EXHIBIT 10.17
TAX PROTECTION AGREEMENT
This AGREEMENT (the "Agreement") by and between
Pennzoil-Quaker State Company, a Delaware corporation (the "Company"), and
___________ (the "Executive"), dated as of ______________________________ and
to be effective as of the date hereof (as defined herein).
In entering into this Agreement, the Company intends that the
compensation and benefits payable or provided to or in respect of Executive not
be adversely impacted by certain excise taxes imposed under the Internal
Revenue Code in connection with any change in control of the Company, the
Company has determined to enter into the following Agreement providing for tax
protection payments to be made to or in respect of Executive.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Additional Payments by the Company.
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(a) In the event it shall be determined that any payment or
distribution to or for the benefit of the Executive (whether paid or
payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional
payments required under this Section 1 (a "Payment")) is subject to the
excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the Executive with respect to such excise tax
(such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") from the Company in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 1(c), all determinations
required to be made under this Section 1, including whether and when
Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be
made by Xxxxxx Xxxxxxxx LLP (the "Accounting Firm"); provided, however,
that the Accounting Firm shall not determine
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that no Excise Tax is payable by the Executive unless it delivers to
the Executive a written opinion (the "Accounting Opinion") that failure to
report the Excise Tax on the Executive's applicable federal income tax
return would not result in the imposition of a negligence or any other
penalty. In the event that Xxxxxx Xxxxxxxx LLP (or any affiliate thereto)
has served, at any time during the two years immediately preceding a
change in control of the Company, as accountant or auditor or consultant
for the individual, entity or group that is involved in effecting or has
any material interest in the change in control of the Company, the
Executive shall appoint another nationally recognized accounting firm to
make the determinations and perform the other functions specified in this
Section 1 (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm
shall be borne solely by the Company. Within 15 business days of the
receipt of notice from the Executive that there has been a Payment, or
such earlier time as is requested by the Company, the Accounting Firm
shall make all determinations required under this Section 1, shall provide
to the Company and the Executive a written report setting forth such
determinations, together with detailed supporting calculations, and, if
the Accounting Firm determines that no Excise Tax is payable, shall
deliver the Accounting Opinion to the Executive. Any Gross-Up Payment, as
determined pursuant to this Section 1, shall be paid by the Company to the
Executive within five days of the receipt of the Accounting Firm's
determination. Subject to the remainder of this Section 1, any
determination by the Accounting Firm shall be binding upon the Company and
the Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that it is ultimately determined in accordance
with the procedures set forth in Section 1 (c) that the Executive is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit
of the Executive.
(c) The Executive shall notify the Company in writing of any claims
by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than 30 days after the Executive
actually receives notice in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such claim
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is requested to be paid; provided, however, that the failure of the
Executive to notify the Company of such claim (or to provide any required
information with respect thereto) shall not affect any rights granted to
the Executive under this Section 1 except to the extent that the Company
is materially prejudiced in the defense of such claim as a direct result
of such failure. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which he gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company
notifies the Executive in writing prior to the expiration of such period
that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney selected by the Company and reasonably acceptable to
the Executive;
(iii) cooperate with the Company in good faith in order effectively
to contest such claim; and
(iv) if the Company elects not to assume and control the defense of
such claim, permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 1(c), the Company shall have the right, at its sole option, to
assume the defense of and control all proceedings in connection with such
contest, in which case it may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim, and may either direct the Executive to pay the tax
claimed and xxx for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine;
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provided, however, that if the Company directs the Executive to pay such claim
and xxx for a refund, the Company shall advance the amount of such payment to
the Executive, on an interest-free basis, and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance; and further provided, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with respect
to which such contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's right to assume the defense of and
control the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 1 (c) the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section 1
(c)) promptly pay to the Company the amount of such refund (together with
an amount, including any interest paid or credited thereon, after taxes
applicable thereto in order to place Executive in the appropriate after
tax position). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 1 (c) a determination is made
that the Executive shall not be entitled to any refund with respect to
such claim, and the Company does not notify the Executive in writing of
its intent to contest such denial of refund prior to the expiration of 30
days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
2. Successors.
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(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the
Executive's heirs, executors and other legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and may only be assigned to a successor described in Section
2(c).
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(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no
such succession had taken place. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
3. Miscellaneous.
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(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas, without reference to principles of
conflict of laws that would require the application of the laws of any
other state or jurisdiction.
(b) The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.
(c) This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective
successors and heirs, executors and other legal representatives.
(d) All notices and other communications hereunder shall be in
writing and shall be given, if by the Executive to the Company, by
telecopy or facsimile transmission at the telecommunications number set
forth below and, if by either the Company or the Executive, either by hand
delivery to the other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive:
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____________________
____________________
____________________
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If to the Company:
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Pennzoil-Quaker Company
Pennzoil Place
P. O. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Corporate Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(e) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(f) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the Company
may have hereunder shall not be deemed to be a waiver of such provision or
right or any other provision or right of this Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.
PENNZOIL-QUAKER STATE COMPANY
By:
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General Counsel
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