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EXHIBIT 11
TAX PROTECTION AGREEMENT
This AGREEMENT (the "Agreement") by and between Pennzoil
Company, a Delaware corporation (the "Company"), and [name of executive
officer] (the "Executive"), dated as of the 30th day of June, 1997 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.
(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 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 thereof) 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
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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 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
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(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; 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.
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2. Successors.
(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).
(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.
(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:
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If to the Executive:
Xxxx X. Xxxxx
000 Xxx Xxxxxx
Xxxxxxx, Xxxxx 00000
If to the Company:
Pennzoil Company
P. O. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Telecommunications Number: (000) 000-0000
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 COMPANY
By:
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Name:
Title:
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Name:
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