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EXHIBIT 10.9
TAX PROTECTION AGREEMENT
This AGREEMENT (the "Agreement") by and between Southdown,
Inc., a Louisiana corporation (the "Company"), and ____________________ (the
"Executive"), dated as of the ____ day of _______________________, 1999 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.
(1) 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. For
purposes of computing the Gross-Up Payment, all amounts paid
as Gross-Up Payments shall be presumed to be taxable to
Executive at the maximum marginal rates.
(2) 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 Deloitte &
Touche 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 it is more
likely than not that no Excise Tax is so payable or unless the
Company provides an opinion to such effect from another "big
five" accounting firm reasonably acceptable to the Executive
and the Company (the "Alternate Firm"). In the event that the
Accounting Firm (or any affiliate thereto) has served, at any
time during the two years immediately preceding a change
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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 equally by the Company and
the Executive. 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 and the Company. In
the event the Accounting Firm is unable to provide the
Accounting Opinion within such 15-day period, the Alternate
Firm shall have 15 days from the date such Firm is selected to
deliver its opinion to Executive and the Company. 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, provided that,
if the Company requests an opinion from an Alternate Firm, the
Gross-Up Payment shall be made five days after the expiration
of the period permitted for delivery, if no such opinion is
delivered. 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.
(3) 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
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the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive
shall:
(1) give the Company any information reasonably requested by
the Company relating to such claim;
(2) 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;
(3) cooperate with the Company in good faith in order
effectively to contest such claim; and
(4) 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.
(4) 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
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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.
(1) 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.
(2) 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).
(3) 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.
(1) 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.
(2) The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.
(3) 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.
(4) 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:
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If to the Company:
Southdown, Inc.
0000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: General Counsel
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.
(5) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(6) 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.
SOUTHDOWN, INC.
By:
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