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EXHIBIT (e)(8)
PARACHUTE TAX AGREEMENT
This Agreement is made by and between _________________ ("Executive")
and Pennaco Energy, Inc., a Delaware corporation (the "Company"), effective for
all purposes as of November 15, 2000.
WHEREAS, Executive is a key member of the Company's management; and
WHEREAS, the Company recognizes that the possibility of a "change in
control" of the Company, within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), may arise (hereafter a "Change of
Control"); and
WHEREAS, such a possibility presents uncertainty for key members of
management that may result in departures or distraction of management to the
detriment of the Company; and
WHEREAS, as an additional inducement to Executive to continue his
employment with the Company, the Company desires to provide Executive with the
benefits of this Agreement in the event of a Change of Control and Executive
desires to receive such benefits;
NOW, THEREFORE, the parties hereto agree as follows:
1. TAX GROSS-UP BENEFIT.
(a) In the event it shall be determined that, as a consequence
of any Change of Control of the Company, any payment or benefit made or
provided by the Company or any other person to or for the benefit of
Executive (a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties are incurred by
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 Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") from the Company
in an amount such that after payment by Executive of all taxes
(including any interest or penalties imposed with respect to such
taxes), including, without limitation, any taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of Paragraph (c) below, all
determinations required to be made under this Agreement, including
whether and when a 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 such nationally recognized certified
public accounting firm as may be designated by Executive (the
"Accounting Firm"), which shall provide detailed supporting
calculations both to the Company and Executive within fifteen business
days of the receipt of notice from Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for
the person effecting the Change of Control, Executive shall appoint
another nationally recognized accounting
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firm to make the determinations required hereunder (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. Any Gross-Up Payment, as determined pursuant to this
Agreement, shall be paid by the Company to Executive within five days
of the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the Company
and 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 (an
"Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant
to Paragraph (c) below and Executive hereafter 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 paid by the Company to or for the benefit of Executive within
five days of the Company's receipt of notice of such Underpayment.
(c) Executive shall notify the Company in writing of any claim
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 ten business days
after Executive is informed 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. Executive shall not pay such claim prior
to the expiration of the thirty-day period following the date on which
it 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 Executive in writing prior to the expiration of
such period that it desires to contest such claim, 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
reasonably selected by the Company;
(iii) cooperate with the Company in good faith in
order effectively to contest such claim; and
(iv) 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
Executive harmless, on an after-tax basis, for any Excise Tax
and other taxes (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 Paragraph (c), the Company shall
control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forgo any and all
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administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at
its sole option, either direct Executive or pay the tax
claimed and xxx for a refund or contest the claim in a
permissible manner, and 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 Executive to pay such
claim and xxx for a refund, the Company shall advance the
amount of such payment to Executive on an interest-free basis
and shall indemnify and hold Executive harmless, on an
after-tax basis, from any Excise Tax and other taxes
(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
an extension of the statute of limitations relating to payment
of taxes for the taxable year of Executive with respect to
which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect
to which a Gross-Up Payment would be payable hereunder and
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 Executive of an amount advanced
by the Company pursuant to Paragraph (c), Executive becomes entitled to
receive any refund with respect to such claim, Executive shall (subject
to the Company's complying with the requirements of Paragraph (c))
promptly pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable thereto).
If, after the receipt of Executive of an amount advanced by the Company
pursuant to Paragraph 3, a determination is made that Executive shall
not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest
such denial of refund prior to the expiration of thirty 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. SUCCESSOR AGREEMENT. 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 if no succession had taken
place.
3. ARBITRATION. The parties agree to resolve any claim or controversy
arising out of or relating to this Agreement by binding arbitration under the
Federal Arbitration Act before one arbitrator in Denver, Colorado, administered
by the American Arbitration Association under its Commercial Arbitration Rules,
and judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The Company shall pay all fees and expenses of the
arbitrator and all the costs and expenses (including, without limitation,
attorneys' fees) of Executive incurred in asserting any claims or rights under
this Agreement.
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4. GOVERNING LAW.
(a) THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES.
(b) EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS IN
DENVER COUNTY, COLORADO, FOR THE PURPOSES OF ANY PROCEEDING
ARISING OUT OF THIS AGREEMENT.
5. ENTIRE AGREEMENT. This Agreement is an integration of the parties'
agreement and no agreement or representatives, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
6. SURVIVAL. This Agreement shall survive any termination of
Executive's employment, whether before, on or after a Change of Control.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
for all purposes as of the date first provided above.
PENNACO ENERGY, INC.
By:
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Name:
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Title:
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EXECUTIVE
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