EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement"), dated as of September 22,
1996, but effective as provided herein, is made and entered into by and between
Ultramar Corporation, a Delaware corporation (the "Company"), and Xxxx Xxxxxx
(the "Executive").
WHEREAS, the Executive has been serving as the Chief Executive Officer
and Chairman of the Board of the Company;
WHEREAS, the Executive is a party to an Employment Agreement with the
Company, dated as of May 21, 1992 (the "Prior Agreement");
WHEREAS, pursuant to the Agreement and Plan of Merger between Ultramar
Corporation and Diamond Shamrock, Inc., a Delaware corporation ("Diamond
Shamrock, Inc."), dated as of September 22, 1996 (the "Merger Agreement"), as of
the effective time of the Merger (the "Effective Date"), Diamond Shamrock, Inc.
will be merged with and into Ultramar Corporation, with Ultramar Corporation as
the surviving entity (the "Merger");
WHEREAS, pursuant to the Merger Agreement it is contemplated that
Executive will execute this Agreement upon the signing of the Merger Agreement
and upon the Effective Date, Executive will serve as the Vice-Chairman of the
Board, President and Chief Operating Officer of the Company;
WHEREAS, the Company considers it in the best interests of its
stockholders to xxxxxx the continuous employment of certain key management
personnel;
WHEREAS, the Company recognizes that, as is the case for most publicly
held companies, the possibility of a Change in Control (as defined herein)
exists;
WHEREAS, the Company wishes to assure itself of both present and
future continuation of management in light of the Merger and in the event of a
Change in Control subsequent to the Merger;
WHEREAS, the Company wishes to continue to employ the Executive and
the Executive is willing to continue to render services, both on the terms and
subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the promises and of the mutual
covenants herein contained, it is agreed as follows:
1. EMPLOYMENT.
1.1 The Company hereby agrees to continue to employ the Executive and
the Executive hereby agrees to undertake employment with the Company upon the
terms and conditions herein set forth.
1.2 Employment will be for a term commencing on the Effective Date
and, subject to earlier expiration upon the Executive's termination under
Section 5, expiring on the fifth anniversary of the Effective Date (the "Term").
Notwithstanding the previous sentence, this Agreement and the employment of the
Executive will be automatically renewed and the Term extended, subject to
Section 5, for successive one-year periods upon the terms and conditions set
forth herein, commencing on the fifth anniversary of the Effective Date, and on
each anniversary date thereafter, unless either party to this Agreement gives
the other party written notice (in accordance with Section 12.5) of such party's
intention to terminate this Agreement at least three months prior to the end of
such initial or extended term. For purposes of this Agreement, any reference to
the "Term" of this Agreement will include the original term and any extension
thereof.
2. POSITIONS AND DUTIES.
2.1 POSITIONS AND DUTIES. From the Effective Date and until December
31, 1998 (or such earlier time as the Executive may be appointed Chief Executive
Officer of the Company), the Executive will serve in the positions of
Vice-Chairman of the Company's Board of Directors (the "Board"), President and
Chief Operating Officer of the Company; thereafter during the Term, the
Executive will continue as Vice-Chairman of the Board and as President and will
assume the position of Chief Executive Officer. At all times during the Term,
the Executive will have such duties, functions, responsibilities and authority
as are (i) consistent with the Executive's position as President and Chief
Operating Officer or Chief Executive Officer, as applicable, of the Company; or
(ii) assigned to his office in the Company's bylaws; or (iii) reasonably
assigned to him by the Board. The Executive will report directly to the Chief
Executive Officer. The Company will use its best efforts to cause the Executive
to be elected as a member of the Board (initially, with a term that expires in
1997) and as Vice-Chairman of the Board throughout the Term and will use its
best efforts to cause him to be included in the management slate for election as
a director at every stockholders' meeting at which his term as a director would
otherwise expire. In addition, the Company will use its best efforts to cause
the Executive to be appointed (x) to the position of Chief Executive Officer
immediately upon vacancy of such position, but in no event later than January 1,
1999, and (y) as Chairman of the Board upon vacancy in such position, but in no
event later than December 31, 2001.
-2-
2.2 COMMITMENT. During the Term, the Executive will be the Company's
full-time employee and, except as may otherwise be approved in advance in
writing by the Board, and except during vacation periods and reasonable periods
of absence due to sickness, personal injury or other disability, the Executive
will devote substantially all of his business time and attention to the
performance of his duties to the Company. Notwithstanding the foregoing, the
Executive may, (i) subject to the approval of the Board, serve as a director of
a company which is not engaged in "Competition" (as defined in Section 9.1) with
the Company, (ii) serve as an officer, director or otherwise participate in
purely educational, welfare, social, religious and civic organizations, (iii)
serve as an officer, director or trustee of, or otherwise participate in, any
organizations and activities with respect to which the Executive's participation
was disclosed in the last Proxy Statement prepared by the Company prior to the
date hereof, and (iv) manage personal and family investments.
3. PLACE OF PERFORMANCE. In connection with his employment during the
Term, unless otherwise agreed by the Executive, the Executive will be based at
the Company's principal executive offices. The Executive will undertake normal
business travel on behalf of the Company.
4. COMPENSATION AND RELATED MATTERS.
4.1 COMPENSATION AND BENEFITS.
(i) ANNUAL BASE SALARY. During the Term, the Company will pay
to the Executive an annual base salary of not less than $725,000, which annual
base salary may be increased (but not decreased) from time to time by the Board
(or the Compensation Committee thereof) in its sole discretion, payable at the
times and in the manner consistent with the Company's general policies regarding
compensation of executive employees. The Board may from time to time authorize
such additional compensation to the Executive, in cash or in property, as the
Board may determine in its sole discretion to be appropriate.
(ii) ANNUAL INCENTIVE COMPENSATION. If the Board (or the
Compensation Committee thereof) authorizes any cash incentive compensation or
approves any other management incentive program or arrangement, the Executive
will be eligible to participate in such plan, program or arrangement under the
general terms and conditions applicable to executive and management employees.
The annual cash incentive compensation paid to the Executive for calendar year
1996 will be paid in accordance with Ultramar Corporation's annual incentive
compensation plan, subject to any equitable adjustment determined by the Board
(or the Compensation Committee thereof) to be necessary in light of the Merger.
Nothing in this Section 4.1(ii) will guarantee to the Executive any specific
amount of incentive compensation, or prevent the Board (or the Compensation
-3-
Committee thereof) from establishing performance goals and compensation targets
applicable only to the Executive.
4.2 EXECUTIVE BENEFITS. In addition to the compensation described in
Section 4.1, the Company will make available to the Executive and his eligible
dependents, subject to the terms and conditions of the applicable plans,
including without limitation the eligibility rules, participation in all
Company-sponsored employee benefit plans including all employee retirement
income and welfare benefit policies, plans, programs or arrangements in which
senior executives of the Company participate, including any stock option, stock
purchase, stock appreciation, savings, pension, supplemental executive
retirement or other retirement income or welfare benefit, disability, salary
continuation, and any other deferred compensation, incentive compensation, group
and/or executive life, health, medical/hospital or other insurance (whether
funded by actual insurance or self-insured by the Company), expense
reimbursement or other employee benefit policies, plans, programs or
arrangements or any equivalent successor policies, plans, programs or
arrangements that may now exist or be adopted hereafter by the Company.
4.3 EXPENSES. The Company will promptly reimburse the Executive for
all travel and other business expenses the Executive incurs in order to perform
his duties to the Company under this Agreement in a manner commensurate with the
Executive's position and level of responsibility with the Company, and in
accordance with the Company's policy regarding substantiation of expenses.
5. TERMINATION. Notwithstanding the Term specified in Section 1.2, the
termination of the Executive's employment hereunder will be governed by the
following provisions:
5.1 DEATH. In the event of the Executive's death during the Term,
the Company will pay to the Executive's beneficiaries or estate, as appropriate,
promptly after the Executive's death, (i) the unpaid annual base salary to which
the Executive is entitled, pursuant to Section 4.1, through the date of the
Executive's death, and (ii) for any accrued but unused vacation days, to the
extent and in the amounts, if any, provided under the Company's usual policies
and arrangements. This Section 5.1 will not limit the entitlement of the
Executive's estate or beneficiaries to any death or other benefits then
available to the Executive under any life insurance, stock ownership, stock
options, or other benefit plan or policy that is maintained by the Company for
the Executive's benefit.
5.2 DISABILITY.
(i) If the Company determines in good faith that the Executive
has incurred a Disability (as defined below) during
-4-
the Term, the Company may give the Executive written notice of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company will terminate effective on the 30th day after receipt of such
notice by the Executive, provided that within the 30 days after such receipt,
the Executive will not have returned to full-time performance of his duties.
The Executive will continue to receive his annual base salary and benefits until
the date of termination. In the event of the Executive's Disability, the
Company will pay the Executive, promptly after the Executive's termination, (a)
the unpaid annual base salary to which he is entitled, pursuant to Section 4.1,
through the date of the Executive's termination, (b) for any accrued but unused
vacation days, to the extent and in the amounts, if any, provided under the
Company's usual policies and arrangements, and (c) a lump sum in cash in an
amount equal to 50% of his annual base salary at the time of termination. This
Section 5.2 will not limit the entitlement of the Executive, the Executive's
estate or beneficiaries to any disability or other benefits then available to
the Executive under any disability insurance or other benefit plan or policy
that is maintained by the Company for the Executive's benefit.
(ii) For purposes of this Agreement, "Disability" will mean the
Executive's incapacity due to physical or mental illness substantially to
perform his duties on a full-time basis for six consecutive months and within 30
days after a notice of termination is thereafter given by the Company the
Executive will not have returned to the full-time performance of the Executive's
duties; provided, however, if the Executive disagrees with a determination to
terminate him because of Disability, the question of the Executive's disability
will be subject to the certification of a qualified medical doctor agreed to by
the Company and the Executive or, in the event of the Executive's incapacity to
designate a doctor, the Executive's legal representative. In the absence of
agreement between the Company and the Executive, each party will nominate a
qualified medical doctor and the two doctors will select a third doctor, who
will make the determination as to Disability. In order to facilitate such
determination, the Executive will, as reasonably requested by the Company,
(a) make himself available for medical examinations by a doctor in accordance
with this Section 5.2(ii), and (b) grant the Company and any such doctor access
to all relevant medical information concerning him, arrange to furnish copies of
medical records to such doctor and use his best efforts to cause his own doctor
to be available to discuss his health with such doctor.
5.3 CAUSE.
(i) The Company may terminate the Executive's employment
hereunder for Cause (as defined below). In the event of the Executive's
termination for Cause, the Company will promptly pay to the Executive (or his
representative) the unpaid annual base salary to which he is entitled, pursuant
to Section
-5-
4.1, through the date the Executive is terminated and the Executive will be
entitled to no other compensation, except as otherwise due to him under
applicable law.
(ii) For purposes of this Agreement, the Company will have
"Cause" to terminate the Executive's employment hereunder upon a finding by the
Board that (a) the Executive committed an illegal act or acts that were intended
to and did defraud the Company, (b) the Executive engaged in gross negligence or
gross misconduct against the Company or another employee, or in carrying out his
duties and responsibilities, or (c) the Executive materially breached any of the
express covenants set forth in Section 9.1, 9.2 or 9.3. The Company will not
have Cause unless and until the Company provides the Executive with written
notice that the Company intends to terminate his employment for Cause. Such
written notice will specify the particular act or acts, or failure to act, that
is or are the basis for the decision to so terminate the Executive's employment
for Cause. The Employee will be given the opportunity within 30 calendar days
of the receipt of such notice to meet with the Board to defend such act or acts,
or failure to act. The Executive's employment by the Company automatically will
be terminated under this Section 5.3 for Cause as of the receipt of the written
notice from the Company or, if later, the date specified in such notice. A
notice given under this Section 5.3 must set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment for Cause, and if the termination date is other than the
date of receipt of such notice, specify the date on which the Executive's
employment is to be terminated (which date will not be earlier than the date on
which such notice is given in accordance with Section 12.5). Such notice must
be given no later than 180 business days after a director of the Company
(excluding the Executive, if applicable) first has actual knowledge of the
events justifying the purported termination.
5.4 TERMINATION.
(i) INVOLUNTARY TERMINATION. The Executive's employment
hereunder may be terminated by the Company for any reason by written notice as
provided in Section 12.5. The Executive will be treated for purposes of this
Agreement as having been involuntarily terminated by the Company if the
Executive terminates his employment with the Company other than for Cause for
any of the following reasons (each, a "Good Reason"): without the Executive's
written consent, (a) the Company has breached any material provision of this
Agreement and within 30 days after notice thereof from the Executive, the
Company fails to cure such breach; (b) a successor or assign (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company fails to assume
liability under the Agreement; (c) at any time after the Company has notified
the Executive pursuant to Section 1.2 that the Company does not
-6-
intend to renew the Agreement and the Executive's employment at the end of the
Term (including any previous renewals)(rather than to allow the Agreement
automatically to renew); (d) a material reduction in the aggregate benefits
described by Section 4.2 (other than stock-based compensation) provided to the
Executive, unless such decrease is required by law or is applicable to all
employees of the Company eligible to participate in any employee benefit
arrangement affected by such reduction; (e) a significant reduction in the
Executive's duties or the addition of duties, which in either case are
materially inconsistent with the Executive's title or position; (f) the
Executive is not elected to or is removed from the Board; or (g) the Board fails
to appoint the Executive to any of his positions by the dates and as set forth
in Section 2.1, or the Executive is removed from any such position.
(ii) VOLUNTARY TERMINATION. The Executive may voluntarily
terminate the Agreement at any time by notice to the Company as provided in
Section 12.5. The Executive's death or Disability (as defined in Section
5.2(ii)) during the term of the Agreement will constitute a voluntary
termination of employment for purposes of eligibility for termination payments
and benefits as provided in Section 5.5, but for no other purpose.
5.5 TERMINATION PAYMENTS AND BENEFITS.
(i) FORM AND AMOUNT. Upon the Executive's involuntary
termination other than for Cause, (a) subject to Section 5.5(iii), the Company
will pay or provide to the Executive (1) his annual base salary and benefits
until the date of termination, (2) within five business days after termination
of his employment, a lump sum cash payment equal in amount to three times the
sum of (x) the Executive's highest annual base salary in effect during the
three years prior to his date of termination, and (y) the highest annual
incentive compensation earned by the Executive during the same three-year
period, (3) additional years of age and service credit as are required to
permit the Executive to retire under the qualified and nonqualified defined
benefit retirement plans of the Company in which the Executive participates at
the time of termination as though he had attained age 62 and such years of
service required to receive an actuarially unreduced retirement benefit;
provided, however, that in the case of a qualified defined benefit pension plan,
the present value of the additional benefit the Executive would have accrued if
he had been credited for all purposes with the additional years of age and
service under such plan as of the Executive's date of termination with the
Company will be paid in a lump sum in cash within five business days after
termination of the Executive's employment, and (4) for a period of one year
after termination of his employment, the continuation of the employee welfare
benefits set forth in Section 4.2 except as offset by benefits paid or provided
by other sources as set forth in Section 8, or as prohibited by law or as a
condition of maintaining the tax-favored status of any such benefits to the
-7-
Company or its employees; (b) the Executive's benefit under the applicable
supplemental executive retirement plan will be not less than the benefit the
Executive would have received under the terms of the corresponding plan
(including any individual modifications thereof) applicable to the Executive as
in effect immediately prior to the Effective Date determined as if the Executive
had continued employment under the terms of such corresponding plan (and
modifications) until his actual termination of employment; and (c) if the
Executive had theretofore relocated to San Antonio and his employment has been
terminated within two years after the Effective Date, Executive will be
reimbursed the costs of relocation from San Antonio to any other location in the
continental United States under the same policies and procedures applicable to
Executive's reimbursement for relocation to San Antonio.
(ii) MAINTENANCE OF BENEFITS. During the period set forth in
Section 5.5(i)(a)(4), the Company will use its best efforts to maintain in full
force and effect for the continued benefit of the Executive all referenced
benefits or will arrange to make available to the Executive benefits
substantially similar to those that the Executive would otherwise have been
entitled to receive if his employment had not been terminated. Such benefits
will be provided to the Executive on the same terms and conditions (including
employee contributions toward the premium payments) under which the Executive
was entitled to participate immediately prior to his termination.
(iii) RELEASE. No benefit will be paid or made available under
Section 5.5(i) (a) unless the Executive first executes a release in the form
attached as an exhibit to this Agreement, and (b) to the extent any portion of
such release is subject to the seven-day revocation period prescribed by the Age
Discrimination in Employment Act of 1967, as amended, or to any similar
revocation period in effect on the date of termination of Executive's
employment, such revocation period has expired.
6. CHANGE IN CONTROL PROVISIONS.
6.1 IMPACT OF CHANGE IN CONTROL. In the event of a "Change in
Control" of the Company, as defined in Section 6.2, (i) the Company will cause
all cash benefits due under this Agreement to be secured by an irrevocable trust
for the benefit of the Executive, the assets of which will be subject to the
claims of the Company's creditors, and will transfer to such trust cash and
other property adequate to satisfy all of the expenses of the trust for at least
five years after the Change in Control and any of the Company's actual and
potential cash obligations under this Agreement, (ii) if the Executive's
employment is involuntarily terminated without Cause after the Change in
Control, (A) the covenants of Sections 9.1 and 10 will be inapplicable to the
Executive, and (B) the covenant of Section 9.2 will expire on the third
anniversary of the date of termination of the Executive's employment, and (iii)
the
-8-
definition of Good Reason, as set forth in Section 5.4(i) above, will be
expanded to include the following:
(a) A good faith determination by the Executive that, as a result of
the Change in Control and a change in circumstances thereafter significantly
affecting his positions, including a change in the scope of business or other
activities for which he was responsible, he has been rendered substantially
unable to carry out, has been substantially hindered in the performance of, or
has suffered a substantial reduction in, any of the authorities, powers,
functions, responsibilities or duties attached to any of the Executive's
positions; the Executive's determination will be presumed to have been made in
good faith unless otherwise shown by the Company by clear and convincing
evidence; or
(b) The relocation of the Company's principal executive offices, or
requirement that the Executive have as his principal location of work any
location that is, in excess of 50 miles from the location thereof immediately
preceding the Change in Control or to travel away from his home or office
significantly more often than that required immediately prior to the Change in
Control.
6.2 DEFINITION OF CHANGE IN CONTROL. For purposes of this Agreement,
a "Change in Control" will be deemed to occur if at any time during the term of
the Agreement any of the following events will occur:
(i) The Company is merged, consolidated or reorganized into or
with another corporation or other legal person, and as a result of such merger,
consolidation or reorganization, less than 50% of the combined voting power of
the then-outstanding securities of such corporation or person immediately after
such transaction are held in the aggregate by the holders of Voting Stock (as
that term is hereafter defined) of the Company immediately prior to such
transaction;
(ii) The Company sells or otherwise transfers all or
substantially all of its assets to any other corporation or other legal person,
and as a result of such sale or transfer, less than 50% of the combined voting
power of the then-outstanding voting securities of such corporation or person
are held in the aggregate by the holders of Voting Stock of the Company
immediately prior to such sale;
(iii) There is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act"), disclosing that any person
(as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) has become the beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) of
-9-
securities representing 20% or more of the combined voting power of the
then-outstanding securities of the Company entitled to vote generally in the
election of Directors of the Company ("Voting Stock");
(iv) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act disclosing in
response to Form 8-K or Schedule 14A (or any successor schedule, form or report
or item therein) that a change in control of the Company has or may have
occurred or will or may occur in the future pursuant to any then-existing
contract or transaction; or
(v) If during the period of two consecutive years individuals
who at the beginning of any such period constitute the Directors of the Company
cease for any reason to constitute at least a majority thereof unless the
election, or the nomination for election by the Company's shareholders, of each
Director of the Company first elected during such period was approved by a vote
of at least two-thirds of the Directors of the Company then still in office who
were Directors of the Company at the beginning of any such period (excluding for
this purpose the election of any new Director in connection with an actual or
threatened election or proxy contest).
Notwithstanding the foregoing provisions of Section 6.2(iii) or (iv) hereof,
unless otherwise determined in a specific case by majority vote of the Board (or
the Compensation Committee thereof), a "Change in Control" will not be deemed to
have occurred for purposes of this Agreement solely because the Company, an
entity in which the Company directly or beneficially owns 50% or more of the
voting securities of such entity, any Company-sponsored employee stock ownership
plan or any other employee benefit plan of the Company either files or becomes
obligated to file a report or a proxy statement under or in response to Schedule
13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form
or report or item therein) under the Exchange Act, disclosing beneficial
ownership by it of shares of voting securities of the Company, whether in excess
of 20% or otherwise, or because the Company reports that a change in control of
the Company has or may have occurred or will or may occur in the future by
reason of such beneficial ownership. Notwithstanding the foregoing provisions
of Section 6.2, the Merger will not constitute a Change in Control.
7.CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY:
(i) Anything in this Agreement to the contrary notwithstanding, if it
is determined (as hereafter provided) that any payment or distribution by the
Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise pursuant to or by reason of any other agreement, policy, plan, program
or arrangement, including without
-10-
limitation any stock option, stock appreciation right or similar right, or the
lapse or termination of any restriction on or the vesting or exercisability of
any of the foregoing (a "Payment"), would be subject to the excise tax imposed
by Section 4999 of the Code (or any successor provision thereto) by reason of
being "contingent on a change in ownership or control" the Company, within the
meaning of Section 280G of the Code (or any successor provision thereto) or to
any similar tax imposed by state or local law, or any interest or penalties with
respect to such excise tax (such tax or taxes, together with any such interest
and penalties, are hereafter collectively referred to as the "Excise Tax"), then
the Executive will be entitled to receive an additional payment or payments (a
"Gross-Up Payment") in an amount such that, after payment by the Executive of
all taxes (including any interest or penalties imposed with respect to such
taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. No Gross-Up Payment will be made with respect to the
Excise Tax, if any, attributable to (a) any incentive stock option, as defined
by Section 422 of the Code ("ISO") granted prior to the execution of this
Agreement (unless a comparable Gross-Up Payment has theretofore been made
available with respect to such option), or (b) any stock appreciation or similar
right, whether or not limited, granted in tandem with any ISO described in
clause (a).
(ii) Subject to the provisions of Section 7(vi) hereof, all
determinations required to be made under this Section 7, including whether an
Excise Tax is payable by the Executive and the amount of such Excise Tax and
whether a Gross-Up Payment is required and the amount of such Gross-Up Payment,
will be made by a nationally recognized firm of certified public accountants
(the "Accounting Firm") selected by the Executive in his sole discretion. The
Executive will direct the Accounting Firm to submit its determination and
detailed supporting calculations to both the Company and the Executive within 15
calendar days after the Termination Date, if applicable, and any other such time
or times as may be requested by the Company or the Executive. If the Accounting
Firm determines that any Excise Tax is payable by the Executive, the Company
will pay the required Gross-Up Payment to the Executive within five business
days after receipt of such determination and calculations. If the Accounting
Firm determines that no Excise Tax is payable by the Executive, it will, at the
same time as it makes such determination, furnish the Executive with an opinion
that he has substantial authority not to report any Excise Tax on his federal,
state, local income or other tax return. Any determination by the Accounting
Firm as to the amount of the Gross-Up Payment will be binding upon the Company
and the Executive. As a result of the uncertainty in the application of
Section 4999 of the Code (or any successor provision thereto) and the
possibility of similar uncertainty regarding applicable state or local tax law
at the time of any determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments that will not have been made by the
-11-
Company should have been made (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts or fails to pursue its remedies pursuant to Section 7(vi) hereof and
the Executive thereafter is required to make a payment of any Excise Tax, the
Executive will direct the Accounting Firm to determine the amount of the
Underpayment that has occurred and to submit its determination and detailed
supporting calculations to both the Company and the Executive as promptly as
possible. Any such Underpayment will be promptly paid by the Company to, or for
the benefit of, the Executive within five business days after receipt of such
determination and calculations.
(iii) The Company and the Executive will each provide the
Accounting Firm access to and copies of any books, records and documents in the
possession of the Company or the Executive, as the case may be, reasonably
requested by the Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the determination
contemplated by Section 7(ii) hereof.
(iv) The federal, state and local income or other tax returns
filed by the Executive will be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive will make proper payment of the amount of any
Excise Tax, and at the request of the Company, provide to the Company true and
correct copies (with any amendments) of his federal income tax return as filed
with the Internal Revenue Service and corresponding state and local tax returns,
if relevant, as filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing such payment. If
prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-Up Payment should be reduced, the
Executive will within five business days pay to the Company the amount of such
reduction.
(v) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations contemplated by
Sections 7(ii) and (iv) hereof will be borne by the Company. If such fees and
expenses are initially paid by the Executive, the Company will reimburse the
Executive the full amount of such fees and expenses within five business days
after receipt from the Executive of a statement therefor and reasonable evidence
of his payment thereof.
(vi) The Executive will notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such notification will be given
as promptly as practicable but no later than 10 business days after the
Executive actually receives notice of such claim and the Executive will further
apprise the Company of the nature of such
-12-
claim and the date on which such claim is requested to be paid (in each case, to
the extent known by the Executive). The Executive will not pay such claim prior
to the earlier of (a) the expiration of the 30-calendar-day period following the
date on which he gives such notice to the Company and (b) the date that any
payment of amount with respect to such claim is due. If the Company notifies
the Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive will:
(1) provide the Company with any written records or documents in
his possession relating to such claim reasonably requested by the
Company;
(2) take such action in connection with contesting such claim as
the Company will reasonably request in writing from time to time,
including without limitation accepting legal representation with
respect to such claim by an attorney competent in respect of the
subject matter and reasonably selected by the Company;
(3) cooperate with the Company in good faith in order effectively
to contest such claim; and
(4) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company will bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and will indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limiting the foregoing provisions of
this Section 7(vi), the Company will control all proceedings taken in connection
with the contest of any claim contemplated by this Section 7(vi) and, at its
sole option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim (provided, however, that the Executive may participate therein at his
own cost and expense) and may, at its option, either direct the Executive to pay
the tax claimed and xxx for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a determination
before any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company will determine; provided, however,
that if the Company directs the Executive to pay the tax claimed and xxx for a
refund, the Company will advance the amount of such payment to the Executive on
an interest-free basis and will indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance; and
provided further, however, that any extension of the statute of
-13-
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which the contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of any such
contested claim will be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive will be entitled to settle
or contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(vii) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7(vi) hereof, the Executive receives
any refund with respect to such claim, the Executive will (subject to the
Company's complying with the requirements of Section 7(vi) hereof) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after any taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to Section 7(vi)
hereof, a determination is made that the Executive will not be entitled to any
refund with respect to such claim and the Company does not notify the Executive
in writing of its intent to contest such denial or refund prior to the
expiration of 30 calendar days after such determination, then such advance will
be forgiven and will not be required to be repaid and the amount of such advance
will offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid pursuant to this Section 7.
8. MITIGATION AND OFFSET. The Executive is under no obligation to
mitigate damages or the amount of any payment or benefit provided for hereunder
by seeking other employment or otherwise; provided, however, that the
Executive's coverage under the Company's welfare benefit plans will be reduced
to the extent that the Executive becomes covered under any comparable employee
benefit plan made available by another employer and covering the same type of
benefits. The Executive will report to the Company any such benefits actually
received by him.
9. COMPETITION; CONFIDENTIALITY; NONSOLICITATION
9.1 (i) Subject to Section 6.1(ii), the Executive hereby covenants and
agrees that during the Term and for one year following the Term he will not,
without the prior written consent of the Company, engage in Competition (as
defined below) with the Company. For purposes of this Agreement, if the
Executive takes any of the following actions he will be engaged in
"Competition": engaging in or carrying on, directly or indirectly, any
enterprise, whether as an advisor, principal, agent, partner, officer, director,
employee, stockholder, associate or consultant to any person, partnership,
corporation or any other business entity, that is principally engaged in the
business of refining and/or marketing oil or related products in States in which
the Company has significant operations; provided, however, that "competition"
will not include (a) the mere ownership of
-14-
securities in any enterprise and exercise of rights appurtenant thereto or (b)
participation in management of any enterprise or business operation thereof
other than in connection with the competitive operation of such enterprise.
(ii) Subject to Section 6.1(ii), the Executive hereby covenants
and agrees that during the Term and for three years following the Term he will
not assist a third party in preparing or making an unsolicited bid for the
Company, engaging in a proxy contest with the Company, or engaging in any other
similar activity.
9.2 During the Term, the Company agrees that it will disclose to
Executive its confidential or proprietary information (as defined in this
Section 9.2) to the extent necessary for Executive to carry out his obligations
under this Agreement. Subject to Section 6.1(ii), the Executive hereby
covenants and agrees that he will not, without the prior written consent of the
Company, during the Term or thereafter disclose to any person not employed by
the Company, or use in connection with engaging in Competition with the Company,
any confidential or proprietary information of the Company. For purposes of
this Agreement, the term "confidential or proprietary information" will include
all information of any nature and in any form that is owned by the Company and
that is not publicly available or generally known to persons engaged in
businesses similar or related to those of the Company. Confidential information
will include, without limitation, the Company's financial matters, customers,
employees, industry contracts, and all other secrets and all other information
of a confidential or proprietary nature. The foregoing obligations imposed by
this Section 9.2 will cease if such confidential or proprietary information will
have become, through no fault of the Executive, generally known to the public or
the Executive is required by law to make disclosure (after giving the Company
notice and an opportunity to contest such requirement).
9.3 Subject to Section 6.1(ii), the Executive hereby covenants and
agrees that during the Term and for one year thereafter he will not attempt to
influence, persuade or induce, or assist any other person in so persuading or
inducing, any employee of the Company to give up, or to not commence, employment
or a business relationship with the Company.
9.4 Executive acknowledges and agrees that the remedy at law available
to the Company for breach of any of his post-termination obligations under
Sections 9.1, 9.2 and 9.3 would be inadequate and that damages flowing from such
a breach may not readily be susceptible to being measured in monetary terms.
Accordingly, Executive acknowledges, consents and agrees that, in addition to
any other rights or remedies which the Company may have at law, in equity or
under this Agreement, upon adequate proof of his violation of any such provision
of this Agreement, the Company will be entitled to immediate injunctive relief
and
-15-
may obtain a temporary order restraining any threatened or further breach,
without the necessity of proof of actual damage.
10. POST-TERMINATION ASSISTANCE. Subject to Section 6.1(ii), the
Executive agrees that after his employment with the Company has terminated he
will provide, upon reasonable notice, such information and assistance to the
Company as may reasonably be requested by the Company in connection with any
litigation in which it or any of its affiliates is or may become a party;
provided, however, that the Company agrees to reimburse the Executive for any
related out-of-pocket expenses, including travel expenses.
11. SURVIVAL. The expiration or termination of the Term will not impair
the rights or obligations of any party hereto that accrue hereunder prior to
such expiration or termination, except to the extent specifically stated herein.
In addition to the foregoing, the Executive's covenants contained in
Sections 9.1, 9.2, 9.3 and 10 and the Company's obligations under Sections 5, 7
and 12.1 will survive the expiration or termination of Executive's employment.
12. MISCELLANEOUS PROVISIONS.
12.1 LEGAL FEES AND EXPENSES. Without regard to whether the Executive
prevails, in whole or in part, in connection therewith, the Company will pay and
be financially responsible for 100% of any and all attorneys' and related fees
and expenses incurred by the Executive in connection with any dispute associated
with the interpretation, enforcement or defense of the Executive's rights under
this Agreement by litigation or otherwise; provided that, in regard to such
dispute, the Executive has not acted in bad faith or with no colorable claim of
success. All such fees and expenses will be paid by the Company as incurred by
the Executive on a monthly basis upon an undertaking by the Executive to repay
such advanced amounts if a court determines, in a decision against which no
appeal may be taken or with respect to which the time period to appeal has
expired, that he acted in bad faith or with no colorable claim of success.
12.2 BINDING ON SUCCESSORS. This Agreement will be binding upon and
inure to the benefit of the Company, the Executive and each of their respective
successors, assigns, personal and legal representatives, executors,
administrators, heirs, distributees, devisees, and legatees, as applicable.
12.3 GOVERNING LAW. This Agreement will be governed, construed,
interpreted and enforced in accordance with the substantive laws of the State of
Delaware, without regard to conflicts of law principles.
12.4 SEVERABILITY. Any provision of this Agreement that is deemed
invalid, illegal or unenforceable in any
-16-
jurisdiction will, as to that jurisdiction, be ineffective to the extent of such
invalidity, illegality or unenforceability, without affecting in any way the
remaining provisions hereof in such jurisdiction or rendering that or any other
provisions of this Agreement invalid, illegal, or unenforceable in any other
jurisdiction. If any covenant should be deemed invalid, illegal or
unenforceable because its scope is considered excessive, such covenant will be
modified so that the scope of the covenant is reduced only to the minimum extent
necessary to render the modified covenant valid, legal and enforceable.
12.5 NOTICES. For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof confirmed), or five business days after
having been mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or three business days after having been sent by a
nationally recognized overnight courier service such as Federal Express, UPS, or
Purolator, addressed to the Company (to the attention of the Secretary of the
Company) at its principal executive offices and to the Executive at his
principal residence, or to such other address as any party may have furnished to
the other in writing and in accordance herewith, except that notices of changes
of address will be effective only upon receipt.
(i) TO THE COMPANY. If to the Company, addressed to the
attention of General Counsel at 0000 Xxxxxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxx
00000.
(ii) TO THE EXECUTIVE. If to the Executive, to him care of the
Company at the above address.
12.6 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which will be deemed to be an original, but all of which
together will constitute one and the same Agreement.
12.7 ENTIRE AGREEMENT. The terms of this Agreement are intended by
the parties to be the final expression of their agreement with respect to the
Executive's employment by the Company and may not be contradicted by evidence of
any prior or contemporaneous agreement. The parties further intend that this
Agreement will constitute the complete and exclusive statement of its terms and
that no extrinsic evidence whatsoever may be introduced in any judicial,
administrative or other legal proceeding to vary the terms of this Agreement.
12.8 AMENDMENTS; WAIVERS. This Agreement may not be modified,
amended, or terminated except by an instrument in writing, approved by the
Company and signed by the Executive and the Company. Failure on the part of
either party to complain of
-17-
any action or omission, breach or default on the part of the other party, no
matter how long the same may continue, will never be deemed to be a waiver of
any rights or remedies hereunder, at law or in equity. The Executive or the
Company may waive compliance by the other party with any provision of this
Agreement that such other party was or is obligated to comply with or perform
only through an executed writing; provided, however, that such waiver will not
operate as a waiver of, or estoppel with respect to, any other or subsequent
failure.
12.9 NO INCONSISTENT ACTIONS. The parties will not voluntarily
undertake or fail to undertake any action or course of action that is
inconsistent with the provisions or essential intent of this Agreement.
Furthermore, it is the intent of the parties hereto to act in a fair and
reasonable manner with respect to the interpretation and application of the
provisions of this Agreement.
12.10 HEADINGS AND SECTION REFERENCES. The headings used in this
Agreement are intended for convenience or reference only and will not in any
manner amplify, limit, modify or otherwise be used in the construction or
interpretation of any provision of this Agreement. All section references are
to sections of this Agreement, unless otherwise noted.
13. EFFECTIVENESS AND PRIOR AGREEMENT. This Agreement will become
effective upon, and the Prior Agreement will terminate immediately prior to, the
Effective Date. Notwithstanding any other provision of this Agreement, if the
Merger Agreement is terminated prior to the Effective Date, this Agreement will
have no further force or effect, and the Prior Agreement will continue in effect
as though this Agreement had not been entered into.
-18-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written, but effective as provided in Section 13.
/s/ Xxxx Xxxxxx
-----------------------------------
Xxxx Xxxxxx
ULTRAMAR CORPORATION,
a Delaware corporation
/s/ Ultramar Corporation
-----------------------------------
-19-
EXHIBIT
GENERAL RELEASE OF ALL CLAIMS
This General Release of all Claims (this "Agreement") is entered into by
and between _____________________ ("Executive") and Ultramar Diamond Shamrock
Corp. (including its subsidiaries) (collectively the "Company") effective as of
__________________.
In consideration of the promises set forth in the employment agreement
between Executive and the Company, dated September ___, 1996, as amended as of
the effective date hereof (the "Employment Agreement"), as well as any promises
set forth in this Agreement, Executive and the Company agree as follows:
(1) EMPLOYMENT AGREEMENT ENTITLEMENTS
The Company will provide Executive the post-termination payments and
benefits to which he is entitled under the Employment Agreement.
(2) RETURN OF PROPERTY
All Company files, access keys, desk keys, ID badges and credit cards, and
such other property of the Company as the Company may reasonably request,
in Executive's possession must be returned no later than the date of
Executive's termination from the Company (the "Termination Date").
(3) GENERAL RELEASE AND WAIVER OF CLAIMS
Except as provided in the last sentence of this paragraph (3), Executive
hereby unconditionally and forever releases, discharges and waives any and
all claims of any nature whatsoever, whether legal, equitable or otherwise,
which Executive may have against the Company arising at any time on or
before the Termination Date, other than with respect to the obligations of
the Company to the Executive under the Employment Agreement. This release
of claims extends to any and all claims of any nature whatsoever, other
than with respect to the obligations of the Company to the Executive under
the Employment Agreement, whether known, unknown or capable or incapable of
being known as of the Termination Date of thereafter. This Agreement is a
release of all claims of any nature whatsoever by Executive against the
Company, other than with respect to the obligations of the Company to the
Executive under the Employment Agreement, and includes, other than as
herein provided, any and all claims, demands, causes of action, liabilities
whether known or unknown including those caused by, arising from or related
to Executive's employment relationship with the Company including, but
without limitation, any and all alleged discrimination or acts of
discrimination which occurred or
-20-
may have occurred on or before the Termination Date based upon race, color,
sex, creed, national origin, age, disability or any other violation of any
Equal Employment Opportunity Law, ordinance, rule, regulation or order,
including, but not limited to, Title VII of the Civil Rights Act of 1964,
as amended; the Civil Rights Act of 1991; the Age Discrimination in
Employment Act, as amended (as further described in Section 7 below); the
Americans with Disabilities Act; claims under the Employee Retirement
Income Security Act ("ERISA"); or any other federal, state or local laws or
regulations regarding employment discrimination or termination of
employment. This also includes claims for wrongful discharge, fraud, or
misrepresentation under any statute, rule, regulation or under the common
law.
The Executive agrees and understands and knowingly agrees to this release
because it is his intent in executing this Agreement to forever discharge
the Company from any and all present, future, foreseen or unforeseen causes
of action except for the obligations of the Company set forth in the
Employment Agreement.
Notwithstanding the foregoing, Executive does not release, discharge or
waive any rights to indemnification that he may have under the By-Laws of
the Company, the laws of the State of Delaware, any indemnification
agreement between the Executive and the Company or any insurance coverage
maintained by or on behalf of the Company.
(4) RELEASE AND WAIVER OF CLAIMS UNDER THE AGE OF DISCRIMINATION IN EMPLOYMENT
ACT
Executive acknowledges that the Company encouraged him to consult with an
attorney of his choosing, and through this Agreement encourages him to
consult with his attorney with respect to possible claims under the Age
Discrimination in Employment Act of 1967, as amended ("ADEA") and that
Executive acknowledges that he understands that the ADEA is a federal
statute that prohibits discrimination, on the basis of age, in employment,
benefits, and benefit plans. Executive wishes to waive any and all claims
under the ADEA that he may have, as of the Termination Date, against the
Company, its shareholders, employees, or successors and hereby waives such
claims. Executive further understands that by signing this Agreement he is
in fact waiving, releasing and forever giving up any claim under the ADEA
that may have existed on or prior to the Termination Date. Executive
acknowledges that the Company has informed him that he has at his option,
twenty-one (21) days in which to sign the waiver of this claim under ADEA,
and he does hereby knowingly and voluntarily waive said twenty-one (21) day
period. Executive also understands that he has seven (7) days following
the Termination Date within which to revoke the release contained in this
paragraph by providing a
-21-
written notice of his revocation of the release and waiver contained in
this paragraph to the Company. Executive further understands that this
right to revoke the release contained in this paragraph relates only to
this paragraph and does not act as a revocation of any other term of this
Agreement.
(5) PROCEEDINGS
Executive has not filed, and agrees not to initiate or cause to be
initiated on his behalf, any complaint, charge, claim or proceeding against
the Company before any local, state or federal agency, court or other body
relating to his employment or the termination of his employment (each
individually, a "Proceeding"), and agrees not to voluntarily participate in
any Proceeding. Executive waives any right he may have to benefit in any
manner from any relief (whether monetary or otherwise) arising out of any
Proceeding.
(6) REMEDIES
In the event Executive initiates or voluntarily participates in any
Proceeding, or if he fails to abide by any of the terms of this Agreement
or his post-termination obligations contained in the Employment Agreement,
or if he revokes the ADEA release contained in Paragraph 4 of this
Agreement within the seven-day period provided under Paragraph 4, the
Company may, in addition to any other remedies it may have, reclaim any
amounts paid to him under the termination provisions of the Employment
Agreement or terminate any benefits or payments that are subsequently due
under the Employment Agreement, without waiving the release granted herein.
Executive acknowledges and agrees that the remedy at law available to the
Company for breach of any of his post-termination obligations under the
Employment Agreement or his obligations under Paragraphs 3, 4, and 5 of
this Agreement would be inadequate and that damages flowing from such a
breach may not readily be susceptible to being measured in monetary terms.
Accordingly, Executive acknowledges, consents and agrees that, in addition
to any other rights or remedies which the Company may have at law, in
equity or under this Agreement, upon adequate proof of his violation of any
such provision of this Agreement, the Company shall be entitled to
immediate injunctive relief and may obtain a temporary order restraining
any threatened or further breach, without the necessity of proof of actual
damage.
Executive understands that by entering into this Agreement he will be
limiting the availability of certain remedies that he may have against the
Company and limiting also his ability to pursue certain claims against the
Company.
(7) SEVERABILITY CLAUSE
-22-
In the event any provision or part of this Agreement is found to be invalid
or unenforceable, only that particular provision or part so found, and not
the entire agreement, will be inoperative.
(8) NON-ADMISSION
Nothing contained in this Agreement will be deemed or construed as an
admission of wrongdoing or liability on the part of the Company.
(9) GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, applicable to agreements made and to be
performed in that State; and the parties agree to the jurisdiction of the
U.S. District Court for the District of Delaware, and agree to appear in
any action in such courts by service of process by certified mail, return
receipt requested, at the following addresses:
To Company: ULTRAMAR DIAMOND SHAMROCK CORP.
0000 Xxxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxx 00000
and
To Executive:
-----------------------------------
-----------------------------------
-----------------------------------
THE EXECUTIVE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT AND THAT HE FULLY
KNOWS, UNDERSTANDS, AND APPRECIATES ITS CONTENTS, AND THAT HE HEREBY EXECUTES
THE SAME AND MAKES THIS AGREEMENT AND THE RELEASE AND AGREEMENTS PROVIDED FOR
HEREIN VOLUNTARILY AND OF HIS OWN FREE WILL.
IN WITNESS WHEREOF, the parties have executed this AGREEMENT as of the date
first set forth above.
-----------------------------------
[EXECUTIVE]
ULTRAMAR DIAMOND SHAMROCK CORP.,
a Delaware corporation
By:
------------------------------
[NAME]
[TITLE]
-23-
