EXHIBIT 10.21
October 4, 2001
PERSONAL & CONFIDENTIAL
Xx. Xxxxx X. Xxxxx
Pennzoil-Quaker State Company
31st Floor, North Tower
700 Xxxxx
Xxxxxxx, Xxxxx 00000
Dear Xx. Xxxxx:
You have previously been or may be designated a participant in the
Pennzoil-Quaker State Company Supplemental Life Insurance Plan (the
"Supplemental Life Insurance Plan"), the Pennzoil-Quaker State Company Medical
Expense Reimbursement Plan (the "Medical Plan") and current and future stock
option plans and you have entered into a Deferred Compensation Agreement, dated
May 4, 2000, as amended by the First and Second Amendment thereto, dated July
13, 2000, and September 20, 2001, respectively, and as may be subsequently
amended from time to time (the "DCA"), pursuant to the terms of the
Pennzoil-Quaker State Company Deferred Compensation Plan. In addition, you are
eligible to participate in the Pennzoil-Quaker State Company Savings and
Investment Plan (the "Savings and Investment Plan") and the Pennzoil-Quaker
State Company Salaried Employees Retirement Plan (the "Retirement Plan"). Your
designation as a participant or an eligible participant and participation in
these plans has been and is intended by the Company as additional compensation.
The Company intends that you not be unfairly deprived of the opportunity to
fulfill service and age prerequisites to entitlement to receipt of benefits in
the described plans because of or in connection with a change in control of the
Company. Accordingly, you and the Company previously entered into an agreement
dated as of September 20, 2001, relating to certain cash-out benefits in the
event of a change in control of the Company (the "Prior Agreement"). It is
intended that the Prior Agreement be superseded by this Agreement effective as
of the date hereof.
Accordingly, in consideration of your agreement to remain in continued
employment with the Company as President and Chief Executive Officer of the
Company, or in such other executive capacity as may be determined from time to
time by the Board of Directors of the Company (the "Board") and your agreement
to devote your normal working time to the business interests and activities of
the Company and to perform the duties and responsibilities assigned to you by
the Board to the best of your ability and with reasonable diligence, in the
event of a Change in Control (as defined in Paragraph III below), you will be
entitled to the cash
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payments described in Paragraph I below. In addition, in the event that your
employment is terminated upon or within three years following the Change in
Control Effective Date (as defined in Paragraph III below), you will be entitled
to the continued life insurance, medical expense reimbursement benefits and cash
payments described in Paragraph II below.
I. In the event that a Change in Control occurs, you will receive from the
Company forthwith following the Change in Control Effective Date, a cash payment
equal to the amount determined by adding, for each share of Common Stock (as
defined in Paragraph III below) as to which a nonqualified option granted you
under any stock option plan of the Company is not exercisable on the Change in
Control Effective Date, the excess of the Value (as defined in Paragraph III
below) of such Common Stock over the option price of such share; provided,
however, that to the extent any such option has become exercisable and been
exercised before the amount described in this Paragraph I is paid to you, you
shall not receive any payment under this Paragraph I in lieu of such option.
II. In the event that your employment with the Company is terminated,
whether voluntarily or involuntarily for any reason other than death, upon or
within three years following the Change in Control Effective Date:
1. Equal to the present value as of your termination date of any
benefits payable to you, your spouse or dependents under paragraphs 3, 4,
and 5 of the DCA, discounting at the lesser of the rate used in the
Retirement Plan in the year of distribution as applied to a lump sum
payment or 7 1/2% annual effective rate of interest and assuming that (a)
your employment with the Company had continued uninterrupted until you had
attained age 65 at a monthly remuneration equal to your monthly salary as
in effect on your termination date; (b) the monthly payments of deferred
compensation commenced on your termination date; (c) Social Security
benefits were calculated assuming that the United States Social Security
laws and your earnings as in effect on your termination date continued in
effect without change; (d) you would accrue no further benefits under any
of the Company's or any other former employer's retirement or other benefit
plans (whether or not in the form of monthly payments) after your
termination date; (e) the life expectancies for you and your spouse as of
your termination date are in accordance with the 1983 Group Annuity
Mortality table (based upon a fixed blend of 50% of the male mortality and
50% of the female mortality); (f) the monthly premiums for your coverage
under the Medical Plan as of the Change in Control Effective Date increased
at 7 1/2% per annum and that the medical programs of the Company, the
United States Social Security, Medicare, or Medicaid, or any analogous
state or federal programs as in effect on your termination date continued
in effect without change.
In determining the cash payment to which you are entitled
pursuant to this Paragraph II(1) hereof in lieu of any benefits payable to
you or your spouse
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under the DCA, the Company shall follow the procedures set forth in that
certain instrument entitled the "Pennzoil-Quaker State Company Benefit
Acceleration Agreement Administrative Procedures," dated March 1999
(prepared by Xxxxxxx X. Xxxxxx, Incorporated) and maintained on file as an
official record of the Company by the Vice President, Compensation and
Benefits of the Company, and such procedures, including any examples or
instructions contained therein, are hereby incorporated by reference as if
fully set forth herein and shall constitute a part of this Agreement
between you and the Company.
2. You will receive from the Company forthwith a cash payment equal to
the sum of the Value of the Common Stock and other assets credited to your
accounts maintained pursuant to the Savings and Investment Plan that are
not vested on the date of your termination of employment.
3. Both the life insurance coverage provided you under the
Supplemental Life Insurance Plan in effect on the Change in Control
Effective Date and the medical expense coverage provided you, your spouse
and dependents under the Medical Plan in effect on the Change in Control
Effective Date shall be continued for one year after your termination date.
III. For purposes of this Agreement, the following definitions shall apply:
1. "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
promulgated under the Exchange Act.
2. A "Change in Control" of the Company shall conclusively be deemed
to have occurred if an event set forth in any one of the following
paragraphs shall have occurred:
(a) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company or its affiliates) representing 35% or more of the combined voting
power of the Company's then outstanding securities; or
(b) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on the
date hereof, constitute the Board and any new director (other than a
director whose initial assumption of office is in connection with an actual
or threatened election contest relating to the election of directors of the
Company) whose appointment or election by the Board or nomination for
election by the Company's stockholders was approved or recommended by a
vote of at least two-thirds (2/3) of the directors then still in office who
either were directors on the date hereof or
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whose appointment, election or nomination for election was previously so
approved or recommended; or
(c) there is consummated a merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any other
corporation, other than (i) a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior to such
merger or consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity or any parent thereof), in combination with the ownership of any
trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any subsidiary of the Company, at least 50% of the
combined voting power of the securities of the Company or such surviving
entity or any parent thereof outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person
is or becomes the Beneficial Owner, directly or indirectly, of securities
of the Company (not including in the securities Beneficially Owned by such
Person any securities acquired directly from the Company or any of its
affiliates other than in connection with the acquisition by the Company or
any of its affiliates of a business) representing 35% or more of the
combined voting power of the Company's then outstanding securities; or
(d) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or disposition
by the Company of all or substantially all of the Company's assets to an
entity, at least 50% of the combined voting power of the voting securities
of which are owned by stockholders of the Company in substantially the same
proportions as their ownership of the Company immediately prior to such
sale.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
have occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of
the Common Stock of the Company immediately prior to such transaction or
series of transactions continue to have substantially the same
proportionate ownership in an entity which owns all or substantially all of
the assets of the Company immediately following such transaction or series
of transactions.
3. "Common Stock" shall mean the common stock, par value $0.10 per
share, of the Company.
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4. "Change in Control Effective Date" shall be:
(a) the first date that the direct or indirect ownership of 35% or
more combined voting power of the Company's outstanding securities results
in a Change in Control as described in Paragraph III(2)(a) above; or
(b) the date of the election of directors that results in a Change in
Control as described in Paragraph III(2)(b) above; or
(c) the date of the merger or consideration that results in a Change
in Control as described in Paragraph III(2)(c) above; or
(d) the date of stockholder approval that results in a Change in
Control as described in Paragraph III(2)(d) above.
5. "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
6. "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (a) the Company or any of its
subsidiaries, (b) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its affiliates, (c) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (d) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
7. "Value" of a share of Common Stock shall mean (i) the average of
the mean between the highest and lowest sales price per share of the Common
Stock reported on the consolidated transaction reporting system for the
principal national securities exchange on which shares of Common Stock are
listed during the ten trading days immediately prior to the Change in
Control Effective Date or (ii) the amount determined to be the fair value
per share thereof by the Board in the resolution or resolutions adopted by
it. In the event the Board determines the fair value, the amount so
determined shall be not less than the ten-day average price computed in
accordance with clause (i) the preceding sentence and not in excess of an
amount (assuming that such amount is in excess of such ten-day average)
equal to the highest consideration paid for the Common Stock in any offer
to the holders thereof made as a part or in connection with the transaction
or transactions resulting in the Change in Control. The Value of assets
other than Common Stock credited to accounts under the Saving and Incentive
Plan shall be the fair value determined for such assets under the terms of
such plan.
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If you find that this Agreement accurately describes the agreement
between Pennzoil-Quaker State Company and you concerning certain of your
employee benefits, please sign three copies of this Agreement and return two to
the Company, whereupon this letter shall constitute a binding agreement between
Pennzoil-Quaker State Company and you.
This letter Agreement shall be effective as of October 4, 2001.
Very truly yours,
PENNZOIL-QUAKER STATE COMPANY
By: /s/ XXXXX X. XXXX
Xxxxx X. Xxxx
Chairman of the Board
Accepted and Agreed to this
11th day of December, 2001.
/s/ XXXXX X. XXXXX
Xxxxx X. Xxxxx
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