Document:

ex10-3.htm

Exhibit 10.3

 

 

EXECUTIVE SEVERANCE AGREEMENT

 

THIS EXECUTIVE SEVERANCE AGREEMENT (“Agreement”), effective as of  June 1, 2010 (the Effective Date”), by and between Frontier Oil Corporation, a Wyoming corporation (the “Company”), and  Paige A. Kester (the “Executive”).

 

WITNESSETH:

 

WHEREAS, the Company and the Executive desire to provide the Executive with certain benefits upon a Qualified Termination of Employment, as defined below;

 

NOW, THEREFORE, in consideration of the premises and covenants herein contained and other good, valuable and binding consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1. Term of Agreement.

 

1.01 This Agreement is effective as of the Effective Date and, unless terminated earlier as provided herein, shall terminate on the first anniversary of the Effective Date; provided, however, on each anniversary of the Effective Date the term of this Agreement (“Term”) shall be extended automatically for an additional one-year period unless the Company shall have delivered to the Executive written notice of non-renewal at least 90 days prior to the applicable anniversary.

 

1.02 Notwithstanding any provision of this Agreement to the contrary, termination of this Agreement shall not alter or impair any rights, benefits or obligations of the Executive (or his estate or beneficiaries) that have arisen under this Agreement on or prior to such termination.

 

1.03 Nothing in this Agreement shall operate or be construed to create any right or duty on the part of the Company or the Executive to remain in the employment of the Company for any period of time, each reserving all rights to terminate the “at will” employment relationship of the Executive at any time.

 

2. Qualified Termination of Employment.

 

2.01 In the event of the Executive’s Qualified Termination of Employment, as defined in paragraph 2.02 below, during the Term of this Agreement, the Executive shall be entitled to receive the following payments and benefits, provided the Executive timely executes and returns to the Company a Waiver and Release in the form attached hereto as Attachment A and does not revoke such Waiver and Release:

 

(a) Continuation of Base Salary: the Company shall pay to the Executive, beginning on the 15th day of the calendar month that is 60 days after such Qualified Termination of Employment occurs and continuing thereafter on the last day of such initial calendar month and on the 15th day and the last day of each calendar month thereafter until the earlier of the Executive’s date of death or the 24th payment made under this paragraph 2.01(a) has been paid an amount equal to 50% of his monthly base salary, as determined immediately prior to the Qualified Termination of Employment, but disregarding any reductions in such monthly base salary made in the preceding three months unless equal percentage reductions were made in the base salaries of all other comparable executives of the Company.  In accordance with Treasury Regulation §1.409A-2(b)(iii), the Executive’s right to this series of installment payments shall at all times be treated as a right to a series of separate payments, and in the event of a “change in control event”, within the meaning of Section 409A(a)(2)(A)(v) of the Internal Revenue Code (“Code”) and Treas. Reg. §1.409A-3(i)(5), all remaining installment payments shall be accelerated and paid in a lump sum, subject to paragraph 2.01(e)(v).

 

(b) Pro Rated Bonus:

 

(i) With respect to a bonus that is intended to qualify as “performance-based compensation” under Section 162(m) of the Code at its time of grant (“Bonus”), such Bonus shall continue pursuant to its terms except as provided herein.  Notwithstanding anything in the Bonus agreement to the contrary, to the extent that all or a part of the Bonus becomes payable (x) pursuant to its terms as a result of the achievement of the performance targets or goals applicable to such Bonus award (based on actual results compared to target(s)), or (y) due to a change in control event, a prorated portion thereof (based on the number of days in the performance period that have lapsed through the Executive’s Qualified Termination of Employment date over the total number of days in the performance period) shall be paid to the Executive in a lump sum on or as soon as practical following the end of the performance period, or, if earlier, the date of the change in control event, and in no event later than 21⁄2 months following the end of the performance period or the date of the change in control event, if earlier.

 

(ii) With respect to a bonus that is not intended to be “performance-based compensation” under Section 162(m) of the Code, the Company shall pay the Executive, in lieu of such bonus, an amount equal to the product of (1) his annual base salary (his monthly base salary as determined above multiplied by 12) and (2) his target bonus percentage for the bonus year in which the qualified Termination of Employment occurs or for the immediately preceding bonus year, if a higher target percentage, with such product prorated based on the number of days the Executive was an employee of the Company during the bonus year in which his employment terminated over 365.  Such prorated bonus shall be paid on the 60th day after the Qualified Termination of Employment.

 

(c) COBRA Premiums:  if the Executive timely elects COBRA continuation coverage on his Qualified Termination of Employment, then, until the earliest of (i) the end of the 12 month period following the Qualified Termination, (ii) the termination of COBRA continuation coverage for the Executive for any reason, or (iii) the Executive becomes employed by another employer, regardless of whether he is covered under a group health plan of such other employer, the Company shall remit on behalf of the Executive the full monthly premium for the COBRA coverage elected by the Executive under the Company’s plan; provided, however, such premium payment by the Company on behalf of the Executive shall constitute and be treated by the parties as additional taxable severance compensation to the Executive for all purposes.

 

(d) Outplacement:  the Company will provide the Executive with outplacement services (to the extent reasonable with the Executive’s position as determined by the Company, but in no event to exceed $15,000) during the 12 month period following the Qualified Termination of Employment, through an outplacement services provider selected or approved by the Company.

 

(e) Company Equity Awards:

 

(i) All Company stock options and stock appreciation rights (“SARs”) granted to the Executive shall, upon a Qualified Termination of Employment, become fully vested upon such Qualified Termination of Employment and shall remain exercisable until the earliest of (i) the third anniversary of the date of the Qualified Termination of Employment (but in no event later than the earlier of (x) the 10th anniversary of the original grant date of the Option or SAR or (y) the latest date on which the option or SAR could have expired by its original terms under any circumstances), (ii) the date the option or SAR would have expired by its terms if the Executive had not incurred a termination of employment, and (iii) the date options and SARs granted under the Company’s equity plan are terminated in connection with a change in control event of the Company;

 

(ii) Except as provided in clause (i) above, all Company equity-based awards that are intended to qualify as “performance-based compensation” under Section 162(m) of the Code (“Performance Awards”) on the date of grant shall, upon a Qualified Termination of Employment, continue pursuant to their terms.  Notwithstanding anything in a Performance Award agreement to the contrary, to the extent that all or a part of the Performance Award becomes payable pursuant to (x) its terms as a result of the achievement of the performance targets or goals applicable to such Performance Award (based on actual results compared to target(s)) or (y) the occurrence of a change in control event, a prorated portion (based on the number of days in the performance period that have lapsed through the Executive’s Qualified Termination of Employment date over the total number of days in the performance period) of such Performance Amount shall be paid to the Executive in a lump sum on or as soon as practical following the end of the performance period or the date of the change in control event; but in no event later than 21⁄2 months following the end of the performance period or the date of the change in control event, if earlier; and

 

(iii) Except as provided in clause (i) above, all other Company equity-based awards that are not intended to be Performance Awards shall vest in full (except as provided below) (notwithstanding anything in such award’s grant agreement to the contrary) upon a Qualified Termination of Employment (at their target level for those awards with target levels and/or performance criteria) and shall be paid to the Executive on the 60th day after his Qualified Termination of Employment; provided, however, that if the Executive’s Qualified Termination of Employment occurs in the year in which such award is granted to the Executive, only a portion of such award shall vest (based on the number of days in the year that have lapsed through the Executive’s Qualified Termination of Employment date over 365) and such vested portion shall be paid to the Executive not later than 60 days after his Qualified Termination of Employment.

 

(f) Life Insurance:  if provided to the Executive immediately prior to the Qualified Termination of Employment, the Company shall continue the Executive’s coverage(s) in the Company’s basic and/or executive life insurance program(s) for 12 months or until the Executive becomes employed by another employer, whichever occurs first, provided such continued coverage(s) of the Executive is permitted by the term(s) of the life insurance contract(s) issued to the Company with respect to such program(s).

 

(g) Waiver and Release: the waiver and release required under this Section 2.01 for payments and benefits to be made to the Executive hereunder must be executed and returned to the Company by the Executive no later than the 45th day following the Executive’s Qualified Termination of Employment; however, if the Executive dies prior to the Waiver and Release becoming effective (or prior to the execution of the Waiver and Release within such 45-day period), such requirement shall be waived and the payment and benefits shall be made to the Executive’s estate by the later of the end of the year of his death or 21⁄2 months after his date of death.

 

2.02 A “Qualified Termination of Employment,” for purposes of this Agreement, means:

 

(a) a termination of the Executive’s employment by the Company during the Term for any reason other than for (i) Cause, as defined in paragraph 2.03 below, or (ii) a disability that is anticipated to be permanent and total, as determined by the Company’s long-term disability insurance carrier, and entitles the Executive to receive benefits under the long-term disability plan of the Company or its affiliates, or

 

(b) a termination by the Executive of his employment with the Company during the Term based upon the occurrence of any of the following events:

 

(i) a material reduction in the Executive’s monthly base salary, unless comparable reductions are made in the base salaries of all similar executives by the Company,

 

(ii) a material reduction in the annual target percentage or bonus opportunities provided to the Executive, as compared against those in effect in the immediately preceding bonus year, unless comparable reductions are made in the annual target percentages or bonus opportunities of all similar executives by the Company, or

 

(iii) a written notice to the Executive of the relocation of his principal office location by more than 50 miles from its then location, unless the Executive is provided with relocation benefits and reimbursements by the Company that are comparable to the relocation package customarily provided by the Company to similarly situated executives of the Company and provides for the payment by the Company of the costs for the relocation of the Executive’s household goods and for the reimbursement of the costs of selling the Executive’s residence, if any, but excluding any costs of repairs, improvements, income taxes or other similar non-realtor selling or closing expenses.

 

2.03 For purposes of this Agreement, the termination of the Executive’s employment by the Company shall be deemed to have been for “Cause” only if:

 

(a) such termination shall have been the result of an act or acts of dishonesty on the part of the Executive resulting or intended to result, directly or indirectly, in gain or personal enrichment to the Executive at the expense of the Company or an affiliate;

 

(b) the Executive’s unwillingness to perform his duties in a satisfactory manner, as determined in good faith by the Board of Directors of the Company (the “Board”); or

 

(c) the Executive, after written notice from the Company, shall have failed, within the period provided in such notice, to perform his duties at a level consistent with his performance prior to the failure that gave rise to the notice from the Company, as determined in good faith by the Board.

 

2.04 If the Executive’s employment with the Company and its affiliates is terminated for any reason other than a Qualified Termination of Employment, this Agreement shall automatically terminate on such termination of employment without any payments or benefits due the Executive under this Agreement.

 

2.05 Notwithstanding anything in this Agreement to the contrary, if any payment to the Executive under this Agreement would subject the Executive to the additional tax provided by Section 409A of the Code if made before the date that is six months after the Qualified Termination of Employment, such payment(s) shall be deferred (and accumulated without interest if more than one) and paid in a single sum on the first business day of the seventh month following the date of the Qualified Termination of Employment or on such earlier date, if any, as would not subject the Executive to such additional tax.

 

2.06 Notwithstanding anything in this Agreement to the contrary, a “termination of Executive’s employment” means a “separation from service” for purposes of Section 409A of the Code.

 

3. Confidential Information

 

3.01 The Executive agrees not to disclose, either while in the Company’s employ or at any time thereafter, to any person not employed by the Company or an affiliate, or not engaged to render services to the Company or an affiliate, or any person who is not authorized to receive such disclosure, any confidential information concerning the Company’s businesses, operations, financial affairs, policies, procedures, personnel, business plans or any other confidential information relating to the business of the Company or an affiliate obtained by him while in the employ of the Company or an affiliate; provided, however, that this provision shall not preclude the Executive from use or disclosure of information known generally to the public or of information not considered confidential by persons engaged in the business conducted by the Company or an affiliate or from disclosure required by law.

 

3.02 The Executive agrees that upon leaving the Company’s employ he will not take with him, without the prior written consent of an officer authorized to act in the matter by the Board, any document, notes, disc, tape, or electronic medium or other property, including copies thereof, containing any information of the Company or its affiliates that is of a confidential nature.

 

3.03 The Executive shall not, for his own account or the account of any other person or entity, during his employment with the Company and the one-year period following the termination of his employment for any reason, solicit or in any manner induce or attempt to induce any employee of the Company or an affiliate to terminate his or her employment or interfere in any manner with any such employment relationship.

 

3.04 The Company and the Executive agree that neither party shall at any time during or after the termination of the Executive’s employment disparage the other party in any manner, including any parent, subsidiary, affiliate, director, agent, officer, employee, agent or shareholder of the Company.

 

3.05 The foregoing obligations of this Section 3 will survive and remain binding and enforceable on the parties, notwithstanding the termination of this Agreement, the Executive’s termination of employment and without regard to the reason for such termination.

 

4. Notices

 

All notices, requests, demands and other communications provided for by this Agreement shall be deemed to have been duly given if and when mailed in the continental United States by registered or certified mail, return receipt requested, postage prepaid, or personally delivered or sent by telex or other telegraphic means to the party entitled thereto at the address stated below or to such changed address as the addressee may have given by a similar notice:

 

To the Company:                             Frontier Oil Corporation

10000 Memorial Drive

Suite 600

Houston, Texas  77024

Attn:  General Counsel

To the Executive:                             Paige A. Kester

10809 Eagle Crest Court

Parker,  CO 80138

 

5. General Provisions

 

5.01 Except as provided in paragraph 5.11, there shall be no right of set-off, mitigation or counterclaim in respect of any claim, debt or obligation, against any payments to the Executive, his dependents, beneficiaries or estate provided for in this Agreement.

 

5.02 The Company and the Executive recognize that each party will have no adequate remedy at law for breach by the other of any of the agreements contained herein and, in the event of any such breach, the Company and the Executive hereby agree and consent that the other shall be entitled to a decree of specific performance, mandamus, injunction or other appropriate remedy to enforce performance of such agreements.

 

5.03 No right or interest in any payments under this Agreement shall be assignable by the Executive; provided, however, that this provision shall not preclude the legal representative of his estate from assigning any right hereunder to the person or persons entitled thereto under his will or, in the case of intestacy, to the person or persons entitled thereto under the laws of intestacy applicable to his estate.

 

5.04 No right, benefit or interest hereunder shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law, except as provided in paragraph 5.03. Any attempt, voluntary or involuntary, to effect any action specified in the immediately preceding sentence shall, to the full extent permitted by law, be null, void and of no effect.

 

5.05 In the event of the Executive’s death or a judicial determination of his incompetence, reference in this Agreement to the Executive shall be deemed, where appropriate, to his beneficiary or beneficiaries. This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

 

5.06 The titles to sections in this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any section.

 

5.07 No provision of this Agreement may be amended, modified or waived unless such amendment, modification or waiver shall be authorized by the Board or any authorized committee of the Board and shall be agreed to in writing, signed by the Executive and by an officer of the Company thereunto duly authorized.

 

5.08  Except as otherwise specifically provided in this Agreement, no waiver by either party hereto of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a subsequent breach of such condition or provision or a waiver of a similar or dissimilar provision or condition at the same or at any prior or subsequent time.

 

5.09 In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions and portions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.

 

5.10 This Agreement shall be governed by and construed in accordance with the laws of the State of Texas.  THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS IN HARRIS COUNTY, TEXAS FOR THE PURPOSES OF ANY PROCEEDING ARISING OUT OF THIS AGREEMENT.

 

5.11 If the Executive is entitled to severance payments or severance benefits pursuant to an individual employment agreement or change of control agreement with the Company, the parties hereto intend for there not to be a duplication of such payments or benefits with any severance payments or severance benefits to which the Executive may be entitled to receive under this Agreement and the payments and benefits under such other agreement shall reduce or offset any similar payment or benefit to which the Executive is entitled to receive under this Agreement and which has not yet been paid or provided.

 

5.12 The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise.

 

5.13 Nothing in this Agreement shall limit or otherwise adversely effect such rights as the Executive may have under the terms of any equity award, employee benefit plan, incentive compensation arrangement or other agreement with the Company or any of its affiliates.

 

5.14 The Company shall withhold from all payments and benefits provided under this Agreement all taxes required to be withheld by the Company by applicable law.

 

5.15 For purposes of this Agreement, “employment with the Company” shall include any employment of the Executive with a parent, subsidiary or affiliate of the Company.

 

5.16 It is the intent of the parties that payments under this Agreement constitute separation pay and comply with the requirements of Section 409A of the Internal Revenue Code so that the Executive is not subject to the additional tax provided under said section.  The parties agree that the Agreement shall be interpreted and modified as necessary to comply with Section 409A.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective for all purposes as of the Effective Date.

 

FRONTIER OIL CORPORATION

 

By:                  /s/ Michael C. Jennings                                      

Name:              Michael C. Jennings

Title:                Chairman, President &

     Chief Executive Officer

EXECUTIVE

                            /s/ Paige A. Kester

                            Paige A. Kesterex10-4.htm

Exhibit 10.4

 

 

EXECUTIVE CHANGE IN CONTROL

SEVERANCE AGREEMENT

 

 

THIS EXECUTIVE CHANGE IN CONTROL SEVERANCE AGREEMENT (“Agreement”), is effective as of June 1, 2010 (the “Effective Date”), by and between Frontier Oil Corporation, a Wyoming corporation (the “Company”), and Paige A. Kester (the “Executive”).

 

WITNESSETH:

 

WHEREAS the Company and the Executive desire to into this Executive Change in Control Severance Agreement; and

 

WHEREAS, the parties agree that on and after the Effective Date and prior to a Change in Control (as defined below) the Executive is an “at will” employee of the Company;

 

NOW, THEREFORE, in consideration of the premises and covenants herein contained and other good, valuable and binding consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties are entering into the Agreement as follows:

 

1. Operation of Agreement.

 

1.01 Unless terminated earlier as provided herein, this Agreement shall terminate on the third anniversary of the Effective Date; provided, however, if a Change in Control of the Company occurs during the term of this Agreement (the “CiC Date”), the term of this Agreement automatically shall continue until the second anniversary of the CiC Date and then terminate, regardless of the length of the term remaining as of the CiC Date.  Notwithstanding any provision of this Agreement to the contrary, termination of this Agreement shall not alter or impair any rights or benefits of the Executive (or his estate or beneficiaries) that have arisen under this Agreement on or prior to such termination, including any contingent rights under paragraph 1.03.

 

1.02 For the purpose of this Agreement, the term “Change in Control” of the Company means the occurrence of any one of the following on or after the Effective Date:

 

(a) the consummation of any transaction (including without limitation, any merger, consolidation, tender offer, or exchange offer) the result of which is that any individual, entity, group or “person” (as such term is used in Sections 13(d)(3) and 14(d)(2), of the Securities Exchange Act of 1934 (the “Exchange Act”)), other than the Company, a subsidiary or an employee benefit plan of either, becomes the “beneficial owner” (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of stock and/or securities of the Company representing 25% or more of the combined voting power of the Company’s then outstanding voting securities,

 

(b) a change in the composition of the Board of Directors of the Company, as a result of which fewer than a majority of the non-employee directors are Incumbent Directors.  “Incumbent Directors” shall mean non-employee directors who either (A) are non-employee Directors as of the date the Plan is adopted, or (B) are elected, or nominated for election, thereafter to the Board of Directors with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination, but “Incumbent Director” shall not include an individual whose election or nomination is in connection with (i) an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934) or an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors or (ii) a plan or agreement to replace a majority of the then Incumbent Directors,

 

(c) the consummation of the sale, lease, transfer, conveyance or other disposition (including by merger or consolidation) in one or a series of related transactions, of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole (other than to an entity wholly owned, directly or indirectly, by the Company), unless, following such transaction all or substantially all of the persons who were the beneficial owners of the outstanding voting stock and securities of the Company immediately prior to such transaction beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding voting stock and securities of the entity resulting from such transaction in substantially the same proportions as immediately prior to such transaction, or

 

(d) the adoption of a plan relating to the liquidation or dissolution of the Company.

 

1.03 Except as provided below, this Agreement automatically shall terminate in the event the Executive ceases for any reason to be an employee of the Company and its affiliates prior to a Change in Control; provided, however, if the Executive’s employment is terminated during the six-month period preceding a “change in control event” (within the meaning of Section 409A(a)(2)(A)(v) of the Internal Revenue Code of 1986, as amended, (the “Code”) and Treas. Reg. §1.409A-3(i)(5)) that would have occurred during the term of this Agreement but for the termination of this Agreement upon the Executive’s termination of employment, and if his termination would have qualified as a Termination of Employment under paragraph 7.02(a) or paragraph 7.02(b)(ii) (without regard to the 30/60 day periods provided in paragraph 7.02(b)(ii)), then, subject to Section 7.01(c), on, but not later than 30 days following, such change in control event the Company shall pay the Executive a lump sum amount equal to (a) the sum of (i) four (4.0) times his annual Base Salary, and (ii) if at the time of his termination of employment the Executive held any equity-based compensation awards that were forfeited upon such termination, the sum of the Fair Market Value of the shares subject to such forfeited awards less the sum of the exercise prices, if any, of such awards minus (b) the amount of any severance payment to the Executive pursuant to an Executive Severance Agreement with respect to such termination of employment.  Solely for the purpose of this paragraph, Fair Market Value shall mean the reported closing price of the common shares of the Company on the effective date of the change in control event.  In addition, any stock options or stock appreciation rights (“SAR”) held by the Executive on the date of the change in control event shall remain exercisable for the remainder of their terms as if the Executive’s employment had not terminated, but in no event later than the earlier of (i) the latest date on which the option or SAR could have expired by its original terms under any circumstances or (ii) the 10th anniversary of the original date of grant of the option or SAR.  To the extent provided by the option plan or the terms of the change in control event agreement, such options and SARs may be terminated earlier.

 

1.04 Nothing in this Agreement shall operate or be construed to create any right or duty on the part of the Company or the Executive to remain in the employment of the Company for any period of time prior to the date of a Change in Control, each reserving all rights to terminate the “at will” employment relationship of the Executive at any time prior to a Change in Control.

 

2. Period of Employment.

 

2.01 If a Change in Control occurs during the term of this Agreement, the Company agrees to continue the Executive in its employ for the period set forth in paragraph 2.02 below (the “Period of Employment”) in the position and with the duties and responsibilities set forth in Section 3 below, and upon the other terms and conditions hereinafter provided.

 

2.02 Subject to its earlier termination as provided below, the Period of Employment shall continue until the 60th day following the first anniversary of the CiC Date unless the Executive elects to extend the term of the Agreement as provided in paragraph 1.01, in which event the Period of Employment shall continue for a period of three years from the CiC Date.

 

3. Position, Duties, Responsibilities.

 

3.01 During the Period of Employment, the Executive shall continue to serve as a Vice President of the Company or one of its subsidiaries and continue to have the duties and responsibilities of those positions that the Executive possessed immediately prior to the CiC Date.

 

3.02 During the Period of Employment, the Executive shall also serve and continue to serve, if and when elected and reelected, as an officer or director, or both, of any affiliate of the Company.

 

3.03 Throughout the Period of Employment, the Executive shall devote his full time and undivided attention during normal business hours to the business and affairs of the Company, except for reasonable vacations, illness or incapacity; however, nothing in this Agreement shall preclude the Executive from (i) devoting reasonable periods required for serving as a director or member of a committee of any organization that does not involve a conflict of interest with the interests of the Company, (ii) engaging in charitable and community activities, and (iii) managing his personal investments, provided that such activities do not materially interfere with the regular performance of his duties and responsibilities under this Agreement.  The Board of Directors of the Company shall give the Executive written notice of any such activities that it believes materially interfere with his duties hereunder and provide the Executive with a reasonable period of time to correct such activities.

 

3.04 During the Period of Employment, the Executive shall be based at the offices of the Company maintained in Cheyenne, WY.  The Executive shall not be required to be absent from the office on travel status or otherwise more than a total of 60 business days in any calendar year nor more than 20 consecutive days at any one time.

 

4. Compensation, Compensation Plans, Perquisites.

 

4.01 During the Period of Employment, the Executive shall be:

 

(a) paid an annual base salary at no less than the rate in effect immediately prior to the CiC Date, with increases (if any) as shall be made from time to time thereafter in accordance with the Company’s regular salary practices for key executives (“Base Salary”); and

 

(b) provided an annual bonus opportunity in an amount no less than 35% of his Base Salary (“Target Bonus”).

 

Any increase in Base Salary or the Target Bonus or other compensation shall in no way diminish any other obligation of the Company under this Agreement.

 

4.02 During the Period of Employment, the Executive shall continue to be eligible to participate in the Company’s equity-based compensation plans and all other compensation and incentive plans and programs in which the Executive participates immediately prior to the CiC Date (or equivalent successor plans that may be adopted by the Company or an affiliate), including, without limitation, an annual bonus plan, and the Executive shall be provided thereunder with at least the same reward opportunities in the aggregate that were provided to the Executive immediately prior to the CiC Date, unless there has been a material diminution in the Executive’s performance or duties. Nothing in this Agreement (i) shall be construed as requiring the Executive to receive during the Period of Employment payments or benefits under such equity, compensation and incentive plans or programs that are at least equal to those the Executive received thereunder immediately prior to the CiC Date, it being the intent of the parties that the payments and benefits provided thereunder shall be subject to being earned by the Executive under the then existing criteria for awards under such plans and programs, which criteria shall be based on substantially the same performance standards and criteria used by the Company immediately prior to the CiC Date, or (ii) shall preclude improvement of any reward opportunities in such plans or other plans or programs in accordance with the practice of the Company or an affiliate.

 

4.03 During the Period of Employment, the Executive shall be entitled to perquisites, including, without limitation, an office, secretarial and clerical staff, and to fringe benefits, including, without limitation, the payment or reimbursement of club dues, in each case at least equal to those provided to the Executive immediately prior to the CiC Date, as well as to reimbursement, upon proper accounting, of reasonable expenses and disbursements incurred by him in the course of his duties.

 

5. Employee Benefit Plans.

 

5.01 The compensation and other matters provided for in Section 4 above are in addition to the benefits provided for in this Section 5.

 

5.02 During the Period of Employment, the Executive, his dependents and eligible beneficiaries shall be entitled to all coverage, participation, payments and benefits, including service credit for benefits, to which officers of the Company, their dependents and beneficiaries are entitled under the terms of the employee benefit plans and practices of the Company in effect immediately prior to the CiC Date, including, without limitation, the Company’s qualified and nonqualified retirement programs, 401(k) and profit sharing plans, the Frontier Oil Corporation Executive Life Insurance Plan, group life insurance plans, accidental death and dismemberment insurance, business travel insurance, long term disability, medical, dental and health and other welfare benefit plans and any successor benefit plans and practices of the Company and its affiliates for which officers, their dependents and beneficiaries are eligible.

 

5.03 Nothing in this Agreement shall preclude the Company during the Period of Employment from amending or terminating any perquisites provided to the Executive or any of its employee benefit plans or practices in which the Executive participates, provided that in the event of any such amendment or termination, the Executive shall be entitled during the remaining Period of Employment to perquisites and benefits (and service credit for benefits) in one or more successor plans or arrangements that are at least as comparable in the aggregate to those he received immediately prior to the CiC Date.

 

6. Effect of Death or Disability.

 

6.01 In the event of the death of the Executive during the Period of Employment, the legal representative of the Executive’s estate shall be entitled to receive a lump sum payment equal to the sum of (i) the Executive’s annual Base Salary and annual Target Bonus amount and (ii) the Fair Market Value of the shares subject to any equity-based compensation awards forfeited as a result of the Executive’s death, less the exercise price, if any, of such forfeited awards. Such payment shall be made as soon as reasonably practical following the Executive’s death, and in no event later than the later of (i) the end of the calendar year in which the Executive’s death occurs or (ii) 21⁄2 months after the Executive’s death.  Such payment will be without prejudice to any other payments or benefits, if any, due hereunder in respect of the Executive’s death or pursuant to any other plans, agreements or arrangements with the Company.

 

6.02 The term “Disability,” as used in this Agreement, means a “disability” as defined in Section 409A of the Code.  In the event of the Disability of the Executive during the Period of Employment, the Executive shall continue to receive the full compensation, benefits and perquisites provided for in this Agreement for the period of such Disability or the balance of the Period of Employment, whichever is less, reduced by any other payments made to the Executive pursuant to any disability, illness or accident plan of the Company or any affiliate.

 

7. Termination of Employment.

 

7.01 In the event of a “Termination of Employment,” as defined in paragraph 7.02 below, during the Period of Employment,

 

(a) the Company shall pay to the Executive (or his dependents, beneficiaries or estate as the case may be), within 30 days following his Termination of Employment, a lump sum amount equal to (1) four (4.0) times his annual Base Salary minus (2) the sum of any Base Salary and annual bonus amounts that have been paid to the Executive for services performed during the Period of Employment.

 

(b) all outstanding stock options and other equity-based compensation awards held by the Executive at the time of his Termination of Employment which were granted prior to the CIC Date shall automatically vest in full, all performance periods shall end with all performance goals deemed met at the highest level and, if applicable, any such options and SARs shall remain exercisable for the remainder of their terms as if the Executive’s employment had not terminated, but in no event later than the earlier of (i) the last date on which the option or SAR could have expired by its original terms under any circumstances or (ii) the 10th anniversary of the original date of grant of the option or SAR.  To the extent provided by the option plan or the terms of the change in control event agreement, such options and SARs may be terminated earlier,

 

(c) notwithstanding anything herein to the contrary, if Section 409A of the Code would subject the Executive to the additional 20% tax provided thereunder with respect to any severance amounts payable under this Agreement to the Executive by reason of the Executive being a “specified employee,” as defined in Section 409A, such payment shall be deferred until the first business day that is six-months after the Executive’s Termination of Employment Date or, if earlier, the date such payment may be made without being subject to such additional tax under Section 409A and shall be paid on such delayed date in a lump sum (with interest at the maximum nonusurious rate from the Termination of Employment date until paid), and

 

(d) any delay by the Company in paying any amount due the Executive under this Agreement (including any deferral pursuant to paragraph (c) above) shall bear interest at the maximum nonusurious rate from the date such payment was due (disregarding for this purpose any deferral pursuant to paragraph (c) above) until paid.

 

7.02 “Termination of Employment,” for the purpose of this Agreement, means:

 

(a) a “separation from service” (within the meaning of Section 409A of the Code) of the Executive by the Company and its affiliates during the Period of Employment for any reason other than for (i) Cause, as defined in paragraph 7.03 below, or (ii) Disability; or

 

(b) a separation from service by the Executive during the Period of Employment upon the occurrence of any of the following events:

 

(i) the failure to elect or reelect the Executive to, or the removal of the Executive from, the offices set forth in paragraph 3.01 above,

 

(ii) a significant change in the nature or scope of the authorities, powers, functions or duties of the Executive as contemplated by paragraph 3.01 above, or a reduction in the compensation under paragraph 4.01(a) or the perquisites or benefits provided under this Agreement, and such change and/or reduction is not remedied within 30 days after receipt by the Company of written notice from the Executive; provided, however, such written notice must be given by the Executive within 60 days of the date the Executive knows, or should reasonably have known, of such change or reduction and if notice is not given by the Executive within such period, he shall be deemed to have waived his rights with respect to such change or reduction constituting a basis for his Termination of Employment,

 

(iii) a breach by the Company of any material provision of this Agreement that is not remedied within 30 days after receipt by the Company of written notice from the Executive,

 

(iv) the failure of a successor to assume all duties and obligations of the Company under this Agreement as provided in paragraph 10.10, or

 

(v) a determination by the Executive made in good faith that as a result of the Change in Control of the Company and a change in circumstances thereafter that significantly affects his position, he is unable to carry out the authorities, powers, functions or duties attached to his position as contemplated by Section 3 of this Agreement, and such change in circumstance is not remedied within 30 days after receipt by the Company of written notice from the Executive,

 

7.03 For purposes of this Agreement, the separation from service of the Executive shall be deemed to have been for “Cause” only if:

 

(a) his separation from service shall have been the result of an act or acts of dishonesty on the part of the Executive constituting a felony and resulting or intended to result directly or indirectly in his gain or personal enrichment at the expense of the Company; or

 

(b) there has been a breach by the Executive during the Period of Employment of the provisions of paragraph 3.03 above, relating to the time to be devoted to the affairs of the Company, or of paragraph 8.01, relating to confidential information, and such breach results in demonstrably material injury to the Company and with respect to any alleged breach of paragraph 3.03 or of paragraph 8.01 hereof, the Executive after notice and an opportunity to be heard either shall have failed to take all reasonable steps to that end within 30 days from his receipt of written notice by the Company pursuant to resolution duly adopted by a majority of the members of the Board of Directors of the Company; and provided that thereafter; and

 

(c) there shall have been delivered to the Executive a certified copy of a resolution of the Board of Directors of the Company adopted by the affirmative vote of not less than a majority of the membership of the Board of Directors called and held for that purpose and at which the Executive was given an opportunity to be heard, finding that the Executive was guilty of conduct set forth in subparagraphs (a) or (b) above, specifying the particulars thereof in detail.

 

Anything in this paragraph 7.03 or elsewhere in this Agreement to the contrary notwithstanding, the employment of the Executive shall in no event be considered to have been terminated by the Company for Cause if termination of his employment took place (a) as the result of bad judgment or negligence on the part of the Executive, or (b) as the result of an act or omission without the intent of gaining therefrom, directly or indirectly, a profit to which the Executive was not legally entitled, or (c) because of an act or omission believed by the Executive in good faith to have been in or not opposed to the interest of the Company, or (d) for any act or omission in respect of which a determination could properly be made that the Executive met the applicable standard of conduct prescribed for indemnification or reimbursement or payment of expenses under the Policies of the Company or the laws of the State of Wyoming or the directors’ and officers’ liability insurance of the Company, in each case as in effect at the time of such act or omission, or (e) as the result of an act or omission that occurred or began more than twelve calendar months prior to the Executive’s having been given notice of his Termination of Employment for such act or omission, unless the commission or commencement of such act or such omission could not have been reasonably known to a member of the Board of Directors of the Company (other than the Executive, if he is then a member of the Board of Directors) in the twelve month period from the date of the commission or commencement of such act or such omission.

 

7.04 In the event that the Executive’s employment shall be terminated by the Company during the Period of Employment and such termination is alleged to be for Cause, or the Executive’s right to terminate his employment under paragraph 7.02(b) or 7.02(c) above shall be questioned by the Company or for any reason, the Executive shall have the right, in addition to all other rights and remedies provided by law, at his election either to seek arbitration in Houston, Harris County, Texas under the rules of the American Arbitration Association by serving a notice to arbitrate upon the Company or to institute a judicial proceeding in Houston, Harris County, Texas, in either case within 90 days after having received written notice that his Termination of Employment is subject to question or that the Company is withholding or proposes to withhold any payments or provision of benefits or within such longer period as may reasonably be necessary for the Executive to take action in the event that his illness or incapacity should preclude his taking such action within such 90-day period.

 

7.05 Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts in Houston, Harris County, Texas, for the purposes of any proceeding arising out of this Agreement.

 

8. Confidential Information

 

8.01 The Executive agrees not to disclose, either while in the Company’s employ or at any time thereafter, to any person not employed by the Company, or not engaged to render services to the Company, any confidential information obtained by him while in the employ of the Company, including, without limitation, any of the Company’s inventions, processes, methods of distribution or customers or trade secrets; provided, however, that this provision shall not preclude the Executive from use or disclosure of information known generally to the public or of information not considered confidential by persons engaged in the business conducted by the Company or from disclosure required by law or Court order.

 

8.02 The Executive also agrees that upon leaving the Company’s employ he will not take with him, without the prior written consent of an officer authorized to act in the matter by the Board of Directors of the Company, any drawing, blueprint, specification or other document of the Company and its affiliates, which is of a confidential nature relating to the Company and its affiliates, or without limitation, relating to its or their methods of distribution, or any description of any formulae or secret processes.

 

9. Notices

 

All notices, requests, demands and other communications provided for by this Agreement shall be deemed to have been duly given if and when mailed in the continental United States by registered or certified mail, return receipt requested, postage prepaid, or personally delivered or sent by telex or other telegraphic means to the party entitled thereto at the address stated below or to such changed address as the addressee may have given by a similar notice:

 

To the Company:                              Frontier Oil Corporation

10000 Memorial Drive

Suite 600

Houston, Texas  77024

Attn:  General Counsel

To the Executive:                             Paige A. Kester

10809 Eagle Crest Court

Parker, CO 80138

 

10. General Provisions

 

10.01 There shall be no right of set-off, mitigation or counterclaim in respect of any claim, debt or obligation, against any payments to the Executive, his dependents, beneficiaries or estate provided for in this Agreement.

 

10.02 The Company and the Executive recognize that each party will have no adequate remedy at law for breach by the other of any of the agreements contained herein and, in the event of any such breach, the Company and the Executive hereby agree and consent that the other shall be entitled to a decree of specific performance, mandamus or other appropriate remedy to enforce performance of such agreements.

 

10.03 No right or interest or in any payments shall be assignable by the Executive; provided, however, that this provision shall not preclude him from designating one or more beneficiaries to receive any amount that may be payable after his death and shall not preclude the legal representative of his estate from assigning any right hereunder to the person or persons entitled thereto under his will or, in the case of intestacy, to the person or persons entitled thereto under the laws of intestacy applicable to his estate. The term “beneficiaries” as used in this Agreement shall mean a beneficiary or beneficiaries so designated to receive any such amount or, if no beneficiary has been so designated, the legal representative of the Executive’s estate.

 

10.04 No right, benefit or interest hereunder, shall be subject to anticipation, alienation, sale, assignment, encumbrance, charge, pledge, hypothecation, or set-off in respect of any claim, debt or obligation, or to execution, attachment, levy or similar process, or assignment by operation of law. Any attempt, voluntary or involuntary, to effect any action specified in the immediately preceding sentence shall, to the full extent permitted by law, be null, void and of no effect.

 

10.05 In the event of the Executive’s death or a judicial determination of his incompetence, reference in this Agreement to the Executive shall be deemed, where appropriate, to his beneficiary or beneficiaries. This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

 

10.06 The titles to sections in this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the title of any section.

 

10.07 No provision of this Agreement may be amended, modified or waived unless such amendment, modification or waiver shall be authorized by the Board of Directors of the Company or any authorized committee of the Board of Directors and shall be agreed to in writing, signed by the Executive and by an officer of the Company thereunto duly authorized.

 

10.08  Except as otherwise specifically provided in this Agreement, no waiver by either party hereto of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of a subsequent breach of such condition or provision or a waiver of a similar or dissimilar provision or condition at the same or at any prior or subsequent time.

 

10.09 In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, the remaining provisions and portions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.

 

10.10 Except in the case of a merger involving the Company with respect to which under applicable law the surviving corporation of such merger will be obligated under this Agreement in the same manner and to the same extent as the Company would have been required if no such merger had taken place, the Company will require any successor, by purchase or otherwise, to all or substantially all of the business and/or assets of the Company, to execute an agreement whereby such successor expressly assumes and agrees to perform this Agreement in the same manner and to the same extent as the Company would have been required if no such succession had taken place and expressly agrees that the Executive may enforce this Agreement against such successor.  Failure of the Company to obtain any such required agreement and to deliver such agreement to the Executive prior to the effectiveness of any such succession shall be a material breach of this Agreement.  As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that executes and delivers the agreement provided for in this paragraph 10.10 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

 

10.11 This Agreement shall be governed by and construed in accordance with the laws of the State of Texas.

 

10.12 To the extent that any payment made or benefit provided to the Executive pursuant to the terms of this Agreement or otherwise results in the Executive being subject to any income, excise, or other tax at a rate above the rate ordinarily applicable to wages and salaries paid in the ordinary course of business (“Penalty Tax”), whether as a result of the provisions of Sections 280G, 4999 or 409A of the Code, or any similar or analogous provisions of the Code or any other statute, whether adopted subsequent to the date hereof or otherwise, then the amount due the Executive under this Agreement shall be increased by an amount (the “Additional Amount”) such that the net amount received by the Executive after paying any applicable Penalty Tax (including any interest or penalties thereon) and any federal, state or other taxes on such Additional Amount, shall be equal to the amount that the Executive would have received if such Penalty Tax were not applicable.  Such Additional Amount shall be paid to the Executive immediately prior to such time or times that the Penalty Tax is due and in no event later than one day after such due date.

 

10.13 To the extent the Executive prevails in whole or in part in any matter contesting the validity or enforceability of this Agreement or the amount of benefit claimed by the Executive hereunder, the Company shall pay all legal fees and expenses that the Executive incurs as a result of or in connection with such matter. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and amounts received from other employment or otherwise by the Executive shall not be recoupable by the Company against the amounts paid or payable to the Executive pursuant to the terms of this Agreement.

 

10.14 Nothing in this Agreement shall limit or otherwise adversely effect such rights as the Executive may have under the terms of any equity award, employee benefit plan, incentive compensation arrangement or other agreement with the Company or any of its affiliates.

 

10.15 The Company shall withhold from all payments and benefits provided under this Agreement all taxes required to be withheld by the Company by applicable law.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective for all purposes as of the Effective Date.

 

FRONTIER OIL CORPORATION

 

By:        /s/ Michale C. Jennings                                               

Name:  Michael C. Jennings

Title:    Chairman, President &

Chief Executive Officer

EXECUTIVE

                            /s/  Paige A. Kester

                            Paige A. Kester

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