SECOND AMENDMENT TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT
EXHIBIT 10.2
SECOND AMENDMENT TO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This
Second Amendment (the “Amendment”) is entered into as of
November 1, 2006 (the
“Effective Date”) as an amendment to the Amended and Restated Employment Agreement entered into by
and between Tesoro Corporation (the “Company”) and Xxxxx X. Xxxxx (the “Executive”) as of December
3, 2003, as previously amended by the First Amendment thereof (the “Employment Agreement”),
WITNESSETH:
WHEREAS, the Company and Executive have previously entered into the Employment Agreement; and
WHEREAS, the Company and Executive wish to amend the Employment Agreement by entering into
this Amendment;
NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions set forth
herein, including but not limited to Executive’s employment and the payments and benefits described
herein, the sufficiency of which is hereby acknowledged, the Company and the Executive hereby agree
as follows:
1. Section 2 of the Agreement is hereby amended by deleting the first sentence thereof and
substituting the following in its stead:
The term of this Agreement shall begin on the Effective Date and end on December 31, 2010.
2. Section 4 of the Agreement is hereby amended by substituting the following for the first
sentence of subsection (a) thereof:
During the Employment Period, the Executive shall receive an annual base salary (the “Annual
Base Salary”) at an annual rate of $1,200,000 less applicable taxes, or such
higher rate as may be determined from time to time by the Compensation Committee (the
“Compensation Committee”) of the Board of Directors of the Company (the “Board”).
3. Section 4 of the Agreement is hereby amended by deleting subsection (b) and substituting
the following in its place:
ANNUAL BONUS. In addition to the Annual Base Salary, during the Employment Period,
Executive will be entitled to participate in an annual incentive compensation plan of the
Company. The Executive’s target annual bonus will be equal to 100%, or such higher rate as
may be determined from time to time by the Compensation Committee, of his Base Salary as in
effect for such year (the “Target Bonus”), and his actual annual bonus may range from 0% to
250%, or such higher maximum percentage of his Base Salary for such year as may be
determined by the Compensation Committee, (the “Maximum Bonus”) and will be determined based
upon achievement of performance goals established by the Compensation Committee pursuant to
such plan.
4. Section 4 of the Agreement is hereby amended by deleting subsection (f) thereof and
substituting the following in its stead:
SUPPLEMENTAL ANNUAL RETIREMENT BENEFIT. Subject to the following sentence, Executive shall
be entitled to participate in the Company’s Amended and Restated Executive Security Plan as
currently in effect or as amended hereafter, but excluding any such amendment which would
reduce Executive’s benefits thereunder, and shall receive a benefit upon his termination of
employment for any reason in an amount determined under such plan and payable in the form of
a life annuity with a 50% right of survivorship payable to his current spouse, Xxxx X. Xxxxx
if she survives Executive; provided, however, that if such termination (i) is a termination
by the Company other than for Cause, (ii) is a termination by Executive for Good Reason or
(iii) occurs after a Change in Control (as defined in Section 7(c) below), such benefit
shall be calculated as if Executive had 20 years of “Service” under such plan. In the event
that Executive voluntarily terminates employment without Good Reason prior to the earlier of
December 31, 2010 or the date of a Change in Control, Executive shall not be entitled to a
benefit under the Company’s Amended and Restated Executive Security Plan, but shall be
entitled to the supplemental annual retirement benefit payable by the Company set forth
below (the “Supplemental Annual Retirement Benefit”). The first applicable Supplemental
Annual Retirement Benefit shall become payable upon the termination of Executive’s
employment with the Company, and such Supplemental Annual Retirement Benefit shall be
payable each year to Executive through the remainder of his life in quarterly calendar
installments (with a prorated initial installment if necessary), with a 50% right of
survivorship to his current spouse, Xxxx X. Xxxxx if she survives him. The Supplemental
Annual Retirement Benefit shall be (with proration between specified dates based on the
number of three-month periods in which he was employed compared to 4):
2
| Date of Employment Termination | Supplemental Annual Retirement Benefit | |||
On or after December 3, 2008 and
before December 31, 2010
|
$ | 700,000 | ||
On or after December 3, 2007 and
before December 3, 2008
|
$ | 500,000 | ||
On or after December 3, 2006 and
before December 3, 2007
|
$ | 300,000 | ||
Before December 3, 2006
|
$ | 200,000 | ||
5. Section 6(e)(vi) of the Agreement is hereby amended by adding the following sentence after
the first sentence thereof:
Notwithstanding the foregoing, Executive shall immediately vest in any restricted stock
award to the extent that such award becomes taxable to Executive after the termination of
his employment under this Section 6(e) and prior to the date such awards would otherwise
vest in accordance with this Section.
6. Section 7 of the Agreement is hereby amended by deleting that portion of subsection (a)
preceding clause (i) thereof and substituting the following in its stead:
(a) PAYMENTS FOLLOWING A CHANGE IN CONTROL. In the event a “Change in Control” occurs and
either (i) the Executive elects, at any time following the one-year period after such Change
in Control, and before the end of the second year after such Change in Control, to terminate
employment for any reason; or (ii) Executive’s employment is terminated within two years
following such Change in Control by the Company for any reason other than Cause, or by
Executive for Good Reason, the Company shall pay the following amounts to Executive:
7. Section 7 of the Agreement is hereby amended by deleting paragraph 7(a)(i) thereof and
substituting the following in its stead:
(i) An amount equal to three times the sum of (x) Executive’s Base Salary as in effect
immediately prior to his termination of employment (his “Current Salary”) plus (y) his
Current Salary multiplied by the greater of his Target Bonus percentage for the year in
which his employment terminates or the average of the actual bonus percentages earned for
the Bonuses paid or payable for the three years ending on the last day of the year prior to
the year in which his employment terminates. Such amount shall be payable in a lump sum six
(6) months following termination of employment. If the Executive’s employment with the
company is terminated for any reason other than Cause on or after the date of the Change in
Control, then (A) the amount provided in this Section 7(a)(i) shall be in lieu of any
amounts otherwise due to the Executive under Section 6(e)(iii), and (B) benefits shall be
continued for the period provided in Section 6(e)(iv), or for three years following the
Change in Control, whichever provides the longer continuation period.
8. Section 7 of the Agreement is hereby amended by deleting subsection (d) thereof.
9. All references in the Employment Agreement to “Tesoro Petroleum Corporation” shall be
changed to “Tesoro Corporation.”
3
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and
year first above written.
| TESORO CORPORATION | ||||
Date:
November 1, 2006 |
/s/ XXXXXX X. XXXXXXXXX | |||
| Title: Lead Director, Chairman Audit Committee | ||||
| /s/ A. XXXXXXX XXXXX | ||||
| Compensation Committee | ||||
| /s/ XXXXXXX X. XXXXXXX | ||||
| Governance Committee | ||||
Date:
November 1, 2006 |
||||
| /s/ XXXXX X. XXXXX | ||||
| Xxxxx X. Xxxxx, Executive |
