Texaco settles the largest ever racial discrimination suit, agreeing to pay $115 million to approximately 1,400 class members, $26.1 million in raises over the next five years to minority workers, and $35 million to fund a Task Force to implement changes in the company's human resources programs. Read related documents.

CONFIDENTIAL

FOR SETTLEMENT PURPOSES ONLY

AGREEMENT IN PRINCIPLE TO SETTLE

This document constitutes an agreement in principle, effective November 15, 1996, between defendant Texaco, Inc. ("Texaco") and the named plaintiffs, both individually and in their capacities as class representatives, and their counsel, in Roberts, et al v. Texaco Inc., 94 Civ 2015 (S.D.N.Y.), to settle the individual and class claims (hereinafter "the claims") asserted against Texaco in that action on the terms and conditions set forth below which, among other terms and conditions, are to be included in a final, definitive, binding settlement agreement ("Agreement") between the parties. Upon execution of this document, however, the parties are obligated to use their best efforts within 30 days thereof (1) to document and execute such a final, definitive, binding settlement agreement, and (2) to submit it to the Court for preliminary approval under Fed. R. Civ. P. 23.

Upon execution of this document, as a condition of this agreement in principle, (1) the plaintiffs agree to withdraw their pending motion for a default judgment against Texaco without prejudice, and (2) the parties agree simultaneously to request that (a) the hearing on that motion, presently scheduled for November 22, 1996, and all discovery related thereto, and (b) Texaco's additional class certification motion scheduled for December 6, 1996, respectively, be adjourned without date pending the parties' submission of a final, definitive, binding settlement agreement to the Court for preliminary approval. In the event such settlement agreement is not submitted within 30 days of execution of this document, or that such settlement agreement is disapproved by the Court, either preliminarily or finally, the parties agree to use their best efforts to reschedule the adjourned hearing, related discovery, and the submission of the additional class certification brief in a manner that the reasonably accommodate the litigation interests of both the plaintiffs and Texaco.

1. Settlement Class. Solely for purposes of settlement, the parties agree to stipulate to certification of a class consisting of all African-Americans employed in a salaried position in the United States by Texaco or its subsidiaries at any time from March 23, 1991 through and including November 15, 1996.

2. Texaco's Obligations. Texaco will undertake the following obligations in complete settlement and satisfaction of the claims asserted against it and any other obligations it might otherwise have to pay for class notice, the cost of administering the payment of claims, and the cost of suit, including reasonable attorneys' fees, under 15 U.S.C. Sections 15 and 26.

(a) Cash Fund. Within five business days of the execution of this Agreement in principle to settle, Texaco will deposit $115 million into a joint escrow account maintained by counsel for plaintiffs and counsel for Texaco ("the Fund"), bearing interest at a rate no less than that payable on 6-month Treasury Bills, to be used for the benefit of the class, including the payment of (I) all claims for damages and compensation; (ii) the cost of class notice; (iii) the cost of suit, including reasonable attorneys' fees and expenses including expert fees and expenses, as approved by the Court under Fed. R. Civ. P. 23, and (iv) any other purpose the Court may order. If the settlement submitted by Texaco and the plaintiffs is disapproved by the Court, either preliminarily or finally, the Fund (including accrued interest), but excluding the cost of administration already expended, will revert to Texaco.

If the settlement receives final approval by the Court, payment of class members' claims shall be made out of the Fund in accordance with a Court-approved plan of allocation submitted by plaintiffs. Texaco will have no responsibility for or involvement with developing or administering this plan of allocation and any payments made thereunder to class members.

(b) Salary Increases. As a condition of the Agreement and upon final approval of the settlement by the Court, the salaries of all class members employed by Texaco as of the date of this Agreement shall be increased, as of January 1, 1997, by the greater of 10 percent or such other percentage as in the aggregate would total annual salary increases of $4,000,000. Upon final approval of the settlement by the Court, the salary increase will be paid retroactive to January 1, 1997. This increase shall be in addition to and not in lieu of or replacement of any other pay increase presently scheduled for April, 1997 provided in the ordinary, customary or usual course of employment.

(c) Programmatic Relief. The parties understandings regarding this relief are specified in Exhibit 1.

(d) Class Notice. The parties will agree in the final settlement agreement upon notice to the class that satisfies the requirements of Fed.R.Civ.P. 23(c)(2), and that includes, among other things, a description of the action and the settlement, the right and procedure to opt out, the consequences of not opting out, the procedure to claim against the Fund, and the scheduled hearing date for objections to the settlement and final approval Texaco shall provide class counsel the names and last known addresses of all class members.

(e) Costs and Attorneys' Fees. The named plaintiffs in this action have agreed to and will, in the settlement stipulation, waive any and all rights to payment of attorneys' fees and costs directly by Texaco. Upon application of plaintiffs' counsel and Court approval under Fed.R.Civ.P. 23, the cost of suit, including reasonable attorneys' fees and expenses including incentive fees to plaintiffs, fees and expenses of experts, will be paid out of the Fund. Since Texaco's creation of the Fund will fully discharge any obligation it might otherwise have for such fees, costs, and expenses, Texaco agrees not to oppose the application of plaintiffs' counsel or class representatives' incentive awards.

4. Texaco's Right to Withdraw. Texaco will have a right to withdraw from the settlement if in its discretion, it deems the number of class members who opt out of the settlement to pursue their own claims to be substantial. Such right shall be exercised within a reasonable period of time (to be defined in the final definitive binding settlement agreement) following the end of the opt-out period.

5. Releases. Upon final approval by the Court, (a) all class members who have not opted out of the settlement and, therefore, are bound thereby, will release Texaco (including its subsidiaries) from, and covenant not to sue it on, any and all claims under federal or state law that have been, or could have been, asserted against Texaco arising out of or relating to claims of employment discrimination, racially disparate treatment or impact in their employment by Texaco prior to November 16, 1996; and (b) judgment will be entered dismissing with prejudice all such claims.

Dated: November 15, 1996

/s/
Andrea S. Christensen, Esq.
On Behalf of Defendant
Texaco Inc.

Dated: November __, 1996

________________________
Michael D. Hausfeld, Esq.
On Behalf of Plaintiffs and
Their Counsel

Dated: November __, 1996

/s/
Daniel Berger, Esq.
On Behalf of Plaintiffs and
Their Counsel

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EXHIBIT 1

PROGRAMMATIC RELIEF

Statement of Equality and Tolerance Objectives

Texaco, Inc. is affirmatively committed to the fullest extent to an environment of inclusion to eradicate all forms of prejudice within the company, to promote and foster complete equality of job opportunities within the company to all applicants and employees regardless of race, gender, religion, age, national origin and disability, and to ensure tolerance, respect and dignity for all people.

The Task Force

Texaco and plaintiffs agree to create an independent Equality and Tolerance Task Force ("Task Force") to determine revisions and additions to Texaco's current human resource programs and to oversee, in conjunction with Texaco's President of the Human Resources Division, the implementation by Texaco of the human resource program changes agreed to or resulting from the term of the settlement of Roberts v. Texaco, Inc. ("the Agreement"), including but not limited to the specific programmatic changes described below.

The Task Force will have authority for a period of five years, under Court supervision, to determine the policies and practices that should be developed, restructured or implemented to meet the programmatic relief objectives of the Agreement. The Task Force will have reasonable access to all relevant books, data [FN1] documents and other sources of information, in whatever form they are maintained in the ordinary course of business, necessary or appropriate to the exercise of their authority. Given the need of the Task Force to review confidential business information of Texaco, each member will sign an appropriate Confidentiality Order agreed to by the parties.

Texaco will be responsible for implementation of all programmatic relief under the terms of the Agreement, except as otherwise provided in the Agreement. Texaco is, however, not precluded from developing and implementing its own inclusion programs as it may find appropriate. In formulating its determinations, the Task Force will take such programs into account.

The Task force will consist of three Texaco appointees, three plaintiffs' appointees, and one independent appointee who serves as Chairperson: to be agreed upon by the parties. With the exception of the Chairperson and one other member of the Task Force for each of Texaco and the plaintiffs, no appointee will be an attorney.

The Task Force will evaluate all existing employment policies and practices and develop and design, in conjunction with the President of the Human Resources Division, procedures, practices and methodologies to achieve the programmatic relief objectives of the Agreement as well as to measure and demonstrate program progress and results. The determinations of the Task Force will apply to all salaried non-officer job positions at all grade levels, in all departments, divisions and subsidiaries nationwide. Texaco will provide all funding necessary to fulfill the work of the Task Force, including the reasonable compensation of the Task Force members, and the cost of reasonable staff, consultants, statisticians, and other appropriate experts.

Within the first six months of the Agreement or at such other reasonable time as is agreed upon by the Task Force, Texaco will:

* Adopt and implement a company-wide diversity and sensitivity training program.

* Adopt and implement a company-wide mentoring program.

* Insure that EEO and Diversity Performance is included in management objectives and in determining management compensation.

* Develop and implement an ombudsperson program.

* Implement national job posting through at least pay grade 18, and commence evaluation of posting at higher grade level positions.

* Develop recommendations for the creation and implementation of a mechanism to minimize the fear of retaliation in connection with complaints of employment discrimination.

During this period, the Task Force will, and the President of the Human Resources Division may also, begin:

* Evaluate and revise or replace the Performance Management Program including the PMP Appeal Process to ensure that the Program accurately measures employee performance and, among other things, that the standards for performance objectives are specific, measurable, achievable, relevant, time bound and documented.

* Evaluate and revise or replace methods for determining the appropriate competencies needed for a job position or positions. Once accepted, Texaco will begin implementation of the changed methods within sixty days. Such implementation will include, if appropriate, job analysis to identify, but not be necessarily limited to, critical job tasks, knowledge, skills and abilities.

* Review AAPs developed under EO 11246 to ensure they are properly constructed. The Task Force, the Chairman and the Board of Directors shall be informed of the compliance performance of each establishment covered by these plans. The Task Force may recommend appropriate action where deemed necessary.

* Evaluate and revise or replace the promotion and employee development process, including High Potential List procedure, including making known to all employees objective Promotability Criteria.

* Establish an Employment Selection and Performance Management Oversight/ Monitoring System.

* Evaluate and revise job positing procedures.

* Develop and implement centralized monitoring of employee compensation to ensure no disparate treatment or impact based on race. Review appropriate data to ensure actual fairness. Data provided may be furnished in such a form as to protect the identity of individuals.

The Task Force will, and the President of the Human Resources Division may also, review and revise, as appropriate, the Company's policies and practices for:

* Recruitment

* Hiring

* Training

* Special Opportunities

* Assignments

* Promotion

The Task Force will, within one year, complete its own review and evaluation of all current employment policies and practices, through, among other means, the use of surveys and employee interviews conducted through Texaco. Subject to the terms of the Agreement, Texaco will implement such changes or additions as the Task Force deems necessary and appropriate to achieve the Equality and Tolerance Objectives and the terms of the Agreement.

Similarly, the Task Force will, within one year or less, complete its initial determinations in all of the areas set forth. Thereafter, for the duration of the Agreement, the Task Force will be responsible for continuing the review and evaluation of all ongoing employment policies and practices of the Company, as well as monitoring the impact and effectiveness of the implementation of its determinations. The Task Force will continue during this time to determine revisions or modifications to ongoing employment policies and practices in order to achieve the Equality and Tolerance Objectives and the terms of the Agreement.

The Task Force will establish the timetable for the implementation and completion of compliance with any of its determinations, subject to the terms of this Agreement.

The President of the Human Resources Division will implement each final determination of the Task Force unless within seven business days after receiving a determination, Texaco files an objection with the Court that the Task Force's determination, in whole or in part, involves the application of unsound business judgment or is technically not feasible.

In the event Texaco files an objection with the Court to a determination of the Task Force, plaintiffs' counsel will participate in the proceedings with the Court in support of the determination of the Task Force objected to by Texaco. All reasonable fees and expenses of plaintiffs' counsel in so doing will be paid by Texaco.

Monitoring

Every six months, beginning on the day of establishment of the Task Force and continuing through the fifth anniversary, the Task Force will provide the Court, the Chairman of Texaco, the Board of Directors of Texaco, and plaintiffs' counsel, information which reflects the impact of this Agreement.

Reporting

At the end of each year, the Task Force will submit a detailed report to the Court and plaintiffs' counsel, reviewing and evaluating Texaco's employment policies and practices, the determinations made by the Task Force, and the impact of the actions taken in achieving the Equality and Tolerance Objectives and the terms of the Agreement. The report will also identify what remains to be done by the Task Force and by the Company, why it needs to be done, and a timetable for accomplishing it.

The work of the Task Force and the supervision of the Court will continue for a period of five years unless, upon good cause shown, the period is shortened or extended by the Court.

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FN1: If there is a disagreement between the task Force and Texaco as to the accuracy and/or completeness of any Texaco data, an independent accounting firm (selected by the Task Force from among the six nationally recognized accounting firms) will be appointed to certify its accuracy and/or completeness at Texaco's expense.