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EXHIBIT 10.19
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement"), dated as of __________,
1996, but effective as provided herein, is made and entered into by and between
Ultramar Corporation, a Delaware corporation (the "Company"), and Xxxxxxx X.
Xxxxxxx (the "Executive").
WHEREAS, the Executive has been serving as a senior executive officer of
Ultramar Corporation;
WHEREAS, the Executive is a party to an Employment Agreement with
Ultramar Corporation, 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, the Company is authorized to
enter into this Agreement with Executive;
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
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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.
a. 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.
b. 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 three years from 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 third 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. Position and Duties.
a. Position and Duties. During the Term, the Executive will
serve as Executive Vice President, General Counsel, and Secretary of the
Company and will have such duties, functions, responsibilities and authority as
are (i) consistent with the Executive's position as Executive Vice President,
General Counsel, and Secretary of the Company; or (ii) assigned to his office
in the Company's bylaws; or (iii) reasonably assigned to him by the Company's
Board of Directors (the "Board").
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b. 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.
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.
a. Compensation and Benefits.
(i) Annual Base Salary. During the Term of this Agreement,
the Company will pay to the Executive an annual base salary of not less than
$335,000, which annual base salary may be modified 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;
provided, however, that so long as the Executive remains employed by the
Company at the end of the applicable fiscal year, (a) the annual cash incentive
compensation paid by the Company to the Executive for the Company's fiscal year
that includes the Effective Date, aggregated with any other annual incentive
compensation earned by the Executive for calendar year 1996, will be in an
amount not less than the greater of (1) 40% of the Executive's highest annual
base salary rate during the fiscal year to which such incentive compensation
relates, and (2) the Executive's actual annual incentive compensation earned
during such fiscal year, as determined by the Company's Board (or the
Compensation Committee thereof), and (b) the cash incentive compensation paid
to the Executive for the Company's next succeeding fiscal year will be in an
amount not less than the greater of (1) 40% of the Executive's highest annual
base salary rate during the fiscal year to which such incentive compensation
relates, and (2) the Executive's actual annual incentive compensation during
such fiscal year, as determined by the Board (or the Compensation Committee
thereof). Except as set forth in the proviso to the preceding sentence,
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
Committee thereof) from establishing performance goals and compensation targets
applicable only to the Executive.
b. 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.
c. Expenses. The Company will promptly reimburse the Executive
for all travel and other business
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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:
a. 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.
b. Disability.
(i) If the Company determines in good faith that the
Executive has incurred a Disability (as defined below) during 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
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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.
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c. 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 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.
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(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 13.5). 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.
d. 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 other than for
Cause if the Executive terminates his employment with the Company for any of
the following
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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 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) a
reduction in the Executive's annual base salary; (g) for any reason or for no
reason within the 30-day period following the 18th month after the Effective
Date, provided, in such case, however, that Executive has given written notice
during the 15th month after the Effective Date of his intention to terminate
employment with the Company; or (h) provided that the Executive has relocated
to the location of the Company's principal place of business prior to Xxxx
Xxxxxx becoming Chief Executive Officer of the Company, for any reason or
without reason within 120 days after (1) the termination of the employment of
Xx. Xxxxxx prior to January 1, 1999, without Xx. Xxxxxx becoming Chief
Executive Officer of the Company if such termination of employment is
involuntary without "Cause" or voluntary with "Good Reason" under the terms of
Xx. Xxxxxx'x employment agreement with the Company, or (2) January 1, 1999, if
Xx. Xxxxxx has not become the Chief Executive Officer of the Company by such
date.
(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
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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.
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e. 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) three additional years of age and service credit under the
qualified and nonqualified defined benefit retirement plans of the Company in
which the Executive participates at the time of termination; 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 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 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.
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(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.
a. 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 definition of Good Reason, as set forth in Section
5.4(i) above, will be expanded to include the following:
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(i) 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;
(ii) The relocation of the Company's principal
executive offices (but only if, immediately prior to the Change in Control, the
Executive's principal place of employment was at 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; or
(iii) For any reason, or without reason,
during the 30-day period immediately following the first anniversary of the
first occurrence of a Change in Control.
b. 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;
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(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 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;
(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
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election of any new Director in connection with an actual or threatened
election or proxy contest); or
(vi) If the Company sells at least 85% of the assets or
outstanding stock of a subsidiary to an unrelated party (or completes a
transaction having a similar effect), a Change in Control will be deemed to
have occurred with respect to the Executive if (A) he is then employed by such
subsidiary, (B) he primarily performs services for such subsidiary and (C) his
principal place of employment is other than the Company's principal executive
offices.
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 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" of 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
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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
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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 which will not
have been made by the 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
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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 advanced 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 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:
a. provide the Company with any written records or documents in
his possession relating to such claim reasonably requested by the Company;
b. 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;
18
c. cooperate with the Company in good faith in order effectively
to contest such claim; and
d. 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 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
19
type of benefits. The Executive will report to the Company any such benefits
actually received by him.
9. Competition; Confidentiality; Nonsolicitation.
a. (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 or Provinces in which the Company (or any division or segment thereof)
has operations; provided, however, that "Competition" will not include (a) the
mere ownership of 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.
b. 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
20
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).
c. 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.
d. 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 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
audit, governmental investigation or litigation in which it or any of its
affiliates is or may
21
become a party; provided, however, that (i) the Company agrees to reimburse the
Executive for any related out-of-pocket expenses, including travel expenses,
and to pay the Executive reasonable compensation for his time based on his rate
of annual salary at the time of termination and (ii) any such assistance may
not unreasonably interfere with the then-current employment of the Executive.
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.
a. 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.
b. 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.
22
c. 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.
d. Severability. Any provision of this Agreement that is
deemed invalid, illegal or unenforceable in any 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.
e. 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 Chief Executive Officer at 0000 Xxxxxxxxx Xxxxxxxxx, Xxx Xxxxxxx,
Xxxxx 00000.
23
(ii) To the Executive. If to the Executive, to him care of
the Company at the above address.
f. 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.
g. 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.
h. 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 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.
i. 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.
24
j. 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.
k. Indemnification. The Company will indemnify, defend and hold
the Executive harmless, to the maximum extent permitted by law, from any and
all claims, litigations or suits arising out of the activities of the Executive
reasonably taken in the performance of his duties hereunder, including all
reasonable expenses and professional fees that may relate thereto. The Company
agrees to use its best efforts to obtain a directors and officers liability
insurance policy covering the Executive in a sufficient amount to provide such
indemnification, and to maintain such policy during the Term (and for so long
thereafter as is practicable in the circumstances taking into account the
availability of such insurance).
l. 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.
25
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.
Xxxxxxx X. Xxxxxxx
ULTRAMAR CORPORATION,
a Delaware corporation
By:
Xxxx Xxxxxx
Chief Executive Officer
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
Corporation (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 __________, 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.
26
(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 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
27
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
28
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 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, other than with respect to the obligations of the Company to
the Executive under the Employment Agreement (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
29
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
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:
30
To Company: ULTRAMAR DIAMOND SHAMROCK CORPORATION
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.
/s/ XXXXXXX X. XXXXXXX
--------------------------------------
Xxxxxxx X. Xxxxxxx
ULTRAMAR DIAMOND SHAMROCK CORPORATION,
a Delaware corporation
By:
Name:
Title:
