Document:

Exhibit 10.5

 

FORM OF INDEMNIFICATION AGREEMENT

 

THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is made and entered into as of [                ] (the “Effective Date”), by and between Select Income REIT, a Maryland real estate investment trust (the “Company”), and [                ] (“Indemnitee”).

 

WHEREAS, Indemnitee currently serves as a [                ] of the Company and may, in connection therewith, be subjected to claims, suits or proceedings arising from such service; and

 

WHEREAS, as an inducement to Indemnitee to continue to serve as such [                ], the Company has agreed to indemnify and to advance expenses and costs incurred by Indemnitee in connection with any such claims, suits or proceedings, to the maximum extent permitted by law as hereinafter provided; and

 

WHEREAS, the parties by this Agreement desire to set forth their agreement regarding indemnification and advance of expenses;

 

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

 

Section 1.           Definitions.  For purposes of this Agreement:

 

(a)       “Change in Control” means a change in control of the Company occurring after the Effective Date of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934, as amended (the “Act”), whether or not the Company is then subject to such reporting requirement; provided, however, that, without limitation, such a Change in Control shall be deemed to have occurred if after the Effective Date (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 10% or more of the combined voting power of all the Company’s then-outstanding securities entitled to vote generally in the election of trustees without the prior approval of at least two-thirds of the members of the Board of Trustees of the Company (the “Board of Trustees”) in office immediately prior to such person attaining such percentage interest; (ii) there occurs a proxy contest, or the Company is a party to a merger, consolidation, sale of assets, plan of liquidation or other reorganization not approved by at least two-thirds of the members of the Board of Trustees then in office, as a consequence of which members of the Board of Trustees in office immediately prior to such transaction or event constitute less than a majority of the Board of Trustees thereafter; or (iii) during any period of two consecutive years, other than as a result of an event described in clause (a)(ii) of this Section 

 

 

1, individuals who at the beginning of such period constituted the Board of Trustees (including for this purpose any new trustee whose election or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds of the trustees then still in office who were trustees at the beginning of such period) cease for any reason to constitute at least a majority of the Board of Trustees.

 

(b)       “Corporate Status” means the status of a person who is or was a director, trustee, officer or agent of the Company and the status of a person who, while a director, trustee, officer or agent of the Company, is or was serving at the request of the Company as a director, trustee, officer or agent of another foreign or domestic real estate investment trust, corporation, partnership, limited liability company, joint venture, trust, other enterprise or employee benefit plan.

 

(c)       “Disinterested Trustee” means a trustee of the Company who is not and was not a party to the Proceeding in respect of which indemnification and/or advance of Expenses is sought by Indemnitee.

 

(d)       “Expenses” means all expenses, including, but not limited to, all reasonable attorneys’ fees and costs, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding.

 

(e)       “Independent Counsel” means a law firm, or a member of a law firm, selected by the Indemnitee and reasonably acceptable to the Company, that is experienced in matters of business law and that neither is, nor in the past two years has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement or of other indemnities of the Company under similar indemnification agreements), or (ii) any other party to or participant or witness in the Proceeding giving rise to a claim for indemnification or advance of Expenses hereunder.

 

(f)        “Proceeding” means any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative (including on appeal), except one initiated by an Indemnitee pursuant to Section 9.

 

Section 2.           Indemnification - General.  The Company shall indemnify, and advance Expenses to, Indemnitee (a) as provided in this Agreement and (b) otherwise to the maximum extent permitted by Maryland law in effect on the Effective Date and as amended from time to time; provided, however, that no change in Maryland law shall have the effect of reducing the benefits available to Indemnitee hereunder based on Maryland law as in effect on the Effective 

 

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Date.  The rights of Indemnitee provided in this Section 2 shall include, without limitation, the rights set forth in the other sections of this Agreement, including any additional indemnification permitted by Section 2-418(g) of the Maryland General Corporation Law (“MGCL”), as applicable to a Maryland real estate investment trust by virtue of Section 8-301(15) of the Maryland REIT Law.

 

Section 3.           Proceedings Other Than Derivative Proceedings by or in the Right of the Company.  Indemnitee shall be entitled to the rights of indemnification provided in this Section 3 if, by reason of his Corporate Status, he is, or is threatened to be, made a party to any threatened, pending, or completed Proceeding, other than a derivative Proceeding by or in the right of the Company (or, if applicable, such other enterprise at which Indemnitee is or was serving at the request of the Company).  Pursuant to this Section 3, Indemnitee shall be indemnified against all judgments, penalties, fines and amounts paid in settlement and all Expenses incurred by him or on his behalf in connection with a Proceeding by reason of Indemnitee’s Corporate Status unless it is established that (i) the act or omission of Indemnitee was material to the matter giving rise to the Proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty, (ii) Indemnitee actually received an improper personal benefit in money, property or services, or (iii) in the case of any criminal Proceeding, Indemnitee had reasonable cause to believe that his conduct was unlawful.

 

Section 4.           Derivative Proceedings by or in the Right of the Company.  Indemnitee shall be entitled to the rights of indemnification provided in this Section 4 if, by reason of his Corporate Status, he is, or is threatened to be, made a party to any threatened, pending or completed derivative Proceeding brought by or in the right of the Company (or, if applicable, such other enterprise at which Indemnitee is or was serving at the request of the Company) to procure a judgment in its favor.  Pursuant to this Section 4, Indemnitee shall be indemnified against all amounts paid in settlement and all Expenses incurred by him or on his behalf in connection with such Proceeding unless it is established that (i) the act or omission of Indemnitee was material to the matter giving rise to such a Proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty or (ii) Indemnitee actually received an improper personal benefit in money, property or services.

 

Section 5.           Indemnification for Expenses of a Party Who is Partly Successful.  Without limitation on Section 3 and Section 4, if Indemnitee is not wholly successful in any Proceeding covered by this Agreement, but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee under this Section 5 for all Expenses incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter, allocated on a reasonable and proportionate basis.  For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

 

Section 6.           Advance of Expenses.  The Company shall advance all Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding to which Indemnitee is, or is threatened to be, made a party or a witness, within ten days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding.  Such statement or statements shall

 

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reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by a written affirmation by Indemnitee of Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Company as authorized by law and by this Agreement has been met and a written undertaking by or on behalf of Indemnitee, in substantially the form attached hereto as Exhibit A or in such form as may be required under applicable law as in effect at the time of the execution thereof, to reimburse the portion of any Expenses advanced to Indemnitee relating to claims, issues or matters in the Proceeding as to which it shall ultimately be established that the standard of conduct has not been met and which have not been successfully resolved as described in Section 5.  To the extent that Expenses advanced to Indemnitee do not relate to a specific claim, issue or matter in the Proceeding, such Expenses shall be allocated on a reasonable and proportionate basis.  The undertaking required by this Section 6 shall be an unlimited general obligation by or on behalf of Indemnitee and shall be accepted without reference to Indemnitee’s financial ability to repay such advanced Expenses and without any requirement to post security therefor.

 

Section 7.           Procedure for Determination of Entitlement to Indemnification.

 

(a)       To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification.  The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board of Trustees in writing that Indemnitee has requested indemnification.

 

(b)       Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 7(a) hereof, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall promptly be made in the specific case: (i) if a Change in Control shall have occurred, by Independent Counsel in a written opinion to the Board of Trustees, a copy of which shall be delivered to Indemnitee; or (ii) if a Change of Control shall not have occurred or if after a Change of Control Indemnitee shall so request, (A) by the Board of Trustees (or a duly authorized committee thereof) by a majority vote of a quorum consisting of Disinterested Trustees (as herein defined), or (B) if a quorum of the Board of Trustees consisting of Disinterested Trustees is not obtainable or, even if obtainable, such quorum of Disinterested Trustees so directs, by Independent Counsel in a written opinion to the Board of Trustees, a copy of which shall be delivered to Indemnitee, or (C) if so directed by a majority of the members of the Board of Trustees, by the shareholders of the Company; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten days after such determination.  Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination.  Any Expenses incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as 

 

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to Indemnitee’s entitlement to indemnification) and the Company shall indemnify and hold Indemnitee harmless therefrom.

 

(c)       The Company shall pay the fees and expenses of Independent Counsel, if one is appointed pursuant to this Section 7.

 

Section 8.           Presumptions and Effect of Certain Proceedings.

 

(a)       In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 7(a) of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making of any determination contrary to that presumption.

 

(b)       The termination of any Proceeding by judgment, order, settlement, conviction, a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, does not create a presumption that Indemnitee did not meet the requisite standard of conduct described herein for indemnification.

 

Section 9.           Remedies of Indemnitee.

 

(a)       If (i) a determination is made pursuant to Section 7 that Indemnitee is not entitled to indemnification under this Agreement, (ii) advance of Expenses is not timely made pursuant to Section 6, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 7(b) within 30 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5 within ten days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not made within ten days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall (A) unless the Company demands arbitration as provided by Section 16, be entitled to an adjudication in an appropriate court of the State of Maryland or in any other court of competent jurisdiction or (B) be entitled to seek an award in arbitration as provided by Section 16, in each case of his entitlement to such indemnification or advance of Expenses.

 

(b)       In any judicial proceeding or arbitration commenced pursuant to this Section 9, the Company shall have the burden of proving that Indemnitee is not entitled to indemnification or advance of Expenses, as the case may be.

 

(c)       If a determination shall have been made pursuant to Section 7(b) that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 9, absent a 

 

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misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification.

 

(d)       In the event that Indemnitee, pursuant to this Section 9, seeks a judicial adjudication of or an award in arbitration as provided by Section 16 to enforce his rights under, or to recover damages for breach of, this Agreement by the Company, Indemnitee shall be entitled to recover in full from the Company, and shall be indemnified in full by the Company for, any and all Expenses incurred by him in such judicial adjudication or arbitration if it is determined that the Indemnitee is entitled to enforce any of his rights under, or to recover any damages for breach of, this Agreement by the Company.

 

Section 10.         Defense of the Underlying Proceeding.

 

(a)       Indemnitee shall notify the Company promptly upon being served with or receiving any summons, citation, subpoena, complaint, indictment, information, notice, request or other document relating to any Proceeding which may result in the right to indemnification or the advance of Expenses hereunder; provided, however, that the failure to give any such notice shall not disqualify Indemnitee from the right, or otherwise affect in any manner any right of Indemnitee, to indemnification or the advance of Expenses under this Agreement unless the Company’s ability to defend in such Proceeding or to obtain proceeds under any insurance policy is materially and adversely prejudiced thereby, and then only to the extent the Company is thereby actually so prejudiced.

 

(b)       Subject to the provisions of the last sentence of this Section 10(b) and of Section 10(c) below, the Company shall have the right to defend Indemnitee in any Proceeding which may give rise to indemnification hereunder; provided, however, that the Company shall notify Indemnitee of any such decision to defend within 15 calendar days following receipt of notice of any such Proceeding under Section 10(a) above, and the counsel selected by the Company shall be reasonably satisfactory to Indemnitee.  The Company shall not, without the prior written consent of Indemnitee, consent to the entry of any judgment against Indemnitee or enter into any settlement or compromise which (i) includes an admission of fault of Indemnitee or (ii) does not include, as an unconditional term thereof, the full release of Indemnitee from all liability in respect of such Proceeding, which release shall be in form and substance reasonably satisfactory to Indemnitee.  This Section 10(b) shall not apply to a Proceeding brought by Indemnitee under Section 9 above or Section 15.

 

(c)       Notwithstanding the provisions of Section 10(b), if in a Proceeding to which Indemnitee is a party by reason of Indemnitee’s Corporate Status, (i) Indemnitee reasonably concludes, based upon an opinion of counsel approved by the Company, which approval shall not be unreasonably withheld, that he may have separate defenses or counterclaims to assert with respect to any issue which may not be consistent with other defendants in such Proceeding, (ii) Indemnitee reasonably concludes, based upon an opinion of counsel approved by the Company, which approval shall not be unreasonably withheld, that an 

 

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actual or apparent conflict of interest or potential conflict of interest exists between Indemnitee and the Company, or (iii) the Company fails to assume the defense of such Proceeding in a timely manner, Indemnitee shall be entitled to be represented by separate legal counsel of Indemnitee’s choice, subject to the prior approval of the Company, which shall not be unreasonably withheld, at the expense of the Company.  In addition, if the Company fails to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any Proceeding to deny or to recover from Indemnitee the benefits intended to be provided to Indemnitee hereunder, Indemnitee shall have the right to retain counsel of Indemnitee’s choice, subject to the prior approval of the Company, which shall not be unreasonably withheld, at the expense of the Company (subject to Section 9(d)), to represent Indemnitee in connection with any such matter.

 

Section 11.         Liability Insurance.  To the extent the Company maintains an insurance policy or policies providing liability insurance for any of its directors, trustees or officers, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any Company director, trustee or officer during the Indemnitee’s tenure as a director, trustee or officer and, following a termination of Indemnitee’s service in connection with a Change in Control, for a period of six years thereafter.

 

Section 12.         Non-Exclusivity; Survival of Rights; Subrogation.

 

(a)       The rights of indemnification and advance of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Amended and Restated Declaration of Trust (as the same may be further amended from time to time, the “Declaration of Trust”) or Amended and Restated Bylaws of the Company (as the same may be further amended from time to time, the “Bylaws”), any agreement or a resolution of the shareholders entitled to vote generally in the election of trustees or of the Board of Trustees, or otherwise.  No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal.

 

(b)       In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

 

(c)       The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable or payable or reimbursable as Expenses hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

 

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Section 13.         Binding Effect.

 

(a)       The indemnification and advance of Expenses provided by, or granted pursuant to, this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, trustee, officer, employee or agent of the Company or of any other real estate investment trust, corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the written request of the Company, and shall inure to the benefit of Indemnitee and his or her spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.

 

(b)       Any successor of the Company (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company shall be automatically deemed to have assumed and agreed to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place, provided that no such assumption shall relieve the Company of its obligations hereunder.  To the extent required by applicable law to give effect to the foregoing sentence and to the extent requested by Indemnitee, the Company shall require and cause any such successor to expressly assume and agree to perform this Agreement by written agreement in form and substance satisfactory to Indemnitee.

 

Section 14.         Severability.  If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

 

Section 15.         Limitation and Exception to Right of Indemnification or Advance of Expenses.  Notwithstanding any other provision of this Agreement, (a) any indemnification or advance of Expenses to which Indemnitee is otherwise entitled under the terms of this Agreement shall be made only to the extent such indemnification or advance of Expenses does not conflict with applicable Maryland law and (b) Indemnitee shall not be entitled to indemnification or advance of Expenses under this Agreement with respect to any Proceeding brought by Indemnitee, unless (i) the Proceeding is brought to enforce indemnification under this Agreement, the Declaration of Trust, the Bylaws, liability insurance policy or policies, if any, or otherwise or (ii) the Declaration of Trust, the Bylaws, a resolution of the shareholders entitled to vote generally in the election of trustees or of the Board of Trustees or an agreement approved by the Board of Trustees to which the Company is a party expressly provides otherwise.

 

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Section 16.         Arbitration.

 

(a)       Any disputes, claims or controversies between the parties (i) regarding the Indemnitee’s entitlement to indemnification or advance of Expenses hereunder or otherwise arising out of or relating to this Agreement, or (ii) brought by or on behalf of any shareholder of the Company (which, for purposes of this Section 16, shall mean any shareholder of record or any beneficial owner of shares of the Company, or any former shareholder of record or beneficial owner of shares of the Company), either on his, her or its own behalf, on behalf of the Company or on behalf of any series or class of shares of the Company or shareholders of the Company against the Company or any trustee, officer, manager (including Reit Management & Research LLC or its successor), agent or employee of the Company, including disputes, claims or controversies relating to the meaning, interpretation, effect, validity, performance or enforcement of this Agreement, including this arbitration agreement, the Declaration of Trust or the Bylaws (all of which are referred to as “Disputes”) or relating in any way to such a Dispute or Disputes, shall on the demand of any party to such Dispute be resolved through binding and final arbitration in accordance with the Commercial Arbitration Rules (the “Rules”) of the American Arbitration Association (“AAA”) then in effect, except as those Rules may be modified in this Section 16.  For the avoidance of doubt, and not as a limitation, Disputes are intended to include derivative actions against trustees, officers or managers of the Company and class actions by a shareholder against those individuals or entities and the Company.  For the avoidance of doubt, a Dispute shall include a Dispute made derivatively on behalf of one party against another party.

 

(b)       There shall be three arbitrators.  If there are only two parties to the Dispute, each party shall select one arbitrator within 15 days after receipt by respondent of a copy of the demand for arbitration.  Such arbitrators may be affiliates or interested persons of such parties.  If either party fails to timely select an arbitrator, the other party to the Dispute shall select a second arbitrator who shall be neutral and impartial and shall not be affiliated with or an interested person of either party.  If there are more than two parties to the Dispute, all claimants, on the one hand, and all respondents, on the other hand, shall each select, by the vote of a majority of the claimants or the respondents, as the case may be, one arbitrator.  Such arbitrators may be affiliated or interested persons of the claimants or the respondents, as the case may be.  If either all claimants or all respondents fail to timely select an arbitrator then such arbitrator (who shall be neutral, impartial and unaffiliated with any party) shall be appointed by the parties who have appointed the first arbitrator.  The two arbitrators so appointed shall jointly appoint the third and presiding arbitrator (who shall be neutral, impartial and unaffiliated with any party) within 15 days of the appointment of the second arbitrator.  If the third arbitrator has not been appointed within the time limit specified herein, then the AAA shall provide a list of proposed arbitrators in accordance with the Rules, and the arbitrator shall be appointed by the AAA in accordance with a listing, striking and ranking procedure, with each party having a limited number of strikes, excluding strikes for cause.

 

(c)       The place of arbitration shall be Boston, Massachusetts unless otherwise agreed by the parties.

 

(d)       There shall be only limited documentary discovery of documents directly related to the issues in dispute, as may be ordered by the arbitrators.

 

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(e)       In rendering an award or decision (the “Award”), the arbitrators shall be required to follow the laws of the State of Maryland.  Any arbitration proceedings or Award rendered hereunder and the validity, effect and interpretation of this arbitration agreement shall be governed by the Federal Arbitration Act, 9 U.S.C. §1 et seq.  The Award shall be in writing and may, but shall not be required to, briefly state the findings of fact and conclusions of law on which it is based.

 

(f)        Except to the extent expressly provided by this Agreement (including Section 5 and Section 9(d)) or as otherwise agreed by the parties, each party involved in a Dispute shall bear its own costs and expenses (including attorneys’ fees), and the arbitrators shall not render an award that would include shifting of any such costs or expenses (including attorneys’ fees) or, in a derivative case or class action by a shareholder of the Company, award any portion of the Company’s award to the claimant or the claimant’s attorneys.  Each party (or, if there are more than two parties to the Dispute, all claimants, on the one hand, and all respondents, on the other hand, respectively) shall bear the costs and expenses of its (or their) selected arbitrator and the parties (or, if there are more than two parties to the Dispute, all claimants, on the one hand, and all respondents, on the other hand) shall equally bear the costs and expenses of the third appointed arbitrator.

 

(g)       An Award shall be final and binding upon the parties thereto and shall be the sole and exclusive remedy between such parties relating to the Dispute, including any claims, counterclaims, issues or accounting presented to the arbitrators.  Judgment upon the Award may be entered in any court having jurisdiction.  To the fullest extent permitted by law, no application or appeal to any court of competent jurisdiction may be made in connection with any question of law arising in the course of arbitration or with respect to any award made except for actions relating to enforcement of this agreement to arbitrate or any arbitral award issued hereunder and except for actions seeking interim or other provisional relief in aid of arbitration proceedings in any court of competent jurisdiction.

 

(h)       Any monetary award shall be made and payable in U.S. dollars free of any tax, deduction or offset.  Each party against which the Award assesses a monetary obligation shall pay that obligation on or before the 30th day following the date of the Award or such other date as the Award may provide.

 

Section 17.         Period of Limitations.  To the fullest extent permitted by law, no legal action shall be brought, and no cause of action shall be asserted, by or on behalf of the Company or any controlled affiliate of the Company against Indemnitee, Indemnitee’s spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company or its controlled affiliate shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two-year period; provided, however, if any shorter period of limitations is otherwise applicable to any such cause of action, such shorter period shall govern.

 

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Section 18.         Reports to Shareholders.  To the extent required by the MGCL, the Company shall report in writing to its shareholders the payment of any amounts for indemnification of, or advance of Expenses to, Indemnitee under this Agreement arising out of a derivative Proceeding by or in the right of the Company with the notice of the meeting of shareholders of the Company next following the date of the payment of any such indemnification or advance of Expenses or prior to such meeting.

 

Section 19.         Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement.  One such counterpart signed by the party against whom enforceability is sought shall be sufficient to evidence the existence of this Agreement.

 

Section 20.         Headings.  The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

 

Section 21.         Modification and Waiver.  No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

Section 22.         Notices.  Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is accepted by the party to whom it is given, and shall be given by being delivered at the following addresses to the parties hereto:

 

(a)       If to Indemnitee, to:  The address set forth on the signature page hereto.

 

(b)       If to the Company to:

 

Select Income REIT
 Two Newton Place

255 Washington Street, Suite 300

Newton, Massachusetts 02458-1634
 Attn:  Secretary

 

or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

 

Section 23.         Governing Law.  The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland, without regard to its conflicts of laws rules.

 

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Section 24.         Miscellaneous.  Use of the masculine pronoun in this Agreement shall be deemed to include usage of the feminine pronoun where appropriate.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

 

	
 
    	
SELECT INCOME REIT
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
INDEMNITEE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Name:
    
	
 
    	
Address:
    

 

 

EXHIBIT A

 

FORM OF UNDERTAKING TO REPAY EXPENSES ADVANCED

 

The Board of Trustees of Select Income REIT

 

Re:  Undertaking to Repay Expenses Advanced

 

Ladies and Gentlemen:

 

This undertaking is being provided pursuant to that certain Indemnification Agreement dated                             , 20    , by and between Select Income REIT (the “Company”) and the undersigned Indemnitee (the “Indemnification Agreement”), pursuant to which I am entitled to advance of expenses in connection with [Description of Proceeding] (the “Proceeding”).

 

Terms used herein and not otherwise defined shall have the meanings specified in the Indemnification Agreement.

 

I am subject to the Proceeding by reason of my Corporate Status or by reason of alleged actions or omissions by me in such capacity.  I hereby affirm that at all times, insofar as I was involved as [a trustee] [an officer] of the Company, in any of the facts or events giving rise to the Proceeding, I (1) did not act with bad faith or active or deliberate dishonesty, (2) did not receive any improper personal benefit in money, property or services and (3) in the case of any criminal proceeding, had no reasonable cause to believe that any act or omission by me was unlawful.

 

In consideration of the advance of Expenses by the Company for reasonable attorneys’ fees and related expenses incurred by me in connection with the Proceeding (the “Advanced Expenses”), I hereby agree that if, in connection with the Proceeding, it is established that (1) an act or omission by me was material to the matter giving rise to the Proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty or (2) I actually received an improper personal benefit in money, property or services or (3) in the case of any criminal proceeding, I had reasonable cause to believe that the act or omission was unlawful, then I shall promptly reimburse the portion of the Advanced Expenses relating to the claims, issues or matters in the Proceeding as to which the foregoing findings have been established and which have not been successfully resolved as described in Section 5 of the Indemnification Agreement.  To the extent that Advanced Expenses do not relate to a specific claim, issue or matter in the Proceeding, I agree that such Expenses shall be allocated on a reasonable and proportionate basis.

 

 

IN WITNESS WHEREOF, I have executed this Affirmation and Undertaking on this                 day of                    , 20    .

 

	
WITNESS:
    	
 
    
	
 
    	
 
    	
 
    	
(SEAL)
    
				

 

 

Schedule to Exhibit 10.5

 

The following individuals are parties to Indemnification Agreements with the Company which are substantially identical in all material respects to the representative Indemnification Agreement filed herewith and are dated as of the respective dates listed below.  The other Indemnification Agreements are omitted pursuant to Instruction 2 to Item 601 of Regulation S-K.

 

	
Name of Signatory
    	
 
    	
Date
    
	
David   M. Blackman
    	
 
    	
March 8,   2012
    
	
President   and Chief Operating Officer
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Jennifer   B. Clark
    	
 
    	
March 8,   2012
    
	
Secretary
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Donna   D. Fraiche
    	
 
    	
March 8,   2012
    
	
Independent   Trustee
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
William   A. Lamkin
    	
 
    	
March 8,   2012
    
	
Independent   Trustee
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
John   C. Popeo
    	
 
    	
March 8,   2012
    
	
Treasurer   and Chief Financial Officer
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Adam   D. Portnoy
    	
 
    	
March 8,   2012
    
	
Managing   Trustee
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Barry   M. Portnoy
    	
 
    	
March 8,   2012
    
	
Managing   Trustee
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Jeffrey   P. Somers
    	
 
    	
March 8,   2012
    
	
Independent   Trustee
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Vern   D. Larkin
    	
 
    	
March 8,   2012
    
	
Director   of Internal Audit
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
Jacquelyn   S. Anderson
    	
 
    	
April 23,   2012
    
	
Assistant   SecretaryExhibit 10.33

 

FORM OF VALUE DRIVER INCENTIVE AWARD AGREEMENT

 

This Value Driver Incentive Award Agreement (“Agreement”) entered into as of [GRANT DATE] (the “Grant Date”), by and between Fluor Corporation, a Delaware corporation (the “Company”), and you (“Grantee” or “you”) evidences and confirms the following Value Driver Incentive Award (“VDI Award”) under the Fluor Corporation 2008 Executive Performance Incentive Plan (the “Plan”).  Capitalized terms used in this Agreement and not defined herein have the meaning set forth in the Plan.

 

Section 1.              AWARD SUBJECT TO PLAN

 

Your VDI Award is made subject to all of the terms and conditions of this Agreement and the Plan, including any terms, rules or determinations made by the Committee, pursuant to its administrative authority under the Plan and such further terms as are set forth in the Plan that are applicable to awards thereunder, including without limitation provisions on adjustment of awards, non-transferability, satisfaction of tax requirements and compliance with other laws.

 

Section 2.              MEASURE DEFINITIONS

 

Your VDI Award performance criteria are comprised of two measures: New Awards Gross Margin dollars and New Awards Gross Margin Percentage (the “Performance Targets”).  New Awards Gross Margin dollars measures the total amount of project gross margin that the Company expects to receive as a result of projects awarded within the performance period.  New Awards Gross Margin percentage is the total amount of gross margin the Company expects to receive as a result of projects awarded within the performance period as a percentage of expected revenue from those projects.

 

Section 3.              PERFORMANCE TARGETS AND VALUE OF AWARD

 

Your VDI Award target amount is $[AMOUNT].  This target amount will be expressed in units by dividing the target amount by the closing price of the Company’s Shares on [GRANT DATE] to determine the applicable number of units (e.g., if your target award amount is $65,000 and the Company’s Share price is $65 on the applicable date, this target amount will be expressed as 1000 units).

 

These units will be adjusted based on the Company’s performance for the [YEAR] calendar year against the established Performance Targets, which will be measured taking into account any project scope changes or cancellations.  [PERCENTAGE]% of the VDI Award performance will be based on New Awards Gross Margin dollars and [PERCENTAGE]% of the VDI Award performance will be based on New Awards Gross Margin Percent.  Specific performance targets are set forth on Exhibit A, which may be attached hereto or sent to you separately at a later date.

 

Once the units are adjusted for the Company’s performance, the number of units will not change for this grant.

 

Section 4.              RETENTION PERIOD AND PAYOUT

 

The period commencing [GRANT DATE] and ending on [FINAL VESTING DATE] shall be the “Retention Period”. Your VDI Award shall vest in two equal installments on [VEST DATE] and [VEST DATE], subject to the continued employment requirements contained in Section 5 below.  Payment of each portion of the VDI Award, if vested, shall be made as soon as practicable after each vesting date.  The VDI Award will generally be paid in cash, but the Company reserves the right to settle the VDI Award in shares or cash in its sole discretion.  The payment amount, if paid in cash, will be equal to the number of units which vested multiplied by the Company’s closing Share price on the applicable vesting date.

 

Section 5.              CONTINUED EMPLOYMENT

 

Payment of the VDI Award is conditioned upon you remaining in the employment of the Company or its subsidiaries for the Retention Period.  You will forfeit your right to receive any part of the VDI Award which has not become vested prior to your termination of employment for any reason unless (i) your termination is on account of death, (ii) your Disability has occurred, (iii) your termination is in connection with your retirement (where retirement is determined in accordance with applicable Company personnel policies), or (iv) your termination is a Qualifying Termination that occurs within two years after a Change of Control of the Company.

 

If your employment terminates during the Retention Period as a result of retirement (provided you retire and deliver a signed non-competition agreement in a form acceptable to the Company), the VDI Award shall continue to vest and continue to become payable in accordance with its terms on the vesting dates described in Section 4, notwithstanding such termination.  The VDI Awards set forth in this Agreement shall immediately vest and become payable (provided that such awards have not previously been forfeited pursuant to the provisions in this Agreement), if your employment with the Company or its subsidiaries is terminated on account of your death, your Disability

 

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occurs or a Qualifying Termination occurs within two (2) years following a Change of Control of the Company.  However, under all circumstances, any VDI Awards held less than one year from the Grant Date will be forfeited regardless of the reason for termination.  Nothing in the Plan or this Agreement confers any right of continuing employment with the Company or its subsidiaries.

 

For purposes of this Agreement, “Change in Control” and “Disability” mean, respectively, a change in control or your disability as defined in Appendix B to this Agreement.

 

In connection with a Change in Control, the term “Qualifying Termination” means your involuntary termination of employment by the Company without Cause or your resignation for Good Reason.  For this purpose, “Cause” means your dishonesty, fraud, willful misconduct, breach of fiduciary duty, conflict of interest, commission of a felony, material failure or refusal to perform your job duties in accordance with Company policies, a material violation of Company policy that causes harm to the Company or its subsidiaries or other wrongful conduct of a similar nature and degree; and “Good Reason” means a material diminution of your compensation (including, without limitation, base compensation, annual bonus opportunities, and/or equity incentive compensation opportunities), a material diminution of your authority, duties or responsibilities, a material diminution in the authority, duties or responsibilities of the supervisor to whom you are required to report or a material diminution of the budget over which you retain authority.

 

Section 6.              TAX WITHHOLDING

 

Regardless of any action the Company or the Grantee’s employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, payment on account or other tax-related withholding (“Tax-Related Items”), the Grantee acknowledges and agrees that the ultimate liability for all Tax-Related Items legally due by the Grantee is and remains the Grantee’s responsibility and that the Company and/or the Employer (i) make no representations nor undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this grant of VDI Awards, including the grant and vesting of VDI Awards, subsequent delivery of the cash payment and/or (ii) do not commit to structure the terms or any aspect of this grant of VDI Awards to reduce or eliminate the Grantee’s liability for Tax-Related Items. The Grantee shall pay the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold as a result of the Grantee’s participation in the Plan or the Grantee’s receipt of VDI Awards that cannot be satisfied by the means described below. Further, if the Grantee is subject to tax in more than one jurisdiction, the Grantee acknowledges that the Company and/or Employer (or former Employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. The Company may refuse to deliver the VDI payment if the Grantee fails to comply with the Grantee’s obligations in connection with the Tax-Related Items.

 

Prior to the taxable or tax withholding event, as applicable, the Grantee shall pay, or make adequate arrangements satisfactory to the Company or to the Employer (in their sole discretion) to satisfy all Tax-Related Items.  In this regard, the Grantee authorizes the Company or Employer to withhold all applicable Tax-Related Items legally payable by the Grantee by (1) withholding from the VDI Award payment in cash (and if Shares are delivered, a number of Shares otherwise deliverable equal to the Retained Share Amount, as defined below) and/or (2) withholding from the Grantee’s wages or other cash compensation paid by the Company and/or Employer.  The “Retained Share Amount” shall mean a number of Shares equal to the quotient of the minimum statutory tax withholding obligation of the Company triggered by the VDI Award payment on the relevant date, divided by the fair market value of one Share on the relevant date or as otherwise provided in the Plan.  If the obligation for Tax-Related Items is satisfied by withholding a number of Shares as described herein, the Grantee understands that he or she will be deemed to have been issued the full number of Shares, notwithstanding that a number of Shares are held back solely for the purpose of paying the Tax-Related Items due as a result of the settlement of the VDI Award.

 

Grantee acknowledges and understands that Grantee should consult a tax adviser regarding Grantee’s tax obligations prior to such settlement or disposition.

 

Section 7.              SEVERABILITY

 

In the event that one or more of the provisions of this Agreement shall be invalidated for any reason by a court of competent jurisdiction, any provision so invalidated shall be deemed to be separable from the other provisions hereof, and the remaining provisions hereof shall continue to be valid and fully enforceable.

 

Section 8.              DATA PROTECTION

 

THE GRANTEE HEREBY EXPLICITLY AND UNAMBIGUOUSLY CONSENTS TO THE COLLECTION, USE AND TRANSFER, IN ELECTRONIC OR OTHER FORM, OF THE GRANTEE’S PERSONAL DATA AS DESCRIBED IN THIS DOCUMENT BY AND AMONG, AS APPLICABLE, THE EMPLOYER, AND THE COMPANY AND ITS SUBSIDIARIES FOR THE EXCLUSIVE PURPOSE OF IMPLEMENTING, ADMINISTERING AND MANAGING THE GRANTEE’S PARTICIPATION IN THE PLAN. THE GRANTEE UNDERSTANDS THAT THE COMPANY, ITS SUBSIDIARIES AND THE EMPLOYER HOLD CERTAIN PERSONAL INFORMATION ABOUT THE GRANTEE, INCLUDING, BUT NOT LIMITED TO, NAME, HOME ADDRESS AND TELEPHONE NUMBER, DATE OF BIRTH, SOCIAL SECURITY OR INSURANCE NUMBER OR OTHER IDENTIFICATION NUMBER, SALARY, NATIONALITY, JOB TITLE, ANY SHARES OR

 

2

 

DIRECTORSHIPS HELD IN THE COMPANY, DETAILS OF ALL OPTIONS OR ANY OTHER ENTITLEMENT TO SHARES AWARDED, CANCELED, PURCHASED, EXERCISED, VESTED, UNVESTED OR OUTSTANDING IN THE GRANTEE’S FAVOR FOR THE PURPOSE OF IMPLEMENTING, MANAGING AND ADMINISTERING THE PLAN (“DATA”).  THE GRANTEE UNDERSTANDS THAT THE DATA MAY BE TRANSFERRED TO ANY THIRD PARTIES ASSISTING IN THE IMPLEMENTATION, ADMINISTRATION AND MANAGEMENT OF THE PLAN, THAT THESE RECIPIENTS MAY BE LOCATED IN THE GRANTEE’S COUNTRY OR ELSEWHERE, INCLUDING OUTSIDE THE EUROPEAN ECONOMIC AREA, AND THAT THE RECIPIENT COUNTRY MAY HAVE DIFFERENT DATA PRIVACY LAWS AND PROTECTIONS THAN THE GRANTEE’S COUNTRY. THE GRANTEE UNDERSTANDS THAT HE/SHE MAY REQUEST A LIST WITH THE NAMES AND ADDRESSES OF ANY POTENTIAL RECIPIENTS OF THE DATA BY CONTACTING THE LOCAL HUMAN RESOURCES REPRESENTATIVE. THE GRANTEE AUTHORIZES THE RECIPIENTS TO RECEIVE, POSSESS, USE, RETAIN AND TRANSFER THE DATA, IN ELECTRONIC OR OTHER FORM, FOR THE PURPOSES OF IMPLEMENTING, ADMINISTERING AND MANAGING THE GRANTEE’S PARTICIPATION IN THE PLAN, INCLUDING ANY REQUISITE TRANSFER OF SUCH DATA, AS MAY BE REQUIRED TO A BROKER OR OTHER THIRD PARTY WITH WHOM THE GRANTEE MAY ELECT TO DEPOSIT SHARES, IF ANY, ACQUIRED UNDER THE PLAN. THE GRANTEE UNDERSTANDS THAT DATA WILL BE HELD ONLY AS LONG AS IS NECESSARY TO IMPLEMENT, ADMINISTER AND MANAGE PARTICIPATION IN THE PLAN. THE GRANTEE UNDERSTANDS THAT HE/SHE MAY, AT ANY TIME, VIEW DATA, REQUEST ADDITIONAL INFORMATION ABOUT THE STORAGE AND PROCESSING OF THE DATA, REQUIRE ANY NECESSARY AMENDMENTS TO THE DATA OR REFUSE OR WITHDRAW THE CONSENTS HEREIN, IN ANY CASE WITHOUT COST, BY CONTACTING THE LOCAL HUMAN RESOURCES REPRESENTATIVE IN WRITING. THE GRANTEE UNDERSTANDS THAT REFUSING OR WITHDRAWING CONSENT MAY AFFECT THE GRANTEE’S ABILITY TO PARTICIPATE IN THE PLAN. FOR MORE INFORMATION ON THE CONSEQUENCES OF REFUSING TO CONSENT OR WITHDRAWING CONSENT, THE GRANTEE UNDERSTANDS THAT HE/SHE MAY CONTACT THE STOCK PLAN ADMINISTRATOR AT THE COMPANY.

 

Section 9.              ACKNOWLEDGMENT AND WAIVER

 

The Grantee acknowledges and agrees that:

 

(a)                      the Plan is established voluntarily by the Company, it is discretionary in nature and may be modified, amended, suspended or terminated by the Company at any time unless otherwise provided in the Plan or this Agreement;

 

(b)                     the grant of VDI Awards is voluntary and occasional and does not create any contractual or other right to receive future grants of VDI Awards, or benefits in lieu of VDI Awards, even if VDI Awards have been granted repeatedly in the past;

 

(c)                      all decisions with respect to future grants, if any, will be at the sole discretion of the Company;

 

(d)                     the Grantee’s participation in the Plan shall not create a right to further employment with Employer and shall not interfere with the ability of Employer to terminate the Grantee’s employment relationship and it is expressly agreed and understood that employment is terminable at the will of either party, insofar as permitted by law;

 

(e)                      the Grantee is participating voluntarily in the Plan;

 

(f)                        VDI Awards and resulting benefits are an extraordinary item that does not constitute compensation of any kind for services of any kind rendered to the Company or the Employer, and are outside the scope of the Grantee’s employment contract, if any;

 

(g)                     VDI Awards and resulting benefits are not part of normal or expected compensation or salary for any purposes, including, but not limited to calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments insofar as permitted by law;

 

(h)                     in the event that the Grantee is not an employee of the Company, this grant of VDI Awards will not be interpreted to form an employment contract or relationship with the Company, and furthermore, this grant of VDI Awards will not be interpreted to form an employment contract with the Employer or any subsidiary of the Company; and

 

(i)                         in consideration of this grant of VDI Awards, no claim or entitlement to compensation or damages shall arise from termination of this grant or diminution in value of this grant of VDI Awards resulting from termination of the Grantee’s employment by the Company or the Employer (for any reason whatsoever) and the Grantee irrevocably releases the Company and the Employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by accepting the terms of this Agreement, the Grantee shall be deemed irrevocably to have waived any entitlement to pursue such claim.

 

3

 

Section 10.            CONFIDENTIALITY

 

This VDI Award is conditioned upon Grantee not disclosing this Agreement to anyone other than Grantee’s spouse, confidential financial advisors, senior management of the Company or members of the Company’s Law, Tax, Human Resources, and Executive Compensation Services departments.  If unauthorized disclosure is made to any other person, this VDI Award shall be forfeited.

 

Section 11.            GRANT-SPECIFIC TERMS

 

Appendix A contains additional terms and conditions of the Agreement applicable to Grantees residing outside the U.S.  In addition, Appendix A also contains information and notices regarding exchange control and certain other issues of which the Grantee should be aware that may arise as a result of participation in the Plan.  Appendix B contains additional terms in compliance with Section 409A of the US Internal Revenue Code.

 

Section 12.            ENFORCEMENT

 

This Agreement shall be construed, administered and enforced in accordance with the laws of the State of Delaware.

 

Section 13.                                   EXECUTION OF AWARD AGREEMENT

 

Please acknowledge your acceptance of the terms of this Agreement by electronically signing this Agreement.  If you have not electronically signed this Agreement within two (2) months, the Company is not obligated to provide you any benefit hereunder and may refuse to issue any payment to you under this Agreement.  In addition, by signing this Agreement, you acknowledge and agree that your prior VDI grants, if any, are amended to include the 409A provisions that are part of this Agreement in Appendix B.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first hereinabove written.

 

 

	
 
    	
FLUOR   CORPORATION
    
	
 
    	
 
    
	
 
    	
By:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
David   T. Seaton
    
	
 
    	
 
    	
Chairman   and Chief Executive Officer
    

 

4

 

APPENDIX A

 

FLUOR CORPORATION
 VDI AWARDS FOR NON-U.S. GRANTEES

 

TERMS AND CONDITIONS

 

This Appendix A, which is part of the Agreement, includes additional terms and conditions of the Agreement that will apply to you if you are resident in the countries listed below.  Capitalized terms used but not defined herein shall have the same meanings assigned to them in the Plan and the Agreement.

 

NOTIFICATIONS

 

This Appendix A also includes information regarding exchange control and certain other issues of which you should be aware with respect to your participation in the Plan.  The information is based on the securities, exchange control and other laws in effect in the respective countries as of [DATE].  Such laws are often complex and change frequently.  As a result, the Company strongly recommends that you not rely on the information in this Appendix A as the only source of information relating to the consequences of your participation in the Plan because such information may be out-of-date when your VDI Awards vest.

 

In addition, the information contained herein is general in nature and may not apply to your particular situation.  As a result, the Company is not in a position to assure you of any particular result.  You are therefore advised to seek appropriate professional advice as to how the relevant laws in your country may apply to your situation.

 

Finally, if you are a citizen or resident of a country other than that in which you are currently working, the information contained herein may not apply to you.

 

GRANT-SPECIFIC LANGUAGE

 

Below please find country specific language that applies to Australia, Canada, Chile, Germany, the Netherlands, Russia, South Africa, Spain and the UK.

 

AUSTRALIA

 

Terms and Conditions

 

There are no country-specific provisions.

 

Notifications

 

Exchange Control Information.  Exchange control reporting is required for cash transactions exceeding A$10,000 and international fund transfers.  The Australian bank assisting with the transaction will file the report.  If there is no Australian bank involved in the transfer, Grantee will be required to file the report.

 

CANADA

 

Terms and Conditions

 

There are no country-specific provisions.

 

Language Consent

 

The following provision applies to residents of Quebec:

 

The parties acknowledge that it is their express wish that the Agreement, as well as all documents, notices, and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English.

 

5

 

Les parties reconnaissent avoir exigé la rédaction en anglais de cette convention, ainsi que de tous documents, avis et procédures judiciaires, exécutés, donnés ou intentés en vertu de, ou liés directement ou indirectement à la présente convention.

 

Notifications

 

There are no country-specific notifications.

 

CHILE

 

Terms and Conditions

 

There are no country-specific provisions.

 

Notifications

 

Securities Law Information.  Neither the Company, the award, or any Company shares acquired under the Plan are registered with the Chilean Registry of Securities or are under the control of the Chilean Superintendence of Securities.

 

Exchange Control Information.  Exchange control reporting is required to remit funds for the purchase of shares exceeding US$10,000 (including cashless exercise transactions).  If reporting is required, you will be responsible for filing this report with the Central Bank of Chile.  In addition, you must also file a report with the Central Bank if, in a given year, you have kept investments, deposits, or credits abroad in an amount that exceeds US$5,000,000.

 

Tax Information.  Registration of your investment in Company shares with the Chilean Internal Revenue Service may result in more favorable tax treatment.  Please consult your tax advisor for additional details.

 

GERMANY

 

Terms and Conditions

 

There are no country-specific provisions.

 

Notifications

 

Exchange Control Information.  Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank.  If Grantee uses a German bank to transfer a cross-border payment in excess of €12,500, the bank will file the report for you.

 

THE NETHERLANDS

 

Terms and Conditions

 

There are no country-specific provisions.

 

Notifications

 

There are no country-specific notifications.

 

RUSSIA

 

Terms and Conditions

 

There are no country-specific provisions.

 

Notifications

 

There are no country-specific notifications.

 

6

 

SOUTH AFRICA

 

Terms and Conditions

 

There are no country-specific provisions.

 

Notifications

 

Exchange Control Information.  To participate in the Plan, Grantee understands that Grantee must comply with exchange control regulations and rulings (the “Exchange Control Regulations”) in South Africa.

 

For VDI Awards, because no transfer of funds from South Africa is required, no filing or reporting requirements should apply when the VDI Awards, if any, are granted or upon settlement of the VDI Awards (in cash or shares).

 

Because the Exchange Control Regulations change frequently and without notice, Grantee understands that Grantee should consult a legal advisor to ensure compliance with current regulations.  Grantee understands that it is Grantee’s responsibility to comply with South African exchange control laws, and neither the Company nor Grantee’s Employer will be liable for any fines or penalties resulting from failure to comply with applicable laws.

 

SPAIN

 

Terms and Conditions

 

There are no country-specific provisions.

 

Notifications

 

No Special Employment or Similar Rights.  Grantee understands that the Company has unilaterally, gratuitously, and discretionally decided to distribute VDI Awards under the Plan to individuals who may be employees of the Company or its subsidiaries throughout the world.  The decision is a temporary decision that is entered into upon the express assumption and condition that any grant will not economically or otherwise bind the Company or any of its subsidiaries presently or in the future, other than as specifically set forth in the Plan and the terms and conditions of Grantee’s VDI Award.  Consequently, Grantee understands that any grant is given on the assumption and condition that it shall not become a part of any employment contract (either with the Company or any of its subsidiaries) and shall not be considered a mandatory benefit, salary for any purpose (including severance compensation) or any other right whatsoever.  Further, Grantee understands and freely accepts that there is no guarantee that any benefit whatsoever shall arise from any gratuitous and discretionary grant.  In addition, Grantee understands that this grant would not be made but for the assumptions and conditions referred to above; thus, Grantee acknowledges and freely accepts that should any or all of the assumptions be mistaken or should any of the conditions not be met for any reason, then any grant of awards shall be null and void and the Plan shall not have any effect whatsoever.

 

Further, the award provides a conditional right to a cash payment or shares and may be forfeited or affected by Grantee’s termination of employment, as set forth in the Agreement.  For avoidance of doubt, Grantee’s rights, if any, to the VDI Awards upon termination of employment shall be determined as set forth in the Agreement, including, without limitation, where (i) Grantee is considered to be unfairly dismissed without good cause; (ii) Grantee is dismissed for disciplinary or objective reasons or due to a collective dismissal; (iii) Grantee terminates service due to a change location, duties or any other employment or contractual condition; or (iv) Grantee terminates service due to the Company’s or any of its subsidiaries’ unilateral breach of contract.

 

Securities Law Notice.  The VDI Awards granted under the Plan do not qualify as securities under Spanish regulations.  By the grant of VDI Awards, no “offer of securities to the public”, as defined under Spanish law, has taken place or will take place in Spanish territory.  The present document and any other document relating to the offer of VDI Awards under the Plan has not been nor will it be registered with the Comisión Nacional del Mercado de Valores (Spanish Securities Exchange Commission), and it does not constitute a public offering prospectus.

 

UNITED KINGDOM

 

Terms and Conditions

 

There are no country-specific provisions.

 

Notifications

 

There are no country-specific notifications.

 

7

 

APPENDIX B

 

Compliance with Section 409A of the Internal Revenue Code

 

(a)           It is intended that the provisions of this Agreement comply with Section 409A of the U.S. Internal Revenue Code, and all provisions of this Agreement shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A.

 

(b)           Neither Grantee nor any of Grantee’s creditors or beneficiaries shall have the right to subject any deferred compensation (within the meaning of Section 409A) payable under this Agreement to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment.  Except as permitted under Section 409A, any deferred compensation (within the meaning of Section 409A) payable to Grantee or for Grantee’s benefit under this Agreement may not be reduced by, or offset against, any amount owing by Grantee to the Company or any of its subsidiaries.

 

(c)           If, at the time of Grantee’s separation from service (within the meaning of Section 409A), (i) Grantee is a specified employee (within the meaning of Section 409A and using the identification methodology selected by the Company from time to time) and (ii) the Company shall make a good faith determination that an amount payable hereunder constitutes deferred compensation (within the meaning of Section 409A) the payment of which is required to be delayed pursuant to the six-month delay rule set forth in Section 409A in order to avoid taxes or penalties under Section 409A, then the Company shall not pay such amount on the otherwise scheduled payment date pursuant to Section 4 of this Agreement but shall instead pay it, without interest, on the first business day after such six-month period or, if earlier, upon the Grantee’s death.

 

(d)           Notwithstanding anything to the contrary contained herein, for the purpose of this Agreement, (i) if the VDI Award has not previously been forfeited, the VDI Award shall vest on a Disability, which shall mean that the Grantee is considered disabled in accordance with U.S. Treasury Regulations section 1.409A-3(i)(4), determined as if all permissible provisions of such regulation were in effect, and (ii) a Change of Control of the Company is considered to have occurred with respect to the Grantee upon the occurrence with respect to the Grantee of a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, as determined in accordance with U.S. Treasury Regulations section 1.409A-3(i)(5).

 

(e)           Notwithstanding any provision of this Agreement to the contrary, in light of the uncertainty with respect to the proper application of Section 409A, the Company reserves the right to make amendments to this Agreement as the Company deems necessary or desirable to avoid the imposition of taxes or penalties under Section 409A.  In any case, Grantee shall be solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on Grantee or for Grantee’s account in connection with this Agreement (including, without limitation, any taxes and penalties under Section 409A), and neither the Company nor any of its subsidiaries shall have any obligation to indemnify or otherwise hold Grantee harmless from any or all of such taxes or penalties.

 

8

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