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ITEM 14(a)3, EXHIBIT 10(h)
FIRST AMENDMENT AND EXTENSION
TO
EMPLOYMENT AGREEMENT
This First Amendment and Extension to Employment Agreement dated
December 14, 1994, between Tesoro Petroleum Corporation, a Delaware
corporation (the "Company"), and Michael D. Burke ("Employee"), amends and
extends the Employment Agreement dated July 27, 1992 (the "Original
Agreement"), between the Company and the Employee:
The Company and the Employee desire and agree to amend and extend the
Original Agreement as follows:
1. Section 2 of the Original Agreement:
(a) Section 2 is amended by changing "semi-monthly" in
subparagraph (a) to "bi-weekly."
(b) Section 2 is further amended by deleting subparagraph (b)
and redesignating subparagraph (c) through (f) as subparagraphs (b) through (e),
respectively.
(c) Section 2 is further amended to add the following
subparagraphs (f), (g), and (h) and changing the designation of
subparagraph (g) to (i):
(f) Annual Incentive Plan. The Company shall
establish an Annual Incentive Compensation Plan for executive
officers in which the Employee shall be entitled to participate
in a manner consistent with his position with the Company and
the evaluations of his performance by the Board of Directors or
any appropriate Committee thereof.
(g) Stock Options and Restricted Stock Grants. The
Employee shall be entitled to receive stock options and
restricted stock grants under the Company's plans in effect
from time to time, if any, commensurate with his position with
the Company and the evaluations of his performance by the Board
of Directors or any appropriate committee thereof.
(h) Flexible Perquisites Arrangement. The Employee
shall receive a stipulated amount of $25,000 which will be
expended by the Company on behalf of the Employee or paid to
the Employee, at the Employee's
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election, to cover various business-related expenses such as
monthly dues for country, luncheon or social clubs, automobile
expenses and financial and tax planning expenses. The Employee
may elect at any time by written notice to the Company to
receive any of such stipulated amount which has not been paid
to or on behalf of the Employee. In addition, the Company will
pay on behalf of the Employee up to $15,000 to pay an
initiation fee or fees for a country, luncheon or social club
or clubs and will pay directly to the Employee an amount equal
to 65 percent of the amount so paid on the Employee's behalf to
offset the applicable income tax expense to the Employee. In
addition, the Company will pay additional initiation fees and
reimburse the Employee for related tax expenses to the extent
the Board of Directors or a duly authorized committee thereof
determines such fees are reasonable and in the best interest
of the Company.
2. Section 5 of the Original Agreement is amended to delete the
phrase "on the third anniversary of the date of this Agreement" and substitute
"on October 27, 1995, therefor and to add the following at the end thereof.
Notwithstanding the foregoing, if the Company shall not have
offered to the Employee the opportunity to enter into a new
employment agreement prior to October 27, 1995, with terms, in
all respects, no less favorable to the Employee than the terms
of this Agreement and with a term lasting until at least
October 27, 1997, the Employee shall have the right to elect
by written notice delivered to the Company prior to November
27, 1995, to terminate his employment and such termination
shall be deemed to have been for Good Reason in accordance with
Section 6 and the Employee shall be entitled to all payments
and benefits as if he had terminated his employment for Good
Reason in accordance with Section 6 on October 26, 1995.
3. Section 6 of the Original Agreement is amended to read in its
entirety as follows:
6. Termination by the Company Without Cause and
Termination by Employee for "Good Reason." The Company may,
by delivering 30 days prior written notice to Employee,
terminate Employee's employment at any time without cause, and
the Employee may, by delivering 30
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days prior written notice to the Company, terminate Employee's
employment for "Good Reason," as defined below. If such
termination without cause or for Good Reason occurs, Employee
shall be entitled to receive a lump-sum payment equal to the
sum of (a) two times the sum of (i) his Base Salary at the then
current rate and (ii) the sum of the target bonuses under all
of the Company's incentive bonus plans applicable to Employee
for the year in which the termination occurs and (b) if
termination occurs in the fourth quarter of a calendar year,
the sum of the target bonuses under all of the Company's
incentive bonus plans applicable to Employee for the year in
which the termination occurs prorated daily based on the number
of days from the beginning of the calendar year in which the
termination occurs to and including the date of termination.
Employee shall also receive all unpaid bonuses for the year
prior to the year in which the termination occurs and shall
receive (i) for a period of two years continuing coverage and
benefits comparable to all life, health and disability
insurance plans which the Company from time to time makes
available to its management executives and their families, (ii)
a lump-sum payment equal to two times the stipulated flexible
perquisites amount pursuant to Section 2(h), and (iii) two
years additional service credit under the current non-qualified
supplemental pension plans, or successors thereto, of the
Company applicable to the Employee on the date of termination.
All unvested stock options held by Employee on the date of the
termination shall become immediately vested and all
restrictions on Restricted Stock then held by the Employee
shall terminate.
For purposes of this Section 6, "Good Reason" shall
mean the occurrence of any of the following events.
(a) Removal, without the consent of Employee in writing,
from one or more of the offices Employee holds on the
date of this Agreement or a material reduction in
Employee's authority or responsibility, including,
without limitation, involuntary removal from the Board
of Directors, but not including termination of
Employee for "cause," as defined below; or
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(b) The Company otherwise commits a material breach of this
Agreement.
The Company shall pay any attorney fees incurred by
Employee in reasonably seeking to enforce the terms of this
Section 6.
4. Section 7 of the Original Agreement is deleted in its entirety and
a new Section 7 is added as follows:
Section 7. Termination upon Death or Disability. If
the Employee's employment is terminated because of death or on
account of becoming permanently disabled (as defined in Section
8), the Employee, or his estate, if applicable, shall be
entitled to receive the Employee's Base Salary earned pro rata
to the date of his termination of employment, plus unpaid
bonuses for the year prior to the year in which the termination
occurs. All unvested stock options held by the Employee on the
date of termination shall become immediately vested and all
restrictions on Restricted Stock held by he Employee shall
terminate.
5. Section 8 of the Original Agreement is amended by deleting the
second sentence thereof and substituting the following therefor:
In the event the employment of Employee is terminated
for "cause," Employee shall be entitled only to his Base Salary
earned pro rata to his date of termination with no entitlement
to any base salary continuation payments or benefit
continuation (except as specifically provided by the terms of
an employee benefit plan of the Company).
6. Section 9 of the Original Agreement is hereby amended by deleting
the words "accrued and" in the second sentence thereof adding the following
after the word "bonuses" appearing in such second sentence:
"for the year prior to the year in which the termination
occurs"
7. Section 10 of the Original Agreement is amended as follows:
(a) Subclause (a) is amended in its entirety to read as follows:
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(a) A lump-sum payment equal to three times the
base salary at the then current rate;
(b) The following is added as a new subclause (b):
(b) A lump-sum payment equal to the sum of (i)
three times the sum of the target bonuses under all of
the Company's incentive bonus plans applicable to the
Employee for the year in which the termination occurs or
the year in which the change of control occurred,
whichever is greater, and (ii) if termination occurs in
the fourth quarter of a calendar year, the sum of the
target bonuses under all of the Company's incentive
bonus plans applicable to Employee for the year in which
the termination occurs prorated daily based on the
number of days from the beginning of the calendar year
in which the termination occurs to and including the
date of termination.
(c) Subclause (b) is redesignated as subclause (c) and the
words "awarded under this Agreement" are deleted therefrom.
(d) The first sentence after subclause lb) is amended to read
in its entirety as follows:
The Company (or its successor) shall also provide (i)
for a period of three years continuing coverage and
benefits comparable to all life, health and disability
plans of the Company in effect at the time a change of
control is deemed to have occured; (ii) a lump-sum
payment equal to three times the stipulated flexible
perquisites amount pursuant to Section 2(h); and (iii)
three years additional service credit under the current
non-qualified supplemental pension plans, or successors
thereto, of the Company applicable to the Employee on
the date of termination.
(e) The second full paragraph relating to "gross up" payments to
cover taxes under Section 280G of the Internal Revenue Code is
deleted in its entirety and the two paragraphs immediately
thereafter are deleted in their entirety and the following is
substituted therefor.
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For purposes of this Agreement, a "change of control" shall be
deemed to have occurred if (i) there shall be consummated (A) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the
Company's Common Stock would be converted into cash, securities or
other property, other than a merger of the Company where a majority of
the Board of Directors of the surviving corporation are, and for a
two-year period after the merger continue to be, persons who were
directors of the Company immediately prior to the merger or were
elected as directors, or nominated for election as director, by a vote
of at least two-thirds of the directors then still in office who were
directors of the Company immediately prior to the merger, or (B) any
sale, lease, exchange or transfer (in one transaction or a series of
related transactions) of all or substantially all of the assets of the
Company, or (ii) the shareholders of the Company shall approve any plan
or proposal for the liquidation or dissolution of the Company, or (iii)
(A) any "person" (as such term is used in Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), other than the Company or a subsidiary thereof or any employee
benefit plan sponsored by the Company or a subsidiary thereof, shall
become the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of securities of the Company representing 20 percent or
more of the combined voting power of the Company's then outstanding
securities ordinarily (and apart from rights accruing in special
circumstances) having the right to vote in the election of directors,
as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise, and (B) at any time during
a period of two years thereafter, individuals who immediately prior to
the beginning of such period constituted the Board of Directors of the
Company shall cease for any reason to constitute at least a majority
thereof, unless the election or the nomination by the Board of
Directors for election by the Company's shareholders of each new
director during such period was approved by a vote of at least
two-thirds of the directors then still in office who were directors at
the beginning of such period.
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For purposes of this Section 10, "good reason upon change of
control" shall exist if any of the following occurs:
(i) without Employee's express written consent, the assignment
to Employee of any duties inconsistent with the employment of Employee
to the positions set forth in Section 1, or a significant diminution of
Employee's positions, duties, responsibilities and status with the
Company from those immediately prior to a change of control or a
diminution in Employee's titles or offices as in effect immediately
prior to a change of control, or any removal of Employee from, or any
failure to reelect Employee to, any of such positions;
(ii) a reduction by the Company in Employee's base salary in
effect immediately prior to a change of control;
(iii) the failure by the Company to continue in effect any
thrift, stock ownership, pension, life insurance, health, dental and
accident or disability plan in which Employee is participating or is
eligible to participate at the time of the change of control (or plans
providing Employee with substantially similar benefits), except as
otherwise required by the terms of such plans as in effect at the time
of any change of control or the taking of any action by the Company
which would adversely affect Employee's participation in or materially
reduce Employee's benefits under any of such plans or deprive Employee
of any material fringe benefits enjoyed by Employee at the time of the
change of control or the failure by the Company to provide the Employee
with the number of paid vacation days to which Employee is entitled in
accordance with the vacation policies of the Company in effect at the
time of a change of control;
(iv) the failure by the Company to continue in effect any
incentive plan or arrangement (including without limitation, the
Company's Incentive Compensation Plan and similar incentive
compensation benefits) in which Employee is participating at the time
of a change of control (or to substitute and continue other plans or
arrangements providing the Employee with substantially similar
benefits), except as otherwise required by the terms of such plans as
in effect at the time of any change of control;
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(v) the failure by the Company to continue in effect any plan or
arrangement with respect to securities of the Company (including,
without limitation, any plan or arrangement to receive and exercise
stock options, stock appreciation rights, restricted stock or grants
thereof or to acquire stock or other securities of the Company) in
which Employee is participating at the time of a change of control (or
to substitute and continue plans or arrangements providing the Employee
with substantially similar benefits), except as otherwise required by
the terms of such plans as in effect at the time of any change of
control or the taking of any action by the Company which would
adversely affect Employee's participation in or materially reduce
Employee's benefits under any such plan;
(vi) the relocation of the Company's principal executive offices to a
location outside the San Antonio, Texas, area, or the Company's
requiring Employee to be based anywhere other than at the location of
the Company's principal executive offices, except for required travel
on the Company's business to an extent substantially consistent with
Employee's present business travel obligations, or, in the event
Employee consents to any such relocation of the Company's principal
executive or divisional offices, the failure by the Company to pay (or
reimburse Employee for) all reasonable moving expenses incurred by
Employee relating to a change of Employee's principal residence in
connection with such relocation and to indemnify Employee against any
loss (defined as the difference between the actual sale price of such
residence and the fair market value thereof as determined by the
highest of three appraisals from Member Appraisal Institute-approved
real estate appraisers reasonably satisfactory to both Employee and the
Company at the time Employee's principal residence is offered for
sale in connection with any such change of residence);
(vii) any material breach by the Company of any provision of this
Agreement;
(viii) any failure by the Company to obtain the assumption of this
Agreement by any successor or assign of the Company; or
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(ix) any purported termination of Employee's employment by the Company
other than termination for cause fully in compliance with this
Agreement and for purposes of this Agreement, no such purported
termination shall be effective.
8. Miscellaneous.
(a) Complete Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
cancels and supersedes all other agreements between the parties which may have
related to the subject matter contained in this Agreement, provided that,
except as expressly modified hereby, the Original Agreement shall remain in
full force and effect.
(b) Modification; Amendment; Waiver. No modification, amendment or
waiver of any provisions of this Agreement shall be effective unless approved in
writing by both parties. The failure at any time to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver of such
provisions and shall not affect the right of either party thereafter to enforce
each and every provision hereof in accordance with its terms.
(c) Governing Law; Jurisdiction. This Agreement and performance under
it, and all proceedings that may ensue from its breach, shall be construed in
accordance with and under the laws of the State of Texas.
(d) Employee's Representations. Employee represents and warrants that
he is free to enter into this Agreement and to perform each of the terms and
covenants of it. Employee represents and warrants that he is not restricted or
prohibited, contractually or otherwise, from entering into and performing this
Agreement, and that his execution and performance of this Agreement is not a
violation or breach of any other agreement between Employee and any other
person or entity.
(e) Company's Representations. Company represents and warrants that it
is free to enter into this Agreement and to perform each of the terms and
covenants of it. Company represents and warrants that it is not restricted or
prohibited, contractually or otherwise, from entering into and performing this
Agreement, and that its execution and performance of this Agreement is not a
violation or breach of any other agreement between Company and any other
person or entity. The Company represents and warrants that this Agreement is a
legal, valid and binding agreement of the Company, enforceable in accordance
with its terms.
(f) Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law,
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but if any provision of this Agreement shall be held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
(g) Assignment. The rights and obligations of the parties under this
Agreement shall be binding upon and inure to the benefit of their respective
successors, assigns, executors, administrators and heirs, provided, however,
that neither the Company nor Employee may assign any duties under this
Agreement without the prior written consent of the other.
(h) Limitation. This Agreement shall not confer any right or impose
any obligation on the Company to continue the employment of Employee in any
capacity, or limit the right of the Company or Employee to terminate Employee's
employment.
In witness whereof, the parties have executed this Agreement as of the
day and year first above written.
Company: Tesoro Petroleum Corporation
BY /s/ CHARLES WOHLSTETTER
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Charles Wohlstetter
Chairman of the Board of Directors
Employee: /s/ MICHAEL D. BURKE
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Michael D. Burke