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ITEM 14(a)3, EXHIBIT 10(j)
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 Bruce A. Smith ("Employee"), amends and
extends the Employment Agreement dated September 14, 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) as subparagraph (b).
(c) Section 2 is further amended to add the following
subparagraphs (c), (d), and (e) and changing the designation of subparagraph
(d) to (f):
(c) 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.
(d) 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.
(e) Flexible Perquisites Arrangement. The Employee shall
receive a stipulated amount of $20,000 which will be expended by the
Company on behalf of the Employee or paid to the Employee, at the
Employee's election, to cover various business-related expenses such as
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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 4 of the Original Agreement is amended to delete the phrase "on
the third anniversary of the date of this Agreement" and substitute "on
December 14, 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 December 14, 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 December 14, 1997, the Employee shall
have the right to elect by written notice delivered to the Company
prior to January 14, 1996, to terminate his employment and such
termination shall be deemed to have been for Good Reason in accordance
with Section 5 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 5 on December 13, 1995.
3. Section 5 of the Original Agreement is amended to read in its
entirety as follows:
5. 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 days
prior written notice to the Company, terminate
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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(e), 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 5, "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 but
not termination of Employee for "cause," as defined below; or
(b) The Company otherwise commits a material breach of this
Agreement.
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The Company shall pay any attorney fees incurred by Employee in
reasonably seeking to enforce the terms of this Section 5.
4. Section 6 of the Original Agreement Is deleted in its entirety and a
new Section 6 is added as follows:
Section 6. 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 7), 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 the Employee shall
terminate.
5. Section 7 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 8 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 9 of the Original Agreement is amended as follows:
(a) Subclause (a) is amended in its entirety to read as follows:
(a) A lump-sum payment equal to three times the base salary at
the then current rate;
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(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 (b) 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 occurred; (ii) a lump-sum payment equal three
times the stipulated flexible perquisites amount pursuant to
Section 2(e); 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 28OG 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.
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
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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.
For purposes of this Section 9, "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
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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;
(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
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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
(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.
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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, 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.
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(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/ MICHAEL D. BURKE
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Michael D. Burke
President and Chief Executive Officer
Employee: /s/ BRUCE A. SMITH
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Bruce A. Smith
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I hereby agree to the removal of Management Information Systems from reporting
directly to me, and I hereby stipulate that such action shall not be considered
to be "Good Reason" under Section 5 of the Employment Agreement between Tesoro
Petroleum Corporation and Bruce A. Smith dated September 14, 1992, as amended
by First Amendment and Extension thereto dated December 14, 1994.
/s/ BRUCE A. SMITH
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Bruce A.Smith