EXECUTION COPY
FORM OF INDEMNIFICATION AGREEMENT
I. AGREEMENT
This Indemnity Agreement (the "Agreement") is entered into as of July 8, 2002
(the "Effective Date") by and between Kiewit Materials Company (the "Company")
and the undersigned Holder ("Holder").
THIS AGREEMENT SUPERSEDES AND REPLACES ANY PRIOR OR CONTEMPORANEOUS AGREEMENT
(INCLUDING, WITHOUT LIMITATION, ANY INDEMNIFICATION AGREEMENT) BETWEEN THE
COMPANY AND THE HOLDER PERTAINING TO THE SUBJECT MATTER HEREOF, THE PARTIES
HEREBY AGREEING THAT ANY SUCH PRIOR OR CONTEMPORANEOUS AGREEMENT IS VOID AB
INITIO.
The Company shall, subject to the terms, conditions and limitations of this
Agreement, indemnify and hold harmless the Holder from any and all Grossed-Up
Loss (as defined herein) that results from the failure of a Holder to receive
the Tax Treatment (as defined herein) or from a Tax Challenge, during the Term
(as defined herein), provided that sworn Proof of Loss is received by the
Company during the Term pursuant to Section IV(B) of this Agreement.
II. DEFINITIONS
"Additional Taxes" means the excess, if any, of (i) the Taxes incurred by the
Holder after giving effect to the Holder's failure to obtain the Tax Treatment,
over (ii) the Expected Taxes.
"Applicable Tax Rate" means the Holder's highest marginal rate of federal, state
and local income taxation in the calendar year (after taking into account the
deduction of state and local taxes), applicable employment taxes, and applicable
excise taxes.
"Code" means the Internal Revenue Code of 1986, as amended, as of the date of
this Agreement.
"Contest Costs" means reasonable costs, charges and expenses, including, but not
limited to, attorney fees, incurred by the Holder in Contest Proceedings of the
Tax Treatment, including appeals therefrom.
"Contest Proceedings" mean (i) an audit or investigation of the Holder by any
Taxing Authority or (ii) a post-audit administrative or judicial contest by the
Holder of an adjustment in his/her Taxes as it relates to the Tax Treatment.
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"Debentures" means any or all of (1) the Series 2000A 8.028% Convertible
Debentures, due October 31, 2010, (2) the Series 2000B 7.35% Convertible
Debentures, due October 31, 2010, (3) the Series 2000C 8.25% Convertible
Debentures, due October 31, 2010, (4) the Series 2000D 7.81% Convertible
Debentures, due November 30, 2010, and (5) the Series 2001 6.60% Convertible
Debentures, due July 31, 2011, issued by the Company.
"Determination" means a determination within the meaning of Section 1313 of the
Code.
"Expected Taxes" means the Taxes the Holder would incur if the Holder received
the Tax Treatment, computed with the modifications described in this definition.
The Holder's federal income taxes will be computed assuming that (1) the
long-term capital gain recognized with respect to the Debentures is taxed at the
highest applicable long-term capital gain tax rate without regard to any capital
losses, capital loss carryovers, or other exclusions or deductions, and (2) the
short-term capital gain recognized with respect to the Debentures is taxed at
the highest marginal tax rate applicable to the Holder under Section 1 of the
Code without regard to any capital losses, capital loss carryovers or other
exclusions or deductions. The Holder's state and local income (or other) taxes
will be computed assuming that both the long-term capital gain and the
short-term capital gain recognized with respect to the Debentures are taxed at
the highest marginal tax rate applicable to such gain under law without regard
to any capital losses or capital loss carryovers (but with regard to any
provision of state or local law (i) which excludes or deducts from gross income
a portion of such gain, (ii) which is applicable to Holder, and (iii) which
Holder has properly elected to apply to such gain in Holder's tax return as
originally filed).
"Grossed-Up Loss" means an amount payable to the Holder in respect of a Loss,
which, after reduction for Taxes imposed upon such payments, is equal to the
Loss incurred by the Holder, and is computed in accordance with the following
formula: A = B / 1 - C, where B is the amount of the Loss, C is the Applicable
Tax Rate, and A is the amount to be paid as the Grossed-Up Loss.
"Holder" means the undersigned Holder, together with his/her heirs, estates, or
assigns, the same being the beneficiaries of this Agreement. As of the date
hereof, the Holder is the owner of the Debentures or of the Company's stock
received upon a conversion of a Debenture.
"Insurer" means any insurer providing contingency indemnity insurance (or
similar insurance) intended to insure the Company's obligations under this
Agreement.
"Interest" means interest imposed on the Holder by a Taxing Authority due to an
underpayment of Taxes by the Holder that results directly from the failure of
the Holder to receive the Tax Treatment.
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"Loss" means the total amount of Additional Taxes and Contest Costs incurred by
the Holder. Loss does not include any amount fairly and reasonably allocated to
matters other than the failure of the Holder to receive the Tax Treatment.
"Penalties" mean penalties imposed on the Holder by a Taxing Authority on
account of either an underpayment of Taxes or negligence by the Holder with
respect to the Tax Treatment.
"Proof of Loss" means the Proof of Loss form attached at Exhibit A to this
Agreement.
"Reasonable Basis" has the meaning accorded that term by Formal Opinion 85-352
issued by the Standing Committee on Ethics and Professional Responsibility of
the American Bar Association.
"Tax Challenge" means a challenge by a Taxing Authority to the Tax Treatment.
"Tax Treatment" means that neither the occurrence of any early conversion right
with respect to Debentures (including, without limitation, pursuant to Section
(7) of the Debentures), nor the conversion of a Debenture into the stock of the
Company will result in any ordinary income or gain recognition by the Holder.
Upon a sale or exchange of a Debenture, or of the Company's stock that was
received as a result of converting a Debenture, the Holder will recognize
capital gain or loss in an amount equal to the difference between (i) the amount
of cash and fair market value of property received in the sale or exchange, and
(ii) the amount the Holder paid to acquire the Debenture at its original
issuance, net of any amortized bond premium. Any gain recognized will be
long-term capital gain if the Holder purchased the Debenture more than 12 months
prior to the time of the sale or exchange and has had continuous beneficial
ownership of the Debenture (or the Holder's stock into which the Debenture was
converted) since such purchase.
"Taxes" mean any Federal or state income taxes, employment taxes or excises,
Penalties or Interest, regardless of whether imposed by statute, rule,
regulation or ordinance.
"Taxing Authority" means either or all of the Internal Revenue Service ("IRS")
and State taxing authorities.
"Term" means the period commencing on the Effective Date and ending on the
Termination date.
"Termination Date" means the earlier of:
(1) October 16, 2010, or
(2) the date of the payment by the Company of all Grossed-Up Loss
covered under this Agreement.
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III. EXCLUSIONS
The Company shall not be liable to make any payment that is based upon,
arises out of, or results in:
(A) the failure of the Holder to follow the conditions set forth
in this Agreement, if failure to do so is material to the
Company's potential liability under this Agreement;
(B) the compromise or settlement of any Contest Proceeding by the
Holder without the Company's prior consent, in accordance with
Section IV.A.(1);
(C) any amortized premium, Interest received on the Debentures,
any amount received as a dividend, or redemption of the
Debentures (provided that this exclusion shall not apply to
any conversion of Debentures into the Company's stock, whether
on an early basis incident to a notice of redemption of the
Debentures under Section (5) of the Debentures or otherwise);
or
(D) failure of the Holder to realize a gain on the sale or
exchange of a Debenture.
IV. GENERAL CONDITIONS AND LIMITATIONS
A. CONTEST, SETTLEMENTS AND PAYMENT OF CLAIMS
(1) The Holder shall not (a) settle or compromise any
Contest Proceeding, (b) incur any Contest Costs, or
(c) otherwise assume any contractual obligation or
admit any liability with respect to any Contest
Proceeding, without the Company's written consent,
which consent shall not be unreasonably withheld or
delayed. The Company shall not be liable for any such
settlement, compromise, Contest Costs, assumed
obligation or admission to which the Company has not
so consented.
(2) The Holder agrees to provide the Company with all
information, assistance and cooperation that the
Company reasonably requests with respect to any
Contest Proceeding and agrees that the Holder will
use all reasonable efforts as reasonably requested by
the Company to avoid prejudicing the Company's
position or its potential or actual rights of
recovery. The Company shall have the right and shall
be given the opportunity to effectively associate
with the Holder in the investigation, defense and
settlement, including but not limited to the
negotiation of a settlement, of any
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Contest Proceeding that appears reasonably likely to
be covered in whole or in part by this Agreement;
provided, however, any such settlement will not
result in any liability or obligation that is not
paid by the Company pursuant to this Agreement.
(3) The Holder agrees to pursue a Contest Proceeding in a
forum approved by the Company and to contest a
proposed or final adjustment, including by appeal to
the United States Circuit Court of Appeals. It is
understood and agreed that if the Company elects a
forum for a Contest Proceeding that requires the
Holder to pay any Taxes to the Taxing Authority prior
to proceeding in that forum, then the Company shall
advance the payment of such Taxes in the form of an
interest free loan to the Holder; and should the
Holder ultimately prevail in such Contest Proceeding,
then the Company shall be entitled to reimbursement
of such payment of Taxes which it had advanced the
Holder within five business days following the
Holder's receipt of same from the Taxing Authority.
(4) All decisions regarding the pursuit of administrative
remedies following an audit of the Holder's tax
returns, the appropriate forum for any judicial
proceeding, the legal basis for contesting the
adjustment and the choice of counsel for the Contest
Proceeding shall be made by the Holder with the
approval of the Company, which approval shall not be
unreasonably withheld or delayed. The end of the
Contest Proceeding shall be when there has been a
Determination adverse to the Holder with respect to
which either no further appeal is available or the
Company declines to request that Holder pursue an
appeal. The Company will not require a Contest
Proceeding, or continuation of a Contest Proceeding,
if the Holder presents the Company with an opinion of
counsel reasonably acceptable to Company that there
is no Reasonable Basis on which to pursue a Contest
Proceeding. The Company shall acknowledge the receipt
and whether it accepts this opinion within fifteen
(15) days following receipt of such opinion. The
reasonable fees and costs of such counsel shall be
treated as Losses incurred by the Holder under this
Agreement.
If the Holder and the Company cannot agree on any of
the foregoing in this Section (4), then the Holder
shall follow the direction of the Company with
respect thereto, unless and until qualified
independent counsel, mutually acceptable to both
parties, opines that such direction is unreasonable
under the circumstances. The reasonable fees and cost
of such counsel shall be treated as Losses incurred
by the Holder under this Agreement.
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(5) Payment of the Grossed-Up Loss shall be made to the
Holder, at the address set forth in Section IV(B)(2)
of this Agreement, not more than thirty (30) business
days after both (a) the receipt by the Company of a
sworn Proof of Loss from the Holder and (b) the
earlier of a Determination that a Loss has occurred
or agreement between the Holder and the Company that
there is no Reasonable Basis on which to pursue a
Contest Proceeding under Section (4) above.
(6) If the Company fails to pay the Grossed-Up Loss
within the time period set forth in Section (5)
above, then such amounts shall be paid to the Holder
by the Company with interest thereon, accruing from
the date such amount was due and payable, at the
applicable IRS interest rate charged on underpayments
as in effect from time to time.
B. NOTICE
(1) If, during the Term, the Holder receives written
notice of a Tax Challenge, the Holder, as a condition
precedent to the Holder's right to be reimbursed
under this Agreement, shall give to the Company
written notice of any such Tax Challenge within
twenty (20) business days after the Holder's receipt
of such notice of the Tax Challenge, but in no event
later than the Termination Date; provided, however,
that if late notice does not materially prejudice the
Company (including, but not limited to, any rights of
the Company under any insurance policy or other
agreement), then such late notice shall not limit the
Holder's rights under this Agreement.
(2) Any notice or other communication to be given to the
Holder shall be given effectively if made in writing
and delivered to:
HOLDER
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(3) Any notice or other communication to be given to the
Company shall be given effectively if made in writing
and delivered to:
Kiewit Materials Company
Xxxxxx Xxxxx
Xxxxx, XX 00000
Attn: General Counsel
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(4) Such notice or other communication shall be given to
such other representatives or at such other addresses
as a party may furnish to the other party pursuant to
the foregoing.
C. CONDITIONS PRECEDENT
It is a condition precedent to the right of the Holder to be
indemnified hereunder that:
(1) The Holder shall have complied with this Agreement in
all material respects.
(2) A signed, sworn Proof of Loss shall have been
received by the Company from the Holder, in
substantially the form of and containing the
information described in Exhibit A attached hereto,
including a calculation of the Grossed-Up Loss in
respect of such Loss in reasonable detail.
D. CONFIDENTIALITY
Except to the extent disclosure is required by a court or
governmental agency or by applicable law, the Holder agrees to
treat as proprietary and to maintain confidentiality as to all
details of this Agreement, except such aspects thereof as are
now in the public domain or come into the public domain
through no fault of the Holder. Notwithstanding the foregoing,
the Holder may disclose the terms of this Agreement for
legitimate business reasons to legal, financial and tax
advisors and to the Holder's spouse.
E. SOLE AGREEMENT
This Agreement, including the Exhibits hereto, constitutes the
sole agreement between the Company and the Holder with respect
to the matters set forth herein, and supersedes any other
prior or contemporaneous agreements, whether written or oral,
between them (including, without limitation, any
indemnification agreement entered into between the Holder and
the Company) pertaining to the subject matter hereof. Holder
hereby acknowledges and agrees that Holder's only remedies in
relation to the failure of Holder to receive the Tax Treatment
shall be such remedies as are afforded to Holder in this
Agreement.
F. GOVERNING LAW
This Agreement shall in all respects be governed by, and
construed in accordance with, the laws of the State of New
York, as applicable to
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contracts entered into in that State between citizens of that
State and without reference to conflicts of law principles.
G. ALTERATION, ASSIGNMENT AND BENEFIT
(1) No change in, modification of, or assignment of
interest under this Agreement shall be effective,
unless signed by an authorized employee or
representative of the Company and the Holder. Notice
to any agent or knowledge possessed by any agent or
any other person shall not effect a waiver or a
change in any part of this Agreement or prevent the
Company or the Holder from asserting any right under
the terms of this Agreement.
(2) This Agreement may not be assigned or transferred,
and any rights that may arise under this Agreement
may not be assigned or transferred, except for
transfers by operation of law, without the prior
written consent of the Company and the Holder, which
consent shall not be unreasonably withheld or
delayed.
(3) This Agreement shall inure only to the benefit of the
Holder. No person, other than the Holder, shall have
any legal or equitable right, remedy or claim under
or in respect of this Agreement.
H. INSURANCE
If and to the extent that the Company obtains a policy or
policies of named contingency indemnity insurance (or similar
insurance) intended to insure the Company's obligations under
this Agreement, then the Company shall cause the Holder to be
named as an additional insured party thereof (but the Company
expressly disclaims any representation or warranty as to what,
if any, rights the Holder obtains as such).
I. REPRESENTATION AND WARRANTY
The Holder represents and warrants to the Company that (to the
extent the Holder holds such): (1) any Series 2000A, 2000B and
2000C Convertible Debentures were received in exchange for
convertible debentures previously issued by Xxxxx Xxxxxx
Son's, Inc. and that those debentures were purchased by the
Holder for cash at a price that was equal to or greater than
the face amount of such debentures and (2) any Series 2000D
and 2001 Convertible Debentures were purchased for cash at a
price that was equal to or greater than the face amount of
such debentures.
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In witness whereof, this Agreement has been executed by or on behalf of the
parties as of the Effective Date.
KIEWIT MATERIALS COMPANY
By:
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Xxxxxxx X. Xxxxxxx, Chairman
HOLDER
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EXHIBIT A
PROOF OF LOSS
In accordance with the terms of that certain Indemnification Agreement
(the "Agreement"), dated as of _________________, 2002, between Kiewit Materials
Company (the "Company") and the undersigned Holder ("Holder"), the Holder is
filing this Proof of Loss pursuant to Section IV(A)(5) of the Agreement. A Loss
in the amount of US$_______________, with respect to a Tax Treatment occurred on
_____________________. Attached hereto is a computation of the Loss in
reasonable detail.
This Proof of Loss verifies on behalf of the Holder that each
applicable condition precedent to payment under the Agreement has been satisfied
in all material respects and that no exclusion contained in the Agreement bars
the Holder's claim.
Effective upon the Holder's receipt of payment in accordance with the
terms of the Agreement, the Holder discharges the Company for all liability with
respect to such Loss.
Please let the undersigned know immediately if you have any questions
with regard to this Proof of Loss or its attachments.
Signature of Holder:
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Printed Name of Holder:
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Date:
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SCHEDULE OF INDEMNIFICATION AGREEMENTS WITH EXECUTIVE OFFICERS
1. Indemnification Agreement, dated as of July 8, 2002, by and between the
Company and Xxxxxxxxxxx X. Xxxxxx.
2. Indemnification Agreement, dated as of July 8, 2002, by and between the
Company and Xxxxxx X. Xxxxxx.
3. Indemnification Agreement, dated as of July 8, 2002, by and between the
Company and Xxxx X. Xxxxxxx.
4. Indemnification Agreement, dated as of July 8, 2002, by and between the
Company and Xxxx X. Xxxxxxx.
5. Indemnification Agreement, dated as of July 8, 2002, by and between the
Company and Xxxxxx X. Xxxxx.
5. Indemnification Agreement, dated as of July 8, 2002, by and between the
Company and Xxxx X. Xxxxxx.
6. Indemnification Agreement, dated as of July 8, 2002, by and between the
Company and Xxxx X. Xxxxxx.
