Document:

Exhibit 10.24

 

[Form of]

 

STOCK OPTION AGREEMENT

 

THIS
AGREEMENT, dated as of [                   ],
(the “Grant Date”) is made by and between PanAmSat Holding Corporation,
a Delaware corporation (hereinafter referred to as “Holdco”), and the
individual whose name is set forth on the signature page hereof, who is an employee of Holdco or a Subsidiary or
Affiliate of Holdco, hereinafter referred to as the “Optionee”.  Any capitalized terms herein not otherwise
defined in Article I shall have the meaning set forth in the Plan (as
hereinafter defined).

 

WHEREAS,
Holdco wishes to carry out the Plan, the terms of which are hereby incorporated
by reference and made a part of this Agreement; and

 

WHEREAS, the
Committee, appointed to administer the Plan, has determined that it would be to
the advantage and best interest of Holdco and its shareholders to grant the
Option provided for herein to the Optionee as an incentive for increased
efforts during his term of office with Holdco or its Subsidiaries or
Affiliates, and has advised Holdco thereof and instructed the undersigned
officers to issue said Option;

 

NOW,
THEREFORE, in consideration of the mutual covenants herein contained and other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto do hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

Whenever the
following terms are used in this Agreement, they shall have the meaning
specified below unless the context clearly indicates to the contrary.

 

Section 1.1.    - Cause

 

“Cause” shall
mean “Cause” as such term may be defined in any employment agreement between
the Optionee and Holdco or any of its Subsidiaries or Affiliates (the “Employment
Agreement”), or, if there is no such Employment Agreement, “Cause” shall
mean: (a) the Optionee’s willful and continued failure to perform his or
her material duties with respect to Holdco or it Subsidiaries which continues
beyond 10 days after a written demand for substantial performance is delivered
to the Optionee by Holdco (the “Cure Period”), (b) the willful or
intentional engaging by the Optionee in conduct that causes material and
demonstrable injury, monetarily or otherwise, to Holdco, any of the Investors,
and their respective Affiliates, (c) conviction of, or a plea of nolo contendere to, a crime constituting (A) a
felony under the laws of the United States or any state thereof or (B) a
misdemeanor involving moral turpitude, or (d) a material breach of the
Optionee’s Management Stockholder’s Agreement or other agreements, if any,
including, without limitation, engaging in any action in breach of the

 

 

restrictive
covenants as set forth therein, which continues beyond the Cure Period (to the
extent that, in the Board’s reasonable judgment, such breach can be cured).

 

Section 1.2.    - Change in Control

 

“Change in
Control” means in one or a series of related transactions (i) the sale of
all or substantially all of the assets of Holdco to an Unaffiliated Person; (ii) a
sale resulting in more than 50% of the voting stock of Holdco being held by an
Unaffiliated Person; (iii) a merger, consolidation, recapitalization or
reorganization of Holdco with or into another Unaffiliated Person; if and only if any such event listed in
clauses (i) through (iii) above results in the inability of the
Investors, or any member or members of the Investors, to designate or elect a
majority of the Board (or the board of directors of the resulting entity or its
parent company).  For purposes of this
definition, the term “Unaffiliated Person” means any Person or Group who
is not (x) an Investor or any member of the Investors, (y) a Rule 405
Affiliate of any Investor or any member of any Investor, or (z) an entity in
which any Investor, or any member of any Investor holds, directly or
indirectly, a majority of the economic interests in such entity.

 

Section 1.3.    - Committee

 

“Committee”
shall mean the
Compensation Committee of the Board, or if no such committee exists, the Board.

 

Section 1.4.    - Common Stock

 

“Common
Stock” shall mean common
stock, par value $0.01 per share, of Holdco.

 

Section 1.5.    - Company

 

“Company”
shall mean PanAmSat Corporation.

 

Section 1.6.    - Fiscal Year

 

“Fiscal Year”
shall mean each fiscal year of Holdco (which, for the avoidance of doubt, ends
on or about December 31 of any given calendar year).

 

Section 1.7.   – Good
Reason

 

“Good
Reason” shall mean “Good Reason” as such term may be defined in any employment
agreement or change-in-control agreement in effect at the time of termination
between the Management Stockholder and Holdco or any of its Subsidiaries or Rule 405
Affiliates; or, if there is no such employment or change-in-control agreement, “Good
Reason” shall mean (i) a material reduction in the Management Stockholder’s
base salary (other than a general reduction in base salary that affects all
members of senior management in substantially the same proportions) or (ii) a
material adverse change in the Management Stockholder’s duties and
responsibilities.

 

2

 

Section 1.8.    -  - Investors

 

“Investors”
means Constellation, LLC, a Delaware limited liability company, Carlyle
PanAmSat I, L.L.C., a Delaware limited liability company, Carlyle PanAmSat II,
L.L.C., a Delaware limited liability company, PEP PAS, LLC, a Delaware limited
liability company, and PEOP PAS, LLC, a Delaware limited liability company.

 

Section 1.9.    - Management Stockholder’s Agreement

 

“Management
Stockholder’s Agreement” shall mean that certain Management Stockholder’s
Agreement of even date herewith among the Optionee, the Company and Holdco.

 

Section 1.10.    - Option

 

“Option” shall
mean the aggregate of the Time Option and the Performance Option granted under Section 2.1
of this Agreement.

 

Section 1.11.    - Permanent Disability

 

“Permanent
Disability” shall mean “Disability” as such term is defined in the Employment
Agreement, or if there is no such Employment Agreement, “Permanent Disability”
shall mean the Optionee becoming physically or mentally incapacitated and is
therefore unable for a period of six (6) consecutive months to perform
substantially all of the material elements of the Optionee’s duties with Holdco
or any Subsidiary or Affiliate thereof. 
Any question as to the existence of the Permanent Disability of the
Optionee as to which the Optionee and Holdco cannot agree shall be determined
in writing by a qualified independent physician mutually acceptable to the
Optionee and Holdco.  If the Optionee and
Holdco 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 Permanent Disability made in writing to Holdco and the
Optionee shall be final and conclusive for all purposes of this Agreement (such
inability is hereinafter referred to as “Permanent Disability” or being “Permanently
Disabled”).

 

Section 1.12.    - Performance Option

 

“Performance
Option” shall mean the right and option to purchase, on the terms and
conditions set forth herein, all or any part of an aggregate of the number of
shares of Common Stock set forth on the signature page hereof opposite the
term Performance Option.

 

Section 1.13.    - Plan

 

“Plan” shall
mean the Amended and Restated 2004 Stock Option Plan for Key Employees of PanAmSat
Holding Corporation and Its Subsidiaries.

 

Section 1.14.    - Secretary

 

“Secretary”
shall mean the Secretary of Holdco.

 

3

 

Section 1.15.    - Time Option

 

“Time Option”
shall mean the right and option to purchase, on the terms and conditions set
forth herein, all or any part of an aggregate of the number of shares of Common
Stock set forth on the signature page hereof opposite the term Time
Option.

 

ARTICLE II

GRANT OF OPTIONS

 

Section 2.1.    - Grant of Options

 

For good and
valuable consideration, on and as of the Grant Date Holdco irrevocably grants
to the Optionee, subject to the condition subsequent in Section 2.5 below,
(i) a Time Option to purchase any part or all of an aggregate of the
number of shares set forth on the signature page hereof of its Common
Stock upon the terms and conditions set forth in this Agreement and (ii) a
Performance Option to purchase any part or all of an aggregate of the number of
shares set forth on the signature page hereof of its Common Stock upon the
terms and conditions set forth in this Agreement.  The Option shall consist of a Time Option and
a Performance Option.

 

Section 2.2.    - Exercise Price

 

Subject to Section 2.4,
the exercise price of the shares of Common Stock covered by the Option shall be
$[               ] per
share (the “Base Price”) without commission or other charge (which is
the Fair Market Value per share of the Common Stock on the date hereof).

 

Section 2.3.    - No Guarantee of Employment

 

Nothing in
this Agreement or in the Plan shall confer upon the Optionee any right to
continue in the employ of Holdco or any Subsidiary or Affiliate or shall
interfere with or restrict in any way the rights of Holdco and its Subsidiaries
or Affiliates, which are hereby expressly reserved, to terminate the employment
of the Optionee at any time for any reason whatsoever, with or without cause,
subject to the applicable provisions of, if any, the Optionee’s employment
agreement with Holdco or any Subsidiary or Affiliate or offer letter provided
by Holdco or any Subsidiary or Affiliate to the Optionee.

 

Section 2.4.    - Adjustments to Option

 

Subject to
Sections 8 and 9 of the Plan, in the event that the outstanding shares of the
stock subject to the Option, are, from time to time, changed into or exchanged
for a different number or kind of shares of Holdco or other securities by
reason of a merger, consolidation, recapitalization, reclassification, stock
split, spin-off, stock dividend, combination of shares, or other corporate
event, the Committee shall make, as appropriate and equitable, an adjustment in
the number and kind of shares and/or the amount of consideration as to which or
for which, as the case may be, such Option, or portions thereof then
unexercised, shall be exercisable, and the Committee may, as it deems
appropriate and equitable, pay to the Optionee an amount in respect of the
shares of Common Stock subject to the Option, with such conditions or
limitations as the

 

4

 

Committee may
deem reasonable and necessary to preserve the economic value of the
Option.  Any such adjustment made by the
Committee shall be final and binding upon the Optionee, Holdco and all other
interested persons.

 

ARTICLE III

PERIOD OF EXERCISABILITY

 

Section 3.1.    - Commencement of Exercisability

 

(a)                                  So long as the Optionee
continues to be employed by Holdco or any of its Subsidiaries or Affiliates,
the Option shall become exercisable pursuant to the following schedules:

 

(i)                                     Time Option.  The Time Option shall become vested and
exercisable ratably with respect to 20% of the shares subject to such Time
Option on each of the first five anniversaries of the Grant Date.

 

(ii)                                  Performance Option.  The Performance Option shall become vested
and exercisable as to 100% of the shares subject to such option on the eighth
anniversary of the Grant Date; provided, however, that the
exercisability of the Performance Option will be accelerated as to 20% of the
shares of Common Stock subject to such Option at the end of each of the first
five Fiscal Years occurring after the Grant Date, if and only if Holdco achieves both the EBITDA and Free Cash
Flow performance targets set forth on Schedule A attached hereto
(each, an “Annual Performance Target”). 
In the event that an Annual Performance Target is not achieved in a
particular Fiscal Year, the vesting of the Performance Option shall accelerate
if both Annual Performance Targets are achieved in any subsequent fiscal year,
such that the Performance Option shall vest as if all prior Annual Performance
Targets had been met.

 

(b)                                 Notwithstanding the foregoing, (i) the
Time Option shall become immediately exercisable as to 100% of the shares of
Common Stock subject to such option immediately prior to a Change in Control
(but only to the extent such option has not otherwise terminated or become
exercisable) and (ii) the Performance Option shall become immediately
exercisable as to 100% of the shares of Common Stock subject to such option
immediately prior to a Change in Control (but only to the extent such option
has not otherwise terminated or become exercisable) if (x) both Annual
Performance Targets have been achieved for each of the prior Fiscal Years or on
a “catch-up” basis or (y) as a result of the Change in Control, (A) the
Investors achieve a gross internal rate of return of not less than 25% (on a
fully diluted basis, assuming the inclusion of all shares of Common Stock
underlying all options), as determined in good faith by the Investors and (B) the
Investors earn at least 3.0 times the Base Price for each

 

5

 

share of Common Stock held (directly or indirectly) by them.  If a Change in Control occurs during a Fiscal
Year, the Board will determine in good faith what percentage will become vested
based upon quarterly performance targets measuring EBITDA over the trailing
twelve month period.

 

(c)                                  Notwithstanding the foregoing,
no Option shall become exercisable as to any additional shares of Common Stock
(which does not otherwise become exercisable in accordance with Section 3.1(a) or
(b) above) following the termination of employment of the Optionee for any
reason and any Option, which is unexercisable as of the Optionee’s termination
of employment, shall be immediately cancelled without payment therefor.

 

Section 3.2.    – Expiration of Option

 

Except as
otherwise provided in Section 5 or 6 of the Management Stockholder’s
Agreement, the Optionee may not exercise the Option to any extent after the
first to occur of the following events:

 

(a)                                  The tenth anniversary of the
Grant Date;

 

(b)                                 The first anniversary of the
date of the Optionee’s termination of employment, if the Optionee’s employment
is terminated by reason of death or Permanent Disability (unless earlier terminated
as provided in Section 3.2(g) below);

 

(c)                                  Immediately upon the date of the
Optionee’s termination of employment by Holdco or its Subsidiaries or
Affiliates for Cause;

 

(d)                                 One hundred and eighty (180)
days after the date of an Optionee’s termination of employment by Holdco or any
of its Subsidiaries or Affiliates without Cause (for any reason other than as
set forth in Section 3.2(b));

 

(e)                                  One hundred and eighty (180)
days after the date of an Optionee’s termination of employment with Holdco or any
of its Subsidiaries or Affiliates by the Optionee with Good Reason;

 

(f)                                    Thirty (30) days after the date
of an Optionee’s termination of employment with Holdco or any of its
Subsidiaries or Affiliates by the Optionee without Good Reason;

 

(g)                                 The date the Option is
terminated pursuant to Section 5 or 6 of the Management Stockholder’s
Agreement; or

 

(h)                                 At the discretion of Holdco, if
the Committee so determines pursuant to Section 9 of the Plan, the
effective date of either the merger or consolidation of Holdco into another
Person, or the exchange or acquisition by another Person of all or
substantially all of Holdco’s assets or 80% or more of its then outstanding
voting stock, or the recapitalization, reclassification, liquidation,
dissolution or other corporate event of Holdco after (x) ten (10) days
prior written notice to the Optionee that Holdco intends to exercise such
discretion and an opportunity for the Optionee to exercise his Options (whether
or not then vested), (y) payment to

 

6

 

the Optionee in respect of the termination of his Options, or (z) an
opportunity for the Executive to rollover his Options into new stock options,
in connection with such transaction.

 

ARTICLE IV

EXERCISE OF OPTION

 

Section 4.1.    – Person Eligible to Exercise

 

Except as
otherwise provided in the Management Stockholder’s Agreement, during the
lifetime of the Optionee, only he may exercise an Option or any portion
thereof.  After the death of the
Optionee, any exercisable portion of an Option may, prior to the time when an
Option becomes unexercisable under Section 3.2, be exercised by his
personal representative or by any person empowered to do so under the Optionee’s
will or under the then applicable laws of descent and distribution.

 

Section 4.2.    – Partial Exercise

 

Any
exercisable portion of an Option or the entire Option, if then wholly
exercisable, may be exercised in whole or in part at any time prior to the time
when the Option or portion thereof becomes unexercisable under Section 3.2;
provided, however, that any partial exercise shall be for whole
shares of Common Stock only.

 

Section 4.3.    – Manner of Exercise

 

An Option, or
any exercisable portion thereof, may be exercised solely by delivering to the
Secretary or his office all of the following prior to the time when the Option
or such portion becomes unexercisable under Section 3.2:

 

(a)                                  Notice in writing signed by the
Optionee or the other person then entitled to exercise the Option or portion
thereof, stating that the Option or portion thereof is thereby exercised, such
notice complying with all applicable rules established by the Committee;

 

(b)                                 Full payment (in cash or by
check or by a combination thereof) for the shares with respect to which such
Option or portion thereof is exercised;

 

(c)                                  A bona fide written
representation and agreement, in a form satisfactory to the Committee, signed
by the Optionee or other person then entitled to exercise such Option or
portion thereof, stating that the shares of Common Stock are being acquired for
his own account, for investment and without any present intention of
distributing or reselling said shares or any of them except as may be permitted
under the Securities Act of 1933, as amended (the “Act”), and then
applicable rules and regulations thereunder, and that the Optionee or
other person then entitled to exercise such Option or portion thereof will
indemnify Holdco against and hold it free and harmless from any loss, damage,
expense or liability resulting to Holdco if any sale or distribution of the
shares by such person is contrary to the representation and agreement referred
to above; provided, however, that the Committee may, in its
reasonable discretion, take whatever additional actions it deems reasonably
necessary to ensure the observance and performance of

 

7

 

such representation and agreement and to effect compliance with the Act
and any other federal or state securities laws or regulations;

 

(d)                                 Full payment to Holdco of all
amounts which, under federal, state or local law, it is required to withhold
upon exercise of the Option; and

 

(e)                                  In the event the Option or
portion thereof shall be exercised pursuant to Section 4.1 by any person
or persons other than the Optionee, appropriate proof of the right of such
person or persons to exercise the option.

 

Without
limiting the generality of the foregoing, the Committee may require an opinion
of counsel acceptable to it to the effect that any subsequent transfer of shares
acquired on exercise of an Option does not violate the Act, and may issue
stop-transfer orders covering such shares. 
Share certificates evidencing stock issued on exercise of this Option
shall bear an appropriate legend referring to the provisions of subsection (c) above
and the agreements herein. The written representation and agreement referred to
in subsection (c) above shall, however, not be required if the shares
to be issued pursuant to such exercise have been registered under the Act, and
such registration is then effective in respect of such shares.

 

Section 4.4.    – Conditions to Issuance of Stock
Certificates

 

The shares of
stock deliverable upon the exercise of an Option, or any portion thereof, may
be either previously authorized but unissued shares or issued shares, which
have then been reacquired by Holdco. 
Such shares shall be fully paid and nonassessable.  Holdco shall not be required to issue or
deliver any certificate or certificates for shares of stock purchased upon the
exercise of an Option or portion thereof prior to fulfillment of all of the
following conditions:

 

(a)                                  The obtaining of approval or
other clearance from any state or federal governmental agency which the
Committee shall, in its reasonable and good faith discretion, determine to be
necessary or advisable; and

 

(b)                                 The lapse of such reasonable
period of time following the exercise of the Option as the Committee may from
time to time establish for reasons of administrative convenience or as may
otherwise be required by applicable law.

 

Section 4.5.    – Rights as Stockholder

 

Except as
otherwise provided in Section 2.4 of this Agreement, the holder of an
Option shall not be, nor have any of the rights or privileges of, a stockholder
of Holdco in respect of any shares purchasable upon the exercise of the Option
or any portion thereof unless and until certificates representing such shares
shall have been issued by Holdco to such holder.

 

8

 

ARTICLE V

MISCELLANEOUS

 

Section 5.1.    – Administration

 

The Committee
shall have the power to interpret the Plan and this Agreement and to adopt such
rules for the administration, interpretation and application of the Plan
as are consistent therewith and to interpret or revoke any such rules.  All actions taken and all interpretations and
determinations made by the Committee shall be final and binding upon the
Optionee, Holdco and all other interested persons.  No member of the Committee shall be
personally liable for any action, determination or interpretation made in good
faith with respect to the Plan or the Option. 
In its absolute discretion, the Board may at any time and from time to
time exercise any and all rights and duties of the Committee under the Plan and
this Agreement.

 

Section 5.2.    – Option Not Transferable

 

Neither the
Option nor any interest or right therein or part thereof shall be liable for
the debts, contracts or engagements of the Optionee or his successors in
interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect; provided, however, that this Section 5.2 shall not
prevent transfers by will or by the applicable laws of descent and
distribution.

 

Section 5.3.    – Notices

 

Any notice to
be given under the terms of this Agreement to Holdco shall be addressed to
Holdco in care of its Secretary, and any notice to be given to the Optionee
shall be addressed to him at the address given beneath his signature hereto.  By a notice given pursuant to this Section 5.3,
either party may hereafter designate a different address for notices to be
given to him.  Any notice, which is
required to be given to the Optionee, shall, if the Optionee is then deceased,
be given to the Optionee’s personal representative if such representative has
previously informed Holdco of his status and address by written notice under
this Section 5.3.  Any notice shall
have been deemed duly given when enclosed in a properly sealed envelope or
wrapper addressed as aforesaid, deposited (with postage prepaid) in a post
office or branch post office regularly maintained by the United States Postal
Service.

 

Section 5.4.    – Titles; Pronouns

 

Titles are
provided herein for convenience only and are not to serve as a basis for interpretation
or construction of this Agreement.  The
masculine pronoun shall include the feminine and neuter, and the singular the
plural, where the context so indicates.

 

9

 

Section 5.5.    – Applicability of Plan and Management
Stockholder’s Agreement

 

The Option and
the shares of Common Stock issued to the Optionee upon exercise of the Option
shall be subject to all of the terms and provisions of the Plan and the
Management Stockholder’s Agreement, to the extent applicable to the Option and
such shares.  In the event of any
conflict between this Agreement and the Plan, the terms of the Plan shall
control.  In the event of any conflict
between this Agreement or the Plan and the Management Stockholder’s Agreement,
the terms of the Management Stockholder’s Agreement shall control.

 

Section 5.6.    – Amendment

 

This Agreement
may be amended only by a writing executed by the parties hereto, which
specifically states that it is amending this Agreement.

 

Section 5.7.    – Governing Law

 

The laws of the State of Delaware shall govern the interpretation,
validity and performance of the terms of this Agreement regardless of the law
that might be applied under principles of conflicts of laws.

 

Section 5.8.    – Arbitration

 

In the event of any controversy among the
parties hereto arising out of, or relating to, this Agreement which cannot be
settled amicably by the parties, such controversy shall be finally, exclusively
and conclusively settled by mandatory arbitration conducted expeditiously in
accordance with the American Arbitration Association rules, by a single
independent arbitrator.  Such arbitration
process shall take place within 100 miles of the New York City metropolitan area.  The decision of the arbitrator shall be final
and binding upon all parties hereto and shall be rendered pursuant to a written
decision, which contains a detailed recital of the arbitrator’s reasoning.  Judgment upon the award rendered may be
entered in any court having jurisdiction thereof.  Each party shall bear its own legal fees and
expenses, unless otherwise determined by the arbitrator.  Notwithstanding anything herein to the
contrary, if the Employment Agreement contains a similar provision relating to
arbitration and/or dispute resolution, such provision in the Employment
Agreement shall govern any controversy hereunder.

 

[Signatures on next page.]

 

10

 

IN WITNESS
WHEREOF, this Agreement has been executed and delivered by the parties hereto.

 

	
   

  	
  PANAMSAT HOLDING CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  

 

11

 

	
   

  	
  OPTIONEE:

  
	
   

  	
   

  
	
   

  	
  [Name]

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  

 

 

	
  Aggregate
  number of shares of Common Stock

  
	
  for which
  the Time Option granted
  hereunder is

  
	
  exercisable
  (100% of number of shares):

  
	
   

  
	
  Aggregate
  number of shares of Common Stock

  
	
  for which
  the Performance Option
  granted

  
	
  hereunder is
  exercisable (100% of number of

  
	
  shares):

  
	
   

  	
   

  
	
  Base Price:

  	
  $[             ]
  per share

  
	
   

  	
   

  
	
  Grant Date:

  	
  [                         ]

  

 

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Exhibit 10.14  

 
 

SPECIAL AGREEMENT    
    

        This Special Agreement (the "Agreement") is entered into on March 3, 2005 (the "Effective Date") between Douglas L. Polson, a resident of Douglas County,
Colorado (the "Executive"), and Pacific Energy Management LLC, a Delaware limited liability company (the "Company"). 

        WHEREAS, the Executive is currently serving as Executive Chairman of Pacific Energy GP, Inc., a Delaware corporation ("General
Partner") pursuant to an Employment Agreement dated October 1, 2002 (the "Employment Agreement"); and 

        WHEREAS, on the Effective Date, General Partner converted into a Delaware limited liability company; and 

        WHEREAS, pursuant to the Purchase and Sale Agreement dated as of October 29, 2004 by and among PPS Holding Company, The Anschutz
Corporation, and LB Pacific, LP (the "Buyer"), the Buyer will purchase all of the membership interests in General Partner, which shall then be converted into a Delaware limited partnership; and 

        WHEREAS, in connection with Buyer's purchase of General Partner, the Company will, effective as of the Effective Date, assume all of
General Partner's rights and obligations under the Employment Agreement; and 

        WHEREAS, the Company desires to effect a change in the Executive's role with the Company, and the Executive has agreed to such change, 

        NOW, THEREFORE, IN CONSIDERATION of the premises, the mutual promises, covenants and agreements contained herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 

        1.    Termination of Employment.    

        The
Executive hereby resigns, effective as of the Effective Date, as Executive Chairman of the Company and as an employee of the Company, and agrees to execute such forms as the Company
may reasonably request to effect such resignation. The Executive and the Company are simultaneously executing a release of claims against each other. 

        2.    Consideration in Connection With Termination of Employment.    

        (a)   The
Company shall pay Executive, by on or before March 8, 2005, the following amounts: 

        (i)    Thirty
Two Thousand One Hundred and Seventy Three Dollars ($32,173) representing accrued but unused vacation, 

        (ii)   Two
Thousand Five Hundred Dollars ($2,500) representing accrued salary through March 3, 2005, and 

        (iii)  Nine
Hundred Thousand Dollars ($900,000) in satisfaction of the Company's obligations under Section 5(c)(ii)(C) of the Employment Agreement. 

        (b)   The
Executive's rights in respect of 50,000 fully vested Options to acquire Common Units, which he holds under the Pacific Energy GP, Inc. Long Range Incentive
Plan (the "Plan"), including any new securities for which or into which such Options may be exchanged or converted, shall be as determined under the terms of the Plan and under any plan applicable to
any such new securities. 

        (c)   Commencing
on the Effective Date, the Company shall reimburse Executive for his cost of obtaining dental and life insurance benefits on terms comparable to the terms of
the Company's plans in effect on the Effective Date, for a period ending on the earlier of (i) the second anniversary of the Effective Date or (ii) the date the Executive becomes covered
under similar plans of a new employer. Commencing on the second anniversary of the Effective Date, and assuming Executive has not

 
commenced full time employment with a subsequent employer and elects COBRA continuation coverage under the medical benefits plan of The Anschutz Corporation, the Company shall reimburse Executive for
the cost of maintaining such COBRA Continuation Coverage for a period equal to the lesser of (i) the period of such COBRA Continuation Coverage or (ii) until the Executive commences full
time employment with a new employer. 

        (d)   The
Executive shall be entitled to bonus for 2005, payable in 2006, under the terms of the Company's Incentive Compensation Plan as in effect for 2005, calculated upon
his base salary paid through the Effective Date. 

        (e)   For
a period of three (3) months from the Effective Date the Company shall provide the Executive suitable office space, parking, staff and administrative support.
The Company agrees to reimburse Executive for the lesser of (i) one half of the reasonable legal fees incurred by Executive in connection with this Agreement, and the Consulting Agreement, or
(ii) Ten Thousand Dollars ($10,000). 

        (f)    The
Company shall obtain and continue in full force and effect appropriate director and officer liability insurance in such amounts and with such terms and provisions as
the Board shall determine in its sole discretion (D&O Insurance). To the fullest extent permitted by the indemnification provisions of the Company's governing instruments in effect as of the date of
this Agreement and the indemnification provisions of the governing laws of the jurisdiction of the Company's formation in effect from time to time (collectively the "Indemnification Provisions"), and
in each case subject to the conditions thereof, the Company shall (i) indemnify the Executive as a director and officer of the Company or a subsidiary of the Company or a trustee or fiduciary
of an employee benefit plan of the Company or a subsidiary of the Company, or, if the Executive shall be serving in such capacity at the Company's request, as a director or officer of any other
corporation (other than a subsidiary of the Company) or as a trustee or fiduciary of an employee benefit plan not sponsored by the Company or a subsidiary of the Company, against any and all
liabilities and reasonable expenses that may be incurred by the Executive in any threatened, pending or completed action, suit or proceeding, whether civil, criminal or administrative, or
investigative and whether formal or informal, because the Executive is or was a director or officer of the Company, a director or officer of such other corporation or a trustee of such employee
benefit plan, and against which the Executive may be indemnified by the Company, and (ii) pay for or reimburse the reasonable expenses incurred by the Executive in the defense of any proceeding
to which the Executive is a party because the Executive is or was a director or officer of the Company, a director or officer of such other corporation or a trustee or fiduciary of such employee
benefit plan. The rights of the Executive under the Indemnification Provisions shall survive the termination of the employment of the Executive by the Company. 

        (g)   The
Parties shall agree on the language of the public announcement of Executive's resignation and neither party shall thereafter make any public statement inconsistent
therewith. 

        3.    Directorship.    

        Following
the Effective Date, Executive shall continue as a non-executive member of the Board of Directors, serving at the pleasure of the member of the Company. During the
period he serves in that capacity he shall be entitled to remuneration as applicable to other non-executive members of the Board, including without limitation restricted units, as per the
Company's policies in place from time to time. 

        4.    Consultancy.    

        Concurrent
with the execution of this agreement, the Company and the Executive are entering into a consulting services agreement providing for the provision of consulting services over a
period of one year from the Effective Date, or such longer period as may be mutually agreed between the parties.

 

        5.    Confidential Information.    

        The
Executive shall not at any time use or disclose any secret, confidential, and/or proprietary information, knowledge, or data relating to the Company, any of its subsidiaries or any
of the other affiliates of the Company, present and future, and their respective businesses, which shall have been obtained by the Executive during his employment by, or provision of services to, the
Company, any of its subsidiaries or any of the other affiliates of the Company and which shall not be or become public knowledge (other than by acts by the Executive or his representatives in
violation of this Agreement) provided that the Executive may comply with legal process, so long as Executive gives prompt notice to the Company of any required disclosure and reasonably cooperates
(without being required to incur any expense or subject himself to sanction or penalty) with the Company if the Company determines to oppose, challenge, or quash the legal process. 

        6.    Nonsolicitation of Employees.    

        The
Executive agrees that for a period of one (1) year following the date of Executive's resignation or removal as a Director of the Company, he will not, directly or indirectly,
solicit on behalf of any entity any employee of the Company, any of its subsidiaries or any of its other affiliates, present or future (while an affiliate), who is being compensated at a rate of Fifty
Thousand Dollars ($50,000.00) or more per year as an employee of the Company, any of its subsidiaries, or any of its other affiliates, present or future, to work for any individual or firm then in
competition with the business of the Company, any of its subsidiaries or any other affiliate of the Company, present or future. The Executive may give references with respect to such employees. 

        7.    Nonsolicitation of Customers.    

        Executive
agrees that for a period of one (1) year following the resignation of Executive as a Director of the Company, he will not directly or indirectly solicit customers of the
Group (defined below) for the purpose of delivering to such customers, at points within fifty miles of the Group's points of delivery, products of the kind delivered by the Group during the period
Executive was employed by the Group. For purposes of this Agreement and the Consulting Agreement, the term "Group" means the Company and any other company that controls or is controlled directly or
indirectly by, or is under common control with the Company including, without limitation, Pacific Energy Partners L.P. 

        8.    Miscellaneous.    

        (a)   This
Agreement and the Consulting Agreement entered into on this day by and between the Company and the Executive contain the entire agreement and understanding
concerning the subject matter hereof between the parties hereto. This Agreement and the Consulting Agreement constitute an integrated agreement and contain the complete understanding and agreement of
the parties with respect to the subject matter they address, and supersede and replace all prior negotiations and agreements, whether written or oral, concerning such subject matter. This Agreement
specifically terminates and supersedes the Employment Agreement. No waiver, termination or discharge of this Agreement, or any of the terms or provisions hereof, shall be binding upon either party
hereto unless confirmed in writing. This Agreement may not be modified or amended, except by a writing executed by both parties hereto. No waiver by either party hereto to any term or provision of
this Agreement or of any default hereunder shall affect such party's rights thereafter to enforce such term or provision or to exercise any right or remedy in the event of any other default, whether
or not similar. 

        (b)   This
Agreement shall be governed by and construed in accordance with the laws of the State of New York. If any action is brought to enforce or interpret this Agreement,
venue for the action will lie in the federal or state courts of the City and County of Denver, Colorado.

 

        (c)   This
Agreement shall be binding on and inure to the benefit of the parties hereto and their respective successors. Executive acknowledges that his services are unique
and personal. Accordingly, Executive may not assign his rights or delegate his duties or obligations under this Agreement to any person or entity; provided
however, that payments may be made to the Executive's estate or beneficiaries as expressly set forth herein. 

        (d)   The
headings contained herein are for the convenience of the parties only and shall not be interpreted to limit or affect in any way the meaning of the language
contained in this Agreement. 

        (e)   The
Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute the same
Agreement. Any signature page of any such counterpart, or any electronic facsimile thereof, may be attached or appended to any other counterpart to complete a fully executed counterpart of this
Agreement, and any telecopy or other facsimile transmission of any signature shall be deemed an original and shall bind such party. 

        (f)    Upon
the reasonable request of the other party, each party hereto agrees to take any and all actions, including, without limitation, the execution of certificates,
documents or instruments, necessary or appropriate to give effect to the terms and conditions set forth in this Agreement. 

        (g)   Amounts
payable hereunder shall be subject to required tax withholding as required by law. 

        (h)   If
any provision of this Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of the Agreement which
can be given effect without the invalid provisions or applications and to this end the provisions of this Agreement are declared to be severable. 

        (i)    Each
party has cooperated in the drafting and preparation of this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed
against any party on the basis that the party was the drafter. The captions of this Agreement are not part of the provisions and shall have no force or effect. 

        (j)    Any
notice hereunder may be made as provided in the Consulting Agreement. 

        (k)   The
Executive represents that he is knowledgeable and sophisticated as to business matters, including the subject matter of this Agreement, that he has read this
Agreement and that he understands its terms. The Executive acknowledges that, prior to assenting to the terms of this Agreement, he has been given a reasonable time to review it, to consult with
counsel of his choice, and to negotiate at arm's-length with the Company as to its contents. The Executive and the Company agree that the language used in this Agreement is the language chosen by the
parties to express their mutual intent, and that they have entered into this Agreement freely and voluntarily and without pressure or coercion from anyone. 

        (l)    The
Executive agrees to keep this Agreement and the terms thereof confidential except for disclosures (i) required by law, (ii) reasonably necessary to the
enforcement of this Agreement or (iii) to his spouse, secretary or legal, tax or financial advisors provided he has made reasonable efforts to assure that those persons shall keep the agreement
and its terms confidential. 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

        IN WITNESS WHEREOF, the parties hereto have caused their duly authorized representatives to execute this Agreement as of the day and year
first above written. 

	

 	
 	

Pacific Energy Management LLC
	

 	
 	

By:	
 	

/s/  IRVIN TOOLE, JR.      

	 	 	Name:	 	Irvin Toole, Jr.
	 	 	Title:	 	President and Chief Executive Officer
	

 	
 	

/s/  DOUGLAS L. POLSON      
 Douglas L. Polson

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SPECIAL AGREEMENT

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