FIRST AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT
Exhibit 10.4
FIRST AMENDMENT TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This First Amendment (the “Amendment”) is entered into as of , 2006 (the
“Effective Date”) as an amendment to the Amended and Restated Employment Agreement entered into by
and between Tesoro Corporation (the “Company”) and Xxxxx X. Xxxxx (the “Executive”) as of December
3, 2003 (the “Employment Agreement”),
WITNESSETH:
WHEREAS, the Company and Executive have previously entered into the Employment Agreement; and
WHEREAS, the Company and Executive wish to amend the Employment Agreement by entering into
this Amendment so as to (i) allow for extended exercise rights for stock options granted to the
Executive in certain circumstances; (ii) effectuate certain changes to conform the Employment
Agreement to Section 409A of the Internal Revenue Code (the “Code”); (iii) modify the provision of
certain post-termination benefits; and (iv) provide certain payments in lieu of vesting under the
Company’s qualified retirement plans;
NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions set forth
herein, including but not limited to Executive’s employment and the payments and benefits described
herein, the sufficiency of which is hereby acknowledged, the Company and the Executive hereby agree
as follows:
1. Section 4 of the Agreement is hereby amended by deleting the first paragraph of subsection
(f) thereof and substituting the following in its stead to read as follows:
(f) SUPPLEMENTAL ANNUAL RETIREMENT BENEFIT. Executive (or his current spouse, Xxxx X.
Xxxxx, that survives Executive) shall be entitled to the Supplemental Annual Retirement
Benefit payable by the Company set forth below (the
“Supplemental Annual Retirement Benefit”). The first applicable Supplemental Annual
Retirement Benefit shall become payable upon the termination of Executive’s employment with
the Company, and such Supplemental Annual Retirement Benefit shall be payable each year to
Executive through the remainder of his life in quarterly calendar installments (with a
prorated initial installment if necessary), with a 50% right of survivorship. The initial
Supplemental Annual Retirement Benefit shall not be paid until six (6) months have elapsed
from Executive’s termination of employment.
2. Section 6 of the Agreement is hereby amended by deleting subparagraph (b) thereof and
substituting the following in its stead to read as follows:
(b) TERMINATION IN THE EVENT OF TOTAL DISABILITY. In the event that Executive’s
employment is terminated by reason of Executive’s Total Disability as determined in
accordance with Section 5(b), the Company shall pay the following amounts to Executive:
(i) Any accrued but unpaid Base Salary for services rendered to the date of
termination, any accrued but unpaid expenses required to be reimbursed under this
Agreement, any vacation accrued to the date of termination and any earned but unpaid
bonuses for any prior period. Executive shall also be eligible for a pro-rata bonus
of incentive compensation payment to the extent such awards are made to senior
executives for the year in which Executive is terminated; provided that such bonuses
shall not be paid until six (6) months have elapsed from Executive’s termination of
employment;
(ii) Any benefits to which Executive my be entitled pursuant to the plans,
policies and arrangements (including those referred to in Section 4(f) hereof) shall
be determined and paid in accordance with the terms of such plans, policies and
arrangements;
(iii) An amount equal to the Base Salary (at the rate in effect as of the date
of Executive’s Total Disability) which would have been payable to Executive if
Executive had continued in active employment for two (2) years following termination
of employment, less any payments under any long-term disability plan or arrangement
paid for by the Company. Payment shall be made at the same time and in the same
manner as such compensation would have been paid if Executive had remained in active
employment until the end of such period, but shall not commence until six (6) months
have elapsed from Executive’s termination of employment;
(iv) As of the date of termination by reason of Executive’s Total Disability,
Executive shall be fully vested in all stock option awards and the Restricted Stock
Grant and Executive shall have up to one (1) year from the date of termination by
reason of total disability to exercise all such options; and
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(v) As otherwise specifically provided herein.
3. Section 6 of the Agreement is hereby further amended by deleting clause (i) of subparagraph
(c) and substituting the following in its stead to read as follows:
(i) Any accrued but unpaid Base Salary for services rendered to the date of
termination, any accrued but unpaid expenses required to be reimbursed under this
Agreement, any vacation accrued to the date of termination and any earned but unpaid
bonuses for any prior period; provided that such bonuses shall not be paid until six
(6) months have elapsed from Executive’s termination of employment;
4. Section 6 of the Agreement is hereby further amended by deleting clause (i) of subparagraph
(d) thereof and substituting the following in its stead to read as follows:
(i) Any accrued but unpaid Base Salary for services rendered to the date of
termination, any accrued but unpaid expenses required to be reimbursed under this
Agreement, any vacation accrued to the date of termination and any earned but unpaid
bonuses for any prior period; provided that such bonuses shall not be paid until six
(6) months have elapsed from Executive’s termination of employment;
5. Section 6 of the Agreement is hereby further amended by deleting subsection (e) thereof in
its entirety and substituting the following in its stead to read as follows:
(e) TERMINATION BY THE COMPANY WITHOUT CAUSE; TERMINATION BY EXECUTIVE FOR GOOD REASON.
In the event that Executive’s employment is terminated by the Company for reasons other
than death, Total Disability or Cause, or Executive terminates his employment for Good
Reason, the Company shall pay the following amounts to Executive:
(i) Any accrued but unpaid Base Salary for services rendered to the date of
termination, any accrued but unpaid expenses required to be reimbursed under this
Agreement, any vacation accrued to the date of termination, and any earned but
unpaid bonuses for any prior period; provided however, that such earned but unpaid
bonuses shall not be paid until six (6) months have elapsed from Executive’s
termination of employment;
(ii) Any benefits to which Executive may be entitled pursuant to the plans,
policies and arrangements referred to in Section 4(f) hereof shall be determined and
paid in accordance with the terms of such plans, policies and arrangements;
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(iii) An amount equal to two times’ the sum of Executive’s Base Salary plus his
Target Annual Bonus (in each case as then in effect), of which one-half shall be
paid in a lump sum as soon as administratively practicable following six (6) months
after such termination and one-half shall be paid during the two (2) year period
beginning as soon as administratively practicable following six (6) months after the
date of Executive’s termination and shall be paid at the same time and in the same
manner as Base Salary would have been paid if Executive had remained in active
employment until the end of such period;
(iv) The Company at its expense will continue for Executive and Executive’s
spouse and dependent, all health benefit plans, programs or arrangements, whether
group or individual, in which Executive was entitled to participate at any time
during the twelve-month period prior to the date of termination; but only to the
extent such arrangements are available to the Company’s retirees; and for these
purposes, Executive will for purposes of this paragraph 6(e)(iv) be considered a
retiree regardless of whether he would otherwise qualify as one; and only until the
earliest to occur of (A) two and one-half years after the date of termination; (B)
Executive’s death (provided that benefits payable to Executive’s beneficiaries shall
not terminate upon Executive’s death); or (C) with respect to any particular plan,
program or arrangement, the date Executive becomes covered by a comparable benefit
by a subsequent employer;
(v) Except to the extent prohibited by law, and except as otherwise provided
herein, Executive will be 100% vested in all benefits, awards, and grants accrued
but unpaid as of the date of termination under any supplemental and/or incentive
compensation plans in which Executive was a participant as of the date of
termination. Executive shall also be eligible for a bonus or incentive compensation
payment, at the same time, on the same basis, and to the same extent payments are
made to senior executive, pro-rated for the fiscal year in which the Executive is
terminated; provided, however, that such payment of bonus or incentive compensation
will be made as soon as administratively practicable following six (6) months from
the Executive’s termination from employment with the Company;
(vi) Executive shall continue to vest in all stock option awards or restricted
stock awards over the two (2) year period commencing on the date of such termination
of employment. Executive shall have two (2) years and six (6) months after the date
of termination of employment to exercise all options, unless by virtue of the
particular stock option award, the option grant expires on an earlier date; and
(vii) As otherwise specifically provided herein.
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6. Section 7 of the Agreement is hereby amended by deleting subparagraph (a) in its entirety
and substituting the following in its stead to read as follows:
(a) PAYMENTS FOLLOWING A CHANGE IN CONTROL. In the event a “Change in Control” occurs
and before the end of the second year after such Change in Control, Executive’s employment
is terminated within two (2) years following such Change in Control by the Company for any
reason other than for Cause, or by Executive for Good Reason, the Company shall pay the
following amounts to Executive:
(i) An amount equal to three times the sum of Executive’s Base Salary plus his
Target Annual Bonus (in each case as then in effect) payable in a lump sum six (6)
months following termination of employment. if the Executive’s employment with the
company is terminated for any reason other than Cause on or after the date of the
Change in Control, then (A) the amount provided in this Section 7(a)(i) shall be in
lieu of any amounts otherwise due to the Executive under Section 6(e)(iii), and (B)
benefits shall be continued for the period provided in Section 6(e)(iv), or for
three years following the Change in Control, whichever provides the longer
continuation period.
(ii) Executive will be 100% vested in all benefits, awards, and grants
(including stock option grants and stock awards, all of such stock options remaining
exercisable for a period of at least three (3) years following the Change in
Control) accrued but unpaid as of the Change in Control under any non-qualified
pension plan, supplemental and/or incentive compensation or bonus plans, in which
Executive was a participant as of the date of the Change in Control and will be
fully vested in the $700,000 retirement benefit provided under Section 4(f) hereof.
Executive shall also receive a bonus or incentive compensation payment (the “Bonus
payment”) equal to 250% of his then Base Salary, pro-rated as of the effective date
of the termination. The bonus payment shall be payable six (6) months following
termination of employment.
Subject to Executive’s right to terminate for Good Reason, which Executive
shall fully retain, Executive agrees to continue to serve as Chief Executive Officer
of the Company for at least a one-year period following a Change in Control before
exercising Executive’s right to receive compensation payable following a Change in
Control pursuant to this Section 7(a)
For purposes of this Agreement, following a Change in Control, the term “Company” shall
include the entity surviving such Change in Control.
7. Section 7 of the Agreement is hereby further amended by deleting subparagraph (c) thereof
and substituting the following in its stead to read as follows:
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(c) CHANGE IN CONTROL means (i) there shall be consummated (A) any consolidation or
merger of Company in which Company is not the continuing or surviving corporation or
pursuant to which shares of Company’s Common Stock would be converted into cash, securities
or other property, other than a merger of Company where a majority of the Board of Directors
of the surviving corporation are, and for a one-year period after the merger continue to be,
persons who were directors of Company immediately prior to the merger or were elected as
directors, or nominate for election as director, by a vote of at least two-thirds of the
directors then still in office who were directors of 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 Company, or (ii) the
shareholders of Company shall approve any plan or proposal for the liquidation or
dissolution of Company, or (iii) (A) any “person” (as such term is used in Sections 13(d)
and 14(d)(2) of the Securities Act), other than Company or a subsidiary thereof or any
employee benefit plan sponsored by Company or a subsidiary thereof, shall become the
beneficiary owner (within the meaning of Rule 13c-3 under the Securities Act) of securities
of Company representing 35 percent or more of the combined voting power of 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 one-year thereafter, individuals who immediately prior to the
beginning of such period constituted the Board of Directors of Company shall cease for any
reason to constitute at least a majority thereof, unless election or the nomination by the
Board of Directors for election by 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.
8. Section 19 of the Agreement is hereby amended by inserting the following subsection (f) to
read as follows:
(f) Deferred Compensation. This Agreement is intended to meet the requirements of
Section 409A of the Code and may be administered in a manner that is intended to meet those
requirements and shall be construed and interpreted in accordance with such intent. To the
extent that an award or payment, or the settlement or deferral thereof, is subject to
Section 409A of the Code, except as the Committee otherwise determines in writing, the award
shall be granted, paid, settled or deferred in a manner that will meet the requirements of
Section 409A of the Code, including regulations or other guidance issued with respect
thereto, such that the grant, payment, settlement or deferral shall not be subject to the
excise tax applicable under Section 409A of the Code. Any provision of this Agreement that
would cause the award or the payment, settlement or deferral thereof to fail to satisfy
Section 409A of the Code shall be amended (in a manner that as closely as practicable
achieves the original intent of this Agreement) to comply with Section 409A of the Code on a
timely basis, which may be made on a retroactive basis, in accordance with regulations and
other guidance issued
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under Section 409A of the Code. In the event additional regulations or other guidance
is issued under Section 409A of the Code or a court of competent jurisdiction provides
additional authority concerning the application of Section 409A with respect to the payments
described in Sections 4 and 6 of the Agreement, then the provisions of such Sections shall
be amended to permit such payments to be made at the earliest time permitted under such
additional regulations, guidance or authority that is practicable and achieves the original
intent of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and
year first above written.
| TESORO CORPORATION | ||||
Date: , 2006
|
Title: Vice President, General
Council and Secretary |
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Date: , 2006 |
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Address: 400 Xxxxxxxxx Xxx Xxxxxxx, Xxxxx 00000 |
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