EXECUTION COPY
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated March 1, 2002 by and between
Premcor Inc. (the "Company") and Xxxxxx X. Xxxxxx (the "Executive").
1. Term of Employment. Subject to the provisions of Section 8, Executive
shall be employed by the Company for a period commencing on March 1, 2002
("Start Date") and ending on March 1, 2004 (the "Employment Term") on the terms
and subject to the conditions set forth in this Agreement. However, commencing
on March 1, 2004 and on each March 1 thereafter (each an "Extension Date"), the
Employment Term shall be automatically extended for an additional one-year
period, unless the Company or Executive provides the other party hereto not less
than 60 days prior written notice before the next Extension Date that the
Employment Term shall not be so extended.
2. Position.
a. During the Employment Term, Executive shall serve as the Company's
full-time Senior Vice President and Chief Administrative Officer of the Company
and as the Senior Vice President and Chief Administrative Officer of The Premcor
Refining Group Inc. and Premcor USA Inc. In such positions, Executive shall have
such duties and authority as shall be determined from time to time by the Chief
Executive Officer and/or Board of Directors of the Company (the "Board").
b. During the Employment Term, Executive shall devote Executive's full
business time and best efforts to the performance of Executive's duties
hereunder and shall not engage in any other business, profession or occupation
for compensation or otherwise which would conflict or interfere with the
rendition of such services either directly or indirectly, without the prior
written consent of the Board; provided that nothing herein shall preclude
Executive (i) from continuing to serve on any board of directors or trustees of
any business corporation or any charitable organization and (ii) subject to the
prior written approval of the Board, which approval shall not be unreasonably
withheld, from accepting appointment to any board of directors or trustees of
any business corporation or any charitable organization; provided in each case,
and in the aggregate, that such activities do not materially conflict or
interfere with the performance of Executive's duties hereunder or conflict with
Section 9.
3. Base Salary. During the Employment Term, the Company shall pay Executive
a base salary at the annual rate of $200,000, payable in regular installments in
accordance with the Company's usual payment practices. Executive shall be
entitled to such increases in Executive's base salary, if any, as may be
determined from time to time in the sole discretion of the Board. Executive's
annual rate of base salary, as in effect from time to time, is hereinafter
referred to as the "Base Salary."
4. Annual Bonus. With respect to each fiscal year of the Company ending
during the Employment Term, Executive shall be eligible to earn an annual bonus
award (an "Annual Bonus") if net earnings per share to common shareholders of
the Company, calculated on a fully diluted basis and according to GAAP, as
determined by the Company's outside auditors, excluding the after-tax impact of
any extraordinary or special items that the Board determines in good faith are
not appropriately includable in the Annual Bonus calculation because such items
do not accurately reflect the operating performance of the Company, such as
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inventory write ups and write downs, LIFO adjustments, asset purchase or
sale-related gains or losses and acquisition-related write downs ("Adjusted
EPS"), is at least equal to $2.50. Upon achievement of such Adjusted EPS, the
Annual Bonus shall equal to fifty percent of Executive's Base Salary (the "Base
Bonus") plus, for each $0.01 increase in the applicable fiscal year's Adjusted
EPS above $2.50 (calculated as described in the foregoing sentence), an amount
equal to one percent of Executive's Base Salary, provided that in no event shall
the Annual Bonus be greater than two times Executive's Base Salary. The Annual
Bonus shall be paid to Executive within fifteen business days after the outside
auditors approve the Company's year-end earnings release. Executive's Annual
Bonus for 2002 shall be calculated based on earnings from January 1, 2002 and
the resulting amount multiplied by 10/12ths, to arrive at the amount due for the
ten months of 2002, so long as Executive is employed hereunder as of December
31, 2002. Annual Bonuses for subsequent full years during which Executive is
employed hereunder will reflect the full year (January 1 through December 31).
5. Equity Arrangements.
a. Initial Options. Upon the date of this Agreement, the Company shall
grant to Executive stock options to purchase 50,000 shares of Company common
stock at an exercise price equal to $10 per share (the "Initial Options").
Subject to Executive's continued employment with the Company, such Initial
Options will vest in equal installments on each of the first three anniversaries
of the date of grant, and will become fully vested upon the occurrence of a
Change in Control (as defined in the Company's 2002 Equity Incentive Plan (the
"Plan")). Other terms and conditions of the Initial Options shall be as set
forth herein, in the Plan and an option agreement between the Company and
Executive.
b. Matching Options.
(i) The Company contemplates an initial public offering of shares of
common stock pursuant to an effective registration statement filed under the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated thereunder (the "Initial Public Offering") during the
year 2002. At the time, if any, of such Initial Public Offering, the Company
shall grant to Executive a stock option to purchase 25,000 shares of Company
common stock at an exercise price equal to the public offering price per share
paid by the initial purchasers in the Initial Public Offering less the
underwriting commission per share (the "Matching Options"). Subject to
Executive's continued employment with the Company, such Matching Options will
vest in equal installments on each of the first three anniversaries of the date
of grant, and will become fully vested upon the occurrence of a Change in
Control of the Company. Other terms and conditions of the Matching Options shall
be as set forth herein, in the Plan and an option agreement between the Company
and Executive.
c. Annual Options. During the month of January in each of the years
2003 and 2004, Executive shall receive a grant of options to purchase 25,000
shares of Company common stock at an exercise price per share equal to Fair
Market Value (as defined in the Plan) on the date of grant (the "Annual
Options"). Subject to Executive's continued employment with the Company, such
Annual Options will vest in equal installments on each of the first three
anniversaries of the date of grant, and will become fully vested upon the
occurrence of a Change in Control of the Company. Other terms and conditions of
the Annual Options shall be as set forth herein, in the Plan and an option
agreement between the Company and Executive. If the
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Company should, prior to any Annual Option grant, be involved in any merger,
reorganization, stock split or spinoff or other similar event, the number of
shares subject to the Annual Options yet to be granted, as provided above, shall
be adjusted on a pro rata basis. Executive's Initial Options, Matching Options
and Annual Options are herein collectively referred to as the "Executive
Options".
d. Restrictions. All shares acquired by exercise of the Executive
Options shall be subject to (x) standard lock-up restrictions as recommended by
the underwriter following the Company's Initial Public Offering and any
subsequent sales of shares of common stock to the public, and (y) the terms and
conditions specified in Appendix A hereto, which are hereby incorporated into
this Agreement with the same effect as if they had been set forth herein.
6. Employee Benefits. During the Employment Term, Executive shall be
entitled to participate in the Company's employee benefit plans (which term does
not include bonus or incentive compensation plans), other than any severance pay
plan, as in effect from time to time (collectively "Employee Benefits"), on the
same basis as those benefits are generally made available to other senior
executives of the Company.
7. Business Expenses. During the Employment Term, reasonable business
expenses incurred by Executive in the performance of Executive's duties
hereunder shall be reimbursed by the Company following presentation by Executive
of proof of such expenses, as and when reasonably required by the Company.
8. Termination. The Employment Term and Executive's employment hereunder
may be terminated by the Company at any time and for any reason or by Executive
for Good Reason. Notwithstanding any other provision of this Agreement (other
than Section 13(h)), the provisions of this Section 8 shall exclusively govern
Executive's rights upon termination of employment with the Company and its
affiliates.
a. By the Company For Cause or By Executive Resignation Without Good
Reason.
(i) If Executive's employment is terminated by the Company for Cause,
or if Executive resigns without Good Reason, Executive shall be entitled to
receive:
(A) the Base Salary through the date of termination;
(B) any Annual Bonus earned but unpaid as of the date of termination
for any previously completed fiscal year (including, if applicable, 2002);
(C) reimbursement for any unreimbursed business expenses properly
incurred by Executive in accordance with this Agreement prior to the date
of Executive's termination; and
(D) such Employee Benefits, if any, as to which Executive may be
entitled under the employee benefit plans of the Company (the amounts
described in clauses (A) through (D) hereof being referred to as the
"Accrued Rights").
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Following such termination of Executive's employment by the Company for
Cause or resignation by Executive without Good Reason, except as set forth in
this Section 8(a)(i), in the Plan and any applicable option agreement, Executive
shall have no further rights to any compensation or any other benefits under
this Agreement.
(ii) For purposes of this Agreement, "Cause" shall mean (A)
Executive's continued failure substantially to perform Executive's duties
hereunder (other than as a result of total or partial incapacity due to physical
or mental illness) for a period of 20 days following written notice by the
Company to Executive of such failure, (B) Executive's conviction of, or plea of
nolo contendere to a crime constituting (x) a felony under the laws of the
United States or any state thereof or (y) a misdemeanor involving moral
turpitude, (C) Executive's willful malfeasance or willful misconduct in
connection with Executive's duties hereunder or any act or omission which is
injurious to the financial condition or business reputation of the Company or
any of its subsidiaries or affiliates, other than an act or omission that was
committed or omitted by Executive in the good faith belief that it was in the
best interest of the Company or (D) Executive's breach of the provisions of
Sections 9 or 10 of this Agreement.
b. Disability or Death.
(i) The Employment Term and Executive's employment hereunder shall
terminate upon Executive's death and may be terminated by the Company if
Executive becomes physically or mentally incapacitated and is therefore unable
for a period of six (6) consecutive months or for an aggregate of nine (9)
months in any twenty-four (24) consecutive month period to perform Executive's
duties (such incapacity is hereinafter referred to as "Disability"). Any
question as to the existence of the Disability of Executive as to which
Executive and the Company cannot agree shall be determined in writing by a
qualified independent physician mutually acceptable to Executive and the
Company. If Executive and the Company cannot agree as to a qualified independent
physician, each shall appoint such a physician and those two physicians shall
select a third who shall make such determination in writing. The determination
of Disability made in writing to the Company and Executive shall be final and
conclusive for all purposes of the Agreement.
(ii) Upon termination of Executive's employment hereunder for either
Disability or death, Executive or Executive's estate (as the case may be) shall
be entitled to receive:
(A) the Accrued Rights; and
(B) a pro rata portion of any Annual Bonus, if any, that Executive
would have been entitled to receive pursuant to Section 4 hereof in such
year based upon the percentage of the fiscal year that shall have elapsed
through the date of Executive's termination of employment, payable when
such Annual Bonus would have otherwise been payable had Executive's
employment not terminated.
Following Executive's termination of employment due to death or
Disability, except as set forth in this Section 8(b)(ii), in the Plan and any
applicable option agreement, Executive shall have no further rights to any
compensation or any other benefits under this Agreement.
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c. By the Company Without Cause or Resignation by Executive for Good
Reason.
(i) If Executive's employment is terminated by the Company without
Cause (other than by reason of death or Disability) or if Executive resigns for
Good Reason, Executive shall be entitled to receive:
(A) the Accrued Rights; and
(B) subject to Executive's continued compliance with the provisions of
Sections 9 and 10, lump sum payment equal to three times Base Salary and
Base Bonus, which shall be paid within 60 days after the date of
termination of Executive's employment.
Following Executive's termination of employment by the Company without
Cause (other than by reason of Executive's death or Disability) or by
Executive's resignation for Good Reason, except as set forth in this Section
8(c)(i), in the Plan and any applicable option agreement, Executive shall have
no further rights to any compensation or any other benefits under this
Agreement.
(ii) For purposes of this Agreement, "Good Reason" shall mean, without
Executive's consent, (A) the failure of the Company to pay or cause to be paid
Executive's Base Salary or Annual Bonus, when due hereunder, (B) any substantial
and sustained diminution in Executive's authority or responsibilities from those
described in Section 2 hereof or (C) relocation of Executive's principal place
of business by more than 30 miles, provided that relocation to St. Louis, MO or
Greenwich, CT shall not constitute Good Reason; provided that the events
described in clauses (A), (B) and (C) of this Section 8(c)(ii) shall constitute
Good Reason only if the Company fails to cure such event within 20 days after
receipt from Executive of written notice of the event which constitutes Good
Reason; provided, further, that "Good Reason" shall cease to exist for an event
on the 90th day following the later of its occurrence or Executive's knowledge
thereof, unless Executive has given the Company written notice thereof prior to
such date.
d. Expiration of Employment Term.
(i) Election Not to Extend the Employment Term. In the event either
party elects not to extend the Employment Term pursuant to Section 1, unless
Executive's employment is earlier terminated pursuant to paragraphs (a), (b) or
(c) of this Section 8, Executive's termination of employment hereunder (whether
or not Executive continues as an employee of the Company thereafter) shall be
deemed to occur on the close of business on the day immediately preceding the
next scheduled Extension Date. If Executive provides the Company notice of
non-extension of the Employment Term pursuant to Section 1, Executive shall be
entitled to receive the Accrued Rights. If the Company provides Executive notice
of non-extension of the Employment Term pursuant to Section 1, Executive shall
be entitled to receive the benefits provided in Sections 8(c)(i)(A) and (B),
above.
Following such termination of Executive's employment hereunder as a result
either party's election not to extend the Employment Term, except as set forth
in this Section
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8(d)(i), Executive shall have no further rights to any compensation or any other
benefits under this Agreement.
e. Notice of Termination. Any purported termination of employment by
the Company or by Executive (other than due to Executive's death) shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 13(g) hereof. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of employment under the provision so indicated.
f. Board/Committee Resignation. Upon termination of Executive's
employment for any reason, Executive agrees to resign, as of the date of such
termination and to the extent applicable, from the Board (and any committees
thereof) and the Board of Directors (and any committees thereof) of any of the
Company's affiliates.
9. Non-Solicitation; Non-Competition.
a. Executive acknowledges and recognizes the highly competitive nature
of the businesses of the Company and its affiliates and accordingly agrees as
follows:
(1) While Executive is employed by the Company and for six months
following the date Executive ceases to be employed by the Company (the
"Restricted Period"), Executive shall not, whether on Executive's own behalf or
on behalf of or in conjunction with any person, company, business entity or
other organization whatsoever, directly or indirectly
(i) solicit, or assist in soliciting, in competition with the
Company, the potential acquisition of refining assets in the
United States;
(ii) solicit or encourage any employee of the Company or its
affiliates to leave the employment of the Company or its
affiliates;
(iii) hire any such person who was employed by the Company or its
affiliates as of the date of Executive's termination of
employment with the Company or whose employment with the
Company terminated within six months prior to the date of such
hire (other than any such person whose employment was
terminated by the Company without cause); or
(iv) solicit or encourage to cease to work with the Company or its
affiliates any consultant then under contract with the Company
or its affiliates.
(2) While Executive is employed by the Company and, following
termination of employment by the Company for Cause or by Executive without Good
Reason, for the remainder of the Employment Term (without regard to Executive's
termination of employment), Executive shall not directly or indirectly:
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(i) engage in the business of petroleum refining or oil product
wholesaling in the United States;
(ii) engage in any other business in which the Company or its
affiliates is engaged at the time of the termination of
Executive's employment, provided such other business is
contributing more than 10% of the Company's consolidated
annual revenues or net income at the time of the termination
of Executive's employment (any of the businesses described in
the preceding subparagraph (i) and this subparagraph (ii)
being referred to as a "Competitive Business");
(iii) enter the employ of, or render any services to, any entity (or
any division, affiliate, business unit or segment of any
entity) which engages in a Competitive Business; provided
that, notwithstanding the foregoing, it shall not be a breach
of Section 9(a)(2) for Executive to provide services to any
division, affiliate, business unit or segment of any entity so
long as (x) such division, affiliate, business unit or segment
does not itself engage in a Competitive Business and (y)
Executive does not, directly or indirectly, provide services
or advice to any division, affiliate, business unit or segment
of the entity that does engage in a Competitive Business;
(iv) acquire a financial interest in (other than a passive
investment acquired through a hedge fund or similar vehicle),
or otherwise become actively involved with, any Competitive
Business, directly or indirectly, as an individual, partner,
shareholder, officer, director, principal, agent, trustee or
consultant; or
(v) interfere with, or attempt to interfere with, business
relationships (whether formed before, on or after the date of
this Agreement) between the Company or any of its affiliates
and their customers, clients or suppliers in connection with
or on behalf of a Competitive Business.
(3) Notwithstanding anything to the contrary in this Agreement, Executive
may, directly or indirectly own, solely as an investment, securities of any
person engaged in the business of the Company or its affiliates which are
publicly traded on a national or regional stock exchange or on the
over-the-counter market if Executive (i) is not a controlling person of, or a
member of a group which controls, such person and (ii) does not, directly or
indirectly, own 5% or more of any class of securities of such person.
b. It is expressly understood and agreed that although Executive and
the Company consider the restrictions contained in this Section 9 to be
reasonable, if a final judicial determination is made by a court of competent
jurisdiction that the time or territory or any other restriction contained in
this Agreement is an unenforceable restriction against Executive, the provisions
of this Agreement shall not be rendered void but shall be deemed amended to
apply as to such maximum time and territory and to such maximum extent as such
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court may judicially determine or indicate to be enforceable. Alternatively, if
any court of competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so as to make
it enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein.
10. Confidentiality. Executive agrees to hold all Company information
confidential ("Confidential Information") and shall not at any time disclose,
retain, or use such Confidential Information for Executive's own benefit or the
benefit of any other person, without the written authorization of the Board;
provided that the foregoing shall not apply to the extent that information is
required to be disclosed by law. Executive agrees that upon termination of
Executive's employment with the Company for any reason, he shall return to the
Company immediately all Confidential Information and all copies thereof or
therefrom, in any way relating to the business of the Company.
11. Specific Performance. Executive acknowledges and agrees that the
Company's remedies at law for a breach or threatened breach of any of the
provisions of Section 9 or Section 10 would be inadequate and the Company would
suffer irreparable damages as a result of such breach or threatened breach. In
recognition of this fact, Executive agrees that, in the event of such a breach
or threatened breach, in addition to any remedies at law, the Company, without
posting any bond, shall be entitled to cease making any payments or providing
any benefit otherwise required by this Agreement and obtain equitable relief in
the form of specific performance, temporary restraining order, temporary or
permanent injunction or any other equitable remedy which may then be available.
12. Gross-Up Payment.
a. If it shall be determined that any amount, right or benefit paid,
distributed or treated as paid or distributed by the Company or any of its
affiliates to or for Executive's benefit (other than any amounts payable
pursuant to this Section 12) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986 (the "Code"), or
any interest or penalties are incurred by Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties,
collectively, the "Excise Tax"), then Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount equal to the amount
necessary such that after payment by Executive of all federal, state and local
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
b. All determinations required to be made under this Section 12,
including whether and when a Gross-Up Payment is required, the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by the Company's independent auditors (the
"Auditor"). The Auditor shall provide detailed supporting calculations to both
the Company and Executive within 15 business days of the receipt of notice from
Executive or the Company that there has been a Payment, or such earlier time as
is requested by the Company. All fees and expenses of the Auditor shall be paid
by the Company. Any Gross-Up Payment, as determined pursuant to this Section 12,
shall be paid by the Company to Executive (or to the Internal Revenue Service or
other applicable taxing
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authority on Executive's behalf) within 5 days of the receipt of the Auditor's
determination. All determinations made by the Auditor shall be binding upon the
Company and Executive; provided that following any payment of a Gross-Up Payment
to Executive (or to the Internal Revenue Service or other applicable taxing
authority on Executive's behalf), the Company may require Executive to xxx for a
refund of all or any portion of the Excise Taxes paid on Executive's behalf, in
which event the provisions of Section 12(c) below shall apply. As a result of
uncertainty regarding the application of Section 4999 of the Code hereunder, it
is possible that the Internal Revenue Service may assert that Excise Taxes are
due that were not included in the Auditor's calculation of the Gross-Up Payments
(an Underpayment"). In the event that the Company exhausts its remedies pursuant
to this Section 12 and Executive thereafter is required to make a payment of any
Excise Tax, the Auditor shall determine the amount of the Underpayment that has
occurred and any additional Gross-Up Payments that are due as a result thereof
shall be promptly paid by the Company to Executive (or to the Internal Revenue
Service or other applicable taxing authority on Executive's behalf).
c. Executive shall notify the Company in writing of any claim that, if
successful, would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than 10
business days after Executive receives written notification of such claim and
shall apprise the Company of the nature of such claim and the date on which such
claim is requested to be paid. Executive shall not pay such claim prior to the
expiration of the 30 day period following the date on which it gives such notice
to the Company) (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies Executive in
writing prior to the expiration of such period that it desires to contest such
claim, Executive shall: (i) give the Company all information reasonably
requested by the Company relating to such claim; (ii) take such action in
connection with contesting such claim as the Company shall reasonably request in
writing from time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney reasonably selected by
the Company and ceasing all efforts to contest such claim; (iii) cooperate with
the Company in good faith in order to effectively contest such claim; and (iv)
permit the Company to participate in any proceeding relating to such claim;
provided, however, that the Company shall bear and pay directly all reasonable
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, from 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 expense. Without limiting the foregoing
provisions of this Section 12, the Company shall control all proceedings taken
in connection with such contest 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 and may, at its sole option,
either direct Executive to pay the tax claimed and xxx for a refund or contest
the claim in any permissible manner, and 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 shall
determine and direct; provided, however that if the Company directs the
Executive to pay such claim and xxx for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis, and shall
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 or with respect to any imputed income with
respect to such advance; and further provided that any extension of the
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statute of limitations relating to payment of taxes for Executive's taxable year
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall 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.
d. If, after the Executive's receipt of an amount advanced by the
Company pursuant to this Section 12, the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the Executive's receipt of an
amount advanced by the Company pursuant to this Section 12, a determination is
made that the Executive shall 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 of refund prior to the expiration of 30 days after the
Company's receipt of notice of such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.
13. Miscellaneous.
a. Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to conflicts of laws principles thereof. Any suit, action or proceeding
related to this Agreement, or any judgment entered by any court related to this
Agreement, may be brought only in any court of competent jurisdiction in the
State of New York, and the parties hereby submit to the exclusive jurisdiction
of such courts. The parties (and any affiliates of the Company or beneficiary or
permitted transferee of Executive) irrevocably waive any objections which they
may now or hereafter have to the laying of venue of any suit, action or
proceeding brought in any court of competent jurisdiction in the State of New
York, and hereby irrevocably waive any claim that any such action, suit or
proceeding has been brought in an inconvenient forum.
b. Entire Agreement; Amendments. This Agreement contains the entire
understanding of the parties with respect to the matters herein (including,
without limitation, Executive's compensation, benefits and severance). There are
no restrictions, agreements, promises, warranties, covenants or undertakings
between the parties with respect to the subject matter herein other than those
expressly set forth herein. This Agreement may not be altered, modified, or
amended except by written instrument signed by the parties hereto.
c. No Waiver. The failure of a party to insist upon strict adherence
to any term of this Agreement on any occasion shall not be considered a waiver
of such party's rights or deprive such party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement.
d. Severability. In the event that any one or more of the provisions
of this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
of this Agreement shall not be affected thereby.
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e. Assignment. This Agreement shall not be assignable by Executive.
This Agreement may be assigned by the Company, with Executive's consent, such
consent not to be unreasonably withheld, to a person or entity that is a
successor in interest to substantially all of the business operations of the
Company. Upon such assignment, the rights and obligations of the Company
hereunder shall become the rights and obligations of such affiliate or successor
person or entity.
f. Successors; Binding Agreement. This Agreement shall inure to the
benefit of and be binding upon personal or legal representatives, executors,
administrators, successors, heirs, distributes, devises and legatees of the
Executive.
g. Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered by hand or overnight courier or
five days after it has been mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective addresses set
forth below Agreement, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.
If to the Company:
Premcor Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xx. Xxxxx, XX 00000
Attention: General Counsel
With a copy to:
The Blackstone Group, L.P.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx
If to Executive:
Xxxxxx Xxxxxx
0000 Xxxx Xxxxxxx Xxx Xxxxx
Xxxxxxxxxx, XX 00000
h. Release. As a condition of receipt of the benefits described in
Section 8, Executive will be required to enter into a full and complete release
of the Company from any and all claims which Executive may then have for
whatever reason or cause in connection with Executive's employment and the
termination thereof (including, without limitation, any rights under an
employment agreement which may then be in effect), other than those obligations
specifically set out in this Agreement, the Plan, indemnification provisions in
the Company's by-laws and obligations of the Company to the extent that the
documents
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providing for such obligations specifically provide that the obligations are in
addition to obligations under this Agreement.
i. Disputes. Any dispute with regard to the enforcement of this
Agreement or any matter relating to the employment of Executive by the Company
including but not limited to disputes relating to claims of employment
discrimination, alleged torts or any violation of law other than the seeking of
equitable relief in accordance with applicable law under Section 11 hereof,
shall be exclusively resolved by a single experienced arbitrator licensed to
practice law in New York, selected in accordance with the American Arbitration
Association rules and procedures, at an arbitration to be conducted in New York
City pursuant to the National Rules for the Resolution of Employment Disputes
rules of the American Arbitration Association ("AAA") with the arbitrator
applying the substantive law of the State of New York as provided for under
Section 13(a) hereof. The AAA shall provide the parties hereto with lists for
the selection of arbitrators composed entirely of arbitrators who are members of
the National Academy of Arbitrators and who have prior experience in the
arbitration of disputes between employers and senior executives. The
determination of the arbitrator shall be final and binding on the parties hereto
and judgment therein may be entered in any court of competent jurisdiction in
accordance with Section 13(a). Each party shall pay its own attorneys fees and
disbursements and other costs of the arbitration.
j. Executive Representation. Executive hereby represents to the
Company that the execution and delivery of this Agreement by Executive and the
Company and the performance by Executive of Executive's duties hereunder shall
not constitute a breach of, or otherwise contravene, the terms of any employment
agreement or other agreement or policy to which Executive is a party or
otherwise bound.
k. Cooperation. Executive shall provide his reasonable cooperation in
connection with any action or proceeding (or any appeal from any action or
proceeding) that relates to events occurring during Executive's employment
hereunder. The Company shall provide Executive with a reasonable stipend and
shall reimburse Executive for reasonable expenses incurred as a result of
Executive's cooperation with the Company. This provision shall survive any
termination of this Agreement.
l. Withholding Taxes. The Company may withhold from any amounts
payable under this Agreement such Federal, state and local taxes as may be
required to be withheld pursuant to any applicable law or regulation.
m. Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
n. Shareholder Approval. This Agreement shall be subject to, and shall
only be effective following, the approval of the Company's shareholders as of
the date hereof who owned, as of the date hereof, more than 75% of the voting
power of all outstanding stock of the Company, determined and obtained in a
manner consistent with the methodology described in proposed Treasury Regulation
Section 1.280G-1, or any successor thereto.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
PREMCOR INC.
/s/ Xxxxxx X. X'Xxxxxx /s/ Xxxxxx X. Xxxxxx
-------------------------------------- ------------------------------------
By: XXXXXX X. X'XXXXXX XXXXXX X. XXXXXX
Title: Chairman and Chief Executive
Officer
APPENDIX A
APPENDIX A
Pursuant to the employment agreement between Premcor Inc. (the
"Company") and the Executive dated as of February 1, 2002 (the "Employment
Agreement"), the Executive has been or will be granted Initial Options, Matching
Options, and Annual Options (each as defined in the Employment Agreement;
collectively, the "Options") to purchase shares of Common Stock ("Common Stock"
or "Shares") of the Company (the "Executive Shares") pursuant to the Company's
2002 Equity Incentive Plan (the "Plan") and one or more option agreements. All
capitalized terms not defined herein shall have the meaning prescribed by the
Employment Agreement.
The Company and the Executive agree to the following terms and
conditions:
1. Limitations on Transfer. (a) The Executive hereby agrees that,
except for any transfer, sale, assignment, exchange, mortgage, pledge,
hypothecation or other disposition of any Executive Shares or any interest
therein ("Transfer") effected pursuant to an effective registration statement
filed under the Securities Act, no Transfer shall occur unless the Company has
been furnished with an opinion in form and substance reasonably satisfactory to
the Company, of counsel reasonably satisfactory to the Company, that such
Transfer is exempt from the provisions of Section 5 under the Securities Act.
(b) The Executive hereby agrees that, except for Transfers in
connection with a sale of shares of Common Stock to the public pursuant to an
effective registration statement filed under the Securities Act ("Public
Offering"), Transfers pursuant to Rule 144 (other than Rule 144(k)) under the
Securities Act and Transfers pursuant to Section 4 or 5, no Transfer shall occur
unless the transferee shall agree to become a party to, and be bound to the same
extent as its transferor by the terms of, this Appendix A.
2. Transfers to Affiliates. Notwithstanding anything contained herein
to the contrary, the Executive shall be entitled from time to time to Transfer
any or all of the Executive Shares beneficially owned by the Executive to the
Executive's spouse or descendants, or to a trust for the primary benefit of the
Executive's spouse or descendants, or to a foundation established and controlled
by the Executive, the Executive's spouse, the Executive's descendants or such
trusts, or to any other entity the owners of which consist exclusively of the
Executive, the Executive's spouse, the Executive's descendants or such trusts
("Permitted Affiliate"), that, in each such case, agree in writing satisfactory
in form and substance to the Company to become a party to, and be bound to the
same extent as its transferor by the terms of this Appendix A.
3. Effect of Void Transfers. In the event of any purported Transfer of
any shares of Common Stock in violation of the provisions of this Appendix A,
such purported Transfer shall be void and of no effect and the Company shall not
give effect to such Transfer.
4. Tag-Along Rights. (a) So long as this Appendix A remains in effect
and Blackstone Capital Partners III Merchant Banking Fund L.P. and its
affiliated co-investors in the Company (collectively, "Blackstone") beneficially
owns not less than one-fourth of the Common Stock owned by Blackstone on the
date hereof, with respect to any proposed Transfer by Blackstone (in such
capacity, a "Transferring Stockholder") of 50% or more of the shares of
Common Stock then held by Blackstone, other than a Transfer (i) to any affiliate
of Blackstone or any stockholder, partner or other equity owner of any such
affiliate or Blackstone or (ii) pursuant to a Public Offering, the Transferring
Stockholder shall have the obligation, and the Executive and the Permitted
Affiliates shall have the right, to require the proposed transferee to offer to
purchase from the Executive and the Permitted Affiliates (in such capacity, a
"Tagging Stockholder") a number of the Executive Shares up to the product
(rounded up to the nearest whole number) of (A) the quotient determined by
dividing (x) the aggregate number of Shares owned by Blackstone to be included
in the contemplated Transfer by (y) the aggregate number of Shares owned by
Blackstone immediately prior to the contemplated Transfer and (B) the total
number of Executive Shares owned by the Tagging Stockholder, and at the same
price per share of Common Stock and upon the same terms and conditions
(including without limitation time of payment and form of consideration)
applicable to the Transferring Stockholder; provided, that in order to be
entitled to exercise his right to sell shares of Common Stock to the proposed
transferee pursuant to this Section 4, the Tagging Stockholder must agree to
make to the transferee the same representations, warranties, covenants,
indemnities and agreements that the Transferring Stockholder agrees to make in
connection with the proposed Transfer of the shares of Common Stock of the
Transferring Stockholder; and provided further, that all representations and
warranties shall be made by the Tagging Stockholder and the Transferring
Stockholder severally and not jointly and that the liability of the Transferring
Stockholder and the Tagging Stockholder (whether pursuant to a representation,
warranty, covenant, indemnification provision or agreement) for liabilities in
respect of the Company shall be evidenced in writings executed by them and the
transferee and shall be borne by each of them on a pro rata basis.
(b) The Transferring Stockholder shall give notice to the Executive of
each proposed Transfer giving rise to the rights of the Tagging Stockholder set
forth in the first sentence of Section 4(a) at least 15 business days prior to
the proposed consummation of such Transfer, setting forth the number of shares
of Common Stock proposed to be so transferred, the name and address of the
proposed transferee, the proposed amount and form of consideration and the other
terms and conditions offered by the proposed transferee, and a representation
that the proposed transferee has been informed of the tag-along rights provided
for in this Section 4 and has agreed to purchase shares of Common Stock in
accordance with the terms hereof. The tag-along rights provided by this Section
4 must be exercised by the Tagging Stockholder within five business days
following receipt of the notice required by the preceding sentence, by delivery
of a written notice to the Transferring Stockholder indicating such Tagging
Stockholder's desire to exercise his rights and specifying the number of shares
of Common Stock he desires to sell.
(c) If the Tagging Stockholder exercises his rights under Section 4(a),
the closing of the purchase of the Executive Shares with respect to which such
rights have been exercised shall take place concurrently with the closing of the
sale of the Transferring Stockholder's Shares.
5. Drag-Along Rights. So long as this Appendix A shall remain in effect
and Blackstone beneficially owns not less than one-fourth of the Common Stock
owned by Blackstone on the date hereof, if Blackstone receives, in a privately
negotiated transaction, an offer from a person other than the Executive or any
of his affiliates (a "Third Party") to purchase 50% or more of the shares of
Common Stock then owned by Blackstone and such offer is
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accepted by Blackstone, then, at the request of Blackstone, the Executive agrees
that he will Transfer the Applicable Number (as defined below) of Executive
Shares to such Third Party upon the terms and conditions of the offer (including
without limitation time of payment and form of consideration) applicable to
Blackstone, provided that the Executive must agree to make to the Third Party
the same representations, warranties, covenants, indemnities and agreements that
Blackstone agrees to make in connection with the proposed Transfer; and provided
further, that all representations and warranties shall be made by the Executive
and Blackstone severally and not jointly and that the liability of the Executive
and Blackstone (whether pursuant to a representation, warranty, covenant,
indemnification provision or agreement) for liabilities in respect of the
Company shall be evidenced in writings executed by them and the Third Party and
shall be borne by each of them on a pro rata basis. The "Applicable Number"
shall mean a number (rounded up to the nearest whole number) equal to the
product of (i) the quotient determined by dividing (A) the aggregate number of
shares owned by Blackstone to be included in the contemplated Transfer by (B)
the aggregate number of shares owned by Blackstone immediately prior to the
contemplated Transfer and (ii) the total number of Executive Shares.
6. Right of First Refusal. In the event Executive or a Permitted
Affiliate (other than to a Permitted Affiliate) enters into an agreement prior
to the consummation of the Company's Initial Public Offering to transfer
Executive Shares, the transferor shall give written notice to Blackstone of the
proposed Transfer, including a complete copy of any written agreement and a
complete and accurate summary of any unwritten agreements relating to the
proposed Transfer, no later than ten days prior to the date of the proposed
Transfer. By written notice given to the transferor no later than seven days
after receipt of such notice and description, Blackstone may purchase the Shares
proposed to be Transferred on the same terms and conditions.
7. Additional Securities Subject to Appendix A. The Executive agrees
that all shares of Common Stock that he shall hereafter acquire by means of a
stock split, stock dividend, or distribution shall track the rights and
obligations applicable to the Executive Shares to which such split, stock
dividend or distribution relates.
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