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EXHIBIT 10.18
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement"), between Valero Energy
Corporation, a Delaware corporation ("Valero"), and William E. Greehey, a
resident of San Antonio, Texas, ("Mr. Greehey") is executed effective as of the
25th day of March 1999 ("Effective Date"). Valero and Mr. Greehey are sometimes
referred to herein individually as a "Party," and collectively as the
"Parties." The Parties hereby agree as follows:
1. Employment. Valero hereby employs Mr. Greehey, and Mr. Greehey
hereby accepts employment with Valero, subject to the terms and conditions set
forth in this Agreement.
2. Term. Subject to the provisions for termination of employment as
provided in Section 9(a), this Agreement shall be in effect beginning on the
Effective Date and ending on July 31, 2001 ("Initial Period"). If Mr. Greehey
notifies Valero at least ninety (90) calendar days prior to the end of the
Initial Period of his intention to extend this Agreement, then this Agreement
shall be extended on a month-to-month basis ("Extension Period"). Mr. Greehey
may terminate this Agreement within the Extension Period by giving Valero
ninety (90) calendar days written notice of termination.
3. Compensation. Mr. Greehey's compensation during his employment
under the terms of this Agreement and prior to his retirement shall be as
follows:
(a) Base Salary. Valero shall pay to Mr. Greehey a base
salary (the "Base Salary") of Nine Hundred Thousand Dollars ($900,000)
per year. In addition, the Board of Directors of Valero shall in good
faith consider granting annual increases to the Base Salary based upon
such factors as Mr. Greehey's performance and the growth and
profitability of Valero, but it shall have no obligation to grant any
such increases in compensation; provided that, based upon the same
such factors, the Board of Directors of Valero may thereafter reduce
the Base Salary to an amount that is not below the amount first set
forth above in this Paragraph 3(a). The Base Salary, as from time to
time so increased or subsequently decreased, shall be payable in
equal, semi-monthly installments on the 15th day and last day of each
month or at such other times and in such installments as may be agreed
between Valero and Mr. Greehey. All payments shall be subject to the
deduction of payroll taxes, income tax withholdings, and similar
deductions and withholdings as required by law.
(b) Bonus. In addition to the Base Salary, Mr. Greehey shall
be eligible to receive bonus compensation in such amounts and at such
times as the Board of Directors of Valero shall from time to time
determine. In the year of his retirement, Mr. Greehey shall be
eligible to receive a pro-rata share of bonus compensation in such
amount as the Board of Directors of Valero shall determine at the
customary time annual bonuses are determined and paid to executive
officers of Valero.
(c) Stock Option Grant. On the Effective Date, Mr. Greehey
shall receive a nonqualified stock option grant (each an "Option") to
purchase 860,000 shares of $.01 par
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value common stock of Valero ("Common Stock"), with an exercise price
per share equal to the fair market value of the Common Stock on the
Effective Date. Fifty percent (50%) of the options shall vest on the
first anniversary of the Effective Date and the remaining 50% shall
vest on the second anniversary of the Effective Date, and the options
shall have a total term of ten years from the Effective Date. These
vesting periods shall not be modified by the accelerated vesting
provisions set forth in Paragraph 7(f).
(d) Performance Share Award. On the Effective Date, Mr.
Greehey shall receive an award of 150,000 Performance Shares under
Valero's Executive Stock Incentive Plan. Fifty percent (50%) of the
Performance Shares shall vest on the first anniversary of the
Effective Date and the remaining 50% shall vest on the second
anniversary of the Effective Date. The Performance Shares shall be
available to be earned on each vesting date pursuant to established
performance criteria set forth in the award agreement to be entered
into between Mr. Greehey and Valero.
4. Expenses and Benefits. During his employment, Mr. Greehey is
authorized to incur reasonable expenses in connection with the business of
Valero, including expenses for entertainment, travel and similar matters.
Valero will reimburse Mr. Greehey for such expenses upon presentation by Mr.
Greehey of such accounts and records as Valero may from time to time reasonably
require. Valero also agrees to provide Mr. Greehey with the following benefits
during employment:
(a) Insurance. Permanent life insurance in accordance with
Paragraph 7(g) in addition to any life insurance under Valero's normal
benefit plans.
(b) Employee Benefit Plans. Participation in any employee
benefit plans now existing or hereafter adopted by Valero for its
executives or other officers and employees.
(c) Club Memberships. Valero shall reimburse Mr. Greehey for
all monthly dues and fees for Mr. Greehey's present country club
memberships and for any expenses incurred by Mr. Greehey in connection
with such club memberships in representing Valero's interests.
(d) Vacations. Mr. Greehey shall be entitled (in addition to
the usual Valero holidays) to a paid vacation for a period in each
calendar year not exceeding five weeks.
(e) Working Facilities. Mr. Greehey shall be furnished by
Valero with an office, secretarial help and other facilities and
services, including but not limited to, full use of Valero's mail and
communication facilities and services reasonably suitable to his
position and reasonably necessary for the performance of his duties
under this Agreement.
(f) Tax Planning. Mr. Greehey will be furnished tax planning
services by an independent certified public accounting firm of the
type furnished to executive officers of Valero.
(g) Other. Such other items as Valero shall from time to time
consider necessary or appropriate to assist Mr. Greehey in or to
provide incentives or compensation for the performance of his duties
under this Agreement.
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5. Positions and Duties. Mr. Greehey is employed as Chief Executive
Officer of Valero and for no additional compensation shall, subject to his
being elected or re-elected as a director by Valero's stockholders, serve at
the discretion of the Board as its Chairman of the Board. In addition, if
requested to do so, Mr. Greehey shall serve as the chief executive officer or
as a member of the Board of Directors, or both, of any subsidiary or affiliate
of Valero. Such duties shall be performed at Valero's principal place of
business in San Antonio, Texas.
6. Extent of Service. Mr. Greehey shall, during his employment under
the terms of this Agreement, devote substantially all of his working time,
attention, energies and business efforts to his duties as an employee of Valero
and to the business of Valero generally, and shall not, during the term of this
Agreement, engage in any other business activity whatsoever, whether or not
such business activity is pursued for gain, profit or other pecuniary
advantage; however, this Paragraph 6 shall not be construed to prevent Mr.
Greehey from serving as a member of the board of directors of other companies,
or from investing his personal, private assets as a passive investor in such
form or manner as will not require any active services on the part of Mr.
Greehey in the management or operation of the affairs of the companies,
partnerships, or other business entities in which any such passive investments
are made.
7. Retirement. Notwithstanding the term and notice provisions of
Paragraph 2, Mr. Greehey may retire at any time as Chief Executive Officer of
Valero under the terms of this Agreement by giving Valero written notice of his
intention to retire ninety (90) days in advance of the designated retirement
date. Upon retirement, and provided that Valero has not terminated Mr. Greehey
for cause pursuant to Paragraph 9(a), Mr. Greehey shall no longer be employed
by Valero, but he shall have the following rights and obligations:
(a) Continuation as Chairman. Subject to his being elected or
re-elected as a director by Valero's stockholders, Mr. Greehey agrees
to continue serving at the discretion of the Board as Chairman of the
Board of Valero for two years following his effective date of
retirement;
(b) Duties. As Chairman of the Board of Valero, Mr. Greehey
shall perform such duties as are reasonably required by a person
holding such position. However, it is agreed and understood that Mr.
Greehey shall not be obligated to devote any particular amount of time
to the affairs of Valero over and above that which he determines is
necessary to perform his duties as a director, and will be free to
pursue other business interests provided the pursuit thereof does not
violate any fiduciary duty owed to Valero in Mr. Greehey's capacity as
Chairman of the Board or violate the provisions of Paragraphs 11 or
12;
(c) Compensation. Mr. Greehey shall be paid for serving as
Chairman of the Board for such two-year period an amount per annum
equal to one-half of the Base Salary being paid to Mr. Greehey at the
time of his retirement, which shall be payable in semi-monthly
installments;
(d) Working Facilities. Valero shall provide Mr. Greehey with
off-site office facilities and secretarial and other office services
reasonably commensurate with
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Mr. Greehey's position as retired Chief Executive Officer of Valero.
The office facilities and secretarial and other services to be provided
to Mr. Greehey following his retirement shall continue until December
31, 2005.
(e) Annual Physical Examination. Valero shall pay for an
annual physical examination for Mr. Greehey for the remainder of his
life.
(f) Vesting and Option Exercise Periods. Upon retirement, Mr.
Greehey's stock options, stock appreciation rights, restricted stock
grants, performance share awards, and any other similar stock or
long-term incentive rights or benefits previously granted to Mr.
Greehey, which have not fully vested, shall immediately fully vest,
except for any unvested stock options granted to Mr. Greehey pursuant
to Paragraph 3(c). Mr. Greehey shall have the right to exercise any
vested stock options or other similar stock or long-term incentive
rights or benefits that have an option or exercise feature for the
full remaining term thereof. Any outstanding performance share awards
shall be deemed to have been earned at the target level for the full
term and shares of Valero Common Stock representing such awards deemed
earned at the target level shall promptly be issued to Mr. Greehey.
(g) Retirement Benefits and Supplemental Retirement Benefits.
Mr. Greehey shall be entitled to all retirement benefits provided
under the Valero Energy Corporation Pension Plan ("Pension Plan") and
Supplemental Executive Retirement Plan ("SERP"), with the following
supplemental benefits:
(i) retiree medical coverage consistent with
coverage amounts and/or deductibles and costs as provided to
other Valero retirees;
(ii) paid up permanent life insurance, in addition
to life insurance included in Valero's normal retirement
benefit plans, with cash value of at least $300,000;
(iii) a total of eight "points" under the SERP to be
added to his years of credited service, or his age, or
divided between both in such proportion that total eight, as
he elects at the time of his retirement (the amount per month
equal to the difference between Mr. Greehey's normal monthly
retirement benefit under the Pension Plan and the SERP with
the eight added points shall constitute a supplemental
monthly retirement payment, payable at the time each payment
is made under the Pension Plan; and for purposes of
calculating Mr. Greehey's monthly retirement benefits,
service shall be deemed continuous from August 19, 1963
through the date of retirement pursuant to this Agreement);
and
(iv) payments under any other employee benefit
plan(s), which are due as a result of separation of service.
Mr. Greehey shall not be entitled to participate in nor
receive the benefits of any special "window" retirement or early
retirement program, if any, that may from time to time be offered to
other employees of Valero.
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8. Death and Disability.
(a) Death.
(i) If during the term of Mr. Greehey's employment
under this Agreement and prior to the date of retirement Mr.
Greehey dies, then in addition to all other employee benefits
to which Mr. Greehey's estate, spouse or other beneficiaries
may be entitled, Valero shall pay in equal semi-monthly
installments to the beneficiary designated by Mr. Greehey, or
his estate if no such beneficiary has been designated in
writing to Valero, the Base Salary that Mr. Greehey would
have received if he had remained employed to the end of the
Initial Period or, if his employment has been extended
pursuant to Paragraph 2, to the end of the Extension Period.
(ii) If during the term of Mr. Greehey's service as
Chairman of the Board pursuant to Paragraph 7(a) Mr. Greehey
dies, then in addition to all other benefits to which Mr.
Greehey's estate, spouse or other beneficiaries may be
entitled, Valero shall pay in equal semi-monthly installments
to the beneficiary designated by Mr. Greehey, or his estate
if no such beneficiary has been designated in writing to
Valero, the compensation provided for in Paragraph 7(c) that
Mr. Greehey would have received if he had continued to serve
as Chairman of the Board for the remainder of the two-year
period following the end effective date of his retirement.
(b) Disability.
(i) If during the term of Mr. Greehey's employment
under this Agreement he becomes unable to perform his duties
as Chief Executive Officer as a result of illness or physical
injury as defined in Valero's Long Term Disability Plan, Mr.
Greehey shall be deemed to have retired and be entitled to
the benefits described in Paragraph 7(d), (e), (f) and (g).
(ii) If following his retirement as Chief Executive
Officer, Mr. Greehey is not elected or re-elected as a
director by Valero's stockholders or becomes unable to
perform his duties as Chairman of the Board, as determined by
a majority of the other Directors, Mr. Greehey's obligations
under Paragraph 7(a) and (b) shall cease; however, Mr.
Greehey shall be entitled to the balance of the remaining two
years' compensation for serving as Chairman of the Board, as
defined in Paragraph 7 (c), payable in semi-monthly
installments.
9. Termination by Valero. Valero shall have the right to terminate Mr.
Greehey's employment as hereinafter provided.
(a) Termination for Cause. Valero shall have the right to
terminate Mr. Greehey's employment under this Agreement for cause. As
used herein, "cause" shall mean and be strictly limited to:
(i) Mr. Greehey's conviction of a crime constituting
a felony under federal or state law or involving moral
turpitude;
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(ii) an illegal act or acts that were intended to and
did defraud Valero; or
(iii) the willful refusal by Mr. Greehey to fulfill
responsibilities under this Agreement after written notice of
such willful refusal from the Board and the failure to
correct such refusal within 30 days from the date such notice
is given.
If Valero terminates this Agreement pursuant to the
provisions of this Paragraph 9(a): (i) all compensation or other
benefits due Mr. Greehey pursuant to Paragraphs 3 and 4, or 7(c), as
the case may be, shall be paid by Valero to Mr. Greehey to the date of
such termination; and (ii) all supplemental and additional benefits
and rights granted to Mr. Greehey at retirement by Paragraph 7 shall
be automatically revoked and become null and void; and, upon such
payment by Valero of the amounts required under subparagraph (i), all
obligations of Valero to Mr. Greehey shall be totally and completely
satisfied, and Valero shall have no further obligations of any type to
Mr. Greehey pursuant to this Agreement.
(b) Termination other than for Cause. Valero shall have the
right to terminate Mr. Greehey's employment as Chief Executive Officer
under this Agreement without cause, and Mr. Greehey's employment under
this Agreement shall be deemed terminated upon the giving of ninety
(90) days written notice to such effect by Valero to Mr. Greehey. A
termination of employment other than as a result of death, retirement,
disability, or in accordance with Paragraph 9(a) shall be deemed a
termination without cause. In the event of termination without cause:
(i) Valero shall pay Mr. Greehey in cash a lump sum
amount equal to the product of Mr. Greehey's semi-monthly
Base Salary being paid to Mr. Greehey at the date of such
termination multiplied by the number of semi-monthly pay
periods remaining to the end of the Initial Period (or
successive monthly period if employment has been extended
pursuant to Paragraph 2), plus an amount equal to the highest
annual bonus paid to Mr. Greehey during the five years
preceding the time of such termination. Such amount shall be
paid within five business days of termination;
(ii) Mr. Greehey shall receive all the payments and
benefits to which he is entitled pursuant to Paragraph 7(f)
and (g); but shall not be entitled to receive any further
payments or benefits under Paragraph 7 after the date of such
termination, including any payment under 7(c).
(c) Termination as Chairman of the Board. If for any reason
Mr. Greehey is removed by a majority of the other Directors as
Chairman of the Board after his retirement as Chief Executive Officer,
other than as a result of death or disability or for cause, he shall
receive the balance of the remaining two years' compensation for
serving as Chairman of the Board as defined in Paragraph 7(c), payable
in semi-monthly installments.
10. Executive Severance Agreement. In the event Mr. Greehey receives
any cash
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payments under that certain Executive Severance Agreement dated December 15,
1982 between Valero and Mr. Greehey, Valero shall be entitled to credit any cash
payments that are made to Mr. Greehey pursuant to his Executive Severance
Agreement against any cash payments that it is obligated to make under this
Agreement. Valero agrees that if remuneration or benefits of any form paid to
Mr. Greehey by Valero during or after his employment with Valero are excess
parachute payments as defined in Section 280G of the Internal Revenue Code of
1986, as amended ("Code"), and are subject to the 20% excise tax imposed by
Section 4999 of the Code, Valero shall pay Mr. Greehey a bonus no later than
seven days prior to the earliest of the due date for the excise tax return or
initial estimated payment, in an amount equal to the excise tax payable as a
result of the excess parachute payment and any additional federal income taxes
(including any additional excise taxes) payable by him as a result of the bonus,
assuming that he will be subject to federal income taxes at the highest
individual marginal rate. It is the intention of the Parties that the bonus be
"grossed up" so that the bonus contains sufficient funds to pay the excise and
all additional federal income taxes due as a result of the bonus payment so that
Mr. Greehey will suffer no detriment from the excise tax payable as a result of
the excess golden parachute payments.
11. Disclosure of Confidential Information. Except to the extent
absolutely required in the performance of his duties and obligations to Valero
as expressly authorized herein, or by prior written consent of a duly
authorized officer or director of Valero, Mr. Greehey will not, directly or
indirectly, at any time during his employment with Valero, or at any time
subsequent to the termination thereof, for any reason whatsoever, with or
without cause, breach the confidence reposed in him by Valero by using,
disseminating, disclosing, divulging or in any manner whatsoever disclosing or
permitting to be divulged or disclosed in any manner to any person, firm,
corporation, association or other business entity, trade secrets, secret
methods or "Confidential Information" of Valero, nor will Mr. Greehey lecture
on or publish articles concerning any trade secrets, secret methods or
"Confidential Information" of Valero. As used herein, the term "Confidential
Information" means any and all information concerning Valero's products,
processes, sources of supply, and services, including information relating to
research, development, inventions, manufacture, purchasing, accounting,
engineering, marketing, merchandising, or the selling of any product or
products to any customers of Valero, disclosed to Mr. Greehey or known by Mr.
Greehey as a consequence of or through his employment by Valero (or any parent,
subsidiary or affiliated corporations of Valero) including, but not necessarily
limited to, any person, firm, corporation, association or other business entity
with which Valero has any type of agency agreement, or any shareholders,
directors, or officers of any such person, firm, corporation, association or
other business entity, if such information is not generally known in any
industry in which Valero is or may become engaged during the term of this
Agreement. On termination of employment with Valero, all documents, records,
notebooks, or similar repositories of or containing Confidential Information,
including all copies of any documents, records, notebooks, or similar
repositories of or containing Confidential Information, then in Mr. Greehey's
possession or in the possession of any third party under the control of Mr.
Greehey or pursuant to any agreement with Mr. Greehey, whether prepared by Mr.
Greehey or any other person, firm, corporation, association or other business
entity, will be delivered to Valero by Mr. Greehey.
12. Noncompetition. Mr. Greehey recognizes and understands that in
performing the responsibilities of his employment, he will occupy a position of
fiduciary trust and confidence, pursuant to which he will develop and acquire
experience and knowledge with respect to Valero's
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business. It is the expressed intent and agreement of Mr. Greehey and Valero
that such knowledge and experience shall be used exclusively in the furtherance
of the interests of Valero and not in any manner which would be detrimental to
Valero's interests. Mr. Greehey further understands and agrees that Valero
conducts its business within a specialized market segment throughout the United
States, and that it would be detrimental to the interests of Valero if Mr.
Greehey used the knowledge and experience which he currently possesses or which
he acquires pursuant to his employment hereunder for the purpose of directly or
indirectly competing with Valero or for the purpose of aiding other persons or
entities in so competing with Valero. In consideration for the benefits herein,
Mr. Greehey therefore agrees that so long as he is employed by Valero and for a
period of the greater of (i) two years after termination of Mr. Greehey's
employment, or (ii) as long as he is receiving any payments under Paragraph
7(c), unless he first secures the written consent of Valero, Mr. Greehey will
not directly or indirectly invest, engage or participate in any entity in direct
or indirect competition with Valero's business or contract to do so, other than
investments in amounts aggregating less than 1% in any securities of any company
that is obligated under the 1934 Act to file periodic reports pursuant to
Section 13 thereunder. In the event that the provisions of this Paragraph 12
should ever be deemed to exceed the time or geographic limitations permitted by
applicable laws, then such provisions shall be reformed to the maximum time or
geographic limitations permitted by applicable law.
13. Insurance. Valero may, in its sole and absolute discretion, at any
time after the Effective Date, apply for and procure, as owner and for its own
benefit, insurance on the life of Mr. Greehey, in such amounts and in such
forms as Valero may choose. Unless otherwise agreed by Valero, Mr. Greehey
shall have no interest whatsoever in any such policy or policies, but Mr.
Greehey shall, at Valero's request, submit to such medical examinations, supply
such information, and execute and deliver such documents as may be required by
the insurance company or companies to which Valero has applied for such
insurance.
14. Acknowledgment of Mr. Greehey. Mr. Greehey hereby acknowledges that
his execution of this Agreement is given in consideration of the following, any
of which Mr. Greehey acknowledges is adequate consideration:
(i) Valero's employment of Mr. Greehey under the terms and
conditions contained herein; and
(ii) The termination by Valero of any previous employment
agreement between Valero and Mr. Greehey.
15. Notice. Any notice, request, reply, instruction, or other
communication provided or permitted in this Agreement must be given in writing
and may be served by depositing same in the United States mail in certified or
registered form, postage prepaid, addressed to the Party to be notified with
return receipt requested, or by delivering the notice in person to such Party.
Unless actual receipt is required by any provision of this Agreement, notice
deposited in the United States mail in the manner herein prescribed shall be
effective on dispatch. For purposes of notice, the address of Mr. Greehey, his
spouse, any purported donee or transferee or any administrator, executor or
legal representative of Mr. Greehey or his estate, as the case may be, shall be
as follows:
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The address of Valero shall be:
Valero Energy Corporation
One Valero Place
P.O. Box 500
San Antonio, Texas 78212-3186 (78292-0500)
Attention: General Counsel
Valero and Mr. Greehey shall have the right from time to time and at any time
to change their respective addresses and shall have the right to specify as
their respective addresses any other address by giving at least ten days
written notice to the other Party as provided hereby.
16. Termination of other Employment Agreements. On the Effective Date,
all other prior employment agreements between the Parties in effect on the
Effective Date shall terminate and forever be from the date null, void and of
no further force or effect whatsoever, and any and all such agreements shall be
superseded in their entirety by this Agreement.
17. Litigation. In the event litigation shall be brought by either
Party to enforce or interpret any provision contained in this Agreement the
following provisions shall apply:
(a) if Mr. Greehey brings such an action, and it is not
established by clear and convincing evidence that Mr. Greehey has no
meritorious bases for such action, Valero shall pay all of Mr.
Greehey's and Valero's legal fees incurred in connection with such
litigation;
(b) in the event Valero brings such an action, and it is not
established by clear and convincing evidence that Mr. Greehey has no
meritorious defenses to such action, Valero shall pay all of Mr.
Greehey's and Valero's legal fees incurred in connection with such
litigation; and
(c) any claim by Valero of a right to terminate this
Agreement pursuant to Paragraph 9(a) which is subjected to litigation
must be established by Valero by clear and convincing evidence.
18. Controlling Law. The execution, validity, interpretation, and
performance of this Agreement shall be determined and governed by the laws of
the State of Texas.
19. Additional Instruments. Valero and Mr. Greehey shall execute and
deliver any and all additional instruments and agreements which may be
necessary or proper to carry out this Agreement.
20. Entire Agreement. This Agreement contains the entire agreement of
the Parties. This Agreement may not be changed orally but only by an agreement
in writing signed by the Party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
21. Separability. If any provision of the Agreement is rendered or
declared illegal or
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unenforceable by reason of any existing or subsequently enacted legislation or
by decree of a court of last resort, Valero and Mr. Greehey shall promptly meet
and negotiate substitute provisions for those rendered and declared illegal or
unenforceable, and all the remaining provisions of this Agreement shall remain
in full force and effect.
22. Effect of Agreement. This Agreement shall be binding upon Mr.
Greehey and his heirs, executors, legal representatives, successors and
assigns, and Valero and its legal representatives, successors and assigns.
23. Execution. This Agreement may be executed in multiple counterparts
each of which shall be deemed an original and all of which shall constitute one
instrument.
24. Waiver of Breach. The waiver by Valero of a breach of any
provision of the Agreement by Mr. Greehey shall not operate or be construed as
a waiver by Valero of any subsequent breach by Mr. Greehey. The waiver by Mr.
Greehey of a breach of any provision of the Agreement by Valero shall not
operate or be construed as a waiver by Mr. Greehey of any subsequent breach by
Valero.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
Effective Date.
/s/ William E. Greehey
-------------------------------------
WILLIAM E. GREEHEY
VALERO ENERGY CORPORATION
By: /s/ Keith D. Booke
---------------------------------
Keith D. Booke,
Vice President-Administration
and Human Resources