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ITEM 14(a)3, EXHIBIT 10(l)
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 Gaylon H. Simmons ("Employee"), amends and
extends the Employment Agreement dated January 4, 1993 (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
April 4, 1996," 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 April 4, 1996, 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 April 4, 1998, the Employee shall have the
right to elect by written notice delivered to the Company prior to May
4, 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 April 3, 1996.
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 to 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 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.
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
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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.
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
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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;
(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
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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
(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
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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, 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
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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/ MICHAEL D. BURKE
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Michael D. Burke
President and Chief Executive Officer
Employee: /s/ GAYLON H. SIMMONS
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Gaylon H. Simmons
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