Finally released! Below is the Master Separation Agreement between KBR and Halliburton from RealDealDocs.com the supplier of hundreds of legal documents from confidentiality agreements to employment agreements and much, much more.
EXHIBIT 10.1
MASTER SEPARATION AGREEMENT
BETWEEN
HALLIBURTON COMPANY
AND
KBR, INC.
Dated as of November 20, 2006
TABLE OF CONTENTS
|
|
|
| ARTICLE I DEFINITIONS |
1 |
|
|
| ARTICLE II SEPARATION AND RELATED TRANSACTIONS |
15 |
|
|
|
| 2.1 |
Separation Date; Separation Time |
15 |
| 2.2 |
Instruments of Transfer and Assumption |
16 |
| 2.3 |
Ancillary Agreements |
16 |
| 2.4 |
Performance of Non-Novated Contracts |
17 |
| 2.5 |
Other Matters |
17 |
|
|
| ARTICLE III MUTUAL RELEASES; INDEMNIFICATION |
18 |
|
|
|
| 3.1 |
Mutual Release of Pre-IPO Closing Date Claims |
18 |
| 3.2 |
Indemnification by KBR |
19 |
| 3.3 |
Indemnification by Halliburton |
20 |
| 3.4 |
Indemnifications Relating to FCPA Subject Matters |
21 |
| 3.5 |
Indemnifications Relating to Barracuda-Caratinga Project |
26 |
| 3.6 |
Indemnification Obligations Net of Insurance Proceeds and Other Amounts |
28 |
| 3.7 |
Procedures for Indemnification of Third Party Claims |
29 |
| 3.8 |
Additional Matters |
30 |
| 3.9 |
Remedies Cumulative |
31 |
| 3.10 |
Survival of Indemnities |
31 |
| 3.11 |
Indemnification of Directors and Officers |
31 |
| 3.12 |
Mitigation of Damages |
31 |
|
|
| ARTICLE IV THE IPO AND ACTIONS PENDING THE IPO |
31 |
|
|
|
| 4.1 |
Transactions Prior to the IPO |
31 |
| 4.2 |
Use of Proceeds |
32 |
| 4.3 |
Cooperation for IPO |
32 |
| 4.4 |
Conditions Precedent to Consummation of the IPO |
32 |
|
|
| ARTICLE V CORPORATE GOVERNANCE AND OTHER MATTERS |
34 |
|
|
|
| 5.1 |
Charter and Bylaws |
34 |
| 5.2 |
KBR Board Representation |
34 |
| 5.3 |
Committees |
36 |
| 5.4 |
Subscription Right. |
36 |
| 5.5 |
Issuance of Stock |
38 |
| 5.6 |
Settlement of KBR Benefit Plan Awards |
38 |
| 5.7 |
Applicability of Rights to Parent in the Event of an Acquisition |
39 |
| 5.8 |
Transfer of Halliburton’s Rights Under Article V |
39 |
| 5.9 |
Restricted Opportunities Under KBR Charter |
39 |
|
|
| ARTICLE VI SUBSEQUENT TRANSACTION |
40 |
|
|
|
| 6.1 |
Sole Discretion of Halliburton |
40 |
| 6.2 |
Cooperation for Halliburton Transfers |
40 |
|
|
|
| 6.3 |
Cooperation for Halliburton Distribution |
40 |
| 6.4 |
Registration Rights Agreement |
41 |
|
|
| ARTICLE VII ARBITRATION; DISPUTE RESOLUTION |
41 |
|
|
|
| 7.1 |
Agreement to Arbitrate |
41 |
| 7.2 |
Escalation |
42 |
| 7.3 |
Demand for Arbitration |
42 |
| 7.4 |
Arbitrators |
43 |
| 7.5 |
Hearings |
43 |
| 7.6 |
Discovery and Certain Other Matters |
44 |
| 7.7 |
Certain Additional Matters |
45 |
| 7.8 |
Continuity of Service and Performance |
45 |
| 7.9 |
Law Governing Arbitration Procedures |
45 |
|
|
| ARTICLE VIII COVENANTS AND OTHER MATTERS |
46 |
|
|
|
| 8.1 |
Other Agreements |
46 |
| 8.2 |
Further Instruments |
46 |
| 8.3 |
Provision of Corporate Records |
46 |
| 8.4 |
Agreement For Exchange of Information |
47 |
| 8.5 |
Auditors and Audits; Annual and Quarterly Statements and Accounting |
49 |
| 8.6 |
Audit Rights |
52 |
| 8.7 |
Preservation of Legal Privileges |
52 |
| 8.8 |
Payment of Expenses |
53 |
| 8.9 |
Governmental Approvals |
53 |
| 8.10 |
Continuance of Halliburton Credit Support |
53 |
| 8.11 |
Confidentiality |
56 |
| 8.12 |
Receipt of Notices |
57 |
| 8.13 |
Non Solicitation of Employees |
58 |
| 8.14 |
Halliburton Policies and Procedures |
58 |
| 8.15 |
Antitrust Matters |
59 |
| 8.16 |
Cooperation for Litigation |
60 |
| 8.17 |
Performance Standard |
60 |
|
|
| ARTICLE IX MISCELLANEOUS |
60 |
|
|
|
| 9.1 |
Limitation of Liability |
60 |
| 9.2 |
Conflicting Agreements; Entire Agreement |
60 |
| 9.3 |
Governing Law |
61 |
| 9.4 |
Termination |
61 |
| 9.5 |
Notices |
61 |
| 9.6 |
Counterparts |
62 |
| 9.7 |
No Third Party Beneficiaries; Assignment |
62 |
| 9.8 |
Severability |
62 |
| 9.9 |
Failure or Indulgence Not Waiver; Remedies Cumulative |
62 |
| 9.10 |
Amendment |
62 |
| 9.11 |
Authority |
62 |
| 9.12 |
Interpretation |
63 |
MASTER SEPARATION AGREEMENT
THIS MASTER SEPARATION AGREEMENT (this “Agreementâ€) is entered into as of November 20, 2006 by and between Halliburton Company, a Delaware corporation (“Halliburtonâ€), and KBR, Inc., a Delaware corporation (“KBRâ€). Capitalized terms used herein and not otherwise defined shall have the meanings set forth in Article I hereof.
RECITALS
WHEREAS, KBR is an indirect wholly-owned subsidiary of Halliburton;
WHEREAS, KBR, together with its direct and indirect U.S. and foreign subsidiaries, provides a wide range of services, including global engineering, procurement, construction, technology and other services, to energy and industrial customers and government entities worldwide;
WHEREAS, the Board of Directors of Halliburton has determined that it is appropriate and desirable, on the terms and conditions contemplated hereby, to initiate the separation of the KBR Group from the Halliburton Group, and has approved this Agreement and the transactions contemplated hereby;
WHEREAS, Halliburton currently contemplates that KBR will effect an initial public offering (“IPOâ€) of less than 20% of the shares of KBR Common Stock pursuant to a registration statement on Form S-1 filed with the Commission pursuant to the Securities Act;
WHEREAS, the parties intend to set forth in this Agreement, including the Schedules hereto and the Ancillary Agreements contemplated hereby, the principal arrangements between and among them and the members of their respective Groups regarding the separation of the KBR Group from the Halliburton Group, the IPO and certain future transactions.
NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms used in this Agreement are defined as set forth below or in the sections indicated, as applicable:
“AAA†has the meaning set forth in Section 7.4.
“Action†means any demand, action, suit, countersuit, arbitration, inquiry, proceeding or investigation by or before any federal, state, local, foreign or international Governmental Authority or any arbitration or mediation tribunal.
An “Affiliate†of any Person means another Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. For this purpose “control†means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the Person controlled, whether through ownership of voting securities, by contract or otherwise. Notwithstanding anything herein to the contrary, no member of the KBR Group shall be deemed to be an Affiliate of any member of the Halliburton Group, and no member of the Halliburton Group shall be deemed to be an Affiliate of any member of the KBR Group.
“Agreement†has the meaning given such term in the Preamble.
“Ancillary Agreements†has the meaning set forth in Section 2.3.
“Antitrust Matters†are alleged or actual violations of antitrust, competition or other applicable Law that occurred prior to the date of this Agreement relating to investigations by the DOJ or other Governmental Authorities into whether in the conduct of the KBR Business (including, without limitation, conduct by a member of the KBR Group or its current or former directors, officers, employees, agents or representatives) coordinated bidding with one or more competitors on projects occurred, as described under the heading “Bidding practices investigation†in Note 12 of the condensed consolidated financial statements included in the Halliburton Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.
“Applicable FCPA Law†means (a) the Council of Europe Criminal Law Convention on Corruption entered into force July 1, 2002, (b) Council of Europe Civil Law Convention on Corruption entered into force November 1, 2003, (c) Organization of American States Inter-American Convention against Corruption adopted on March 29, 1996, (d) African Union Convention on Preventing and Combating Corruption adopted July 11, 2003, (e) United Nations Convention against Corruption adopted October 31, 2003, (f) OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions adopted November 21, 1997, (g) the FCPA and (h) any and all implementing legislation in respect of clauses (a) through (g) above, including, without limitation, any laws, statutes, regulations and rules issued by any Governmental Authority of similar purpose and scope.
“Applicable Deadline†has the meaning set forth in Section 7.3.
“Arbitration Demand Date†has the meaning set forth in Section 7.3.
“Arbitration Demand Notice†has the meaning set forth in Section 7.3.
“Barracuda-Caratinga Bolts Matter†means threatened, pending or future claims against any KBR B-C Indemnitee by Barracuda & Caratinga Leasing Company B.V. and/or Petrobras or its Affiliates, and threatened, pending or future claims by any KBR B-C Indemnitee against Barracuda & Caratinga Leasing Company B.V. and/or Petrobras or its Affiliates, arising out of the subsea flow-line bolts installed in connection with the Barracuda-Caratinga Project.
“Barracuda-Caratinga Project†means the turnkey engineering, procurement and construction contract, dated as of June 30, 2000, as amended, and related agreements by and among members of the KBR Group, Barracuda & Caratinga Leasing Company B.V., Petrobras or its Affiliates relating to the development of the Barracuda and Caratinga oilfields located in the Campos Basin offshore of Brazil.
“best efforts†means a Person’s good faith best efforts to achieve such goal as expeditiously as possible, which may require the incurrence of expense or hardship in order to achieve the reasonable expectations of the parties as agreed hereunder.
“Business Day†means a day other than a Saturday, a Sunday or a day on which banking institutions located in the State of Texas are authorized or obligated by law or executive order to close.
“Code†means the Internal Revenue Code of 1986, as amended, or any successor statute.
“Commission†means the U.S. Securities and Exchange Commission.
“Confidential Information†has the meaning set forth in Section 8.11.
“Credit Support Agreements†means any and all surety bonds, letters of credit, reimbursement agreements, surety contracts, performance guarantees, financial guarantees, indemnities and other credit support instruments and agreements relating to or for the benefit of the KBR Business or a customer or lender thereof for which a member of the Halliburton Group is a primary obligor, secondary obligor, guarantor, indemnitor, account party or otherwise may become liable (i) entered into or obtained prior to the Separation Date and (ii) entered into or obtained following the Separation Date as provided under Section 8.10(b) hereof or at Halliburton’s sole discretion. Non-exclusive lists of certain Credit Support Agreements are set forth on Schedule C-1 (Surety Bonds and Related Indemnity Agreements), Schedule C-2 (Letters of Credit and Related Reimbursement Agreements), Schedule C-3 (Performance and Financial Guarantees) and Schedule C-4 (Other Credit Support Agreements).
“Current Investigations†means the investigations ongoing as of the date hereof by (a) the DOJ, (b) the Commission, (c) the Tribunal de Grande Instance de Paris (investigation number: 25/03 and Public Prosecution Service ID: P 02/29192509) in the French Republic, (d) the Serious Frauds Office in the United Kingdom, (e) officials at the Federal Police Office (proceeding B 0152492 BOT) of the Swiss Confederation, (f) the Economic and Financial Crimes Commission, an agency of the executive branch of the government of the Federal Republic of Nigeria, (g) the Committee on Public Petitions of the House of Representatives of the Federal Republic of Nigeria, and (h) a public prosecutor or an investigating judge in the People’s Democratic Republic of Algeria with respect to contracts awarded to Brown & Root - Condor Spa.
“Disposition†means any resolution or termination of any Proceeding, whether adjudicated or consensual.
“Distribution†means a tax-free distribution under Section 355 of the Code or any corresponding provision of any successor statute of all or any portion of the KBR Common Stock beneficially owned by Halliburton to Halliburton stockholders by way of a dividend, exchange or otherwise.
“DOJ†means the United States Department of Justice.
“Employee Matters Agreement†means the Employee Matters Agreement dated the date hereof between Halliburton and KBR.
“Environmental Law†means any and all Laws or determinations of any Governmental Authority (including common law duties established by courts or other Governmental Authorities) pertaining to pollution or the protection of human health, the environment, natural resources or plant or animal species including Laws relating to emissions, discharges, releases or threatened releases of pollutants, contaminants or chemical, industrial, hazardous, radioactive, or toxic materials or wastes into ambient or indoor air, surface water, ground water or lands or otherwise relating to the manufacture, processing, distribution (including the sale or marketing of goods containing), use, treatment, storage, disposal, transportation or handling of pollutants, contaminants or chemical, industrial, hazardous. radioactive, or toxic materials or wastes, in any jurisdiction, federal, state, local or foreign, in which the Halliburton Business or KBR Business is or has operated; including, without limitation, in United States jurisdictions the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq. (“CERCLAâ€), the Superfund Amendments Reauthorization Act, 42 U.S.C. Section 11001 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Federal Water Pollution Control Act, 33 U.S.C. Section 1251 et seq., the Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., and the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq., other similar state or local laws or laws or decrees in non-U.S. jurisdictions, and all other environmental conservation and protection laws, both foreign and domestic, and any applicable state or local statutes, and the regulations promulgated thereto, as each has been and may be amended and supplemented from time to time, provided, however, that Environmental Laws shall not include Laws pertaining primarily to workplace safety, such as the Occupational Safety and Health Act, except to the extent such Laws govern environmental conditions, including the management of asbestos-containing materials, or employee exposure or potential exposure to pollutants, contaminants or chemical, industrial, hazardous, radioactive, or toxic materials or wastes.
“Escalation Notice†has the meaning set forth in Section 7.2.
“Excess Director Number†has the meaning set forth in Section 5.2.
“Exchange Act†means the Securities Exchange Act of 1934, as amended, or any successor statute.
“Existing Authority†has the meaning set forth in Section 8.9.
“FCPA†means the United States Foreign Corrupt Practices Act of 1977, as amended.
“FCPA Subject Matters†are alleged or actual violations of the FCPA or other Applicable FCPA Law that occurred prior to the date of this Agreement in the conduct of the KBR Business (including, without limitation, conduct by a member of the KBR Group or its current or former directors, officers, employees, agents or representatives) in connection with (a) the construction and subsequent expansion by TSKJ of a natural gas liquefaction complex and related facilities at Bonny Island in Rivers State, Nigeria or (b) such other projects, whether located inside or outside of Nigeria, in each case including without limitation the use of agents in connection with such projects, that are identified by Governmental Authorities of the United States, France, the United Kingdom, Switzerland, Nigeria or Algeria in connection with the Current Investigations and the continuation of such Current Investigations after the date hereof.
“Governmental Approvals†means any notices, reports or other filings to be made, or any consents, registrations, approvals, permits or authorizations to be obtained from, any Governmental Authority.
“Governmental Authority†means any nation or government, any state, province, city, municipal entity or other political subdivision thereof, and any governmental, executive, legislative, judicial, administrative or regulatory agency, department, authority, instrumentality, commission, board, bureau or similar body, whether federal, state, provincial, territorial, local or foreign.
“Governmental FCPA Claim†means a claim, whether civil or criminal, made by any Governmental Authority of the United States, France, the United Kingdom, Switzerland, Nigeria or Algeria, or by a court of competent jurisdiction therein relating to the FCPA Subject Matters.
“Group†means either the Halliburton Group or the KBR Group, as the context requires.
“Halliburton†has the meaning given such term in the Preamble.
“Halliburton’s Auditors†means Halliburton’s independent certified public accountants.
“Halliburton Books and Records†means originals or true and complete copies thereof, including electronic copies (if available) of (a) minute books, corporate charters and bylaws or comparable constitutive documents, records of share issuances and related corporate records, of the Halliburton Group; (b) all books and records primarily relating to (i) Persons who are employees of the Halliburton Group as of the Separation Date, (ii) the purchase of materials, supplies and services for the Halliburton Business and (iii) dealings with customers of the Halliburton Business; and (c) all files relating to any Action the Liability with respect to which is a Halliburton Liability.
“Halliburton Business†means any business of the Halliburton Group (whether conducted independently or in association with one or more third parties through a partnership, joint venture or other mutual enterprise) other than the KBR Business, including without limitation the Non-Novated ESG Contracts. The parties intend that each member of the KBR Group which is party to a Non-Novated ESG Contract shall remain a party thereto following the Separation, and the parties hereby agree that each Non-Novated ESG Contract shall be considered to be part of the Halliburton Business for all purposes under this Agreement.
“Halliburton Cash Management Note†means the promissory note dated as of December 1, 2005 made by Halliburton Energy Services, Inc. to KBR Holdings, LLC.
“Halliburton Designee†has the meaning set forth in Section 5.2.
“Halliburton Environmental Liabilities†means all Liabilities arising under or relating to Environmental Law to the extent, as between the Halliburton Group and the KBR Group, such Liabilities relate to, arise out of or result from: (a) the ownership, operation or conduct of the Halliburton Business at any time prior to, on or after the Separation Time except for those Liabilities included in clause (ii) of the definition of “KBR Environmental Liabilities†below, or (b) any properties or assets owned, leased, used or held for use in connection with any terminated, divested or discontinued business or other activities which, at the time of such termination, divestiture or discontinuation, related to the Halliburton Business as then conducted. It is understood that, consistent with the foregoing, Halliburton Environmental Liabilities shall include without limitation all Liabilities arising under or relating to Environmental Law attributable to (1) investigation or remediation activities involving the sites listed on Part 1 of the attached Schedule D; and (2) the transportation, treatment, storage, or disposal of waste generated by the operations of members of the Halliburton Group, including liability under CERCLA or a comparable law allocated by the applicable Governmental Authority or potentially responsible party group, as appropriate, to members of the Halliburton Group, which shall include the liability ultimately allocated to members of the Halliburton Group at the sites listed on Part 2 of Schedule D.
“Halliburton Group†means Halliburton, each current and former subsidiary of Halliburton (other than any member of the KBR Group), including the subsidiaries set forth in Schedule A, and each Person that becomes a subsidiary of Halliburton after the Separation Time.
“Halliburton Indemnified Barracuda-Caratinga Matters†has the meaning set forth in Section 3.5.
“Halliburton Indemnified FCPA Matters†has the meaning set forth in Section 3.4.
“Halliburton Indemnitees†has the meaning set forth in Section 3.2.
“Halliburton Liabilities†shall mean (a) any and all Liabilities that are expressly contemplated by a Prior Transfer Agreement, this Agreement or any Ancillary Agreement as Liabilities to be retained or assumed by Halliburton or any other member of the Halliburton Group, (b) all agreements, obligations and Liabilities of any member of the Halliburton Group under a Prior Transfer Agreement, this Agreement or any of the Ancillary Agreements, (c) any liability arising under or relating to a claim made against Halliburton by a Halliburton stockholder in its capacity as such other than a claim for which KBR and the KBR Group have agreed to indemnify Halliburton and the Halliburton Group pursuant to Section 3.2(f) hereof and (d) any Liability of any member of the Halliburton Group other than the KBR Liabilities.
“Halliburton Transferee†has the meaning set forth in Section 5.7.
“Indebtedness†of any Person means (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person, (e) all obligations of such Person issued or assumed as the deferred purchase price of property or services, (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, or other encumbrance on property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (g) all guarantees by such Person of Indebtedness of others, (h) all capital lease obligations of such Person and (i) all securities or other similar instruments convertible or exchangeable into any of the foregoing, but excluding daily cash overdrafts associated with routine cash operations.
“Indemnifying Party†has the meaning set forth in Section 3.6.
“Indemnitee†shall have the meaning set forth in Section 3.6.
“Indemnity Payment†has the meaning set forth in Section 3.6.
“Information†means information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), and other technical, financial, employee or business information or data, but excluding the Halliburton Books and Records and the KBR Books and Records.
“Insurance Proceeds†means those monies:
(a) received by an insured from an insurance carrier; or
(b) paid by an insurance carrier on behalf of the insured;
in any such case net of any applicable premium adjustments (including reserves and retrospectively rated premium adjustments) and net of any costs or expenses (including allocated costs of in-house counsel and other personnel) incurred in the collection thereof.
“Intercompany Note†means the promissory note dated as of December 1, 2005 made by KBR Holdings, LLC to Halliburton Energy Services, Inc. in an amount not to exceed $489 million.
“Intellectual Property Matters Agreement†means the Intellectual Property Matters Agreement dated the date hereof between Halliburton and KBR.
“IPO†has the meaning given such term in the Recitals.
“IPO Closing Date†means the first date on which the proceeds of any sale of KBR Common Stock to the Underwriters are received.
“IPO Prospectus†means the prospectus included in the IPO Registration Statement, including any prospectus subject to completion, final prospectus or any supplement to or amendment of any of the foregoing.
“IPO Registration Statement†means the Registration Statement on Form S-1 (Registration No. 333-133302) of KBR filed with the Commission pursuant to the Securities Act, registering the shares of KBR Common Stock to be issued in the IPO, together with all amendments thereto.
“Issuance Event†has the meaning set forth in Section 5.4.
“Issuance Event Date†has the meaning set forth in Section 5.4.
“KBR†has the meaning given such term in the Preamble.
“KBR Auditors†means KBR’s independent certified public accountants.
“KBR Balance Sheets†means (a) the KBR Holdings, LLC Consolidated Balance Sheet as of December 31, 2005 and (b) the KBR Holdings, LLC Consolidated Balance Sheet as of September 30, 2006.
“KBR B-C Indemnitees†shall mean KBR and its Majority Owned Subsidiaries as of the date hereof.
“KBR Books and Records†means originals or true and complete copies thereof, including electronic copies (if available), of (a) all minute books, corporate charters and bylaws or comparable constitutive documents, records of share issuances and related corporate records of the KBR Group; (b) all books and records primarily relating to (i) Persons who are employees of the KBR Group as of the Separation Date, (ii) the purchase of materials, supplies and services for the KBR Business and (iii) dealings with customers of the KBR Business; and (c) all files relating to any Action the Liability with respect to which is a KBR Liability; except that no portion of the Halliburton Books and Records shall be included in the “KBR Books and Records.â€
“KBR Business†means (a) the business and operations conducted by KBR and the members of the KBR Group (whether conducted independently or in association with one or more third parties through a partnership, joint venture or other mutual enterprise) prior to, on and after the Separation Time, including without limitation the following global engineering, procurement, construction, technology and other services provided to energy and industrial customers and government entities worldwide as conducted by the Energy and Chemicals and the Government and Infrastructure segments of Halliburton (such segments as referenced in the Halliburton Form 10-K for the year ended December 31, 2005) prior to the Separation:
(i) construction, maintenance and logistics services for government operations, facilities and installations;
(ii) civil engineering, construction, consulting and project management services for state and local government agencies and private industries;
(iii) integrated security solutions, including threat definition assessments, mitigation and consequence management; design, engineering and program management; construction and delivery; and physical security, operations and maintenance;
(iv) dockyard operation and management, with services that include design, construction, surface/subsurface fleet maintenance, nuclear engineering and refueling, and weapons engineering;
(v) privately financed initiatives such as a facility, service or infrastructure for a government client, and the ownership, operation and maintenance of same;
(vi) downstream engineering and construction capabilities, including global engineering execution centers, as well as engineering, construction and program management of liquefied natural gas, ammonia, petrochemicals, crude oil refineries and natural gas plants;
(vii) upstream oil and gas engineering, marine technology and project management;
(viii) operations, maintenance and start-up services to the oil and gas, petrochemical, forest product, power and commercial markets;
(ix) technology licensing in the areas of fertilizers and synthesis gas, olefins, refining and chemicals and polymers;
(x) consulting services in the form of expert technical and management advice that includes studies, conceptual and detailed engineering, project management, construction supervision and design, and construction verification or certification in upstream, midstream and downstream markets;
(xi) effective from and after April 11, 2006, the business and operations of MMM-SS Holdings, LLC and its subsidiaries MMM S.R.L. de C.V., AGRH S.R. L. de C.V. and CCC Cayman Ltd.; and
(xii) the Non-Novated KBR Contracts. The parties intend that each member of the Halliburton Group which is party to a Non-Novated KBR Contract shall remain a party thereto following the Separation, and the parties hereby agree that each Non-Novated KBR Contract shall be considered to be part of the KBR Business for all purposes under this Agreement;
and (b) except as otherwise specifically provided herein, any terminated, divested or discontinued business or operations that at the time of such termination, divestiture or discontinuation related primarily to the KBR Business as then conducted.
“KBR Cash Management Note†means the promissory note dated as of December 1, 2005 made by KBR Holdings, LLC to Halliburton Company and Halliburton Energy Services, Inc.
“KBR Charter†means the Amended and Restated Certificate of Incorporation of KBR as in effect on the date hereof.
“KBR Common Stock†means Common Stock, par value $0.001 per share, of KBR.
“KBR Credit Agreement†means the $850 million Five Year Revolving Credit Agreement dated as of December 16, 2005 among KBR Holdings, LLC, as borrower, and the issuing banks named therein, as amended by Amendment No. 1 dated April 13, 2006 and Amendment No. 2 dated October 31, 2006, and as further amended from time to time.
“KBR Debt Obligations†means all Indebtedness of KBR or any other member of the KBR Group, including without limitation the Intercompany Note but excluding all Indebtedness of any member of the Halliburton Group to the extent it constitutes Indebtedness of KBR by virtue of clause (f) or clause (g) of the definition of Indebtedness. KBR Debt Obligations shall include, as of the date of the most recent balance sheet of KBR Holdings, LLC included in the IPO Prospectus, the Indebtedness of KBR Holdings, LLC reflected on such balance sheet.
“KBR Environmental Liabilities†means all Liabilities arising under or relating to Environmental Law to the extent, as between the Halliburton Group and the KBR Group, such Liabilities relate to, arise out of, or result from (i) the ownership, operation or conduct of the KBR Business at any time prior to, on or after the Separation Time except for those Liabilities included in clause (b) of the definition of “Halliburton Environmental Liabilities†above, or (ii) any properties or assets owned, leased, used or held for use in connection with any terminated, divested or discontinued business or other activities which, at the time of such termination, divestiture or discontinuation, related to the KBR Business as then conducted. It is understood that, consistent with the foregoing, KBR Environmental Liabilities shall include without limitation all Liabilities arising under or relating to Environmental Law attributable to (1) investigation or remediation activities involving the sites listed on Part 1 of the attached Schedule E; and (2) the transportation, treatment, storage, or disposal of waste generated by the operations of members of the KBR Group, including liability under CERCLA or a comparable law allocated by the applicable Governmental Authority or potentially responsible party group, as appropriate, to members of the KBR Group, which shall include the liability ultimately allocated to members of the KBR Group at the sites listed on Part 2 of Schedule E.
“KBR FCPA Indemnitees†shall mean KBR and its Majority Owned Subsidiaries as of the date hereof.
“KBR Group†means KBR, each current and former subsidiary of KBR, including the subsidiaries set forth in Schedule B, and each Person that becomes a subsidiary of KBR after the Separation Time.
“KBR Indemnitees†has the meaning assigned to that term in Section 3.3.
“KBR Liabilities†shall mean (without duplication):
(i) any and all Liabilities that are expressly contemplated by a Prior Transfer Agreement, this Agreement or any Ancillary Agreement to be assumed by KBR or any member of the KBR Group, and all agreements, obligations and Liabilities of any member of the KBR Group under a Prior Transfer Agreement, this Agreement or any of the Ancillary Agreements;
(ii) all Liabilities (other than Taxes that are not treated as liabilities of KBR under the Tax Sharing Agreement) primarily relating to, arising out of or resulting from the operation of the KBR Business, as conducted at any time prior to, on or after the Separation Time including, without limitation:
(A) any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative of KBR (whether or not such act or failure to act is or was within such Person’s authority);
(B) any KBR Environmental Liabilities;
(C) liabilities primarily relating to, arising out of or resulting from any KBR Assets;
(D) the KBR Debt Obligations; and
(E) any liability arising under or relating to a claim made against KBR by a KBR stockholder in its capacity as such (other than Halliburton) other than a claim for which Halliburton and the Halliburton Group have agreed to indemnify KBR and the KBR Group pursuant to Section 3.3(f) hereof; and
(iii) all Liabilities reflected as liabilities or obligations of KBR in the KBR Balance Sheets, subject to any discharge of such Liabilities subsequent to the date of such KBR Balance Sheets.
Notwithstanding the foregoing, the KBR Liabilities shall not include the Halliburton Liabilities.
“KBR Non-Voting Stock†means any class or series of KBR capital stock, and any warrant, option or right in such stock, other than KBR Voting Stock.
“KBR Voting Stock†means the KBR Common Stock and any other capital stock of KBR entitled to vote generally in the election of directors but excluding any class or series of capital stock only entitled to vote in the event of dividend arrearages thereon, whether or not at the time of determination there are any such dividend arrearages.
“Law†means any law, statute, ordinance, rule, regulation, order, writ, judgment, injunction or decree of any Governmental Authority.
“Liabilities†shall mean any and all Indebtedness, liabilities and obligations of any nature, whether accrued, fixed or contingent, mature or inchoate, known or unknown, reflected on a balance sheet or otherwise, including, but not limited to, those arising under any law, rule, regulation, Action, order, injunction or consent decree of any Governmental Authority or any judgment of any court of any kind or any award of any arbitrator of any kind, and those arising under any contract, commitment or undertaking.
“Losses†shall mean any and all damages, losses, deficiencies, Liabilities, obligations, penalties, judgments, settlements, claims, payments, fines, interest costs and expenses (including, without limitation, the costs and expenses of any and all Actions and demands, assessments, judgments, settlements and compromises relating thereto, and attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense thereof or the enforcement of rights hereunder), excluding losses that are special, indirect, derivative or consequential, lost profits or punitive damages (other than punitive damages awarded to any third party against an Indemnified Party).
“Majority Owned Subsidiary†of any Person means any corporation (including a business trust), partnership, joint stock company, trust, unincorporated association, joint venture or other entity of which more than 50% of the outstanding capital stock, securities or other ownership interests having ordinary voting power to elect directors of such corporation or, in the case of any other entity, other persons performing similar functions (irrespective of whether or not at the time capital stock, securities or other ownership interests of any other class or classes of such corporation or such other entity shall or might have voting power upon the occurrence of any contingency) is, as of the date hereof, directly or indirectly owned by such Person, by such Person and one or more other subsidiaries of such Person or by one or more other subsidiaries of such Person.
“Market Price†of any shares of KBR Voting Stock or KBR Non-Voting Stock on any date means (i) the last sale price during regular trading hours of such shares on such date on the New York Stock Exchange, Inc. or, if such shares are not listed thereon, on the principal national securities exchange or automated interdealer quotation system on which such shares are traded; or (ii) if such sale price is unavailable or such shares are not so traded, the value of such shares on such date determined in accordance with agreed-upon procedures reasonably satisfactory to Halliburton and KBR.
“Non-Novated ESG Contracts†means those contracts and other agreements entered into by the Energy Services Group segments of Halliburton (such segments as referenced in the Halliburton Form 10-K for the year ended December 31, 2005) prior to the Separation Date for which a member of the KBR Group is a signator or contract party, including without limitation certain contracts entered into by Kellogg Brown & Root LLC (and its predecessor), Kellogg Brown & Root Limited, Rockwell B.V., Kellogg Brown & Root International, Inc., Halliburton AS, Asian Marine Contractors Limited, KBR Overseas, Inc., Breswater Marine Contracting B.V., Corporación Mexicana de Mantenimiento Integral, S. de R.L. de C.V., PT KBR Indonesia and Halliburton Australia Pty. Ltd. (B&R Div.). A non-exclusive list of outstanding contract jobs associated with the Non-Novated ESG Contracts is set forth on Schedule G hereto.
“Non-Novated KBR Contracts†means those contracts and other agreements entered into by the Energy and Chemicals or the Government and Infrastructure segments of Halliburton (such segments as referenced in the Halliburton Form 10-K for the year ended December 31, 2005) prior to the Separation Date for which a member of the Halliburton Group is a signator or contract party, including without limitation certain contracts entered into by Servicios Professionales Petroleros, S. de R.L. de C.V., Halliburton Far East Pte Ltd., Halliburton International, Inc., Servicios Halliburton De Venezuela, S.R.L., Halliburton West Africa Ltd., Halliburton Operations Nigeria Limited and Halliburton SAS. A non-exclusive list of outstanding contract jobs associated with the Non-Novated KBR Contracts is set forth on Schedule F hereto.
“NYSE†means the New York Stock Exchange, Inc.
“Ownership Percentage†means with respect to any class or series of KBR Non-Voting Stock, at any time, the fraction, expressed as a percentage and rounded to the nearest thousandth of a percent, whose numerator is the number of shares of such class or series of KBR Non-Voting Stock beneficially owned by the Halliburton Group and whose denominator is the total number of outstanding shares of such class or series of KBR Non-Voting Stock; provided, however, that any shares of such KBR Non-Voting Stock issued by KBR in violation of its obligations under Article V of this Agreement shall not be deemed outstanding for the purpose of determining the Ownership Percentage.
“Penalty†means a fine or other monetary penalty or direct monetary damage, including disgorgement, in each case as a result of a Governmental FCPA Claim, assessed against a KBR FCPA Indemnitee or paid by a KBR FCPA Indemnitee.
“Person†means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a Governmental Authority or any department, agency or political subdivision thereof.
“Prior Transfer†means a transfer in contemplation of the Separation occurring prior to the Separation Date of any part of the KBR Business contained in the Halliburton Group to the KBR Group and an assumption in contemplation of the Separation occurring prior to the Separation Date by the KBR Group of any of the KBR Liabilities, and a transfer in contemplation of the Separation occurring prior to the Separation Date of any part of the Halliburton Business contained in the KBR Group to the Halliburton Group and an assumption in contemplation of the Separation occurring prior to the Separation Date by the Halliburton Group of any of the Halliburton Liabilities.
“Prior Transfer Agreements†means all agreements, deeds, certificates, instruments or other documents entered into by a member of the Halliburton Group or a member of the KBR Group in order to implement the Prior Transfers.
“Privilege†has the meaning set forth in Section 8.7.
“Providing Company†has the meaning set forth in Section 8.6.
“reasonable best efforts†means a Person’s good faith best efforts to achieve such goal as soon as reasonably practicable and consistent with reasonable commercial practice and without payment of any assignment, consent or similar fee requested by any person or the incurrence of unreasonable expense or hardship, and/or the requirement to engage in litigation.
“Receiving Company†has the meaning set forth in Section 8.6.
“Registration Rights Agreement†means the Registration Rights Agreement dated the date hereof between Halliburton and KBR.
“Regulatory Proceedings†shall mean filings, notices, adjudicatory proceedings, rulemakings, enforcement actions before a Governmental Authority relating to regulatory activity, any other proceedings at or before any regulatory or administrative agency, and any investigation instituted by the Audit Committee of the Board of Directors of a Party in response to or in anticipation of the foregoing. The term shall also refer to appellate activities relating to any of the foregoing, including actions seeking injunctions, writs of mandamus and appeals.
“Securities Act†means the Securities Act of 1933, as amended, or any successor statute.
“Separation†means (i) the transfer of those assets (including funds relating to the KBR Business) relating primarily to the KBR Business as conducted immediately prior to the IPO that are contained in the Halliburton Group immediately prior to the IPO to the KBR Group and the assumption by KBR and the members of the KBR Group of the KBR Liabilities, and (ii) the transfer of those assets (including funds relating to the Halliburton Business) relating primarily to the Halliburton Business as conducted immediately prior to the IPO that are contained in the KBR Group immediately prior to the IPO to the Halliburton Group and the assumption by the Halliburton Group of the Halliburton Liabilities, all as more fully described in this Agreement and the Ancillary Agreements.
“Separation Date†has the meaning set forth in Section 2.1.
“Separation Time†has the meaning set forth in Section 2.1.
“Silica Note†means the Senior Secured Note dated January 20, 2005 made jointly and severally by DII Industries, LLC and Kellogg Brown & Root LLC (as successor to Kellogg Brown & Root, Inc., a Delaware corporation) to the DII Industries, LLC Silica PI Trust.
“Subscription Right†has the meaning set forth in Section 5.4.
“Subscription Right Notice†has the meaning set forth in Section 5.4.
“Tax Sharing Agreement†means the Tax Sharing Agreement dated as of January 1, 2006 by and among Halliburton and its affiliated companies and KBR and its affiliated companies.
“Taxes†has the meaning set forth in the Tax Sharing Agreement.
“Third Party Claim†has the meaning set forth in Section 3.7.
“Third-Party FCPA Claim†means a claim resulting in a monetary judgment against a KBR FCPA Indemnitee, or a settlement in lieu thereof, to the extent relating to the FCPA Subject Matters and as a result of demands or claims made against a KBR FCPA Indemnitee by a Person other than a Governmental Authority, including without limitation by Persons who are customers of, joint venture partners in or financing parties of projects of a KBR FCPA Indemnitee.
“Transition Services Agreements†means the two Transition Services Agreements dated the date hereof between Halliburton Energy Services, Inc. and KBR.
“TSKJ†means the private limited liability company registered in Madiera, Portugal whose members are Technip, SA, Snamprogetti Netherlands B.V., JGC Corporation and Kellogg, Brown and Root.
“Underwriters†means the several underwriters of the IPO named in the Underwriting Agreement.
“Underwriting Agreement†has the meaning set forth in Section 4.1.
“Voting Percentage†means, at any time, the fraction, expressed as a percentage and rounded to the nearest thousandth of a percent, whose numerator is the number of votes entitled to be cast with respect to all of the outstanding shares of KBR Voting Stock beneficially owned by the Halliburton Group and whose denominator is the number of votes entitled to be cast with respect to all of the outstanding shares of KBR Voting Stock; provided, however, that any shares of such KBR Voting Stock issued by KBR in violation of its obligations under Article V of this Agreement shall not be deemed outstanding for the purpose of determining the Voting Percentage.
ARTICLE II
SEPARATION AND RELATED TRANSACTIONS
2.1 Separation Date; Separation Time. Unless otherwise provided in this Agreement, or in any agreement to be executed in connection with this Agreement, the effective time and date of each action in connection with the Separation shall be as of 11:59 p.m., Houston, Texas time (the “Separation Timeâ€), on the date that is immediately prior to the IPO Closing Date, or such other date as may be fixed by Halliburton (the “Separation Dateâ€). The effective time and date of each action in connection with a Prior Transfer shall be as specified in such Prior Transfer Agreement. Notwithstanding the Separation, each of the KBR Cash Management Note and the Halliburton Cash Management Note shall continue in full force and effect pursuant to Section 9.2 hereof.
2.2 Instruments of Transfer and Assumption. Halliburton and KBR agree that (a) transfers of assets required to be transferred by this Agreement or an Ancillary Agreement shall be effected by delivery by Halliburton or the other transferring entity, as applicable, to the transferee, of (i) with respect to those assets that constitute stock, certificates endorsed in blank or evidenced or accompanied by stock powers or other instruments of transfer endorsed in blank, against receipt, (ii) with respect to any real property interest or any improvements thereon, a special warranty deed with general warranty of limited application limiting recourse and remedies to title insurance and warranties by predecessors in title to the transferor, and (iii) with respect to all other assets, such good and sufficient instruments of contribution, conveyance, assignment and transfer, in form and substance reasonably satisfactory to Halliburton and KBR, as shall be necessary to vest in the designated transferee, all of the title and ownership interest of the transferor in and to any such asset, and (b) to the extent necessary, the assumption of the Liabilities contemplated hereby shall be effected by delivery by the transferee to the transferor of such good and sufficient instruments of assumption, in form and substance reasonably satisfactory to Halliburton and KBR, as shall be necessary for the assumption by the transferee of such Liabilities. Each of the parties hereto also agrees to deliver to the other party hereto such other documents, instruments and writings as may be reasonably requested by such other party hereto in connection with the transactions contemplated hereby. Except as set forth in this Section 2.2, (x) THE TRANSFERS AND ASSUMPTIONS REFERRED TO HEREIN WILL BE MADE WITHOUT ANY REPRESENTATION OR WARRANTY OF ANY NATURE (A) AS TO THE VALUE OR FREEDOM FROM ENCUMBRANCE OF, ANY ASSETS, (B) AS TO MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OR (C) AS TO THE LEGAL SUFFICIENCY TO CONVEY TITLE TO ANY ASSETS, and (y) the instruments of transfer or assumption referred to herein shall not include any representations and warranties other than as specifically provided herein. Halliburton and KBR hereby acknowledge and agree that ALL ASSETS ARE BEING TRANSFERRED “AS IS, WHERE IS.â€
2.3 Ancillary Agreements. On or prior to the Separation Date, Halliburton and KBR shall execute and deliver (or shall cause the appropriate members of their respective Groups to execute and deliver, as applicable) the agreements between them designated as follows:
(a) the Transition Services Agreements;
(b) the Employee Matters Agreement;
(c) the Tax Sharing Agreement;
(d) the Registration Rights Agreement;
(e) the Intellectual Property Matters Agreement; and
(f) such other agreements, documents or instruments as the parties may agree are necessary or desirable and which specifically state that they are Ancillary Agreements within the meaning of this Agreement
(collectively, the “Ancillary Agreementsâ€). To the extent such documents are not executed and delivered on the Separation Date, they shall be executed and delivered as soon as practicable thereafter and (except as otherwise provided therein) shall be effective as of the Separation Time.
2.4 Performance of Non-Novated Contracts.
(a) Non-Novated KBR Contracts. The parties intend that each member of the Halliburton Group which is party to a Non-Novated KBR Contract shall remain a party thereto following the Separation Date, and the parties hereby agree that each Non-Novated KBR Contract shall be considered to be part of the KBR Business for all purposes under this Agreement. Notwithstanding the foregoing, Halliburton will cause each member of the Halliburton Group which is a party to a Non-Novated KBR Contract to continue to timely perform each such Non-Novated KBR Contract on behalf of the KBR Group. The benefits and/or liabilities of the performance of each such Non-Novated KBR Contract, and the costs associated with such performance, from and after the Separation Time shall be for the account of the KBR Group.
(b) Non-Novated ESG Contracts. The parties intend that each member of the KBR Group which is party to a Non-Novated ESG Contract shall remain a party thereto following the Separation Date, and the parties hereby agree that each Non-Novated ESG Contract shall be considered to be part of the Halliburton Business for all purposes under this Agreement. Notwithstanding the foregoing, KBR will cause each member of the KBR Group which is a party to a Non-Novated ESG Contract to continue to timely perform each such Non-Novated ESG Contract on behalf of the Halliburton Group. The benefits and/or liabilities of the performance of each such Non-Novated ESG Contract, and the costs associated with such performance, from and after the Separation Time shall be for the account of the Halliburton Group.
(c) Settlement of Intercompany Balances. From time to time following the Separation Date, the parties shall settle the intercompany account balances relating to the Non-Novated KBR Contracts and the Non-Novated ESG Contracts with cash payments.
2.5 Other Matters. From and after the Separation Date, except as contemplated under this Agreement or any Ancillary Agreement, KBR covenants and agrees that it will not, and will not permit any member of the KBR Group to, enter into any commitment or agreement that binds or purports to bind Halliburton or any member of the Halliburton Group.
ARTICLE III
MUTUAL RELEASES; INDEMNIFICATION
3.1 Mutual Release of Pre-IPO Closing Date Claims.
(a) KBR Release. Except as expressly provided in this Agreement, effective as of the Separation Time, KBR does hereby, for itself and each other member of the KBR Group and their respective successors and assigns, remise, release and forever discharge Halliburton, each member of the Halliburton Group and their respective successors and assigns, from any and all Liabilities whatsoever to KBR and each other member of the KBR Group, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Separation Time, including in connection with the transactions and all other activities to implement any Prior Transfers, the Separation, the IPO and any Distribution.
(b) Halliburton Release. Except as expressly provided in this Agreement, effective as of the Separation Time, Halliburton does hereby, for itself and each other member of the Halliburton Group and their respective successors and assigns, remise, release and forever discharge KBR, each member of the KBR Group and their respective successors and assigns, from any and all Liabilities whatsoever to Halliburton and each other member of the Halliburton Group, whether at law or in equity (including any right of contribution), whether arising under any contract or agreement, by operation of law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the Separation Time, including in connection with the transactions and all other activities to implement any Prior Transfers, the Separation, the IPO and any Distribution.
(c) Surviving Liabilities. Nothing contained in Section 3.1(a) or (b) shall impair any right of any Person to enforce a Prior Transfer Agreement, this Agreement, any Ancillary Agreement or any agreements, arrangements, commitments or understandings that are specified in, or are contemplated to continue pursuant to, a Prior Transfer Agreement, this Agreement or in any Ancillary Agreement. Furthermore, nothing contained in Section 3.1(a) or (b) shall release any Person from:
(i) any Liability, contingent or otherwise, assumed, transferred, assigned or allocated to the Group of which such Person is a member in accordance with, or any other Liability of any member of any Group under, a Prior Transfer Agreement, this Agreement or any Ancillary Agreement;
(ii) any Liability for unpaid amounts for the sale, lease, construction or receipt of goods, property or services purchased, obtained or used in the ordinary course of business by a member of one Group from a member of any other Group within 180 days prior to the IPO Closing Date;
(iii) any Liability for unpaid amounts for products or services or refunds owing on products or services for work done by a member of one Group at the request or on behalf of a member of another Group within 180 days prior to the IPO Closing Date;
(iv) any Liability that the parties may have with respect to indemnification or contribution pursuant to this Agreement, any Ancillary Agreement or any Prior Transfer Agreement, which Liability shall be governed by the provisions of this Article III and, if applicable, the appropriate provisions of such Ancillary Agreement or such Prior Transfer Agreement; or
(v) any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 3.1; provided that the parties agree not to bring suit, seek to collect any amounts or file any liens or encumbrances against any Person, or permit any member of their Group to bring suit, seek to collect any amounts or file any liens or encumbrances against any Person, with respect to any Liability to the extent that such Person would be released with respect to such Liability by this Section 3.1 but for the provisions of this clause (v).
(d) Agreement to Make No Claims. Except as provided in this Article III, KBR shall not make, and shall not permit any member of the KBR Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Halliburton or any member of the Halliburton Group, or any other Person released pursuant to Section 3.1(a), with respect to any Liabilities released pursuant to Section 3.1(a). Except as provided in this Article III, Halliburton shall not make, and shall not permit any member of the Halliburton Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against KBR or any member of the KBR Group, or any other Person released pursuant to Section 3.1(b), with respect to any Liabilities released pursuant to Section 3.1(b).
(e) Further Assurances. Except as expressly set forth in Section 3.1(c), it is the intent of each of Halliburton and KBR by virtue of the provisions of this Section 3.1 to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Separation Time, between or among KBR or any member of the KBR Group, on the one hand, and Halliburton or any member of the Halliburton Group, on the other hand (including any contractual agreements or arrangements existing or alleged to exist between or among any such members on or before the Separation Time). At any time, at the request of any other party, each party shall cause each member of its respective Group to execute and deliver releases reflecting the provisions hereof.
3.2 Indemnification by KBR. Except as provided in this Article III, KBR and the Appropriate Members of the KBR Group shall indemnify, defend and hold harmless Halliburton, each member of the Halliburton Group and their respective successors and assigns (collectively, the “Halliburton Indemniteesâ€), from and against any and all Losses of the Halliburton Indemnitees relating to, arising out of or resulting from any of the following (without duplication):
(a) any KBR Liability, including the failure of KBR or any other member of the KBR Group or any other Person to pay, perform or otherwise promptly discharge any KBR Liabilities in accordance with their respective terms, whether prior to or after the Separation Time;
(b) the KBR Business;
(c) any breach by KBR or any member of the KBR Group of this Agreement or any of the Ancillary Agreements;
(d) the Credit Support Agreements;
(e) certain pending or threatened litigation described on Schedule 3.2(e) hereto; and
(f) any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to all information (i) contained in the IPO Registration Statement or any IPO Prospectus (other than information provided by Halliburton to KBR specifically for inclusion in the IPO Registration Statement or any IPO Prospectus and set forth on Schedule 3.3(f)), (ii) contained in any public filings made by KBR with the Commission following the IPO Closing Date and (iii) provided by KBR to Halliburton specifically for inclusion in Halliburton’s annual or quarterly reports following the IPO Closing Date.
As used in this Section 3.2, “Appropriate Members of the KBR Group†means the member or members of the KBR Group, if any, whose acts, conduct or omissions or failures to act caused, gave rise to or resulted in the Loss from and against which indemnity is provided.
3.3 Indemnification by Halliburton. Except as provided in this Article III, Halliburton and the Appropriate Members of the Halliburton Group shall indemnify, defend and hold harmless KBR, each member of the KBR Group and their respective successors and assigns (collectively, the “KBR Indemniteesâ€), from and against any and all Losses of the KBR Indemnitees relating to, arising out of or resulting from any of the following (without duplication):
(a) the Halliburton Liabilities, including the failure of Halliburton or any other member of the Halliburton Group or any other Person to pay, perform or otherwise promptly discharge any Halliburton Liabilities, in accordance with their respective terms, whether prior to or after the Separation Time;
(b) the Halliburton Business;
(c) any breach by Halliburton or any member of the Halliburton Group of this Agreement or any of the Ancillary Agreements;
(d) any Halliburton Environmental Liabilities;
(e) certain pending or threatened litigation described on Schedule 3.3(e) hereto;
(f) any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, with respect to all information contained in the IPO Registration Statement or any IPO Prospectus provided by Halliburton specifically for inclusion therein and set forth on Schedule 3.3(f); and
(g) the Silica Note and any reimbursement obligations of the Halliburton Group to the KBR Group with respect thereto.
As used in this Section 3.3, “Appropriate Members of the Halliburton Group†means the member or members of the Halliburton Group, if any, whose acts, conduct or omissions or failures to act caused, gave rise to or resulted in the Loss from and against which indemnity is provided.
3.4 Indemnifications Relating to FCPA Subject Matters
(a) Halliburton Indemnity. Halliburton agrees to indemnify and hold harmless the KBR FCPA Indemnitees from and against any Penalties (such Penalties hereinafter referred to as “Halliburton Indemnified FCPA Mattersâ€); provided, that with respect to any KBR FCPA Indemnitee that is not wholly owned, directly or indirectly, by the KBR Group as of the date hereof (a “non-wholly owned majority subsidiaryâ€), the Halliburton indemnity provided under this Section 3.4(a) shall be limited to that percentage of Penalties assessed against or paid by such non-wholly owned majority subsidiary equal to the KBR Group’s ownership interest in such non-wholly owned majority subsidiary as of the date hereof.
For avoidance of doubt, the Halliburton indemnification provided under this Section 3.4(a) shall not apply to any losses, claims, liabilities or damages relating to the FCPA Subject Matters that are not Halliburton Indemnified FCPA Matters (and the indemnity provided under Section 3.4(a) will not include any such other losses, claims, liabilities or damages), regardless of how denominated or the cause of action, whether in tort, contract, a criminal proceeding or otherwise. Without limiting the foregoing, “Halliburton Indemnified FCPA Matters†shall not include, and the indemnity provided under this Section 3.4(a) shall not apply to: (x) Third-Party FCPA Claims; (y) losses, claims, liabilities or damages that (I) are special, indirect, derivative or consequential, (II) relate to or result in threatened or actual suspension or debarment from bidding or continued activity under government contracts, (III) relate to alleged or actual damage to business or other reputation or loss of, or adverse effect on, cash flow, assets, goodwill, results of operations, business, prospects, profits or business value, whether in the present or future, (IV) relate to alleged or actual adverse consequences in obtaining, continuing or termination of financing for current or future projects, and/or (V) are as a result of claims by directors, officers, employees, Affiliates, advisors, attorneys, agents, debt holders or other interest holders or constituents of KBR or any member of the KBR Group in their capacity as such; or (z) costs or expenses incurred for any monitor required by or agreed to with, a Governmental Authority to review continued compliance by the KBR Group with Applicable FCPA Law.
(b) Sole Beneficiaries. The indemnity provided under Section 3.4(a) is solely for the benefit of the KBR FCPA Indemnitees, and no provision of this Agreement shall create any third party beneficiary or other rights in any Person or Persons other than the KBR FCPA Indemnitees.
(c) Control of Proceedings. Until such time, if ever, that KBR exercises its right to assume control over the investigation, defense and/or settlement of FCPA Subject Matters with respect to KBR pursuant to Section 3.4(e), Halliburton and its Majority Owned Subsidiaries shall at all times, in their sole discretion, have and maintain control over the investigation, defense and/or settlement of, any FCPA Subject Matter. Even if KBR exercises its right pursuant to Section 3.4(e) hereof, Halliburton and its Majority Owned Subsidiaries shall at all times, in their sole discretion, have and maintain control over the investigation, defense and/or settlement of FCPA Subject Matters with respect to Halliburton. Notwithstanding the foregoing, (i) no settlement by KBR of any claims relating to FCPA Subject Matters effected without the prior written consent of Halliburton will be effective or binding upon Halliburton, any member of the Halliburton Group or their respective successors or assigns, and (ii) no settlement by Halliburton of any claims relating to FCPA Subject Matters effected without the prior written consent of KBR will be effective or binding upon any KBR FCPA Indemnitee. The parties agree that Halliburton may terminate its indemnity provided under Section 3.4(a) upon the settlement by KBR of any claims relating to FCPA Subject Matters effected without the prior written consent of Halliburton.
(d) Cooperation. At all times during the term of this Agreement, including whether or not or before or after KBR exercises its right to assume control over the investigation, defense and/or settlement of FCPA Subject Matters pursuant to Section 3.4(e) hereof, KBR, at Halliburton’s expense, shall use best efforts to assist with Halliburton’s full cooperation with any Governmental Authority in Halliburton’s investigation of FCPA Subject Matters and its investigation, defense and/or settlement of any Governmental FCPA Claim. Without limiting the foregoing, KBR’s best efforts to assist with Halliburton’s full cooperation contemplated by the preceding sentence shall include:
(i) At the request of Halliburton, the voluntary and truthful disclosure to Halliburton, the DOJ, the Commission or other Governmental Authority of all information in KBR’s possession, custody or control (in any form or medium, including documents) respecting the activities of KBR, Halliburton and its or their current and former directors, officers, employees, agents, distributors and Affiliates relating to FCPA Subject Matters about which Halliburton inquires or which is material to the investigation conducted by Halliburton, the DOJ, the Commission or other Governmental Authority into the FCPA Subject Matters.
(ii) At the written request of Halliburton, the voluntary production to Halliburton, the DOJ, the Commission or other Governmental Authority, of all documents, records or other tangible evidence in KBR’s possession, custody or control relating to FCPA Subject Matters. Without limiting the foregoing, KBR will assemble, organize and produce, or take reasonable steps to effectuate the production of, all documents, records, or other tangible evidence related to FCPA Subject Matters in KBR’s possession, custody, or control in such reasonable format as Halliburton, the DOJ, the Commission or other Governmental Authority requests. KBR shall preserve, maintain and retain all such documents, records and other tangible evidence related to FCPA Subject Matters. KBR shall provide Halliburton access to all electronic mail, metadata, computer hard drives, computer tape or other electronic data necessary to answer a subpoena of any Governmental Authority.
(iii) At the request of Halliburton, the provision of access to copies of KBR’s original documents and records relating to FCPA Subject Matters in KBR’s possession, custody or control and, using reasonable best efforts, in the custody or control of all current and former directors, officers, employees, agents, distributors, attorneys and Affiliates.
(iv) At the written request of Halliburton, using reasonable best efforts, (A) making available any of KBR’s current and former directors, officers, employees, agents, distributors, attorneys and Affiliates who may have been involved in FCPA Subject Matters and whose cooperation is requested by Halliburton, the DOJ, the Commission or other Governmental Authority; (B) recommending orally and in writing that any and all such Persons cooperate fully (including by appearing for interviews with Governmental Authorities or testimony, including sworn testimony before a grand jury) with (x) any investigation conducted by Halliburton, the DOJ, the Commission or other Governmental Authority with respect to FCPA Subject Matters, or (y) any prosecution of individuals (including without limitation the cooperation of current or former directors, officers or employees of KBR who are not defendants in the prosecution) or entities; and (C) taking appropriate disciplinary action with respect to such of KBR’s current and former directors, officers, employees, agents, distributors and Affiliates who do not cooperate, or who cease to cooperate, fully as contemplated herein.
(v) At the written request of Halliburton, the provision of testimony and other information deemed necessary by Halliburton to identify or establish the original location, authenticity or other evidentiary foundation necessary to admit into evidence documents in any criminal or other proceeding as requested by Halliburton related to FCPA Subject Matters.
(vi) At the written request of Halliburton, using reasonable best efforts, the provision of access to the outside accounting and legal consultants of KBR whose work includes or relates to FCPA Subject Matters, as well as the records, reports and documents of those outside consultants related to FCPA Subject Matters.
(vii) At the request of Halliburton, KBR shall not assert a claim of attorney-client or work-product privilege as to: (i) any KBR original documents or records, or any copies thereof, in possession of attorneys of KBR relating to FCPA Subject Matters, (ii) any memoranda of witness interviews (including exhibits thereto) by attorneys or employees of KBR relating to FCPA Subject Matters; (iii) due diligence reports by attorneys of KBR relating to agents of KBR that are or have been created contemporaneously with and related to transactions or events underlying FCPA Subject Matters; or (iv) documents that are or have been created by attorneys of KBR in connection with internal investigations by Halliburton or KBR into FCPA Subject Matters.
Notwithstanding anything to the contrary contained in this Agreement, in making production of any documents, disclosure of any information or available any people, pursuant to this Section 3.4(d), KBR shall not be required to (1) expressly or implicitly waive its right to assert any privilege that is available under law against Persons other than the Governmental Authority at issue concerning the documents or information at issue or the subject matters thereof; or (2) produce, disclose or make available any legal advice or attorney work product relating to or given in connection with (A) internal investigations by Halliburton or KBR; (B) investigations conducted by any Governmental Authority, proceedings related thereto or resulting therefrom; or (C) any Third-Party Claims.
KBR shall promptly inform and disclose to Halliburton any developments, communications or negotiations between KBR, on the one hand, and any Governmental Authority or third party, on the other hand, with respect to FCPA Subject Matters, except as prohibited by law or lawful order of a Governmental Authority. Halliburton may terminate its indemnity provided under Section 3.4(a) upon the material breach by KBR of its obligations under this Section 3.4(d); provided, however, that if, despite using KBR’s best efforts or reasonable best efforts, as the case may be, to assist with Halliburton’s full cooperation in accordance with this Section 3.4(d), KBR is unable to achieve the desired goal contemplated by any of the foregoing subsections (i)-(vii), Halliburton shall not have grounds to terminate such indemnity. Termination of Halliburton’s indemnity provided under Section 3.4(a) pursuant to this Section 3.4(d) shall not preclude Halliburton from pursuing any other rights or seeking any and all other available remedies against KBR for material breach by KBR of its obligations under this Section 3.4(d).
(e) Assumption of Control by KBR; Refusal of Settlement. KBR, by written notice to Halliburton, may (i) take control over the investigation, defense and/or settlement of FCPA Subject Matters with respect to KBR or (ii) refuse (in KBR’s sole discretion) to agree to a settlement of FCPA Subject Matters negotiated and presented by Halliburton. In either such event, Halliburton may terminate its indemnity provided under Section 3.4(a). Notwithstanding the foregoing, a member of the KBR Group that is not a Majority Owned Subsidiary as of the date hereof may control the investigation, defense and/or settlement of FCPA Subject Matters solely with respect to such subsidiary, and may agree to a settlement of FCPA Subject Matters solely with respect to such subsidiary without the prior written consent of Halliburton, and any such control or agreement to a settlement shall not allow Halliburton to terminate its indemnity provided under Section 3.4(a).
(f) No Admission. Each of Halliburton and KBR do not, by the making of the indemnities in this Section 3.4 or by any other provision of this Agreement, c
