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EXHIBIT 10(r)
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 10th day of February, 1997, by and
between Pennzoil Company, a Delaware corporation (hereinafter called the
"Company"), and Stephen D. Chesebro' (hereinafter called "Employee");
W I T N E S S E T H:
WHEREAS, the Company desires to induce Employee to become
employed by the Company and to enter into an employment agreement with the
Company in order that the Company have the benefit of Employee's services from
and after the date hereof and has agreed to provide compensation and benefits
to Employee in consideration of Employee's agreement to become employed by the
Company; and
WHEREAS, Employee desires to become employed by the Company and
to enter into an employment arrangement with the Company and to perform
services for the Company for the compensation and benefits described herein;
NOW, THEREFORE, in consideration of the premises and the
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment; Employment Term: Company hereby agrees to
employ Employee and Employee agrees to become an employee of the Company as of
the date hereof. Employee shall be an executive of the Company with the title
of Executive Vice President with such duties and responsibilities relating to
the Company as may be assigned to Employee from time to time by the Board of
Directors of the Company or the Chairman of the Board of Directors of the
Company. Employee shall report to the Chairman of the Board of Directors of
the Company. The
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term of employment under this Agreement shall begin on the date hereof and
shall continue thereafter until the earliest of (i) the close of business until
the day after the Company's 1998 annual meeting of stockholders or (ii)
termination of employment under Paragraph 13 ("Employment Term"). The
employment of Employee shall be subject to the other terms and conditions of
this Agreement. Employee agrees to devote his full time, attention and
energies to, and use his best efforts, ability and fidelity in the performance
of the duties attaching to such employment. The Company is aware that Employee
has certain obligations in respect of a prior employer to provide consulting
service during calendar year 1997 and Employee and the Company agree to work
together in good faith to accommodate Employee's required performance of such
consulting services.
2. Salary Compensation: During the Employment Term the
Company hereby agrees to pay as current salary compensation to Employee
$500,000 on an annualized basis, but payable in biweekly installments of
$19,230.77 each. The salary amounts described in the preceding sentence may be
increased from time to time by action of the Company but may not be decreased
during the Employment Term.
3. Stock Option Grants: Employee shall be granted stock
options on 50,000 shares of the Company's Common Stock and with each option
having an option exercise price equal to the fair market value of one share of
Company Common Stock on the date hereof and other terms and conditions
consistent with the Company's stock option grant policy with respect to
similarly situated Company employees.
4. Conditional Stock Awards: Employee shall be granted as of
the date hereof 10,000 Common Stock Units under the Company's Conditional Stock
Award Programs under terms
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and conditions consistent with the Company's grant policy with respect to
similarly situated Company employees.
5. 1997 Bonus: For calendar year 1997, Employee shall be
paid a minimum bonus of $300,000.
6. Executive Severance Plan: The Company agrees to cover
Employee under the Company's Executive Severance Plan effective as of the date
hereof and to continue Employee as a participant in said plan, subject to the
Company's right to terminate or amend the plan as applicable to its key
executives participating therein.
7. Excess Benefits Agreement and Benefits Acceleration
Agreement: The Company will enter into with Employee an Excess Benefits
Agreement. The Company will enter into with Employee a Benefits Acceleration
Agreement.
8. Retirement Plan: Employee shall participate in the
Company's retirement plan for salaried employees on the same terms and
conditions as are applicable to other Company salaried employees.
9. Savings Plan: Employee shall participate in the Company's
Savings and Investment Plan on the same terms and conditions as are applicable
to other Company salaried employees.
10. Other Benefits: Except as is specifically provided herein
to the contrary, Employee shall be entitled to participate in all other benefit
plans, programs or practices generally applicable to salaried employees and in
those special benefit programs, plans and practices applicable to executives,
such as, and not by way of limitation, the Company's Supplemental Life
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Insurance Plan, the Company's Supplemental Long Term Disability Program, the
Company's Medical Expenses Reimbursement Plan, the Company's Salary
Continuation Plan and the Company's Annual Incentive Plan. Employee shall
receive a grant of participation in respect to the 1997 Annual Incentive
Program at a level appropriate for his compensation level and position.
11. Perquisites: The Company shall afford to Employee
perquisites consistent with Employee's grade level, such perquisites to be
continued uninterrupted except to the extent that the Company's policies or
practices are changed for his grade level.
12. Disability. In the event the Employee suffers a
Disability during the Employment Term, salary payments under Paragraph 2 shall
be discontinued; provided, however, Employee shall be entitled to the
disability and other benefits provided by the Company and consistent with
Paragraph 10 of this Agreement. For purposes of this Agreement, "Disability"
shall have the meaning set forth in the Company's Supplemental Long Term
Disability Plan.
13. Termination of Employment:
(a) By the Company for Due Cause. Nothing herein shall
prevent the Company from terminating the Employee for Due Cause in which
event the Employment Term shall end and Employee shall continue to
receive salary and benefit coverages provided for in this Agreement only
through the period ending with the date of such termination, as provided
in this Paragraph 13(a). Any other rights and benefits he may have
under other employee benefit plans and programs of the Company,
generally, shall be determined in accordance with the terms of such
plans and programs. The term "Due Cause" as used herein, shall mean (x)
Employee has committed a willful serious act, such as embezzlement,
against the
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Company intending to enrich himself at the expense of the Company or has
been convicted of a felony involving moral turpitude or (y) Employee, in
carrying out his duties hereunder, has been guilty of (i) willful, gross
neglect or (ii) willful, gross misconduct resulting in either case in
material harm to the Company.
(b) By Death or Disability:
I. In the event of the death of Employee during the
Employment Term, this Agreement shall terminate, and no further payments
shall be made to Employee pursuant to Paragraph 2 of this Agreement.
Any death benefit due under any life insurance or other benefit
programs, plans or policies of the Company applicable to Employee shall
be determined and paid in accordance with the provisions of such
policies, plans and programs. Any stock options previously granted and
outstanding shall be vested and remain outstanding for one year after
Employee's death (unless an option sooner expires by its terms) and any
Conditional Stock Awards previously granted and outstanding shall become
matured under the Conditional Stock Award Program. All amounts accrued
for the benefit of the Employee on the Employee's date of death shall be
paid to the estate of the Employee.
II. If Employee's employment is terminated by reason of
Disability during the Employment Term, (i) any outstanding stock options
shall be vested and remain outstanding until the earlier to occur of (a)
the Employee's death or (b) expiration of the option term and (ii) any
Conditional Stock Awards previously granted and outstanding shall become
matured under the Conditional Stock Award Program.
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(c) Voluntarily By Employee. Employee may terminate his
employment and the Employment Term under this Agreement by providing
thirty (30) days' notice to the Company in which event salary payments
under Paragraph 2 shall immediately cease and Employee shall be entitled
only to those benefits as are specifically provided under the terms of
the particular benefit plans or programs in which the Employee is
participating.
(d) By Company Other Than For Due Cause. If Employee's
employment under this Agreement is terminated by the Company prior to
the expiration of the Employment Term for any reason other than as
provided in Paragraph 13(a) or (b) hereof, the Company shall (i) pay to
Employee in a lump sum an amount equal to the sum of one year's base
salary under Paragraph 2 and the 1997 minimum bonus amount under
Paragraph 5 and (ii) cause (x) the stock options previously granted to
Employee and outstanding to be vested and immediately exercisable for
their entire remaining term notwithstanding such termination of
employment (but such options may expire subsequently by reason of their
terms other than by reason of termination of employment) and (y) any
Conditional Stock Awards previously granted and outstanding to be cashed
out by the payment of a lump sum amount equal to the product of the
number of Conditional Stock Units so granted and outstanding on the date
of termination times the fair market value of a share of Common Stock of
the Company on the date of termination and all of such Conditional Stock
Awards shall be thereafter cancelled.
(e) By Employee For Good Reason. Anything herein to the
contrary notwithstanding, if Employee is not elected to the Company's
Board of Directors by the 1998 annual meeting of Company stockholders,
then, such failure by the Company, unless
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consented to in writing by Employee, shall constitute a termination of
Employee's employment by the Company pursuant to Paragraph 13(d) above
as of the close of business on the date of the Company's 1998 annual
stockholders meeting.
(f) Effect on Agreement. Termination of employment or the
Employment Term as used herein shall not constitute termination of this
Agreement unless expressly stated.
14. Prohibition Against Assignment: The right of Employee to
benefits under this Agreement shall not be assigned, transferred, pledged or
encumbered in any way and any attempt at assignment, transfer, pledge,
encumbrance or other disposition of such benefits shall be null and void and
without effect.
15. Binding Effect: This Agreement shall be binding upon and
enure to the benefit of the Company, its successors and assigns, and Employee,
his heirs, executors, administrators and legal representatives.
16. Entire Agreement: This Agreement constitutes the entire
understanding between the parties hereto with respect to the subject matter
hereof, and may be modified only by a writing executed by the parties hereto.
17. Governing Law: This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
18. Severability: The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
19. Amendment or Termination: This Agreement may be amended
only by mutual consent of the parties hereto evidenced in writing. As provided
in Paragraph 1, the
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Employment Term shall automatically terminate on the close of business on the
day after the Company's 1998 annual meeting of stockholders without any further
action by either Employee or the Company.
20. Provision of Certain Office Expense: The Company shall
provide to Employee reimbursement for the cost of office space and secretarial
assistance for calendar years 1999 and 2000 on a basis consistent with that
being provided to Employee presently by his former employer, but in no event
shall the cost of such provision of office space and secretarial assistance
exceed $35,000 in any 12-month period.
IN WITNESS WHEREOF, the parties have executed this Agreement (in
multiple copies).
PENNZOIL COMPANY
/s/ STEPHEN D. CHESEBRO' By /s/ JAMES L. PATE
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Stephen D. Chesebro' James L. Pate
Chairman of the Board and
Chief Executive Officer
Pennzoil Company
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