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ITEM 14(a)3, EXHIBIT 10(m)
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of
December 14, 1994, by and between James C. Reed, Jr. ("Employee"), and Tesoro
Petroleum Corporation, a Delaware corporation (the "Company").
Recitals:
A. The Company wishes to continue the employment of Employee as
its Senior Vice President, General Counsel and Secretary; as such, Employee
shall have certain responsibilities and shall receive certain compensation and
benefits.
B. Employee and the Company wish to formalize this employment
relationship in a written agreement and to set forth certain additional
agreements between Employee and the Company.
THE PARTIES AGREE AS FOLLOWS:
1. Employment and Duties.
During the term of this Agreement, the Company agrees to employ
Employee as Senior Vice President, General Counsel and Secretary, and Employee
agrees to serve the Company in such capacity on the terms and subject to the
conditions set forth in this Agreement. Employee shall devote substantially
all of his business time, energy and skill to the affairs of the Company as the
Company, acting through its Board of Directors or its Chief Executive Officer,
shall reasonably deem necessary to discharge Employee's duties in such
capacity. Employee may participate in social, civic, charitable, religious,
business, educational or professional associations, so long as such
participation would not materially detract from Employee's ability to perform
his duties under this Agreement. Employee shall not engage in any other
business activity during the term of this Agreement without the prior written
consent of the Company, other than the passive management of Employee's
personal investments or activities which would not materially detract from
Employee's ability to perform his duties under this Agreement.
2. Compensation.
(a) Salary. Withholding. During the term of this Agreement, the
Company shall pay Employee a base salary of $175,000 per year, payable in
arrears in equal bi-weekly installments. The parties shall comply with all
applicable withholding requirements in connection with all compensation payable
to Employee. The Company's Board of Directors may, in its sole discretion,
review and adjust upward Employee's base salary from time to time, but no
downward adjustment in Employee's base salary may be made during the term of
this Agreement.
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(b) 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.
(c) 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.
(d) Flexible Perquisites Arrangement. The Employee shall receive
annually 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 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.
(e) Other Benefits. Employee shall be eligible to participate in
and have the benefits under the terms of all life, accident, disability and
health insurance plans, pension, profit sharing, incentive compensation and
savings plans and all other similar Plans and benefits which the Company from
time to time makes available to its management executives, including, without
limitation, those listed on Exhibit A, in the same manner and at least at the
same participation level as other senior management executives.
3. Business Expenses.
The Company shall promptly reimburse Employee for all appropriately
documented, reasonable business expenses incurred by Employee in accordance
with Company policies.
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4. Term.
This Agreement shall commence effective as of December 14, 1994, and
if not terminated earlier as herein provided, shall terminate on December 31,
1996. 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 31, 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 December 31, 1998, the Employee shall have the right to elect by written
notice delivered to the Company prior to January 31, 1997, 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 30, 1996.
5. Termination by the Company Without Cause, Termination by
Employee for "Good Reason" or Failure to Extend Employment
Contract.
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 Employee's employment for "good reason," as defined below. If such
termination without cause or for good reason occurs or if the Company fails to
offer to the Employee a new employment contract prior to December 31, 1996,
with terms, in all respects, no less favorable to the employee than the terms
of this Agreement, 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(d), 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.
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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.
The Company shall pay any attorney fees incurred by Employee in
reasonably seeking to enforce the terms of this Paragraph 5.
6. Termination upon Death or Disability.
If the Employee's employment is terminated because of death or on
account of his 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.
7. Termination by the Company for Cause.
The Company may terminate this Agreement at any time if such
termination is for "cause," as defined below, by delivering to Employee written
notice describing the cause of termination 30 days before the effective date of
such termination and by granting Employee at least 30 days to cure the cause.
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). Except as otherwise provided in this
Agreement, the determination of whether Employee is terminated for "cause"
shall be made by the Board of Directors of the Company, in the reasonable
exercise of its business judgment, and shall be limited to the occurrence of
the following events:
(a) Conviction of or a plea of nolo contendere, to the charge of a
felony (which, through lapse of time or otherwise, is not subject to appeal);
(b) Willful refusal without proper legal cause to perform, or
gross negligence in performing, Employee's duties and responsibilities;
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(c) Material breach of fiduciary duty to the Company through the
misappropriation of Company funds or property; or
(d) The unauthorized absence of Employee from work (other than for
sick leave or disability) for a period of 30 working days or more during a
period of 45 working days.
For purposes of this Agreement, Employee shall be deemed to be
"permanently disabled" if Employee shall be considered to be permanently and
totally disabled in accordance with the Company's Long-Term Disability Income
Plan. If there should be a dispute between the Company and Employee as to
Employee's physical or mental disability for purposes of this Agreement, the
question shall be settled by the opinion of an impartial reputable physician or
psychiatrist agreed upon by the parties or their representatives, or if the
parties cannot agree within ten calendar days after a request for designation
of such party, then a physician or psychiatrist shall be designated by the San
Antonio, Texas Medical Association. The parties agree to be bound by the final
decision of such physician or psychiatrist.
8. Voluntary Termination by Employee.
Employee may terminate this Agreement at any time upon delivering 30
days written notice to the Company. In the event of such voluntary termination
other than for "good reason," as defined above, Employee shall be entitled to
his base salary earned pro rata to the date of his resignation, plus unpaid
bonuses for the year prior to the year in which the termination occurs, but no
base salary continuation payments or benefits continuation (except as
specifically provided by the terms of an employee benefit plan of the Company).
On or after the date the Company receives notice of Employee's resignation, the
Company may, at its option, pay Employee his base salary through the effective
date of his resignation and terminate his employment immediately.
9. Termination Following Change of Control.
Notwithstanding anything to the contrary contained herein, should
Employee at any time within two years of a change of control cease to be an
employee of the Company (or its successor), by reason of (i) involuntary
termination by the Company (or its successor) other than for "cause" (following
a change of control, "cause" shall be limited to the conviction of or a plea of
nolo contendere to the charge of a felony (which, through lapse of time or
otherwise, is not subject to appeal), or a material breach of fiduciary duty to
the Company through the misappropriation of Company funds or property), or (ii)
voluntary termination by Employee for "good reason upon change of control" (as
defined below), the Company (or its successor) shall pay to Employee within ten
days of such termination the following severance payments and benefits:
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(a) A lump-sum payment equal to three times the base salary of the
Employee at the then current rate;
(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) A lump-sum payment equal to the amount of any unpaid bonuses
to which the Employee is entitled under any incentive bonus plan.
The Company (or its successor) shall also provide to Employee (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(d); 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.
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
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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 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
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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 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
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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 the
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.
In the event of a change of control as "change of control" is defined
in any stock option plan or stock option agreement pursuant to which the
Employee holds options to purchase common stock of the Company, Employee shall
retain the rights to all accelerated vesting and other benefits under the terms
of such plans and agreements.
The Company shall pay any attorney fees incurred by Employee in
reasonably seeking to enforce the terms of this paragraph 9.
10. Exclusivity of Termination Provisions.
The termination provisions of this Agreement regarding the parties'
respective obligations in the event Employee's employment is terminated are
intended to be exclusive and in lieu of any other rights or remedies to which
Employee or the
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Company may otherwise be entitled at law, in equity, or otherwise. It is also
agreed that, although the personnel policies and fringe benefit programs of the
Company may be unilaterally modified from time to time, the termination
provisions of this Agreement are not subject to modification, whether orally,
impliedly or in writing, unless any such modification is mutually agreed upon
and signed by the parties.
11. Vacation.
Employee shall be entitled to four weeks vacation annually in
accordance with Company policy as in effect from time to time. In the event
Employee does not use his entire vacation time in any year, Employee shall be
entitled to carry over unused vacation into the following year until his
accrued vacation reaches six weeks or such greater period as may be permitted
under the Company's vacation policy for management executives.
12. Nondisclosure.
During the term of this Agreement and thereafter, Employee shall not,
without the prior written consent of the Board of Directors, disclose or use
for any purpose (except in the course of his employment under this Agreement
and in furtherance of the business of the Company) confidential information or
proprietary data of the Company (or any of its subsidiaries), except as
required by applicable law or legal process; provided, however, that
confidential information shall not include any information known generally to
the public or ascertainable from public or published information (other than as
a result of unauthorized disclosure by Employee) or any information of a type
not otherwise considered confidential by persons engaged in the same business
or a business similar to that conducted by the Company (or any of its
subsidiaries.
13. Noncompetition.
The Company and Employee agree that the services rendered by Employee
hereunder are unique. Employee hereby agrees that, during the term of this
Agreement and for a period of one year thereafter, he shall not (except in the
course of his employment under this Agreement and in furtherance of the
business of the Company (or any of its subsidiaries)) (i) engage in as
principal, consultant or employee in any segment of a business of a company,
partnership or firm ("Business Segment") that is directly competitive with any
significant business of the Company in one of its major commercial or
geographic markets or (ii) hold an interest (except as a holder of a less than
5 percent interest in a publicly traded firm or mutual fund, or as a minority
stockholder or unitholder in a firm not publicly traded) in a company,
partnership, or firm with a Business Segment that is directly competitive,
without prior written consent of the Company.
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14. Remedies.
Employee acknowledges that irreparable damage would result to the
company if the provisions of paragraphs 12 or 13 above are not specifically
enforced and agrees that the Company shall be entitled to any appropriate
legal, equitable or other remedy, including injunctive relief, in respect of
any failure to comply with such provisions.
15. Miscellaneous.
(a) Complete Agreement. This Agreement constitutes the entire
agreement between the parties and cancels and supersedes all other agreements
between the parties which may have related to the subject matter contained in
this Agreement.
(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.
(i) Notices. All notices and other communications under this
Agreement shall be in writing and shall be given in person or by telegraph,
facsimile or first-class mail, certified or registered with return receipt
requested, and shall be deemed to have been duly given when delivered
personally or three days after mailing or one day after transmission of a
telegram or facsimile, as the case may be, to the representative persons named
below.
If to the Company: Corporate Secretary
Tesoro Petroleum Corporation
8700 Tesoro Drive
San Antonio, Texas 78217
If to the Employee: James C. Reed, Jr.
9050 Bat Cave Loop
San Antonio, Texas 78266
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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
-------------------------------------
Michael D. Burke
President and Chief Executive Officer
EMPLOYEE: /s/ JAMES C. REED, JR.
-------------------------------------
James C. Reed, Jr.
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EXHIBIT A
BENEFITS LISTING
1. Group Health Plan
2. Group Life and Accidental Death & Dismemberment Plan
3. Short Term Disability Income Plan
4. Long Term Disability Income Plan
5. Business Travel Accident Insurance Plan
6. Tesoro Petroleum Corporation Thrift/401K Plan
7. Tesoro Petroleum Corporation Retirement Plan
8. Tesoro Petroleum Corporation Amended Executive Security Plan
9. Tesoro Petroleum Corporation Funded Executive Security Plan
10. Tax Preparation and Financial Planning