Exhibit 10.3

 

 

LOGO [g111765ex10_3.jpg]

   Lynn L. Elsenhans   

Chairman and

  

Chief Executive Officer

     

 

Sunoco, Inc.

1818 Market Street Ste 1500

Philadelphia PA 19103-3615

215 977 3143

Fax 215 977 3131

lelsenhans@sunocoinc.com

September 2, 2010

Mr. Frederick A. Henderson

55 Cabot Place

Bloomfield Hills, MI 48304

Dear Fritz:

Contained herein are the specific terms and conditions of an offer to you to
join Sunoco, Inc. (“Sunoco”) as Senior Vice President of Sunoco, effective as of
September 1, 2010 (the “Effective Date of Hire”) and, subject to your
termination rights (described below), ending effective as of December 31, 2011.
In this position, you will be responsible for the business operations of SunCoke
Energy, Inc. (“SunCoke”). Until the separation of SunCoke from Sunoco on or
prior to December 31, 2011 by means of an initial public offering of SunCoke
stock, a spinoff of all or substantially all of SunCoke’s stock to Sunoco’s
shareholders or a similar transaction following which all or a significant
portion of SunCoke becomes held by persons independent of Sunoco (the
“Separation”), you shall report to the Chief Executive Officer of Sunoco. Upon
the Separation, Sunoco shall cause SunCoke to assume this letter agreement, you
shall become the Chief Executive Officer of SunCoke, a member of the SunCoke
Board, the Chairman of the SunCoke Board, and you shall report to the SunCoke
Board. You are required to complete a physical examination and substance
screening as soon as possible prior to your start date or within a reasonable
time thereafter. Your examination and screening will be coordinated by Sunoco’s
Medical Director once we have received your written acceptance of this offer.
Beginning on the Effective Date of Hire, you will be entitled to serve on the
board of directors of one unrelated company, provided that (i) such company is
not, directly or indirectly, competitive with SunCoke or, until the Separation,
with Sunoco, and (ii) such board service does not materially interfere with the
performance of your duties to SunCoke and, prior to the Separation, Sunoco. With
the approval of the Sunoco Board, you will be permitted to serve on the board of
directors of one additional unrelated company, provided that the conditions in
(i) and (ii) above are met.

Compensation

Your annual rate of salary will be $925,000 (“Salary”) and your target annual
bonus will be 110% of your Salary. For 2010, your bonus will be a prorated
amount of your target bonus based on the portion of the year during which you
are employed with Sunoco. For 2011, the actual amount of your bonus will be
based upon a combination of your target bonus and both corporate and individual
goals, as applied in a manner consistent with that used to determine the

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Mr. Frederick A. Henderson

September 2, 2010

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2011 annual bonuses of the executive officers of Sunoco. The performance metrics
for your 2011 bonus will be determined (i) for the portion of the year prior to
the Separation, in the sole and absolute discretion of the Chief Executive
Officer of Sunoco, and, if applicable, (ii) for the portion of the year on and
after the Separation, in accordance with the terms of the annual incentive plan
adopted by the SunCoke Board.

Upon the Separation, you shall be granted an equity award having an aggregate
value of $6,400,000. Fifty percent of this award shall be in the form of options
to purchase shares of common stock of SunCoke and the other 50% shall be in the
form of restricted share units of SunCoke. The number of stock options will be
determined as of the date of grant by SunCoke’s outside auditors or compensation
consultant, using a generally accepted stock option pricing model, applied, if
applicable, in the same manner as used by SunCoke in preparing its Form S-1
registration statement in connection with the Separation, rounded down to the
nearest whole number of shares. The number of restricted share units shall be
determined by dividing the targeted value ($3,200,000) by the closing price of
SunCoke common stock on the date of the Separation (or the following day, if
SunCoke common stock does not trade on such day), rounded down to the nearest
whole number of share units. The stock options will vest in equal one-third
installments on the first, second, and third anniversaries of the date of the
Separation, subject to continued employment. The restricted share units will
vest in equal one-third installments on the third, fourth, and fifth
anniversaries of the Effective Date of Hire, subject to continued employment.
For the avoidance of doubt, you shall not be entitled to, and have no
expectation of, any other grant of equity awards through the Separation, or
thereafter in 2011, although the Compensation Committee of the Sunoco Board
(prior to the Separation) or the SunCoke Board (on and following the Separation)
may grant you additional equity awards in their sole and absolute discretion.
The distributions in respect of the restricted share units will be made to you
in the form of net common shares after taxes within 30 days after the vesting
date. Dividend equivalents accrued up through the vesting date on each
installment will be paid in cash net of required taxes. A voluntary termination
by you or termination by Sunoco for any reason will result in the forfeiture of
any remaining unvested options and restricted share units.

For 2012, and subject to the approval of the SunCoke Board and/or the SunCoke
Compensation Committee, we anticipate that your target long-term incentive award
would be $3,200,000 and, on and after the Separation, you will be covered by a
market-competitive change-in-control arrangement.

Relocation and Temporary Living Expenses

You shall be entitled to receive from Sunoco reimbursement for any reasonable
and substantiated temporary living and commuting expenses incurred by you in
connection with the performance of your duties for a period of one year from
your Effective Date of Hire in accordance with Sunoco’s relocation policy in
effect from time to time, a copy of which has been attached to this letter. No
later than twelve months following the later of the Separation or the SunCoke
Relocation (as defined in this sentence), you shall be required to relocate your
principal residence to the Chicago, Illinois or Atlanta, Georgia metropolitan
area in connection with the

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Mr. Frederick A. Henderson

September 2, 2010

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relocation of the SunCoke executive offices to such area (the “SunCoke
Relocation”), Additional benefits under Sunoco’s relocation policy, including a
home purchase option and reimbursement for all reasonable and customary home
purchase costs and moving, storage, and other incidental relocation expenses,
will be made available to you, in addition to reimbursement for those expenses
described in the first sentence of this paragraph.

Perquisites

Sunoco has eliminated perquisites that do not serve a business purpose, and any
perquisite is subject to the annual review of perquisites conducted by the
Compensation Committee of the Sunoco Board. If SunCoke maintains a corporate
aircraft, you will have access to such aircraft for business purposes.

Vacation

You will be entitled to 25 days of paid vacation annually. In addition, you will
also be allocated two paid floating holidays each year. These floating holidays
are in addition to the normal Company-designated holidays. Because 2010 will be
a partial year, your number of vacation days will be prorated for 2010, rounded
up to the nearest whole day.

Benefits

Sunoco provides a full range of benefits for most of its salaried employees,
including comprehensive health plans, disability, life insurance, and savings
plans. The disability plan requires a mandatory employee contribution of 0.5% of
base salary for the first ten years of employment. You will be entitled to and
encouraged to have a thorough annual physical examination performed at no cost
to you. Sunoco has a policy of supporting its executives who serve on non-profit
organizations through matching contributions (subject to certain limitations).
You may participate in the Sunoco savings plan, or SunCap, which matches your
contributions up to 5% of a participant’s salary. Eligibility for Sunoco match
commences after one year of service. Matching amounts in excess of statutory
limits will be provided in Sunoco’s non-qualified Savings Restoration Plan. More
complete descriptions of Sunoco’s plans, including the Summary Plan Descriptions
and plan documents, are available to you. The Board of Directors of Sunoco
and/or Sunoco reserves the right to make changes to its employee policies,
procedures, and plans at any time.

Indemnification and D&O Insurance

You will also be entitled to receive indemnification and directors’ and
officers’ insurance coverage pursuant to the terms and conditions of the Sunoco
Amended and Restated Indemnification Agreement, as amended from time to time.

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Mr. Frederick A. Henderson

September 2, 2010

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Termination Rights

Every executive, including each Senior Vice President, is an employee at will.
You will not be eligible to participate in The Sunoco, Inc. Special Executive
Severance Plan, Amended and Restated as of November 1, 2007, or the Sunoco, Inc.
Executive Involuntary Severance Plan, Amended and Restated Effective December 3,
2009 (the “Involuntary Severance Plan”), and shall have the severance rights
described below in lieu of the benefits under those plans or, in the case of any
termination of employment on or prior to December 31, 2011, under any similar
plans adopted by SunCoke.

Basic Severance

In the event that you are terminated without “Just Cause” (as defined in
Section 1.12 of the Involuntary Severance Plan) (any such termination, a
“Qualifying Termination”), you shall be entitled to receive a lump-sum cash
payment equal to (i) in the case of a Qualifying Termination on or before
June 30, 2011, the sum of your annual Salary and target bonus for the year of
the Qualifying Termination (the “First Severance Amount”), or (ii) in the case
of a Qualifying Termination after June 30, 2011 and on or before December 31,
2011, two times the sum of your annual Salary and target bonus for the year of
the Qualifying Termination (the “Second Severance Amount”). You will also be
entitled to receive a pro rata annual bonus based on business and personal
performance, payable when annual bonuses for the year in which you are
terminated are payable to other senior executives of Sunoco or SunCoke, as
applicable (the “Pro Rata Annual Bonus”).

Severance in the Event of a Sale

If, instead of the Separation, on or prior to December 31, 2011 Sunoco sells all
or substantially all of the assets or stock of SunCoke to a person, or more than
one person acting as a group, which is not affiliated with Sunoco (a “Sale”),
you may, on or prior to the date of such Sale, give Sunoco written notice of
your intent to resign your employment effective as of the date of such Sale, in
which case you shall receive a lump-sum cash payment equal to the sum of (x) the
Pro Rata Annual Bonus and (y) the First Severance Amount if the Sale occurs on
or before June 30, 2011 or the Second Severance Amount if the Sale occurs after
June 30, 2011 and on or before December 31, 2011.

Severance in the Event of No Sale and No Separation

In the event that neither the Separation nor a Sale occurs on or before
December 31, 2011, you may, on or prior to December 31, 2011, give Sunoco
written notice of your intent to resign your employment effective as of
December 31, 2011, in which case you shall receive a lump-sum cash payment equal
to the sum of the Pro Rata Annual Bonus and the Second Severance Amount.

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Mr. Frederick A. Henderson

September 2, 2010

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This letter and any amendments shall, to the extent applicable, comply with and
be interpreted in such a manner as to be consistent with the provisions of
Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and
any Treasury regulations or other Internal Revenue Service guidance promulgated
thereunder. In addition, notwithstanding any provision herein to the contrary,
if you are determined to be a “specified employee” (as such term is defined in
Section 409A(a)(2)(B)(i) of the Code), any payment of “deferred compensation”
due and payable hereunder as a result of your separation from service shall not
be made before the date which is six months after your date of separation from
service.

This letter is subject to the approval of the Sunoco, Inc. Compensation
Committee. Please review this offer letter. If you elect to accept our offer,
please sign and return to us a counterpart signature page. This offer letter
will be effective if signed in counterparts, and delivery of a signature page by
facsimile is effective to bind the parties to this offer letter. The effective
date of this letter is the date hereof.

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Mr. Frederick A. Henderson

September 2, 2010

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We are pleased to make this offer to you and look forward to hearing from you
and to your joining Sunoco.

 

Sincerely,

/s/ Lynn L. Elsenhans

Lynn L. Elsenhans

Chairman, Chief Executive Officer and President, Sunoco, Inc.

/s/ Dennis Zeleny

Dennis Zeleny

Senior Vice President and Chief Human Resources Officer, Sunoco, Inc.

I accept this offer to be Senior Vice President, Sunoco, Inc. on the terms set
forth above.

 

/s/ Mr. Frederick A. Henderson

Mr. Frederick A. Henderson