Program (the
"Deferred Compensation Program"). In the event Mr. Blankenship's employment
terminates prior to the expiration of the term due to death or disability, then
any previously granted units will become vested and the units not yet granted
would be forfeited. In the event Mr. Blankenship's employment terminates prior
to the expiration of the term for any reason other than the foregoing, then all
of the units terminate and are forfeited.
Mr. Blankenship was also granted 300,000 stock appreciation rights ("SARs")
which will vest if Mr. Blankenship remains continuously employed by Massey
through the expiration of the term, or if his employment with Massey terminates
either due to termination by the Company without "cause" or following a "change
of control". In each of these cases, the value of the SARs upon vesting will be
credited to Mr. Blankenship's account in the Deferred Compensation Program. In
the event Mr. Blankenship's employment terminates prior to the expiration of the
term due to death or disability, then a portion of the SARs (25% upon grant and
an additional 25% on each of the next three anniversaries of the grant) will
vest and be credited to Mr. Blankenship's account in the Deferred Compensation
Program and the unvested SARs would be forfeited. In the event Mr. Blankenship's
employment terminates prior to the expiration of the term for any reason other
than the foregoing, then all of the SARs terminate and are forfeited.
The Company will also provide Mr. Blankenship with an after-tax
reimbursement of up to $360,000 of certain home construction costs which become
earned and payable upon the occurrence of the same events which would cause the
vesting of the SARs. In the event that Mr. Blankenship's employment with Massey
terminates prior to the expiration of the term due to death or disability, then
payment of a portion (25% upon award and an additional 25% on each of the next
three anniversaries of the award) of the amount will be made.
The agreement also provides for certain payments in connection with the
termination of Mr. Blankenship's employment. Upon termination, the Company will
be obligated to pay Mr. Blankenship as a minimum amount all accrued and unpaid
base salary, any unpaid bonus, any benefits to which he is entitled under the
Deferred Compensation Program and Long-Term Incentive Award Program. Under the
Long-Term Incentive Award Program, if Mr. Blankenship's employment with Massey
is terminated due to death or disability, or within two years following a
"change of control" (as defined in the program), the stock options, restricted
stock and restricted units will become fully vested, and a pro-rata portion of
the cash component will become payable. In the event Mr. Blankenship's
employment terminates for any reason other than the foregoing, then such
stock-based awards will be forfeited to the extent they are unvested and the
cash component will be forfeited entirely.
If Mr. Blankenship's employment is terminated by Massey without cause,
Massey and/or the Company will be obligated to pay Mr. Blankenship, in addition
to the minimum amount, base salary for the remaining term of the agreement,
annual bonuses for the remaining term (including a pro-rata bonus for any
partial year) and the house construction cost reimbursement amount.
Mr. Blankenship is also a party to the Special Successor Development and
Retention Program adopted by the Company in September 1998. Pursuant to this
Program, Mr. Blankenship can earn up to $1,000,000 (plus investment return on
amounts conditionally credited to Mr. Blankenship on a pro-rata basis during the
term of the program), if he remains continuously employed by Massey until July
1, 2001 and if Massey achieves certain financial objectives and Mr. Blankenship
develops an acceptable successor and senior executive management team (50% of
the award is related to the financial objective and 25% each to the acceptable
successor and acceptable senior executive management team). Pursuant to the
Program, Mr. Blankenship was also granted 11,829 shares of restricted stock and
6,861 restricted units on December 8, 1998, and will be granted 9,538 shares of
restricted stock and 5,365 restricted units in March 1999. The restricted shares
and the restricted units will vest 33% on each of the next three anniversaries
of the grant date.
13
<PAGE> 17
The cash amount under the Program will be credited into Mr. Blankenship's
account in the Deferred Compensation Program if Mr. Blankenship remains
continuously employed until July 1, 2001, or Mr. Blankenship's employment
terminates due to death or disability, or following a change of control. In the
event Mr. Blankenship's employment terminates prior to such vesting dates for
any reason other than the foregoing, then all of the cash amount and the
unvested restricted stock and units will be forfeited.
Also, the Company is obligated upon Mr. Blankenship's retirement to provide
Mr. Blankenship title to a company-owned residence and associated property in
Sprigg, West Virginia, and to pay an amount to reimburse him for any income
taxes owed by him as a result of such title transfer. The residence is currently
valued at approximately $250,000. Upon the recommendation of the Chief Executive
Officer of the Company, the Organization and Compensation Committee may
authorize such transfer before retirement so long as it is after July 1, 2001.
Also under the Program, the Organization and Compensation Committee agreed to
approve Mr. Blankenship's early retirement at age 55 for the purposes of the
Company's Executive Supplemental Benefit Plan.
Mr. Stein. In order to strengthen the retention of the services of Mr.
Stein as President and Chief Operating Officer of Fluor Daniel, Inc., the
Company has provided Mr. Stein with a retention arrangement whereby Mr. Stein
can earn $1,743,159 (plus investment return on amounts conditionally credited to
him on a pro-rata basis during the term of the arrangement), if he remains
continuously employed by Fluor Daniel until October 31, 2001. The amount under
the arrangement will be credited into Mr. Stein's account in the Deferred
Compensation Program if he remains continuously employed until October 31, 2001,
or his employment terminates prior to that date due to death or disability or a
company-initiated reduction in force, or following a change of control. In the
event Mr. Stein's employment terminates prior to such vesting date for any
reason other than the foregoing, then all of the amount will be forfeited.
Under the arrangement, the Company has also provided Mr. Stein with a loan
in the amount of $1,006,841. The loan, which is secured by a deed of trust on
his residence, provides for an interest rate of 4.52%, compounded annually with
a balloon payment of the entire amount due on termination of employment. The
loan is subject to acceleration in the event of Mr. Stein's termination of
employment for any reason prior to October 31, 2001. The Company will forgive
the loan upon Mr. Stein's termination of employment on or after October 31,
2001, or if his employment terminates prior to that date due to death or
disability or a company-initiated reduction in force, or following a change of
control.
In December 1997, the Company made an interest-free loan in the amount of
$1,000,000 to Mr. Stein used to purchase his new residence in connection with
Mr. Stein's relocation to Fluor Daniel's Irvine, California headquarters. The
loan requires payment of principal in yearly installments equal to 50% of Mr.
Stein's after-tax proceeds from his annual Incentive Compensation Award
commencing February 1, 2000, with the remaining balance due February 1, 2006.
The loan is secured by a deed of trust on Mr. Stein's residence.
Mr. Rollans. In order to strengthen the retention of the services of Mr.
Rollans as Chief Financial Officer of the Company, the Company has provided Mr.
Rollans with a retention arrangement whereby Mr. Rollans can earn $1,122,424
(plus investment return on amounts conditionally credited to him on a pro-rata
basis during the term of the arrangement), if he remains continuously employed
by the Company until October 31, 2001. The amount under the arrangement will be
credited into Mr. Rollans' account in the Deferred Compensation Program if he
remains continuously employed until October 31, 2001, or his employment
terminates prior to that date due to death or disability or a company-initiated
reduction in force, or following a change of control. In the event Mr. Rollans'
employment terminates prior to such vesting date for any reason other than the
foregoing, then all of the amount will be forfeited.
Under the arrangement, the Company has also provided Mr. Rollans with a
loan in the amount of $1,627,576. The loan, which is secured by a deed of trust
on his residence, provides for an interest rate of 4.52%, compounded annually
with a balloon payment of the entire amount due on termination of employment.
The loan is subject to acceleration in the event of Mr. Rollans' termination of
employment for any reason prior to October 31, 2001. The Company will forgive
the loan upon Mr. Rollans' termination of employment on or
14
<PAGE> 18
after October 31, 2001, or if his employment terminates prior to that date due
to death or disability or a company-initiated reduction in force, or following a
change of control.
Mr. McCraw. In December 1997, the Company's former Chief Executive Officer
and Chairman, Mr. McCraw, indicated his intention to take early retirement in
order to focus on certain personal health issues that had arisen. Upon his
retirement he and the Company entered into an agreement which consisted of a
final settlement and disposition of any claims he might have against the Company
based on his employment. In exchange, the Company agreed to provide Mr. McCraw
with certain benefits which consisted of a continuation of Mr. McCraw's salary
for a period of two years following his January 1998 retirement and approval of
his early retirement for purposes of the Company's Executive Supplemental
Benefit Plan and restricted stock and units.
The Organization and Compensation Committee also approved a transfer to Mr.
McCraw of his company-owned vehicle and continuation of Mr. McCraw's
participation in the group health insurance plan (partially at his expense) and
the Executive Health Care Program for two years following his retirement. Mr.
McCraw will be provided tax services and financial planning services in an
amount up to a total of $10,000 following retirement, transfer of a
company-owned membership in a country club, a physical examination for Mr.
McCraw and his spouse and office space, secretarial support and other office
services.
15
<PAGE> 19
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ended October 31, 1996,
1997 and 1998, the cash compensation paid by the Company and its subsidiaries,
as well as certain other compensation paid or accrued for those years, to each
of the Named Executive Officers in all capacities in which they served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-----------------------
ANNUAL COMPENSATION AWARDS
-------------------------------- -----------------------
OTHER RESTRICTED SECURITIES PAYOUTS
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
FISCAL SALARY BONUS COMPENSATION AWARDS OPTIONS/ PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(A) ($)(A) ($)(B) ($)(C) SARS(#) ($) ($)(D)
--------------------------- ------ ------- ------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
P. J. Carroll, Jr.................. 1998 252,692 360,000 0 6,800,006 200,000 0 816,325
Chairman and 1997 N/A N/A N/A N/A N/A N/A N/A
Chief Executive Officer 1996 N/A N/A N/A N/A N/A N/A N/A
L. G. McCraw....................... 1998 165,295 0 938,563 828,914 137,940 0 2,604,017
Former Chairman and 1997 875,040 0 227,024 974,063 0 138,336 739,759
Chief Executive Officer 1996 830,040 975,000 219,133 877,719 115,880 464,160 321,009
D. L. Blankenship.................. 1998 535,732 540,000 50,189 2,435,625 363,760 176,400 116,191
Chairman and 1997 425,040 425,000 60,365 177,520 0 176,400 91,984
Chief Executive Officer, 1996 375,000 380,000 57,009 204,069 16,260 137,240 76,295
A. T. Massey Coal Company, Inc.
J. C. Stein........................ 1998 480,425 400,000 31,037 0 104,760 88,120 557,215
President and 1997 378,565 0 33,880 177,520 0 50,867 663,843
Chief Operating Officer, 1996 325,020 235,000 32,638 110,081 8,700 154,334 264,237
Fluor Daniel, Inc.
J. O. Rollans...................... 1998 436,985 300,000 48,903 0 87,760 81,027 176,506
Senior Vice President/ 1997 375,000 0 59,248 177,520 0 38,878 96,063
Chief Financial Officer 1996 360,000 295,000 56,393 204,069 16,260 130,259 197,594
L. N. Fisher....................... 1998 297,005 170,000 14,631 0 44,600 101,200 112,966
Senior Vice President--Law 1997 245,040 0 16,296 77,280 0 67,500 152,185
and Secretary 1996 210,348 150,000 13,583 88,838 7,100 88,964 33,612
</TABLE>
- ---------------
(A) Amounts shown include cash compensation earned and received by executive
officers as well as amounts earned but deferred at the election of those
officers.
(B) Amounts shown as Other Annual Compensation represent restricted unit
payments for the benefit of each Named Executive Officer to compensate for
federal and state withholding taxes arising from the lapse of restrictions
on restricted stock held by such Named Executive Officer.
(C) The amount reported in the table includes restricted stock and, for 1998,
shadow stock, and represents the market value at the date of grant, without
giving effect to the diminution in value attributable to the restrictions on
such stock. In fiscal years 1996, 1997 and 1998, the Company awarded 24,430,
25,890 and 0 shares of restricted stock to all Named Executive Officers as a
group. In fiscal years 1996, 1997 and 1998, the Company awarded 0, 0 and
232,254 shares of shadow stock to all Named Executive Officers as a group.
With respect to shares of restricted stock granted in fiscal year 1996,
20,730 shares of restricted stock awarded vest at 10% per year and 3,700
shares of restricted stock awarded under the Directors' Achievement Award
Program would have vested only if the Company achieved a certain level of
annual net earnings in the period ended October 31, 1998. With respect to
shares granted in fiscal year 1997, 22,190 shares of restricted stock
awarded vest at 10% per year and 3,700 shares of restricted stock awarded
under the Directors' Achievement Award Program would have vested only if the
Company achieved a certain level of annual net earnings in the period ended
October 31, 1998. The earnings levels under such program were not met and
the restricted stock was forfeited. With respect to shares of shadow stock
granted in fiscal 1998, (i) a pro-rata portion of the 148,634 shares granted
to Mr. Carroll vest daily during the term of his employment agreement, or
sooner in certain events related to termination of his employment, (ii) of
the 23,620 shares granted to Mr. McCraw, 17,800 shares vested and were
exercised and 5,820 shares expired by their terms or in connection with Mr.
McCraw's
16
<PAGE> 20
retirement, and all 60,000 shares granted to Mr. Blankenship will vest upon
completion of the term of his employment agreement or sooner in certain
events related to termination of his employment. As of the end of the 1998
fiscal year, the aggregate restricted and shadow stock holdings for each of
the above Named Executive Officers consisted of the following: (i) Mr.
Carroll: 148,634 shares with a value of $5,792,083 ; (ii) Mr. McCraw: 0
shares with a value of $0 ; (iii) Mr. Blankenship: 73,911 shares with a
value of $2,880,220; (iv) Mr. Stein: 10,480 shares with a value of $408,393;
(v) Mr. Rollans: 16,997 shares with a value of $662,352 and (vi) Mr. Fisher:
5,186 shares with a value of $202,092. As of the end of fiscal year 1998,
aggregate restricted and shadow stock holdings for the Company consisted of
666,282 shares with a value of $25,964,183 at the then current market value,
without giving effect to the diminution of value attributable to the
restrictions on such stock. Quarterly dividends of $.20 are currently paid
to all stockholders of record.
(D) The total amounts shown in this column for the fiscal year 1998 consist of
the following: (i) Mr. Carroll: $37,125 -- Benefit attributable to
Company-owned life insurance policy; $750,000 -- Hiring bonus; $29,200
-- Prorated non-discretionary bonus; (ii) Mr. McCraw: $168,078 -- Company
contributions and other allocations to defined contribution plans and
related excess benefit plans; $5,359 -- Benefit to Company-owned life
insurance policy; $1,900,080 -- Severance payment; $453,647 -- vacation pay
cashout; $60,816 -- Auto allowance; $4,358 -- Long term storage expenses;
$11,680 -- Miscellaneous expenses; (iii) Mr. Blankenship: $30,200 -- Benefit
attributable to Company-owned life insurance policy; $78,031 -- Company
contributions and other allocations to defined contribution plans and
related excess benefit plans; $4,423 -- Childcare expenses;
$3,537 -- Miscellaneous expenses; (iv) Mr. Stein: $104,598 -- Company
contributions and other allocations to defined contribution plans and
related excess benefit plans; $65,113 -- Benefit attributable to
Company-owned life insurance policy; $341,101 -- Equity loss deferral;
$3,089 -- Imputed auto allowance; $41,595 -- Relocation expenses;
$1,720 -- Miscellaneous expenses; (v) Mr. Rollans: $101,132 -- Company
contributions and other allocations to defined contribution plans and
related excess benefit plans; $72,599 -- Benefit attributable to
Company-owned life insurance policy; $2,775 -- Miscellaneous expenses; and
(vi) Mr. Fisher: $39,840 -- Company contributions and other allocations to
defined contribution plans and related excess benefit plans;
$44,465 -- Benefit attributable to Company-owned life insurance policy;
$28,661 -- vacation pay cashout.
17
<PAGE> 21
STOCK OPTIONS
The following table contains information concerning the grant of stock
options and stock appreciation rights ("SARs") made during fiscal 1998 under the
Company's long-term incentive program to the Named Executive Officers:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(A)
----------------------------------------------------
NUMBER
OF % OF TOTAL GRANT
SECURITIES OPTIONS EXERCISE DATE
UNDERLYING GRANTED TO PRICE(S) PRESENT
OPTIONS EMPLOYEES IN ($/SH) EXPIRATION VALUE
NAME GRANTED FISCAL YEAR (A) DATE ($)(B)
---- ---------- ------------ -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
P. J. Carroll, Jr................. 200,000(C) 5.9 45.75000 07/15/08 3,240,000
L. G. McCraw...................... 57,940(D) 1.7 35.09375 12/09/02 644,872
80,000(E) 2.4 35.09375 12/09/02 891,200
D. L. Blankenship................. 16,260(D) 0.5 35.09375 12/09/02 180,974
47,500(E) 1.4 35.09375 12/09/02 529,150
300,000(F) 8.8 40.59375 10/31/01 2,985,000
J. C. Stein....................... 16,260(D) 0.5 35.09375 12/09/02 180,974
88,500(E) 2.6 35.09375 12/09/02 985,890
J. O. Rollans..................... 16,260(D) 0.5 35.09375 12/09/02 180,974
71,500(E) 2.1 35.09375 12/09/02 796,510
L. N. Fisher...................... 7,100(D) 0.2 35.09375 12/09/02 79,023
37,500(E) 1.1 35.09375 12/09/02 417,750
</TABLE>
- ---------------
(A) Options were granted with an exercise price equal to the fair market value
of the underlying common stock on the date of grant. The exercise price and
tax withholding obligations related to exercise may be paid by delivery of
already owned shares or by offset of the underlying shares, subject to
certain conditions. The vesting of these options may accelerate upon
termination of employment following a change of control of the Company. See
the discussion under the heading "Change of Control Provisions in Certain
Plans" at page 21.
(B) The Grant Date Present Value is computed using the Black-Scholes option
pricing model based on the following general assumptions: (a) an Expected
Option Term of five years for options which expire five years from the date
of grant and six years for options which expire 10 years from the date of
grant which reflects a reduction of the actual 10-year life of the option
based on historical data regarding the average length of time an executive
holds an option before exercising; (b) a Risk-Free Interest Rate that
represents the interest rate on a U.S. Treasury Strip with a maturity date
corresponding to that of the Expected Option Term; (c) Stock Price
Volatility is calculated using daily stock prices over a three-year period
preceding the grant date; and (d) Dividend Yield is calculated using yields
over a three-year period preceding the grant date. Notwithstanding the fact
that these options are non-transferable, no discount for lack of
marketability was taken. The option value was discounted by approximately
3% for risk of forfeiture during the vesting period. The actual value, if
any, an executive may realize will depend upon the excess of the stock
price on the date the option is exercised, so there is no assurance that
the value realized by the executive will be at or near the amount shown.
(C) Options were granted for a term of 10 years, subject to earlier termination
in certain events related to termination of employment, and vest in five
equal annual installments commencing on the date of grant and thereafter on
each successive anniversary of the date of grant. The specific option
pricing model assumptions for this grant were as follows: $45.75 Exercise
Price; 5.56% Risk Free Interest Rate; 31.9% Stock Price Volatility; and
1.25% Dividend Yield.
(D) Options were granted for a term of five years, subject to earlier
termination in certain events related to termination of employment, and
vest in four equal annual installments commencing 12 months after the date
of grant. Accelerated vesting of 50% of the award occurs if the stock price
remains $45 for
18
<PAGE> 22
10 consecutive days and an additional 50% vests if the stock price remains
$55 for 10 consecutive days. The specific option pricing model assumptions
for this grant were as follows: $35.09375 Exercise Price; 5.90% Risk Free
Interest Rate; 29.6% Stock Price Volatility; and 1.18% Dividend Yield.
(E) Options were granted for a term of five years, subject to earlier
termination in certain events related to termination of employment, and
vest 50% if the stock price remains $45 for 10 consecutive days and an
additional 50% vests if the stock price remains $55 for 10 consecutive
days, otherwise the options fully vest three years from the date of grant.
The specific option pricing model assumptions for this grant were as
follows: $35.09375 Exercise Price; 5.90% Risk Free Interest Rate; 29.6%
Stock Price Volatility; and 1.18% Dividend Yield.
(F) SARs were granted for a term of three years and fully vest three years from
date of grant, subject to earlier termination in certain events related to
termination of employment. The specific option pricing model assumptions
for this grant were as follows: $40.59375 Exercise Price; 4.10% Risk Free
Interest Rate; 33.7% Stock Price Volatility; and 1.25% Dividend Yield.
OPTION/SAR EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers, concerning the exercise of options during the last fiscal
year and unexercised options and SARs held as of the end of fiscal 1998:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUE
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES VALUE AT FISCAL YEAR END(#) AT FISCAL YEAR END($)(B)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE(#(A) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
P. J. Carroll, Jr........... 0 0 40,000 160,000 0 0
L. G. McCraw................ 75,260 559,746 401,980 0 618,244 0
D. L. Blankenship........... 0 0 71,707 342,203 123,535 123,535
J. C. Stein................. 5,250 154,219 104,951 61,151 261,512 202,973
J. O. Rollans............... 0 0 116,575 60,140 190,253 170,035
L. N. Fisher................ 0 0 37,934 27,066 86,413 86,413
</TABLE>
- ---------------
(A) Includes, with respect to the exercise of free-standing (cash-only) SARs,
the number of shares with respect to which the SARs were exercised.
(B) Market value of underlying securities at fiscal year-end, minus the exercise
price.
LONG-TERM AWARDS
The following table provides information with respect to the Named
Executive Officers concerning cash incentive awards made during fiscal 1998
under the Company's Long-Term Incentive Award Program. Each award under the
Company's Long-Term Incentive Award Program represents the right to receive an
amount in cash if earnings targets for a specified period, as established by the
Organization and Compensation Committee, are achieved. If earnings fall below
the threshold amount, no award is payable. If earnings fall between the
threshold amount and the target amount or between the target amount and the
maximum amount then the amount of the award is prorated accordingly. Payments
made under the Long-Term Incentive Program are reported in the Summary
Compensation Table in the year of payout, if any. There were no cash incentive
awards to the Named Executive Officers under the Directors' Achievement Award
Program during fiscal 1998.
19
<PAGE> 23
LONG-TERM INCENTIVE PROGRAM-AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE BASED
PERFORMANCE OR PLANS($)(A)
OTHER PERIOD -------------------------------
UNTIL MATURATION MIDDLE
NAME OR PAYOUT THRESHOLD TARGET MAXIMUM
---- ---------------- --------- ------- -------
<S> <C> <C> <C> <C>
P. J. Carroll, Jr............ N/A 0 0 0
L. G. McCraw................. 1 year 0 240,000 480,000
D. L. Blankenship............ 3 years 16,900 67,400 134,700
J. C. Stein.................. 1 year 0 67,400 134,800
J. O. Rollans................ 1 year 0 67,400 134,800
L. N. Fisher................. 1 year 0 71,400 142,800
</TABLE>
- ---------------
(A) Mr. Blankenship's award is payable if certain thresholds are met based on
consolidated earnings before interest, taxes, depreciation and amortization
of A.T. Massey rather than Fluor Daniel earnings.
PENSION PLANS
The following table shows the estimated annual pension benefits payable to
a covered participant at normal retirement age under the A.T. Massey Coal
Company, Inc. defined benefit pension plans (the "A.T. Massey Pension Plans"),
as well as a non-qualified supplemental pension that provides benefits that
would otherwise be denied participants by reason of certain Internal Revenue
Code limitations on qualified plan benefits, based on remuneration that is
covered under the plans and years of service with A.T. Massey and its
subsidiaries. Mr. Blankenship is the only Named Executive Officer participating
in the A.T. Massey Pension Plans.
A participant's remuneration covered by the A.T. Massey Pension Plans is
his average salary and bonus (as reported in the Summary Compensation Table) for
the highest 60 consecutive months in the 120-month period immediately preceding
the determination date. As of the end of the last calendar year, Mr.
Blankenship's covered compensation under the A.T. Massey Pension Plans was
$160,000 his covered compensation under the non-qualified supplemental pension
was $634,690 for a combined covered compensation amount of $794,690. He had been
credited with seventeen years of service as of the end of the last calendar
year. Benefits shown are computed as a ten year certain and life annuity
beginning at age 65 with no deduction for Social Security or other offset
amounts.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
REMUNERATION 10 15 20 25 30 35 OR MORE
- ------------ -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
$250,000 $ 37,500 $ 56,250 $ 75,000 $ 93,750 $112,500 $131,250
$300,000 $ 45,000 $ 67,500 $ 90,000 $112,500 $135,000 $157,500
$400,000 $ 60,000 $ 90,000 $120,000 $150,000 $180,000 $210,000
$450,000 $ 67,500 $101,250 $135,000 $168,750 $202,500 $236,250
$500,000 $ 75,000 $112,500 $150,000 $187,500 $225,000 $262,500
$525,000 $ 78,750 $118,125 $157,500 $196,875 $236,250 $275,625
$550,000 $ 82,500 $123,750 $165,000 $206,250 $247,500 $288,750
$575,000 $ 86,250 $129,375 $172,500 $215,625 $258,750 $301,875
$600,000 $ 90,000 $135,000 $180,000 $225,000 $270,000 $315,000
$625,000 $ 93,750 $140,625 $187,500 $234,375 $281,250 $328,125
$650,000 $ 97,500 $146,250 $195,000 $243,750 $292,500 $341,250
$675,000 $101,250 $151,875 $202,500 $253,125 $303,750 $354,375
$700,000 $105,000 $157,500 $210,000 $262,500 $315,000 $367,500
$725,000 $108,750 $163,125 $217,500 $271,875 $326,250 $380,625
$750,000 $112,500 $168,750 $225,000 $281,250 $337,500 $393,750
$775,000 $116,250 $174,375 $232,500 $290,625 $348,750 $406,875
$800,000 $120,000 $180,000 $240,000 $300,000 $360,000 $420,000
</TABLE>
20
<PAGE> 24
PERFORMANCE GRAPH
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG FLUOR CORPORATION,
S&P 500 AND DJ HEAVY CONSTRUCTION GROUP
[PERFORMANCE GRAPH]
- ---------------
(1) The above graph compares the performance of Fluor Corporation with that of
the S&P 500 Composite Index and the Dow Jones Heavy Construction Industry
Group Index, which is a published industry index.
(2) The comparison of total return on investment (change in year end stock price
plus reinvested dividends) for each of the periods assumes that $100 was
invested on October 31, 1993 in each of Fluor Corporation, the S&P 500
Composite Group and the Dow Jones Heavy Construction Industry Group, with
investment weighted on the basis of market capitalization.
CHANGE OF CONTROL PROVISIONS IN CERTAIN PLANS
Under the Company's "Stock Plans," which provide for stock options,
restricted stock and SARs, restrictions on exercisability and transferability
which are premised on continued service with the Company or its subsidiaries
lapse if the holder's employment is terminated for any reason within two years
following a change of control of the Company. A change of control of the Company
shall be deemed to have occurred if (1) a third person, including a "group," as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, acquires
shares of the Company having twenty-five percent or more of the total number of
votes that may be cast for the election of directors of the Company or (2) as a
result of any cash tender or exchange offer, merger or other business
combination, or any combination of the foregoing transactions (a "Transaction"),
the persons who were directors of the Company before the Transaction shall cease
to constitute a majority of the Board of Directors of the Company or any
successor to the Company.
DIRECTORS' FEES
Nine of the thirteen present directors are not salaried employees of the
Company or its subsidiaries. For their services, those directors are paid a
retainer at the annual rate of $30,000 or, in the case of Chairmen of
21
<PAGE> 25
Board Committees, $34,000, plus a fee of $2,000 per day for each day upon which
one or more Board or Board Committee meetings are attended. Each such director
also receives a $2,000 annual California tax allowance. Salaried employees
receive no additional compensation for their services as directors. Directors
are permitted to defer receipt of directors' fees until their retirement or
other termination of status as a director. Deferred amounts (at the election of
the director) either accrue interest at rates fixed from time to time by the
Executive Committee or are valued as if having been invested in common stock of
the Company. In calendar 1998, Carroll A. Campbell, Jr., Peter J. Fluor, David
P. Gardner, and Vilma S. Martinez chose to defer all of their directors' fees
and each elected the common stock valuation method. Dean R. O'Hare and Martha R.
Seger chose to defer 50% of their retainer fees and elected the common stock
valuation method.
Under the Stock Plan for Non-Employee Directors (the "1995 Director Stock
Plan"), Directors who are not, and have never been, employees of the Company or
its subsidiaries are eligible to receive, when they become Directors, 1,000
shares of restricted common stock and restricted units in an amount determined
by the Organization and Compensation Committee which are payable in cash to
assist in satisfying related income tax liabilities. Awards are made on a date
determined by the Committee following appointment. Restrictions lapse on 20% of
the shares on March 14 next following the date of the initial award.
Restrictions lapse on the balance of the shares in four equal increments on each
succeeding March 14. The value of 1,000 shares of stock on March 14, 1998, was
$51,094. This does not take into account the diminution in value attributable to
the restrictions on such stock under the 1995 Director Stock Plan.
In addition to benefits available under the 1995 Director Stock Plan,
directors who are not, and have never been, employees of the Company or its
subsidiaries are eligible to receive grants of restricted common stock under the
1997 Fluor Restricted Stock Plan for Non-Employee Directors (the "1997 Director
Stock Plan"). The 1997 Director Stock Plan provides for annual grants of 500
shares of restricted stock to each eligible director, which grants are made as
of the first Board meeting in any calendar year during which such director
serves as a member of the Board. Restrictions on all stock granted under this
plan lapse once such stock has been held for at least six months, the applicable
director has served on the Board for at least six years and the director either
attains the age for mandatory retirement (72 years) or becomes permanently and
totally disabled. As of March 10, 1998, the value of 500 shares of stock was
$24,422. This does not take into account the diminution in value attributable to
the restrictions on such stock under the 1997 Director Stock Plan.
On June 9, 1998, the Board of Directors awarded Mr. Fluor a special bonus
of $643,750 in recognition of his outstanding service while on special
assignment at the request of the Board to serve as Non-Executive Chairman of the
Company from January 1998 to July 1998, following the retirement of Mr. McCraw.
This amount was credited to Mr. Fluor's account in the Deferred Directors' Fees
Program and was the economic equivalent of 12,500 shares of the Company's Common
Stock on such date.
RATIFICATION OF APPOINTMENT OF AUDITORS
PROPOSAL 2
The Board of Directors has appointed the firm of Ernst & Young LLP, which
firm was engaged as independent auditors for the fiscal year ended October 31,
1998, to audit the financial statements of the Company for the fiscal year
ending October 31, 1999. A proposal to ratify this appointment is being
presented to the shareholders at the Annual Meeting because the Board of
Directors believes that it is a good corporate practice to seek shareholder
ratification of the selection of independent auditors. If the appointment of
Ernst & Young LLP is not ratified, the Board of Directors will evaluate the
basis for the shareholders' vote when evaluating whether to renew the firm's
engagement. A representative of Ernst & Young LLP is expected to be present at
the meeting and available to respond to appropriate questions and, although that
firm has indicated that no statement will be made, an opportunity for a
statement will be provided.
22
<PAGE> 26
BOARD RECOMMENDATION
The Board of Directors recommends a vote FOR the ratification of the
appointment of Ernst & Young LLP as independent auditors for the fiscal year
ending October 31, 1999.
APPROVAL OF FLUOR CORPORATION 1999 EXECUTIVE PERFORMANCE INCENTIVE PLAN
PROPOSAL 3
At the Annual Meeting, shareholders will be asked to approve the Fluor
Corporation 1999 Executive Performance Incentive Plan (the "Incentive Plan"). In
December 1998, the Board of Directors adopted the Incentive Plan, subject to
approval by the Company's shareholders.
The Incentive Plan is intended to supplement the 1996 Fluor Executive Stock
Plan (the "1996 Plan"), which was adopted with shareholder approval in March
1996, but which had only approximately 756,000 shares available for grant of
stock options or restricted stock as of December 31, 1998. The following summary
of the main features of the Incentive Plan is qualified in its entirety by
reference to the complete text of the Incentive Plan, which appears as Exhibit A
to this Proxy Statement.
SUMMARY OF THE PLAN
General. The Incentive Plan is designed to enable the Company to attract,
retain and motivate its management and other key employees, and to further align
the interests of such employees with those of the shareholders of the Company,
by providing for or increasing the proprietary interest of such employees in the
Company.
The Incentive Plan authorizes the grant and issuance of awards that may
take the form of Stock Options, Restricted Stock, Incentive Awards and Stock
Units (any such arrangement, an "Award"). The Incentive Plan has various
provisions so that Awards under it may, but need not, qualify for an exemption
from the "short swing liability" provisions of Section 16(b) of the Exchange Act
pursuant to Rule 16b-3 and/or qualify as "performance-based compensation" that
is exempt from the $1 million limitation on the deductibility of compensation
under Section 162(m) of the Internal Revenue Code (the "Code"). Shareholder
approval of the Incentive Plan is required in order for the exemption from
Section 162(m) to be satisfied.
Eligibility. Any person who is an employee and officer, key employee or
member of the Executive Management Team ("EMT"), prospective employee who is to
be an officer, key employee or member of the EMT, consultant or advisor of the
Company or any of its affiliates is eligible to be selected as a recipient of an
Award (a "Participant") under the Incentive Plan. Currently, there are
approximately 800 members of the EMT covered under the Incentive Plan.
Administration. The Incentive Plan will be administered by the Organization
and Compensation Committee and/or one or more committees (any such committee, a
"Committee") of the Board of Directors of the Company (the "Board"). With
respect to any Award that is not intended to satisfy the conditions of Exchange
Act Rule 16b-3 or Code Section 162(m)(4)(C), the Committee may delegate all or
any of its responsibilities to one or more directors or officers of the Company,
including individuals who participate in the Incentive Plan.
Subject to the express provisions of the Incentive Plan, the Committee has
broad authority to administer and interpret the Incentive Plan, including,
without limitation, authority to determine who is eligible to participate in the
Incentive Plan, to which of such persons, and when, Awards are granted under the
Incentive Plan, to make Awards, to determine the terms of such Awards, to
determine the number of shares of Common Stock subject to Awards and the
exercise or purchase price of such shares under an Award, to establish and
verify the extent of satisfaction of any performance goals applicable to Awards,
to prescribe and amend the terms of the agreements or other documents evidencing
Awards made under the Incentive Plan, and to make all other determinations
deemed necessary or advisable for the administration of the Incentive Plan.
23
<PAGE> 27
Stock Subject To The Incentive Plan. The aggregate number of shares of the
Company's Common Stock ("Shares") that can be issued under the Incentive Plan
may not exceed 3,700,000. Of the 3,700,000 shares authorized under the Incentive
Plan, the aggregate number of shares that can be issued pursuant to all
Incentive Awards, Restricted Stock Awards and Stock Units (other than Stock
Units issued upon exercise of options) under the Incentive Plan may not exceed
1,000,000. The number of Shares subject to the Incentive Plan and to outstanding
Awards under the Incentive Plan will be appropriately adjusted by the Board of
Directors if the Company's Common Stock is affected through a reorganization,
merger, consolidation, recapitalization, restructuring, reclassification,
dividend (other than quarterly cash dividends) or other distribution, stock
split, spin-off or sale of substantially all of the Company's assets. For
purposes of calculating the aggregate number of Shares issued under the
Incentive Plan, only the number of Shares actually issued upon exercise or
settlement of an Award and not returned to the Company upon cancellation,
expiration or forfeiture of an Award or in payment or satisfaction of the
purchase price, exercise price or tax withholding obligation of an Award will be
counted.
Awards. The Incentive Plan authorizes the grant and issuance of the
following types of Awards: Stock Options, Restricted Stock, Incentive Awards,
and Stock Units:
Stock Option Awards: Subject to the express provisions of the Incentive
Plan and as discussed in this paragraph, the Committee has discretion to grant
options, to determine the vesting schedule of options, the events causing an
option to expire, the number of shares subject to any option, the restrictions
on transferability of an option, and such further terms and conditions, in each
case not inconsistent with the Incentive Plan, as may be determined from time to
time by the Committee. Options granted under the Incentive Plan may be either
Incentive Stock Options qualifying under Code Section 422 ("ISOs") or options
which are not intended to qualify as Incentive Stock Options ("NQSOs"). The
exercise price for options may not be less than 100% of the fair market value of
the Company's Stock on the date the option is granted, except that the exercise
price of such options may be above or below the fair market value of the
Company's Stock on the date the option is granted if the options are granted in
assumption and substitution of options held by employees of a company acquired
by the Company or to the extent that an optionee foregoes current cash
compensation in exchange for an option grant. The exercise price of an option
may be paid through various means specified by the Committee, including in cash
or check, by delivering to the Company shares of the Company's stock, by a
reduction in the number of shares issuable pursuant to such option, or by a
promissory note or other commitment to pay (including such a commitment by a
stock broker). The Committee may, but need not, provide that the holder of an
Award has a right (such as a stock appreciation right) to receive a number of
Shares or cash, or a combination thereof, the amount of which is determined by
reference to the value of the Award. Unless approved by shareholders,
outstanding options may not be amended to reduce the exercise price.
Restricted Stock Awards: Restricted Stock is an Award of Shares, the grant,
issuance, retention and/or vesting of which is subject to such performance and
other conditions as are specified by the Committee. Subject to the express
provisions of the Incentive Plan and as discussed in this paragraph, the
Committee has discretion to determine the terms of any Restricted Stock Award,
including the number of Shares subject to a Restricted Stock Award or a formula
for determining such, the performance criteria and level of achievement versus
these criteria which determine the number of Shares granted, issued, retainable
and/or vested, the period as to which performance will be measured for
determining achievement of performance, forfeiture provisions, the effect of
termination of employment for various reasons, and such further terms and
conditions, in each case not inconsistent with the Incentive Plan, as may be
determined from time to time by the Committee. The performance criteria upon
which Restricted Stock is granted, issued, retained and/or vested may be based
on financial performance, personal performance evaluations, and/or completion of
service by the Participant; provided, however, that no Restricted Stock Award
will first vest within one year from its date of grant, other than upon death,
disability, a change of control or upon satisfaction of such performance
requirements deemed appropriate by the Committee. Notwithstanding the foregoing,
for any Restricted Stock that is intended by the Committee to satisfy the
requirements for "performance-based compensation" under Code Section 162(m) the
performance criteria will be a measure based on one or more Qualifying
Performance Criteria, as described below. Notwithstanding satisfaction of any
completion of service or
24
<PAGE> 28
performance goals, the number of Shares granted, issued, retainable and/or
vested under a Restricted Stock Award may be reduced by the Committee on the
basis of such further considerations as the Committee in its sole discretion
will determine.
Incentive Awards: The Incentive Plan authorizes the grant of Incentive
Awards pursuant to which a Participant may become entitled to receive an
amount -- which may be paid in cash, stock or stock units -- based on
satisfaction of such performance criteria as are specified by the Committee.
Subject to the express provisions of the Incentive Plan and as discussed in this
paragraph, the Committee has discretion to determine the terms of any Incentive
Award, including the target, minimum and maximum amount payable to a Participant
as an Incentive Award, the performance criteria (which may be based on financial
performance and/or personal performance evaluations) and level of achievement
versus these criteria which determines the amount payable under an Incentive
Award, the fiscal year(s) as to which performance will be measured for
determining the amount of any payment, the timing of any payment earned by
virtue of performance, restrictions on the alienation or transfer of an
Incentive Award prior to actual payment, forfeiture provisions, and such further
terms and conditions, in each case not inconsistent with the Incentive Plan, as
the Committee may determine from time to time. All or any portion of an
Incentive Award may be designed to qualify as "performance-based compensation"
that is exempt from the $1 million limit on deductible compensation under
Section 162(m) of the Code. The performance criteria for any portion of an
Incentive Award that is intended to satisfy the requirements for
"performance-based compensation" will be a measure based on one or more
"Qualifying Performance Criteria", as described below. Notwithstanding
satisfaction of any performance goals, the amount paid under an Incentive Award
may be reduced by the Committee on the basis of such further considerations as
the Committee in its sole discretion will determine.
Stock Unit Awards: A "Stock Unit" is a bookkeeping entry representing an
amount equivalent to the fair market value of one share of Common Stock, also
referred to as "restricted units" or "shadow stock". Stock Units may be settled
in Common Stock or cash. The grant, issuance, retention and/or vesting of Stock
Units will be subject to such performance conditions and to such further terms
and conditions as the Committee deems appropriate. Each Stock Unit Award will
reflect the number of Stock Units subject to such Award or a formula for
determining such, the performance criteria and level of achievement versus these
criteria which will determine the number of Stock Units granted, issued,
retainable and/or vested, the period as to which performance will be measured
for determining achievement of performance, forfeiture provisions, and such
further terms and conditions, in each case not inconsistent with the Plan as may
be determined from time to time by the Committee. Stock Units may also be issued
upon exercise of Stock Options, may be granted in payment and satisfaction of
Incentive Awards and may be issued in lieu of any other compensation that the
Committee elects to be paid in the form of Stock Units.
The grant, issuance, retention and or vesting of each Stock Unit will be
subject to such performance criteria and level of achievement versus these
criteria as the Committee may determine, which criteria may be based on
financial performance, personal performance evaluations and/or completion of
service by the Participant; provided, however, that no Stock Unit will first
vest within one year from its date of grant, other than upon death, disability,
a change of control or upon satisfaction of such performance requirements as
deemed appropriate by the Committee. Notwithstanding anything to the contrary
herein, the performance criteria for any Stock Unit that is intended by the
Committee to satisfy the requirements for "performance-based compensation" under
Code Section 162(m) will be a measure based on one or more Qualifying
Performance Criteria selected by the Committee and specified at the time the
Stock Unit is granted.
The Committee will determine the timing of award of any Stock Unit. The
Committee may provide for or, subject to such terms and conditions as the
Committee may specify, may permit a Participant to elect for the award or
vesting of any Stock Unit to be deferred to a specified date or event. The
Committee may provide for a Participant to have the option for his or her Stock
Unit, or such portion thereof as the Committee may specify, to be granted in
whole or in part in Shares. The Committee may provide for Stock Units to be
settled in cash or Shares (at the election of the Company or the Participant, as
specified by the Committee) and to be made at such other times as it determines
appropriate or as it permits a Participant to choose. Notwithstanding
satisfaction of any completion of service or performance goals, the number of
Stock Units granted, issued,
25
<PAGE> 29
retainable and/or vested under a Stock Unit Award may be reduced by the
Committee on the basis of such further considerations as the Committee in its
sole discretion will determine.
Qualifying Performance Criteria And Section 162(m) Limits. Subject to
shareholder approval of the Incentive Plan, the performance criteria for any
Restricted Stock, Incentive Award or Stock Unit that is intended to satisfy the
requirements for "performance-based compensation" under Code Section 162(m) will
be any one or more of the following performance criteria, either individually,
alternatively or in any combination, applied to either the Company as a whole or
to a business unit or subsidiary, and measured either annually or cumulatively
over a period of years, on an absolute basis or relative to a pre-established
target, to previous years' results or to a designated comparison group, in each
case as specified by the Committee in the Award: (a) cash flow, (b) earnings
(including gross margin, earnings before interest and taxes ("EBIT"), earnings
before taxes ("EBT"), and net earnings), (c) earnings per share, (d) growth in
earnings or earnings per share, (e) stock price, (f) return on equity or average
stockholders' equity, (g) total stockholder return, (h) return on capital, (i)
return on assets or net assets, (j) return on investment, (k) revenue, (l)
income or net income, (m) operating income or net operating income, (n)
operating profit or net operating profit, (o) operating margin, (p) return on
operating revenue, (q) market share, (r) contract awards or backlog, (s)
overhead or other expense reduction, (t) growth in stockholder value relative to
the two-year moving average of the S&P 500 Index, (u) growth in stockholder
value relative to the two-year moving average of the Dow Jones Heavy
Construction Index, (v) credit rating, (w) strategic plan development and
implementation, (x) succession plan development and implementation, (y)
retention of executive talent, (z) improvement in workforce diversity, (aa)
return on average stockholders' equity relative to the ten year Treasury yield,
(bb) improvement in safety records, (cc) capital resource management plan
development and implementation, (dd) improved financial controls plan
development and implementation, (ee) corporate tax savings, (ff) corporate cost
of capital reduction, (gg) investor relations program development and
implementation, (hh) corporate relations program development and implementation,
(ii) executive performance plan development and implementation, and (jj) tax
provision rate for financial statement purposes. The Committee will
appropriately adjust any evaluation of performance under a Qualifying
Performance Criteria to exclude any of the following events that occurs during a
performance period: (i) asset write-downs, (ii) litigation or claim judgments or
settlements, (iii) the effect of changes in tax law, accounting principles or
other laws or provisions affecting reported results, (iv) accruals for
reorganization and restructuring programs, and (v) any extraordinary
non-recurring items as described in Accounting Principles Board Opinion No. 30
and/or in management's discussion and analysis of financial condition and
results of operations appearing in the Company's annual report to stockholders
for the applicable year. The aggregate number of Shares subject to options
granted under the Incentive Plan during any calendar year to any one Participant
may not exceed 500,000. The aggregate number of Shares issued or issuable under
any Incentive Awards, Restricted Stock Awards or Stock Unit Awards (other than
Stock Units issued or issuable upon exercise of options) granted under the
Incentive Plan during any calendar year to any one Participant may not exceed
75,000. The maximum amount payable pursuant to that portion of an Incentive
Award granted for any fiscal year to any person that is intended to satisfy the
requirements for "performance-based compensation" under Code Section 162(m) may
not exceed $3 million.
Change Of Control. The Committee may provide that in connection with a
Change of Control, Awards will become exercisable, payable, vested, paid, or
canceled, and may provide for an absolute or conditional exercise, payment or
lapse of conditions or restrictions on an Award which would be effective only
if, upon the announcement of a transaction intended or reasonably expected to
result in a Change of Control, no provision is made under the terms of such
transaction for the holder of an Award to realize the full benefit of the Award.
Transferability Of Awards. Generally, Awards granted under the Incentive
Plan may not be sold, assigned, conveyed, gifted, pledged, hypothecated or
otherwise transferred in any manner prior to the vesting or lapse of any and all
restrictions applicable thereto, other than by will or the laws of descent and
distribution, except that the Committee may permit an Award to be transferable
to a member or members of the Participant's family or to entities owned or
established for the benefit of a Participant's family.
Amendments And Termination. The Board may amend, alter or discontinue the
Plan or any agreement evidencing an Award made under the Incentive Plan, but no
such amendment may, without the approval of
26
<PAGE> 30
the shareholders of the Company: (a) materially increase the maximum number of
shares of Common Stock for which Awards may be granted under the Incentive Plan;
(b) reduce the price at which Stock Options may be granted below the price
specified in the Incentive Plan; (c) take any action to reduce or adjust
downward the exercise price of outstanding Stock Options; (d) after the date of
a Change of Control, impair the rights of any Award holder, without such
holder's consent, under any Award granted prior to the date of any Change of
Control; (e) extend the term of the Incentive Plan; or (f) change the class of
persons eligible to be Participants. No Stock Option Award, Restricted Stock
Award or Incentive Award granted under the Incentive Plan may be granted
pursuant to the Incentive Plan more than ten years after the date of the Board's
adoption of the Incentive Plan.
Federal Income Tax Consequences. The following discussion of the federal
income tax consequences of the Incentive Plan is intended to be a summary of
applicable federal law as currently in effect. State and local tax consequences
may differ and may be amended or interpreted differently during the term of the
Incentive Plan or of options granted thereunder. Because the federal income tax
rules governing options and related payments are complex and subject to frequent
change, optionees are advised to consult their tax advisors prior to exercise of
options or dispositions of stock acquired pursuant to option exercise.
ISOs and NQSOs are treated differently for federal income tax purposes.
ISOs are intended to comply with the requirements of Section 422 of the Code.
NQSOs need not comply with such requirements.
An optionee is not taxed on the grant or exercise of an ISO. The difference
between the exercise price and the fair market value of the shares on the
exercise date will, however, be taken into account for purposes of the
alternative minimum tax. If an optionee holds the shares acquired upon exercise
of an ISO for at least two years following the option grant date and at least
one year following exercise, the optionee's gain, if any, upon a subsequent
disposition of such shares is long term capital gain. The measure of the gain is
the difference between the proceeds received on disposition and the optionee's
basis in the shares (which generally equals the exercise price). If an optionee
disposes of stock acquired pursuant to exercise of an ISO before satisfying the
one and two-year holding periods described above, the optionee may recognize
both ordinary income and capital gain in the year of disposition. The amount of
the ordinary income will be the lesser of the amount realized on disposition or
the fair market value of the stock on the exercise date reduced in both
instances by the exercise price. The excess of the consideration received on
such a disposition over the lesser of the amount realized on disposition or the
fair market value of the stock on the exercise date will generally be long term
capital gain if the stock had been held for more than one year following
exercise of the ISO. The Company is not entitled to an income tax deduction on
the grant or exercise of an ISO or on the optionee's disposition of the shares
after satisfying the holding period requirement described above. If the holding
periods are not satisfied, the Company will be entitled to a deduction in the
year the optionee disposes of the shares in an amount equal to the ordinary
income recognized by the optionee.
An optionee is not taxed on the grant of an NQSO. On exercise, however, the
optionee recognizes ordinary income equal to the excess of the fair market value
of the shares acquired on the date of exercise over the exercise price.
The Company is entitled to an income tax deduction in the year of exercise
in the amount recognized by the optionee as ordinary income. Any gain on
subsequent disposition of the shares is long term capital gain if the shares are
held for more than one year following exercise. The Company does not receive a
deduction for this gain.
An employee who receives Restricted Stock subject to restrictions which
create a "substantial risk of forfeiture" (within the meaning of Section 83 of
the Code) will normally realize taxable income on the date the Shares become
transferable or no longer subject to substantial risk of forfeiture or on the
date of their earlier disposition. The amount of such taxable income will be
equal to the amount by which the fair market value of the Shares of Common Stock
on the date such restrictions lapse (or any earlier date on which the Shares
become transferable or are disposed of ) exceeds their purchase price, if any.
An employee may elect, however, to include in income in the year of grant the
excess of the fair market value of the Shares of Common Stock (without regard to
any restrictions) over their purchase price, if any, on the date of grant.
27
<PAGE> 31
Upon accelerated exercisability of Options and accelerated lapsing of
restrictions upon Restricted Stock in connection with a Change of Control of the
Company, certain amounts associated with such awards could, depending upon the
individual circumstances of the recipient Participant, constitute "excess
parachute payments" under the golden parachute provisions of the Code. Pursuant
to these provisions a Participant will be subject to a 20% excise tax on any
excess parachute payment and the Company will be denied any deduction with
respect to such excess parachute payment. The limit on the deductibility of
compensation under Section 162(m) of the Code is also reduced by the amount of
any excess parachute payments. Whether amounts constitute excess parachute
payments depends upon, among other things, the value of the Awards accelerated
and the past compensation of the Participant.
As described above, options granted under the Incentive Plan may qualify as
"performance-based compensation" under Section 162(m) of the Code in order to
preserve federal income tax deductions by the Company with respect to any
compensation required to be taken into account under Section 162 of the Code
that is in excess of $1 million and paid to a "Covered Employee" (as defined
under the Section 162 regulations). To so qualify, options must have an exercise
price at least equal to the fair market value of the underlying shares on the
date of grant, be awarded by a committee consisting solely of two or more
"outside directors" (as defined under the Section 162 regulations) and satisfy
the Incentive Plan's limit on the total number of shares subject to options that
may be awarded to any one participant during any calendar year.
INITIAL GRANTS
To date, no Awards have been granted under the Incentive Plan. The closing
price of the Company's Common Stock on the Consolidated Reporting System on
January 12, 1999, was $42.0625 per share. The Committee has full discretion to
determine the timing and recipients of any stock option grants under the
Incentive Plan and the number of shares subject to any such options which may be
granted under the Incentive Plan, subject to an annual limitation on the total
number of options that may be granted to any optionee. Therefore, the benefits
and amounts that will be received by each of the Named Executive Officers, the
executive officers as a group, the non-employee directors as a group and all
other key employees under the Incentive Plan are not presently determinable. It
is not possible to determine the benefits that Participants would have received
had the Incentive Plan been in effect in the last fiscal year.
BOARD RECOMMENDATION
The Board of Directors of the Company recommends a vote FOR the approval of
the Fluor Corporation 1999 Executive Performance Incentive Plan.
OTHER BUSINESS
The Company does not intend to present any other business for action at the
Annual Meeting and does not know of any other business intended to be presented
by others.
The Company's Bylaws require that, for other business to be properly
brought before an annual meeting by a shareholder, the Company must have
received written notice thereof not less than 60 nor more than 90 days prior to
the annual meeting (or not later than 10 days after public disclosure of the
annual meeting). The Notice must set forth (a) a brief description of the
business proposed to be brought before the annual meeting and the reasons for
conducting such business, (b) the shareholder's name and address, and the number
of shares of Common Stock beneficially owned by the shareholder, and (c) any
material interest of the shareholder in such business.
28
<PAGE> 32
SHAREHOLDERS' PROPOSALS FOR 2000 ANNUAL MEETING
Any proposal of a shareholder intended to be presented at the Company's
2000 annual meeting of shareholders must be received by the Company for
inclusion in the proxy statement and form of proxy/voting instruction card for
that meeting pursuant to Rule 14a-8, under the Securities Exchange Act of 1934,
no later than October 1, 1999. Under Rule 14a-4 promulgated under the Securities
Exchange Act of 1934, as amended, the Company may exercise discretionary voting
authority at the 2000 annual meeting under proxies it solicits to vote on a
proposal made by a shareholder that the shareholder does not seek to include in
the Company's proxy statement pursuant to Rule 14a-8, unless the Company is
notified about the proposal between December 14, 1999, and January 13, 2000
(assuming that the Company's 2000 annual meeting of shareholders will be held on
March 14, 2000), and the shareholder satisfies the other requirements of Rule
14a-4(c).
/s/ LAWRENCE N. FISHER
------------------------------
LAWRENCE N. FISHER
Senior Vice President-Law and
Secretary
January 30, 1999
Irvine, California
29
<PAGE> 33
EXHIBIT A
FLUOR CORPORATION
1999 EXECUTIVE PERFORMANCE INCENTIVE PLAN
SECTION 1. Purpose of Plan
The purpose of this "Fluor Corporation 1999 Executive Performance Incentive
Plan" ("Plan") of Fluor Corporation, a Delaware corporation, is to enable the
Company, as defined in Section 2.2(a)(ii) hereof, to attract, retain and
motivate its officers, management and other key personnel, and to further align
the interests of such persons with those of the shareholders of the Company, by
providing for or increasing their proprietary interest in the Company.
SECTION 2. Administration of the Plan
2.1 Composition of Committee. The Plan shall be administered by the
Organization and Compensation Committee of the Board of Directors, and/or by the
Board of Directors or another committee of the Board of Directors of the
Company, as appointed from time to time by the Board of Directors (any such
administrative body, the "Committee"). The Board of Directors shall fill
vacancies on, and from time to time may remove or add members to, the Committee.
The Committee shall act pursuant to a majority vote or unanimous written
consent. Notwithstanding the foregoing, with respect to any Award that is not
intended to satisfy the conditions of Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") or Section 162(m)(4)(C) of the
Internal Revenue Code of 1986, as amended (the "Code"), the Committee may
appoint one or more separate committees (any such committee, a "Subcommittee")
composed of one or more directors of the Company (who may but need not be
members of the Committee) and may delegate to any such Subcommittee(s) the
authority to grant Awards, as defined in Section 5.1 hereof, under the Plan to
Employees, to determine all terms of such Awards, and/or to administer the Plan
or any aspect of it. Any action by any such Subcommittee within the scope of
such delegation shall be deemed for all purposes to have been taken by the
Committee. The Committee may designate the Secretary of the Company or other
Company employees to assist the Committee in the administration of the Plan, and
may grant authority to such persons to execute agreements evidencing Awards made
under this Plan or other documents entered into under this Plan on behalf of the
Committee or the Company.
2.2 Powers of the Committee. Subject to the express provisions of this
Plan, the Committee shall be authorized and empowered to do all things necessary
or desirable in connection with the administration of this Plan with respect to
the Awards over which such Committee has authority, including, without
limitation, the following:
(a) to prescribe, amend and rescind rules and regulations relating to
this Plan and to define terms not otherwise defined herein; provided that,
unless the Committee shall specify otherwise, for purposes of this Plan (i)
the term "fair market value" shall mean, as of any date, the average of the
highest price and the lowest price per share at which the Shares (as
defined in Section 3.1 hereof) are sold in the regular way on the New York
Stock Exchange or, if no Shares traded on the New York Stock Exchange on
the date in question, then for the next preceding date for which Shares
traded on the New York Stock Exchange; and (ii) the term "Company" shall
mean Fluor Corporation and its subsidiaries and affiliates, unless the
context otherwise requires.
(b) to determine which persons are Eligible Employees (as defined in
Section 4 hereof), to which of such Eligible Employees, if any, Awards
shall be granted hereunder, to make Awards under the Plan and to determine
the terms of such Awards and the timing of any such Awards;
(c) to determine the number of Shares subject to Awards and the
exercise or purchase price of such Shares;
(d) to establish and verify the extent of satisfaction of any
performance goals applicable to Awards;
A-1
<PAGE> 34
(e) to prescribe and amend the terms of the agreements or other
documents evidencing Awards made under this Plan (which need not be
identical);
(f) to determine whether, and the extent to which, adjustments are
required pursuant to Section 11 hereof;
(g) to interpret and construe this Plan, any rules and regulations
under the Plan and the terms and conditions of any Award granted hereunder,
and to make exceptions to any such provisions in good faith and for the
benefit of the Company; and
(h) to make all other determinations deemed necessary or advisable for
the administration of the Plan.
2.3 Determinations of the Committee. All decisions, determinations and
interpretations by the Committee or the Board regarding the Plan shall be final
and binding on all Eligible Employees and Participants, as defined in Section 4
hereof. The Committee or the Board, as applicable, shall consider such factors
as it deems relevant, in its sole and absolute discretion, to making such
decisions, determinations and interpretations including, without limitation, the
recommendations or advice of any officer of the Company or Eligible Employee and
such attorneys, consultants and accountants as it may select.
SECTION 3. Stock Subject to Plan
3.1 Aggregate Limits. Subject to adjustment as provided in Section 11, at
any time, the aggregate number of shares of the Company's common stock, $0.625
par value ("Shares"), issued pursuant to all Awards (including all ISOs (as
defined in Section 5.1 hereof)) granted under this Plan shall not exceed
3,700,000; provided that no more than 1,000,000 of such Shares may be issued
pursuant to all Restricted Stock Awards, Incentive Awards, and Stock Units
(other than Stock Units issued upon exercise of Options) granted under the Plan.
The Shares subject to the Plan may be either Shares reacquired by the Company,
including Shares purchased in the open market, or authorized but unissued
Shares.
3.2 Code Section 162(m) Limits. The aggregate number of Shares subject to
Options granted under this Plan during any calendar year to any one Eligible
Employee shall not exceed 500,000. The aggregate number of Shares issued or
issuable under any Restricted Stock Awards, Incentive Awards or Stock Unit
Awards (other than Stock Units issued or issuable upon exercise of Options)
granted under this Plan during any calendar year to any one Eligible Employee
shall not exceed 75,000. Notwithstanding anything to the contrary in the Plan,
the foregoing limitations shall be subject to adjustment under Section 11 only
to the extent that such adjustment will not affect the status of any Award
intended to qualify as "performance based compensation" under Code Section
162(m).
3.3 Issuance of Shares. For purposes of Section 3.1, the aggregate number
of Shares issued under this Plan at any time shall equal only the number of
Shares actually issued upon exercise or settlement of an Award and not returned
to the Company upon cancellation, expiration or forfeiture of an Award or
delivered (either actually or by attestation) in payment or satisfaction of the
purchase price, exercise price or tax obligation of an Award.
SECTION 4. Persons Eligible Under Plan
Any person who is an (i) employee and who also is an officer, key employee
or member of the Executive Management Team ("EMT"), (ii) prospective employee
who is to be an officer, key employee or member of the EMT, (iii) consultant, or
(iv) advisor of the Company (an "Eligible Employee") shall be eligible to be
considered for the grant of Awards hereunder. For purposes of this Plan, the
Chairman of the Board's status as an Employee shall be determined by the Board.
For purposes of the administration of Awards, the term "Eligible Employee" shall
also include a former Eligible Employee or any person (including any estate) who
is a beneficiary of a former Eligible Employee. A "Participant" is any Eligible
Employee to whom an Award has been made and any person (including any estate) to
whom an Award has been assigned or transferred pursuant to Section 10.1.
A-2
<PAGE> 35
SECTION 5. Plan Awards
5.1 Award Types. The Committee, on behalf of the Company, is authorized
under this Plan to enter into certain types of arrangements with Eligible
Employees and to confer certain benefits on them. The following such
arrangements or benefits are authorized under the Plan if their terms and
conditions are not inconsistent with the provisions of the Plan: Stock Options,
Restricted Stock, Incentive Awards and Stock Units. Such arrangements and
benefits are sometimes referred to herein as "Awards." The authorized types of
arrangements and benefits for which Awards may be granted are defined as
follows:
Stock Option Awards: A Stock Option is a right granted under Section 6
to purchase a number of Shares at such exercise price, at such times, and
on such other terms and conditions as are specified in or determined
pursuant to the document(s) evidencing the Award (the "Option Agreement").
Options intended to qualify as Incentive Stock Options ("ISOs") pursuant to
Code Section 422 and Options which are not intended to qualify as ISOs
("Non-qualified Options") may be granted under Section 6 as the Committee
in its sole discretion shall determine.
Restricted Stock Awards: Restricted Stock is an award of Shares made
under Section 7, the grant, issuance, retention and/or vesting of which is
subject to such performance and other conditions as are expressed in the
document(s) evidencing the Award (the "Restricted Stock Agreement").
Incentive Awards: An Incentive Award is a bonus opportunity awarded
under Section 8 pursuant to which a Participant may become entitled to
receive an amount (which may be payable in cash, Shares or other property)
based on satisfaction of such performance criteria as are specified in the
document(s) evidencing the Award (the "Incentive Bonus Agreement").
Stock Unit Awards: A Stock Unit Award is an award of a right to
receive the fair market value of one share of Common Stock made under
Section 9, the grant, issuance, retention and/or vesting of which is
subject to such performance and other conditions as are expressed in the
document(s) evidencing the Award (the "Stock Unit Agreement").
5.2 Grants of Awards. An Award may consist of one such arrangement or
benefit or two or more of them in tandem or in the alternative.
SECTION 6. Stock Option Awards
The Committee may grant an Option or provide for the grant of an Option,
either from time-to-time in the discretion of the Committee or automatically
upon the occurrence of specified events, including, without limitation, the
achievement of performance goals, the satisfaction of an event or condition
within the control of the recipient of the Award, within the control of others
or not within any person's control.
6.1 Option Agreement. Each Option Agreement shall contain provisions
regarding (a) the number of Shares which may be issued upon exercise of the
Option, (b) the purchase price of the Shares and the means of payment for the
Shares, (c) the term of the Option, (d) such terms and conditions of
exercisability as may be determined from time to time by the Committee, (e)
restrictions on the transfer of the Option and forfeiture provisions, and (f)
such further terms and conditions, in each case not inconsistent with the Plan
as may be determined from time to time by the Committee. Option Agreements
evidencing ISOs shall contain such terms and conditions as may be necessary to
comply with the applicable provisions of Section 422 of the Code.
6.2 Option Price. The purchase price per Share of the Shares subject to
each Option granted under the Plan shall equal or exceed 100% of the fair market
value of such Stock on the date the Option is granted, except that (i) the
Committee may specifically provide that the exercise price of an Option may be
higher or lower in the case of an Option granted to employees of a company
acquired by the Company in assumption and substitution of options held by such
employees at the time such company is acquired, and (ii) in the event an
Eligible Employee is required to pay or forego the receipt of any cash amount in
consideration of receipt of an Option, the exercise price plus such cash amount
shall equal or exceed 100% of the fair market value of such Stock on the date
the Option is granted.
A-3
<PAGE> 36
6.3 Option Term. The "Term" of each Option granted under the Plan,
including any ISOs, shall not exceed ten (10) years from the date of its grant.
6.4 Option Vesting. Options granted under the Plan shall be exercisable at
such time and in such installments during the period prior to the expiration of
the Option's Term as determined by the Committee in its sole discretion. The
Committee shall have the right to make the timing of the ability to exercise any
Option granted under the Plan subject to such performance requirements as deemed
appropriate by the Committee. At any time after the grant of an Option the
Committee may, in its sole discretion, reduce or eliminate any restrictions
surrounding any Participant's right to exercise all or part of the Option,
except that no Option shall first become exercisable within one (1) year from
its date of grant, other than upon death, disability, a Change of Control (as
defined in Section 12.2 hereof) or upon satisfaction of such performance
requirements as deemed appropriate by the Committee.
6.5 Option Exercise.
(a) Partial Exercise. An exercisable Option may be exercised in whole or in
part. However, an Option shall not be exercisable with respect to fractional
Shares and the Committee may require, by the terms of the Option Agreement, a
partial exercise to include a minimum number of Shares.
(b) Manner of Exercise. All or a portion of an exercisable Option shall be
deemed exercised upon delivery to the representative of the Company designated
for such purpose by the Committee all of the following: (i) notice of exercise
in such form as the Committee authorizes specifying the number of Shares to be
purchased by the Participant, (ii) payment or provision for payment of the
exercise price for such number of Shares, (iii) such representations and
documents as the Committee, in its sole discretion, deems necessary or advisable
to effect compliance with all applicable provisions of the Securities Act of
1933, as amended, and any other federal, state or foreign securities laws or
regulations, (iv) in the event that the Option shall be exercised pursuant to
Section 10.1 by any person or persons other than the Eligible Employee,
appropriate proof of the right of such person or persons to exercise the Option,
and (v) such representations and documents as the Committee, in its sole
discretion, deems necessary or advisable to provide for the tax withholding
pursuant to Section 13. Unless provided otherwise by the Committee, no
Participant shall have any right as a shareholder with respect to any Shares
purchased pursuant to any Option until the registration of Shares in the name of
such person, and no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such Shares are
so registered.
(c) Payment of Exercise Price. To the extent authorized by the Committee,
the exercise price of an Option may be paid in the form of one of more of the
following, either through the terms of the Option Agreement or at the time of
exercise of an Option: (i) cash or certified or cashiers' check, (ii) shares of
capital stock of the Company that have been held by the Participant for such
period of time as the Committee may specify, (iii) other property deemed
acceptable by the Committee, (iv) a reduction in the number of Shares or other
property otherwise issuable pursuant to such Option, (v) a promissory note of or
other commitment to pay by the Participant or of a third party, the terms and
conditions of which shall be determined by the Committee, or (vi) any
combination of (i) through (v).
SECTION 7. Restricted Stock Awards
Restricted Stock consists of an award of Shares, the grant, issuance,
retention and/or vesting of which shall be subject to such performance
conditions and to such further terms and conditions as the Committee deems
appropriate.
7.1 Restricted Stock Award. Each Restricted Stock Award shall reflect, to
the extent applicable (a) the number of Shares subject to such Award or a
formula for determining such, (b) the time or times at which Shares shall be
granted or issued and/or become retainable or vested, and the conditions or
restrictions on such Shares, (c) the performance criteria and level of
achievement versus these criteria which shall determine the number of Shares
granted, issued, retainable and/or vested, (d) the period as to which
performance shall be measured for determining achievement of performance, (e)
forfeiture provisions, and
A-4
<PAGE> 37
(f) such further terms and conditions, in each case not inconsistent with the
Plan as may be determined from time to time by the Committee.
7.2 Restrictions and Performance Criteria. The grant, issuance, retention
and/or vesting of each Restricted Stock Award may be subject to such performance
criteria and level of achievement versus these criteria as the Committee shall
determine, which criteria may be based on financial performance, personal
performance evaluations and/or completion of service by the Participant;
provided, however, that no Restricted Stock Award shall first vest within one
year from its date of grant, other than upon death, disability, a Change of
Control (as defined in Section 12.2 hereof) or upon satisfaction of such
performance requirements as deemed appropriate by the Committee. Notwithstanding
anything to the contrary herein, the performance criteria for any Restricted
Stock Award that is intended by the Committee to satisfy the requirements for
"performance-based compensation" under Code Section 162(m) shall be a measure
based on one or more Qualifying Performance Criteria (as defined in Section 10.2
hereof) selected by the Committee.
7.3 Timing and Form of Award. The Committee shall determine the timing of
award of any Restricted Stock Award. The Committee may provide for or, subject
to such terms and conditions as the Committee may specify, may permit a
Participant to elect for the award or vesting of any Restricted Stock to be
deferred to a specified date or event. The Committee may provide for a
Participant to have the option for his or her Restricted Stock, or such portion
thereof as the Committee may specify, to be granted in whole or in part in Stock
Units.
7.4 Discretionary Adjustments. Notwithstanding satisfaction of any
completion of service or performance goals, the number of Shares granted,
issued, retainable and/or vested under a Restricted Stock Award on account of
either financial performance or personal performance evaluations may be reduced
by the Committee on the basis of such further considerations as the Committee in
its sole discretion shall determine.
SECTION 8. Incentive Awards
Each Incentive Award will confer upon the Eligible Employee the opportunity
to earn a future payment tied to the level of achievement with respect to one or
more performance criteria established for a performance period of not less than
one year.
8.1 Incentive Award. Each Incentive Award shall contain provisions
regarding (a) the target and maximum amount payable to the Participant as an
Incentive Award, (b) the performance criteria and level of achievement versus
these criteria which shall determine the amount of such payment, (c) the period
as to which performance shall be measured for establishing the amount of any
payment, (d) the timing of any payment earned by virtue of performance, (e)
restrictions on the alienation or transfer of the Incentive Award prior to
actual payment, (f) forfeiture provisions, and (g) such further terms and
conditions, in each case not inconsistent with the Plan as may be determined
from time to time by the Committee. In establishing the provisions of Incentive
Awards, the Committee may refer to categories of such Awards as parts of
"Programs" or "Plans", which names will not affect the applicability of this
Plan. The maximum amount payable as an Incentive Award may be a multiple of the
target amount payable, but the maximum amount payable pursuant to that portion
of an Incentive Award granted under this Plan for any fiscal year to any
Participant that is intended to satisfy the requirements for "performance based
compensation" under Code Section 162(m) shall not exceed Three million dollars
($3,000,000).
8.2 Performance Criteria. The Committee shall establish the performance
criteria and level of achievement versus these criteria which shall determine
the target and the minimum and maximum amount payable under an Incentive Award,
which criteria may be based on financial performance and/or personal performance
evaluations. The Committee may specify the percentage of the target Incentive
Award that is intended to satisfy the requirements for "performance-based
compensation" under Code Section 162(m). Notwithstanding anything to the
contrary herein, the performance criteria for any portion of an Incentive Award
that is intended by the Committee to satisfy the requirements for
"performance-based compensation" under Code Section 162(m) shall be a measure
based on one or more Qualifying Performance Criteria (as
A-5
<PAGE> 38
defined in Section 10.2 hereof) selected by the Committee and specified at the
time required under Code Section 162(m).
8.3 Timing and Form of Payment. The Committee shall determine the timing
of payment of any Incentive Award. The Committee may provide for or, subject to
such terms and conditions as the Committee may specify, may permit a Participant
to elect for the payment of any Incentive Award to be deferred to a specified
date or event. The Committee may specify the form of payment of Incentive
Awards, which may be cash, shares or other property, or may provide for a
Participant to have the option for his or her Incentive Award, or such portion
thereof as the Committee may specify, to be paid in whole or in part in Shares
or Stock Units.
8.4 Discretionary Adjustments. Notwithstanding satisfaction of any
performance goals, the amount paid under an Incentive Award on account of either
financial performance or personal performance evaluations may be reduced by the
Committee on the basis of such further considerations as the Committee in its
sole discretion shall determine.
SECTION 9. Stock Units
9.1 Stock Units. A "Stock Unit" is a bookkeeping entry representing an
amount equivalent to the fair market value of one share of Common Stock, also
sometimes referred to as a "restricted unit" or "shadow stock". Stock Units
represent an unfunded and unsecured obligation of the Company, except as
otherwise provided for by the Committee.
9.2 Stock Unit Awards. Each Stock Unit Award shall reflect, to the extent
applicable (a) the number of Stock Units subject to such Award or a formula for
determining such, (b) the time or times at which Stock Units shall be granted or
issued and/or become retainable or vested, and the conditions or restrictions on
such Stock Units, (c) the performance criteria and level of achievement versus
these criteria which shall determine the number of Stock Units granted, issued,
retainable and/or vested, (d) the period as to which performance shall be
measured for determining achievement of performance, (e) forfeiture provisions,
and (f) such further terms and conditions, in each case not inconsistent with
the Plan as may be determined from time to time by the Committee. Stock Units
may also be issued upon exercise of Options, may be granted in payment and
satisfaction of Incentive Awards and may be issued in lieu of Restricted Stock
or any other Award that the Committee elects to be paid in the form of Stock
Units.
9.3 Performance Criteria. The grant, issuance, retention and or vesting of
each Stock Unit may be subject to such performance criteria and level of
achievement versus these criteria as the Committee shall determine, which
criteria may be based on financial performance, personal performance evaluations
and/or completion of service by the Participant; provided, however, that no
Stock Unit shall first vest within one (1) year from its date of grant, other
than upon death, disability, a Change of Control (as defined in Section 12.2
hereof) or upon satisfaction of such performance requirements as deemed
appropriate by the Committee. Notwithstanding anything to the contrary herein,
the performance criteria for any Stock Unit that is intended by the Committee to
satisfy the requirements for "performance-based compensation" under Code Section
162(m) shall be a measure based on one or more Qualifying Performance Criteria
(as defined in Section 10.2 hereof) selected by the Committee and specified at
the time the Stock Unit is granted.
9.4 Timing and Form of Award. The Committee shall determine the timing of
award of any Stock Unit. The Committee may provide for or, subject to such terms
and conditions as the Committee may specify, may permit a Participant to elect
for the award or vesting of any Stock Unit to be deferred to a specified date or
event. The Committee may provide for a Participant to have the option for his or
her Stock Unit, or such portion thereof as the Committee may specify, to be
granted in whole or in part in Shares.
9.5 Settlement of Stock Units. The Committee may provide for Stock Units
to be settled in cash or Shares (at the election of the Company or the
Participant, as specified by the Committee) and to be made at such other times
as it determines appropriate or as it permits a Participant to choose. The
amount of cash or Shares, or other settlement medium, to be so distributed may
be increased by an interest factor or by dividend
A-6
<PAGE> 39
equivalents, as the case may be, which may be valued as if reinvested in Shares.
Until a Stock Unit is settled, the number of Shares represented by a Stock Unit
shall be subject to adjustment pursuant to Section 11.
9.6 Discretionary Adjustments. Notwithstanding satisfaction of any
completion of service or performance goals, the number of Stock Units granted,
issued, retainable and/or vested under a Stock Unit Award on account of either
financial performance or personal performance evaluations may be reduced by the
Committee on the basis of such further considerations as the Committee in its
sole discretion shall determine.
SECTION 10. Other Provisions Applicable to Awards
10.1 Transferability. Unless the agreement evidencing an Award (or an
amendment thereto authorized by the Committee) expressly states that it is
transferable as provided hereunder, no Award granted under the Plan, nor any
interest in such Award, may be sold, assigned, conveyed, gifted, pledged,
hypothecated or otherwise transferred in any manner, other than by will or the
laws of descent and distribution, prior to the vesting or lapse of any and all
restrictions applicable to any Shares issued under an Award. The Committee may
in its sole discretion grant an Award or amend an outstanding Award to provide
that the Award is transferable or assignable to a member or members of the
Eligible Employee's "immediate family", as such term is defined under Exchange
Act Rule 16a-1(e), or to a trust for the benefit solely of a member or members
of the Eligible Employee's immediate family, or to a partnership or other entity
whose only owners are members of the Eligible Employee's family, provided that
following any such transfer or assignment the Award will remain subject to
substantially the same terms applicable to the Award while held by the Eligible
Employee, as modified as the Committee in its sole discretion shall determine
appropriate, and the Participant shall execute an agreement agreeing to be bound
by such terms.
10.2 Qualifying Performance Criteria. For purposes of this Plan, the term
"Qualifying Performance Criteria" shall mean any one or more of the following
performance criteria, either individually, alternatively or in any combination,
applied to either the Company as a whole or to a business unit, subsidiary or
business segment, either individually, alternatively or in any combination, and
measured either annually or cumulatively over a period of years, on an absolute
basis or relative to a pre-established target, to previous years' results or to
a designated comparison group, in each case as specified by the Committee in the
Award: (a) cash flow, (b) earnings (including gross margin, earnings before
interest and taxes ("EBIT"), earnings before taxes ("EBT"), and net earnings),
(c) earnings per share, (d) growth in earnings or earnings per share, (e) stock
price, (f) return on equity or average stockholders' equity, (g) total
stockholder return, (h) return on capital, (i) return on assets or net assets,
(j) return on investment, (k) revenue, (l) income or net income, (m) operating
income or net operating income, (n) operating profit or net operating profit,
(o) operating margin, (p) return on operating revenue, (q) market share, (r)
contract awards or backlog, (s) overhead or other expense reduction, (t) growth
in stockholder value relative to the two-year moving average of the S&P 500
Index, (u) growth in stockholder value relative to the two-year moving average
of the Dow Jones Heavy Construction Index, (v) credit rating, (w) strategic plan
development and implementation, (x) succession plan development and
implementation, (y) retention of executive talent, (z) improvement in workforce
diversity, (aa) return on average stockholders' equity relative to the Ten Year
Treasury Yield (as hereinafter defined), (bb) improvement in safety records,
(cc) capital resource management plan development and implementation, (dd)
improved internal financial controls plan development and implementation, (ee)
corporate tax savings, (ff) corporate cost of capital reduction, (gg) investor
relations program development and implementation, (hh) corporate relations
program development and implementation, (ii) executive performance plan
development and implementation, and (jj) tax provision rate for financial
statement purposes. The Committee may appropriately adjust any evaluation of
performance under a Qualifying Performance Criteria to exclude any of the
following events that occurs during a performance period: (i) asset write-downs,
(ii) litigation or claim judgments or settlements, (iii) the effect of changes
in tax law, accounting principles or other such laws or provisions affecting
reported results, (iv) accruals for reorganization and restructuring programs,
and (v) any extraordinary non-recurring items as described in Accounting
Principles Board Opinion No. 30 and/or in management's discussion and analysis
of financial condition and results of operations appearing in the Company's
annual report to stockholders for the applicable year. The term "Ten Year
Treasury Yield" shall mean, for any fiscal period, the daily average
A-7
<PAGE> 40
percent per annum yield for U.S. Government Securities -- 10 year Treasury
constant maturities, as published in the Federal Reserve statistical release or
any successor publication. Prior to the payment of any compensation under an
Award intended to qualify as "performance-based compensation" under Code Section
162(m) the Committee shall certify the extent to which any Qualifying
Performance Criteria and any other material terms under such Award have been
satisfied (other than in cases where such relate solely to the increase in the
value of the Company's Common Stock).
10.3 Dividends. Unless otherwise provided by the Committee, no adjustment
shall be made in Shares issuable under Awards on account of cash dividends which
may be paid or other rights which may be issued to the holders of Shares prior
to their issuance under any Award. The Committee shall specify whether dividends
or dividend equivalent amounts shall be paid to any Participant with respect to
the Shares subject to any Award that have not vested or been issued or that are
subject to any restrictions or conditions on the record date for dividends.
10.4 Agreements Evidencing Awards. The Committee shall, subject to
applicable law, determine the date an Award is deemed to be granted, which for
purposes of this Plan shall not be affected by the fact that an Award is
contingent on subsequent stockholder approval of the Plan. The Committee or,
except to the extent prohibited under applicable law, its delegate(s) may
establish the terms of agreements evidencing Awards under this Plan and may, but
need not, require as a condition to any such agreement's effectiveness that such
agreement be executed by the Participant and that such Participant agree to such
further terms and conditions as specified in such agreement. The grant of an
Award under this Plan shall not confer any rights upon the Participant holding
such Award other than such terms, and subject to such conditions, as are
specified in this Plan as being applicable to such type of Award (or to all
Awards) or as are expressly set forth in the Agreement evidencing such Award.
10.5 Tandem Stock or Cash Rights. Either at the time an Award is granted
or by subsequent action, the Committee may, but need not, provide that an Award
shall contain as a term thereof, a right, either in tandem with the other rights
under the Award or as an alternative thereto, of the Participant to receive,
without payment to the Company, a number of Shares, cash or a combination
thereof, the amount of which is determined by reference to the value of the
Award; provided, however, that the number of such rights granted under any Award
shall not exceed the per Eligible Employee share limitation for such Award as
set forth in Section 3.2.
10.6 Financing. The Committee may in its discretion provide financing to a
Participant in a principal amount sufficient to pay the purchase price of any
Award and/or to pay the amount of taxes required by law to be withheld with
respect to any Award. Any such loan shall be subject to all applicable legal
requirements and restrictions pertinent thereto, including Regulation G
promulgated by the Federal Reserve Board. The grant of an Award shall in no way
obligate the Company or the Committee to provide any financing whatsoever in
connection therewith.
SECTION 11. Changes in Capital Structure
If the outstanding securities of the class then subject to this Plan are
increased, decreased or exchanged for or converted into cash, property or a
different number or kind of shares or securities, or if cash, property or shares
or securities are distributed in respect of such outstanding securities, in
either case as a result of a reorganization, merger, consolidation,
recapitalization, restructuring, reclassification, dividend (other than a
regular, quarterly cash dividend) or other distribution, stock split, reverse
stock split, spin-off or the like, or if substantially all of the property and
assets of the Company are sold, then, unless the terms of such transaction shall
provide otherwise, the Committee may make appropriate and proportionate
adjustments in (i) the number and type of shares or other securities or cash or
other property that may be acquired pursuant to Awards theretofore granted under
this Plan and the exercise or settlement price of such Awards, provided,
however, that any such adjustment shall be made in such a manner that will not
affect the status of any Award intended to qualify as an ISO under Code Section
422 or as "performance based compensation" under Code Section 162(m), and (ii)
the maximum number and type of shares or other securities that may be issued
pursuant to such Awards thereafter granted under this Plan.
A-8
<PAGE> 41
SECTION 12. Change of Control
12.1 Effect of Change of Control. The Committee may through the terms of
the Award or otherwise provide that any or all of the following shall occur,
either immediately upon the Change of Control or a Change of Control
Transaction, or upon termination of the Eligible Employee's employment within
twenty-four (24) months following a Change of Control or a Change of Control
Transaction: (a) in the case of an Option, the Participant's ability to exercise
any portion of the Option not previously exercisable, (b) in the case of an
Incentive Award, the right to receive a payment equal to the target amount
payable or, if greater, a payment based on performance through a date determined
by the Committee prior to the Change of Control, and (c) in the case of Shares
issued in payment of any Incentive Award, and/or in the case of Restricted Stock
or Stock Units, the lapse and expiration of any conditions to the grant,
issuance, retention, vesting or transferability of, or any other restrictions
applicable to, such Award. The Committee also may, through the terms of the
Award or otherwise, provide for an absolute or conditional exercise, payment or
lapse of conditions or restrictions on an Award which shall only be effective
if, upon the announcement of a Change of Control Transaction, no provision is
made in such Change of Control Transaction for the exercise, payment or lapse of
conditions or restrictions on the Award, or other procedure whereby the
Participant may realize the full benefit of the Award.
12.2 Definitions. Unless the Committee or the Board shall provide
otherwise, "Change of Control" shall mean an occurrence of any of the following
events (a) a third person, including a "group" as defined in Section 13(d)(3) of
the Exchange Act, acquires shares of the Company having twenty-five percent or
more of the total number of votes that may be cast for the election of directors
of the Company, (b) as the result of any cash tender or exchange offer, merger
or other business combination, or any combination of the foregoing transactions
(a "Transaction"), the persons who were directors of the Company before the
Transaction shall cease to constitute a majority of the Board of the Company or
any successor to the Company; or (c) such other events as the Committee or the
Board from time to time may specify. "Change of Control Transaction" shall
include any tender offer, offer, exchange offer, solicitation, merger,
consolidation, reorganization or other transaction which is intended to or
reasonably expected to result in a Change of Control.
SECTION 13. Taxes
13.1 Withholding Requirements. The Committee may make such provisions or
impose such conditions as it may deem appropriate for the withholding or payment
by the Employee or Participant, as appropriate, of any taxes which it determines
are required in connection with any Awards granted under this Plan, and a
Participant's rights in any Award are subject to satisfaction of such
conditions.
13.2 Payment of Withholding Taxes. Notwithstanding the terms of Section
13.1 hereof, the Committee may provide in the agreement evidencing an Award or
otherwise that all or any portion of the taxes required to be withheld by the
Company or, if permitted by the Committee, desired to be paid by the
Participant, in connection with the exercise of a Non-qualified Option or the
exercise, vesting, settlement or transfer of any other Award shall be paid or,
at the election of the Participant, may be paid by the Company withholding
shares of the Company's capital stock otherwise issuable or subject to such
Award, or by the Participant delivering previously owned shares of the Company's
capital stock, in each case having a fair market value equal to the amount
required or elected to be withheld or paid. Any such elections are subject to
such conditions or procedures as may be established by the Committee and may be
subject to disapproval by the Committee.
SECTION 14. Amendments or Termination
The Board may amend, alter or discontinue the Plan or any agreement
evidencing an Award made under the Plan, but no such amendment shall, without
the approval of the shareholders of the Company:
(a) materially increase the maximum number of shares of Common Stock
for which Awards may be granted under the Plan;
(b) reduce the price at which Options may be granted below the price
provided for in Section 6.2;
A-9
<PAGE> 42
(c) reduce the exercise price of outstanding Options;
(d) after the date of a Change of Control, impair the rights of any
Award holder, without such holder's consent, under any Award granted prior
to the date of any Change of Control;
(e) extend the term of the Plan; or
(f) change the class of persons eligible to be Participants.
SECTION 15. Compliance With Other Laws and Regulations
The Plan, the grant and exercise of Awards thereunder, and the obligation
of the Company to sell, issue or deliver Shares under such Awards, shall be
subject to all applicable federal, state and foreign laws, rules and regulations
and to such approvals by any governmental or regulatory agency as may be
required. The Company shall not be required to register in a Participant's name
or deliver any Shares prior to the completion of any registration or
qualification of such Shares under any federal, state or foreign law or any
ruling or regulation of any government body which the Committee shall, in its
sole discretion, determine to be necessary or advisable. This Plan is intended
to constitute an unfunded arrangement for a select group of management or other
key employees.
No Option shall be exercisable unless a registration statement with respect
to the Option is effective or the Company has determined that such registration
is unnecessary. Unless the Awards and Shares covered by this Plan have been
registered under the Securities Act of 1933, as amended, or the Company has
determined that such registration is unnecessary, each person receiving an Award
and/or Shares pursuant to any Award may be required by the Company to give a
representation in writing that such person is acquiring such Shares for his or
her own account for investment and not with a view to, or for sale in connection
with, the distribution of any part thereof.
SECTION 16. Option Grants by Subsidiaries
In the case of a grant of an Option to any Eligible Employee employed by a
subsidiary or affiliate, such grant may, if the Committee so directs, be
implemented by the Company issuing any subject Shares to the subsidiary or
affiliate, for such lawful consideration as the Committee may determine, upon
the condition or understanding that the subsidiary or affiliate will transfer
the Shares to the optionholder in accordance with the terms of the Option
specified by the Committee pursuant to the provisions of the Plan.
Notwithstanding any other provision hereof, such Option may be issued by and in
the name of the subsidiary or affiliate and shall be deemed granted on such date
as the Committee shall determine.
SECTION 17. No Right to Company Employment
Nothing in this Plan or as a result of any Award granted pursuant to this
Plan shall confer on any individual any right to continue in the employ of the
Company or interfere in any way with the right of the Company to terminate an
individual's employment at any time. The Award agreements may contain such
provisions as the Committee may approve with reference to the effect of approved
leaves of absence.
SECTION 18. Effectiveness and Expiration of Plan
The Plan shall be effective on the date the Board adopts the Plan. All
Awards granted under this Plan are subject to, and may not be exercised before,
the approval of this Plan by the shareholders prior to the first anniversary
date of the effective date of the Plan, by the affirmative vote of the holders
of a majority of the outstanding shares of the Company present, or represented
by proxy, and entitled to vote, at a meeting of the Company's shareholders or by
written consent in accordance with the laws of the State of Delaware; provided
that if such approval by the shareholders of the Company is not forthcoming, all
Awards previously granted under this Plan shall be void. No Stock Option Award,
Restricted Stock Award or Incentive Award shall be granted pursuant to the Plan
more than ten (10) years after the effective date of the Plan.
A-10
<PAGE> 43
SECTION 19. Non-Exclusivity of the Plan
Neither the adoption of the Plan by the Board nor the submission of the
Plan to the shareholders of the Company for approval shall be construed as
creating any limitations on the power of the Board or the Committee to adopt
such other incentive arrangements as it or they may deem desirable, including
without limitation, the granting of restricted stock or stock options otherwise
than under the Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.
SECTION 20. Governing Law
This Plan and any agreements hereunder shall be interpreted and construed
in accordance with the laws of the State of Delaware and applicable federal law.
The Committee may provide that any dispute as to any Award shall be presented
and determined in such forum as the Committee may specify, including through
binding arbitration. Any reference in this Plan or in the agreement evidencing
any Award to a provision of law or to a rule or regulation shall be deemed to
include any successor law, rule or regulation of similar effect or
applicability.
A-11
<PAGE> 44
[MAP OF DIRECTIONS TO SHAREHOLDERS' MEETING]
<PAGE> 45
[LOGO] FLUOR CORPORATION
PROXY/VOTING INSTRUCTION CARD SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OF THE COMPANY FOR THE ANNUAL MEETING MARCH 9, 1999
The undersigned, a shareholder of FLUOR CORPORATION, a Delaware
corporation, acknowledges receipt of a Notice of Annual Meeting of Shareholders,
the accompanying Proxy Statement and the Annual Report to Shareholders for the
year ended October 31, 1998; and, revoking any proxy previously given, hereby
constitutes and appoints J.C. Stein, James O. Rollans and L.N. Fisher, and each
of them, the true and lawful agents and proxies of the undersigned with full
power of substitution in each, to vote the shares of Common Stock of FLUOR
CORPORATION standing in the name of the undersigned at the Annual Meeting of
Shareholders of FLUOR CORPORATION, on Tuesday, March 9, 1999 at 9:00 A.M., and
at any adjournment or postponement thereof with respect to the proposals listed
on the reverse side.
THIS PROXY/VOTING INSTRUCTION CARD WHEN PROPERLY EXECUTED WILL BE VOTED IN
THE MANNER DIRECTED HEREBY BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY/VOTING INSTRUCTION CARD WILL BE VOTED FOR THE NOMINEES LISTED
ON THE REVERSE, FOR PROPOSAL 2 AND FOR PROPOSAL 3. IF YOU HAVE A BENEFICIAL
INTEREST IN SHARES HELD BY A 401(K) PLAN SPONSORED BY FLUOR CORPORATION OR A
SUBSIDIARY, SUCH AS THE FLUOR CORPORATION SALARIED EMPLOYEES' SAVINGS INVESTMENT
PLAN, THEN THIS CARD ALSO CONSTITUTES YOUR VOTING INSTRUCTIONS TO THE TRUSTEE OF
SUCH PLAN AND IF YOU DO NOT SIGN AND RETURN THIS CARD, OR ATTEND THE MEETING AND
VOTE BY BALLOT, SUCH SHARES WILL BE VOTED BY THE TRUSTEE IN THE SAME MANNER AND
IN THE SAME PROPORTION AS THE SHARES FOR WHICH THE TRUSTEE RECEIVES VALID VOTING
INSTRUCTIONS.
- --------------------------------------------------------------------------------
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS BOX ON REVERSE SIDE.
(continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
[LOGO] FLUOR CORPORATION
1999 Annual Meeting of Shareholders
March 9, 1999
You are cordially invited to attend the 1999 Annual Meeting of Shareholders
which will be held on Tuesday, March 9, 1999, beginning at 9:00 a.m. at:
The Hyatt Regency Hotel
17900 Jamboree Road
Irvine, California
A map is included on the last page of the Notice of Annual Meeting.
ADMITTANCE TICKET
This ticket entitles you, the shareholder, and one guest to attend the
1999 Annual Meeting. Please bring it with you. Only shareholders
and their guests will be admitted. We look forward to
welcoming you on Tuesday, March 9.
<PAGE> 46
- --------------------------------------------------------------------------------
THIS PROXY/VOTING INSTRUCTION CARD WILL BE VOTED AS DIRECTED. UNLESS OTHERWISE
DIRECTED, THIS PROXY/VOTING INSTRUCTION CARD WILL BE VOTED FOR THE ELECTION OF
THE FOUR NOMINEES, FOR PROPOSAL 2 AND FOR PROPOSAL 3.
Please mark
your votes as [X]
indicated in
this sample
- --------------------------------------------------------------------------------
The Board of Directors recommends that you vote FOR the nominees on Proposal 1
and FOR Proposal 2 and Proposal 3.
- --------------------------------------------------------------------------------
1. Election of Class III Directors: Don L. Blankenship, Peter J. Fluor, Bobby R.
Inman and James O. Rollans
<TABLE>
<S> <C> <C>
FOR all nominees listed WITHHOLD AUTHORITY INSTRUCTIONS: To withhold
(except as marked to (to vote for all authority to vote for any individual
the contrary) nominees listed) nominee, strike a line through the
[ ] [ ] nominee's name in the list above.
</TABLE>
- --------------------------------------------------------------------------------
2. Ratification of the appointment of Ernst & Young LLP as auditors for 1999.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------
3. Approval of Fluor Corporation 1999 Executive Performance Incentive Plan 4. In their discretion the Proxies are
authorized to vote upon such other business
FOR AGAINST ABSTAIN as may properly come before the meeting and
[ ] [ ] [ ] any and all postponements or adjournments
thereof.
</TABLE>
- --------------------------------------------------------------------------------
COMMENTS/ADDRESS CHANGE I Plan to
Please mark the box if you have [ ] Attend [ ]
written comments or an address Meeting
change on the reverse side
- --------------------------------------------------------------------------------
***IF YOU WISH TO VOTE BY
TELEPHONE, PLEASE READ THE
INSTRUCTIONS BELOW***
- --------------------------------------------------------------------------------
Signature_____________________ Signature______________________ Date ____________
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. Corporations and partnerships should sign in full corporate
or partnership name by an authorized officer.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE*
<PAGE> 47
*VOTE BY TELEPHONE*
QUICK *** EASY *** IMMEDIATE
Your telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
* You will be asked to enter a Control Number which is located in the box in the
lower right hand corner of this form.
- --------------------------------------------------------------------------------
OPTION #1: To vote as the Board of Directors recommends on ALL proposals:
Press 1.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
When asked, please confirm your vote by Pressing 1.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OPTION #2: If you choose to vote on each proposal separately, press 0. You will
hear these instructions:
- --------------------------------------------------------------------------------
Proposal 1: To vote FOR ALL nominees, press 1; to WITHHOLD FOR ALL
nominees, press 9. To withhold FOR AN INDIVIDUAL nominee,
press 0 and listen to the instructions.
Proposal 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0.
The instructions are the same for all remaining proposals.
When asked, please confirm your vote by Pressing 1.
- --------------------------------------------------------------------------------
PLEASE DO NOT RETURN THE ABOVE PROXY CARD IF VOTED BY PHONE.
- --------------------------------------------------------------------------------
Thank you for voting.
3"
------------------------------------------------------
------------------------------------------------------
<TABLE>
<S> <C> <C>
Call ** Toll Free ** On a Touch Tone Telephone CONTROL NUMBER
1-800-840-1208 - ANYTIME --------------------------
There is NO CHARGE to you for this call. 1 1/2" 123 456 789 12
--------------------------
THIS AREA TO BE LEFT BLANK
CMSS TO IMPRINT CONTROL
NUMBER
------------------------------------------------------
</TABLE>
