SEPARATION, CONSULTING, WAIVER
OF LIABILITY AGREEMENT
I, Otto C.
Schwethelm, am an employee of Tesoro Companies, Inc. My last day of
employment is November 20, 2008 (the “Separation
Date”). I have voluntarily agreed to accept certain
separation benefits being offered to me, on the terms and
conditions set forth below, and voluntarily enter into this
Separation, Consulting, Waiver of Liability Agreement
(“Agreement”).
1. Payments
and Other Considerations.
In consideration
of the payments and benefits listed below, and other good and
valuable consideration (the “Consideration”), the
sufficiency of which I acknowledge, I make the following agreements
and RELEASE AND FOREVER DISCHARGE the persons and organizations
specified in paragraph 3 below. I acknowledge that the
Consideration is in addition to anything of value to which I am
already entitled. This release and these agreements are made for
myself, and on behalf of my heirs, executors, legal
representatives, administrators, successors, and assigns. As used
in this Agreement, the term “Consideration” shall
include the following:
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(a)
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Cash payment to me of the sum of ONE
MILLION TWO HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($1,250,000.00) in separation pay (hereinafter, the
“Separation Pay”). I understand and agree that Tesoro
Companies, Inc. will deduct from this Separation Pay withholdings
for federal income taxes, social security taxes, any other
deductions required by law, and any other deductions agreed to by
me in writing.
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The
Separation Pay shall be paid as follows (assuming Employee has
timely executed and not revoked the Agreement): ONE MILLION TWO
HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($1,250,000.00) shall be
paid on May 31, 2009. I acknowledge and agree that these
payments are not otherwise required by Tesoro’s policies,
procedures, and practices and that I would not be entitled to the
Separation Pay but for the promises made by me in this Agreement.
These payments shall be made via direct deposit to the account
information I provide to Tesoro Companies, Inc.
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(b)
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In
the event that Senior Vice Presidents of Tesoro are paid a cash
bonus based on performance during the 2008 calendar year, I will
receive a cash payment equal to a pro rata portion of the bonus to
which I would otherwise have been entitled if my employment with
Tesoro Companies, Inc. had continued through December 31,
2008. The amount of the cash payment will be determined by
prorating such cash bonus, if any, based on the number of days in
2008 that I was providing services as an employee of Tesoro, and
will be paid no later than March 15, 2009. If Senior Vice
Presidents of Tesoro are not entitled to receive a cash bonus based
on performance in 2008, no amount under this sub-paragraph
(b) will be paid;
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(c)
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Benefits under the Tesoro
Corporation Amended and Restated Executive Security Plan determined
as if I had attained age fifty-five (55) on my Separation
Date;
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(d)
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Waiver of the non-competition
provisions of Section 2.3 of the Tesoro Corporation Amended
and Restated Executive Security Plan;
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(d)
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Reimbursement of expenses, other
than travel expenses, that I incur for a physical examination in
the same nature and scope generally made available to other peer
executives of Tesoro Companies, Inc., provided such expenses are
incurred within the six (6) month period following my
Separation Date;
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(e)
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Continuation of health care and life
insurance benefits for me, my spouse and my dependents for the
eighteen (18) month period following my Separation Date at the
same level of coverage as in effect on the day immediately
preceding my Separation Date, with the cost of such continuation
coverage to be paid directly by Tesoro Companies, Inc.; provided,
however, that if I become employed with another employer and am
eligible to receive health care and life insurance benefits under
another employer provided plan, the health care and life insurance
benefits, as applicable, hereunder shall cease, except, with
respect to the health care benefits, to the extent otherwise
required under the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended;
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I acknowledge
that, prior to entering this Agreement, I have already received or
have been advised that I will receive payment from Tesoro
Companies, Inc. for the following items in accordance with
applicable state law, less standard deductions as required by
law:
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(a)
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All
previously unpaid salary earned through the Separation
Date;
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(b)
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All
earned but unused vacation pay earned through the Separation Date;
and
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(c)
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Immediate termination pay in lieu of
two weeks notice.
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I agree to provide
consulting services as requested from time to time by Tesoro
Companies, Inc., its parent and affiliates, specifically, I agree
to consult with the Chief Financial Officer from time to time at
his request, but no more than eight (8) hours per
week, on matters including, but not limited to, Tesoro
Corporation’s 2008 year-end financial reporting, and
on-going matters related to accounting and finance that may
arise. I agree to continue as a consultant for Tesoro
Companies, Inc. and affiliates until the earlier of (i) the
last day of the six-month period commencing on the Separation Date
or (ii) the day on which I commence employment elsewhere (the
“Consulting Period”). If I commence employment
elsewhere prior to the end of the Consulting Period or I am
approved for release from the Consulting Period prior to the end of
Consulting Period (“Early Release”), I shall be
entitled to a lump sum payment for the remaining compensation from
the date of the Early Release through the end of the six month
period. I shall further be required to provide the Senior Vice
President, Administration of Tesoro Companies, Inc. with written
notice indicating that I have commenced employment elsewhere if
such commencement is during the Consulting Period. Such approval
for Early Release shall be in writing and signed by the Senior Vice
President, Administration of Tesoro Companies, Inc.
2
I agree that
payment for my services during the Consulting Period shall be
THIRTY-THREE THOUSAND THREE HUNDRED THIRTY-THREE AND NO/100 DOLLARS
($33,333.00) per month payable on the first day of each calendar
month during the Consulting Period.
3. Persons
and Organizations Released.
I release Tesoro
Corporation, any subsidiary or other affiliated companies,
successors, and assigns and all of their past, present, and future
shareholders, owners, agents, representatives, officers, directors,
administrators, trustees, insurers, successors, and employees.
Collectively, these persons and organizations are referred to in
this Agreement as “Tesoro”.
I release Tesoro
from all existing, past and present, known and unknown claims,
demands, and causes of action of any nature for all existing, past
and present, known and unknown damages and remedies of any nature,
which have accrued or which may ever accrue to me or to others on
whose behalf I enter into this Agreement, resulting from or
relating to any act or omission of any kind occurring on or before
the date of signing this Agreement.
This release
includes but is not limited to all claims under any federal, state,
or local employment law or regulation. I understand and agree that
this release is intended to include but is not limited to all
claims that I could assert concerning the terms and conditions of
my employment, concerning anything that happened to me while I was
an employee, or concerning the separation of my
employment.
This release
includes but is not limited to claims under Title VII of the Civil
Rights Act of 1964, as amended; the Civil Rights Act of 1991; 42
U.S.C. § 1981; the Americans with Disabilities Act; the
Rehabilitation Act of 1973; Executive Order 11246; the Age
Discrimination in Employment Act, as amended by the Older Workers
Benefit Protection Act; the Worker Adjustment and Retraining
Notification Act (“WARN”), the Employment Retirement
Income Security Act, as amended; the retaliation provisions of the
Texas Workers’ Compensation Act, the Texas Commission on
Human Rights Act, Chapter 451 of the Texas Labor Code; the
Fair Labor Standards Act; the Equal Pay Act; and the Family and
Medical Leave Act.
This release also
includes but is not limited to all claims under any other state,
federal, or local law or regulation and all claims at common
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