EXECUTION COPY
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated April 26, 2002 by and
between Premcor Inc. (the "Company") and Xxxxx 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 April 26,
2002 ("Start Date") and ending on May 1, 2004 (the "Employment Term") on the
terms and subject to the conditions set forth in this Agreement; provided,
however, that commencing with May 1, 2004 and on each May 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 Executive Vice President-Refining and Chief Operating
Officer and as the Executive Vice President-Refining and Chief Operating 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 $250,000, 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
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because such items do not accurately reflect the operating performance of the
Company, such as 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 fifty percent (50%) of his 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 three
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. The Annual Bonus for 2002 shall be calculated based
on earnings from January 1, 2002, and the resulting amount multiplied by
9/12ths, to arrive at the amount due for the nine 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. Options at Initial Public Offering.
(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 "IPO Options"). Subject to
Executive's continued employment with the Company, such IPO 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 IPO 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
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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 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, IPO 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
non-qualified pension plan or 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. Executive shall also be entitled to participate in any senior executive
retirement plan as may be adopted hereafter by 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;
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(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"); and
(E) the benefits as provided pursuant to the Premcor Senior
Executive Retirement Plan, if it has previously become vested,
accrued in respect to any prior fiscal year.
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:
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(A) the Accrued Rights;
(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; and
(C) any vested benefit as provided in the Premcor Senior
Executive Retirement Plan, accrued to the date of termination of
employment.
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.
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;
(B) subject to Executive's continued compliance with the
provisions of Sections 9 and 10, payment, within 60 days of the date of
termination of Executive's employment, of a lump sum equal to three times the
sum of Executive's Base Salary and Base Bonus; and
(C) the benefits as provided in the Premcor Senior Executive
Retirement Plan, whether or not previously vested.
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), and 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
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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) - (C), 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 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;
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(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:
(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.
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(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 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
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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 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
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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 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.
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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.
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
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With a copy to:
The Blackstone Group, L.P.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx
If to Executive:
Xxxxx Xxxxxx
0 Xxxxxxx Xxxx 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 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.
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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/ Xxxxx Xxxxxx
------------------------------- ---------------------------
By: XXXXXX X. X'XXXXXX XXXXX XXXXXX
Title: Chairman, President and
Chief Executive Officer
APPENDIX A
Pursuant to the employment agreement between Premcor Inc.
(the "Company") and the Executive dated as of April 15, 2002 (the "Employment
Agreement"), the Executive has been or will be granted Initial Options, IPO
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 (A)
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 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
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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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