AMENDED AND RESTATED MANAGEMENT STABILITY AGREEMENT
Exhibit 10.14
AMENDED AND RESTATED
MANAGEMENT STABILITY AGREEMENT
MANAGEMENT STABILITY AGREEMENT
This Amended and Restated Management Stability Agreement is dated December 31, 2008, between
Tesoro Corporation, a Delaware corporation (the “Company”), and G. Xxxxx Xxxxxxxxx (“Employee”),
and supersedes and replaces any other previously dated Management Stability Agreement.
Recitals:
WHEREAS, the Board of Directors of the Company has determined that it is in the best interest
of the Company to reduce uncertainty to certain key employees of the Company in the event of
certain fundamental events involving the control or existence of the Company;
WHEREAS, the Board of Directors of the Company has determined that an agreement protecting
certain interests of key employees of the Company in the event of certain fundamental events
involving the control or existence of the Company is in the best interest of the Company because it
will assist the Company in attracting and retaining key employees such as this Employee; and
WHEREAS, the Employee is relying on this Agreement and the obligations of the Company
hereunder in continuing to work for the Company.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Termination Following Change of Control.
Should Employee at any time within two years of a change of control cease to be an employee of
the Company (or its successor), by reason of (i) involuntary termination by the Company (or its
successor) other than for “cause” (following a change of control), “cause” shall be limited to the
conviction of or a plea of nolo contendere to the charge of a felony (which, through lapse
of time or otherwise, is not subject to appeal), a material breach of fiduciary duty to the Company
through the misappropriation of Company funds or property) or (ii) voluntary termination by
Employee for “good reason upon change of control” (as defined below), the Company (or its
successor) shall pay to Employee within ten days of such termination the following severance
payments and benefits:
(a) A lump-sum payment equal to two and one-half times the base salary of the Employee at the then
current rate; and
(b) A lump-sum payment equal to (i) two and one-half times the sum of the target bonuses under all
of the Company’s incentive bonus plans applicable to the Employee for the year in which the
termination occurs or the year in which the change of control occurred, whichever is greater, and
(ii) if termination occurs in the fourth quarter of a calendar year, the sum of the target bonuses
under all of the Company’s incentive bonus plans applicable to Employee for the year in which the
termination occurs prorated daily based on the number of days from the beginning of the calendar
year in which the termination occurs to and including the date of termination.
The Company (or its successor) shall also provide continuing coverage and benefits comparable to
all life, health and disability plans of the Company for a period of 30 months from the date of
termination, and Employee shall receive two and one-half years additional service credit under the
current non-qualified supplemental pension plans, or successors thereto, of the Company applicable
to the Employee on the date of termination. To the extent subject to Section 409A of the Internal
Revenue Code, the amount of medical expenses eligible for reimbursement during any year may not
affect the medical expenses eligible for reimbursement in any other year. Furthermore, the
reimbursement of eligible medical expenses must be made on or before the last day of the Employee’s
taxable year following the taxable year in which the expense is incurred and the right to
reimbursement of any eligible medical expense is not subject to liquidation or exchange for any
other benefit.
For purposes of this Agreement, a “change of control” shall be deemed to have occurred if (i)
there shall be consummated (A) any consolidation or merger of the Company in which the Company is
not the continuing or surviving corporation or pursuant to which shares of the Company’s Common
Stock would be converted into cash, securities or other property, other than a merger of the
Company where a majority of the Board of Directors of the surviving corporation are, and for a two
year period after the merger continue to be, persons who were directors of the Company immediately
prior to the merger or were elected as directors, or nominated for election as directors, by a vote
of at least two-thirds of the directors then still in office who were directors of the Company
immediately prior to the merger, or (B) any sale, lease, exchange or transfer (in one transaction
or a series of related transactions) of all or substantially all of the assets of the Company, or
(ii) the shareholders of the Company shall approve any plan or proposal for the liquidation or
dissolution of the Company, or (iii) (A) any “person” (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than the
Company or a subsidiary thereof or any employee benefit plan sponsored by the Company or a
subsidiary thereof, shall become the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of securities of the Company representing 20 percent or more of the combined voting
power of the Company’s then outstanding securities ordinarily (and apart from rights accruing in
special circumstances) having the right to vote in the election of directors, as a result of a
tender or exchange offer, open market purchases, privately negotiated purchases or otherwise, and
(B) at any time during a period of one year thereafter, individuals who immediately prior to the
beginning of such period constituted the Board of Directors of the Company shall cease for any
reason to constitute at least a majority thereof, unless the election or the nomination by the
Board of Directors for election by the Company’s shareholders of each new director during such
period was approved by a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period.
For purposes of any payment to which Employee becomes entitled on account of termination
following a change of control, as provided in this Section 1, such termination shall be deemed to
refer only to a termination of employment that constitutes a “Separation from Service”. “Separation
from Service” shall mean a reasonably anticipated permanent reduction in the level of bona fide
services performed by the Employee for the Company and all Affiliates to 20% or less of the average
level of bona fide services performed by the Employee for the Company and all Affiliates (whether
as an employee or an independent contractor) over the immediately preceding thirty-six (36) months
(or the full period of service to the Company and all Affiliates if less than thirty-six (36)
months). For purposes of this paragraph, the term “Affiliate” means each entity that would be
considered a single employer with the Company under Section 414(b) or Section 414(c) of the
Internal Revenue Code, except that the phrase “at least 50%” shall be substituted for the phrase
“at least 80%” as used therein. In addition, payment of any amounts under this Section 1 will be
deferred to the extent necessary to cause such payment to comply with the six-month deferral rule
described in Section 409A(a)(2)(B) of the Internal Revenue Code if Employee is at the time of
termination a “specified employee” within the meaning of Section 409A.
For purposes of this Section 1, “good reason upon change of control” shall exist if any of the
following occurs:
(i) without Employee’s express written consent, the assignment to Employee of any duties
inconsistent with the employment of Employee immediately prior to the change of control, or a
significant diminution of Employee’s positions, duties, responsibilities and status with the
Company from those immediately prior to a change of control or a diminution in Employee’s titles or
offices as in effect immediately prior to a change of control, or any removal of Employee from, or
any failure to reelect Employee to, any of such positions;
(ii) a reduction by the Company in Employee’s base salary in effect immediately prior to a change
of control;
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(iii) the failure by the Company to continue in effect any thrift, stock ownership, pension, life
insurance, health, dental and accident or disability plan in which Employee is participating or is
eligible to participate at the time of the change of control (or plans providing Employee with
substantially similar benefits), except as otherwise required by the terms of such plans as in
effect at the time of any change of control or the taking of any action by the Company which would
adversely affect Employee’s participation in or materially reduce Employee’s benefits under any of
such plans or deprive Employee of any material fringe benefits enjoyed by Employee at the time of
the change of control or the failure by the Company to provide the Employee with the number of paid
vacation days to which Employee is entitled in accordance with the vacation policies of the Company
in effect at the time of a change of control;
(iv) the failure by the Company to continue in effect any incentive plan or arrangement (including
without limitation, the Company’s Incentive Compensation Plan and similar incentive compensation
benefits) in which Employee is participating at the time of a change of control (or to substitute
and continue other plans or arrangements providing the Employee with substantially similar
benefits), except as otherwise required by the terms of such plans as in effect at the time of any
change of control;
(v) the failure by the Company to continue in effect any plan or arrangement with respect to
securities of the Company (including, without limitation, any plan or arrangement to receive and
exercise stock options, stock appreciation rights, restricted stock or grants thereof or to acquire
stock or other securities of the Company) in which Employee is participating at the time of a
change of control (or to substitute and continue plans or arrangements providing the Employee with
substantially similar benefits), except as otherwise required by the terms of such plans as in
effect at the time of any change of control or the taking of any action by the Company which would
adversely affect Employee’s participation in or materially reduce Employee’s benefits under any
such plan;
(vi) the relocation of the Company’s principal executive offices to a location outside the San
Antonio, Texas, area, or the Company’s requiring Employee to be based anywhere other than at the
location of the Company’s principal executive offices, except for required travel on the Company’s
business to an extent substantially consistent with Employee’s present business travel obligations,
or, in the event Employee consents to any such relocation of the Company’s principal executive or
divisional offices, the failure by the Company to pay (or reimburse Employee for) all reasonable
moving expenses incurred by Employee relating to a change of Employee’s principal residence in
connection with such relocation and to indemnify Employee against any loss (defined as the
difference between the actual sale price of such residence and the higher of (a) Employee’s
aggregate investment in such residence or (b) the fair market value thereof as determined by a real
estate appraiser reasonably satisfactory to both Employee and the Company at the time the
Employee’s principal residence is offered for sale in connection with any such change of residence;
(vii) any failure by the Company to obtain the assumption of this Agreement by any successor or
assign of the Company;
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In the event of a change of control as “change of control” is defined in any stock option plan
or stock option agreement pursuant to which the Employee holds options to purchase common stock of
the Company, Employee shall retain the rights to all accelerated vesting and other benefits under
the terms thereof.
The Company shall pay any attorney fees incurred by Employee in reasonably seeking to enforce
the terms of this Paragraph 1.
2. Complete Agreement.
This Agreement constitutes the entire agreement between the parties and cancels and supersedes
all other agreements between the parties which may have related to the subject matter contained in
this Agreement.
1. Modification: Amendment: Waiver.
No modification, amendment or waiver of any provisions of this Agreement shall be effective
unless approved in writing by both parties. The failure at any time to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall
not affect the right of either party thereafter to enforce each and every provision hereof in
accordance with its terms.
3. Governing Law: Jurisdiction.
This Agreement and performance under it, and all proceedings that may ensue from its breach,
shall be construed in accordance with and under the laws of the State of Texas.
4. Severability.
Whenever possible, each provision of this Agreement shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Agreement shall be held
to be prohibited by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
5. Assignment.
The rights and obligations of the parties under this Agreement shall be binding upon and inure
to the benefit of their respective successors, assigns, executors, administrators and heirs,
provided, however, that the Company may not assign any duties under this Agreement without the
prior written consent of the Employee.
6. Limitation.
This Agreement shall not confer any right or impose any obligation on the Company to continue
the employment of Employee in any capacity, or limit the right of the Company or Employee to
terminate Employee’s employment.
7. Notices.
All notices and other communications under this Agreement shall be in writing and shall be
given in person or by telegraph, facsimile or first class mail, certified or registered with return
receipt requested, and shall be deemed to have been duly given when delivered personally or three
days after mailing or one day after transmission of a telegram or facsimile, as the case may be, to
the representative persons named below:
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If to the Company:
|
Corporate Secretary | |
| Tesoro Corporation | ||
| 000 Xxxxxxx Xxxxx Xxxxx | ||
| Xxx Xxxxxxx, Xxxxx 00000-0000 | ||
If to the Employee:
|
G. Xxxxx Xxxxxxxxx |
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first
above written.
COMPANY:
|
TESORO CORPORATION | |
| By: /s/ Xxxxx X. Xxxxx | ||
| Xxxxx X. Xxxxx | ||
| Chairman of the Board of Directors, | ||
| President and Chief Executive Officer | ||
EMPLOYEE:
|
G. Xxxxx Xxxxxxxxx | |
| /s/ G. Xxxxx Xxxxxxxxx | ||
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